LODGIAN, INC.

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, check the following box. o

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. o


(1)	Includes shares subject to the underwriters’ overallotment option.

(2)	Estimated solely for the purpose of computing the registration fee in accordance with Rule 457 under the Securities Act of 1933, as amended. Pursuant to Rule 457(o), certain information has been omitted from the table.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Our common stock is listed on the American Stock Exchange under the symbol “LGN.” On , 2004, we announced a 1-for- reverse stock split which will be effective on , 2004. On , 2004, the closing price of our common stock as reported on the American Stock Exchange was $ per share after giving effect to the reverse stock split.

Investing in our common stock involves risks that are discussed in the “Risk Factors” section beginning on page 8 of this prospectus.

The underwriters may also purchase up to an additional shares at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover any overallotments.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined that this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different or additional information. If anyone provides you with different or additional information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

References in this prospectus to “Lodgian,” “we,” “us,” “our” and “our company” refer to Lodgian, Inc. and, unless the context otherwise requires or otherwise as expressly stated, our subsidiaries.

Lodgian and our logo are the property of Lodgian, Inc. All other brand and trade names referred to in this prospectus are the property of their respective owners, and their appearance in this prospectus may not in any way be construed as participation by, or endorsement of, this offering by any of our franchisors.

PROSPECTUS SUMMARY

The following summary may not contain all of the information that may be important to you. All share and per share information set forth in this prospectus has been adjusted to reflect a 1-for- reverse stock split which will be effective on , 2004. You should read all of the information contained in this prospectus, including our consolidated financial statements and related notes and the risks of investing in our common stock discussed under “Risk Factors,” before making a decision to invest in our common stock.

Our Company

Lodgian, Inc. is one of the largest independent owners and operators of full-service hotels in the United States in terms of our number of guest rooms and gross annual revenues, as reported by Hotel & Motel Management Magazine in September 2003. We are considered an independent owner and operator because we do not operate our hotels under our own name. We operate substantially all of our hotels under nationally recognized brands, such as “Crowne Plaza,” “Holiday Inn” and “Marriott.” As of March 1, 2004, we operated 92 hotels, with an aggregate of 17,417 rooms, located in 30 states and Canada. Of the 92 hotels, 78 hotels, with an aggregate of 14,348 rooms, are part of our continuing operations, while 14 hotels, with an aggregate of 3,069 rooms, are held for sale.

Our portfolio of 92 hotels consists of 87 hotels that we wholly own and operate through subsidiaries, four hotels that we operate in joint ventures in which we have a 50% or greater voting equity interest and exercise control, and one hotel that we operate in a joint venture in which we have a 30% non-controlling equity interest.

Our hotels are primarily full-service properties that offer food and beverage services, meeting space and banquet facilities and compete in the midscale and upscale market segments of the lodging industry. We operate all but five of our hotels under franchises obtained from nationally recognized hospitality franchisors. We operate sixty-one of our hotels under franchises obtained from InterContinental Hotels Group as franchisor of the Crowne Plaza, Holiday Inn, Holiday Inn Select and Holiday Inn Express brands. We operate sixteen of our hotels under franchises obtained from Marriott International as franchisor of the Marriott, Courtyard by Marriott, Fairfield Inn by Marriott and Residence Inn by Marriott brands. We operate another ten hotels under other nationally recognized brands. We believe that these strong national brands afford us many benefits, such as guest loyalty and market share premiums.

Our corporate office is located in Atlanta, Georgia, and our website address is www.lodgian.com.

Lodging Industry Outlook

We believe that we have passed the bottom of the U.S. economic and lodging industry cycle, based on industry forecasts, general economic forecasts and historical data. Smith Travel Research recently forecasted that revenue per available room, or RevPAR, for the U.S. lodging industry will experience annual growth of 4.5% for 2004, driven by an expected improvement in supply and demand fundamentals. Specifically, Smith Travel Research forecasted an annual increase in demand, as measured by average daily rooms sold, of 4.0% for 2004, which it forecasted will outpace the annual net change in supply of 1.4% in 2004. Other lodging industry analysts also have forecasted RevPAR growth in 2004 and 2005. Although these are only industry forecasts, and do not apply specifically to our portfolio of hotels, based on forecasted industry fundamentals, we believe that it is an opportune time in the business cycle to own, acquire and reinvest in hotels.

Competitive Strengths

Portfolio Improvement Strategy. Our strategy is to own and operate a portfolio of profitable, well maintained and appealing hotels at superior locations in strong markets. We are implementing this strategy by renovating and/or repositioning existing hotels to improve performance, by divesting hotels that do not

meet this strategy or that are unlikely to do so without significant effort or expense, and by acquiring or investing in hotels that fit this strategy. During 2003 and the first two months of 2004, we sold five hotels and one office building as we implemented this strategy, and we have identified an additional 14 hotels as held for sale. We expect to purchase and sell other hotels as we continuously seek to improve our portfolio of hotels.

Hotel Renovation and Repositioning Program. We seek to renovate and reposition our hotels based on strategic plans designed to address the opportunities presented by each hotel and its particular market. Renovations typically include upgrading guest rooms and public areas, and may include a substantial exterior renovation to improve the hotel’s overall appearance and appeal. Repositioning typically involves upgrading a hotel to a new market segment, such as from midscale to upscale, via physical improvements, rebranding, or both. We believe that selected renovations and repositionings will enable us to improve the financial performance of our hotels by increasing both occupancy and average daily rate, or ADR. In 2002 and 2003, we invested $26.2 million and $30.7 million, respectively, in renovations and repositionings of selected hotels in our continuing operations. In 2004, we intend to invest approximately $40 million on renovations and repositionings of selected hotels, which we expect to fund from operating cash flows and asset disposition proceeds, as well as from the net proceeds of this offering.

Nationally Recognized Franchised Brands. We operate substantially all of our hotels under nationally recognized hotel brands. We are the second largest franchisee of InterContinental Hotels Group, which is the franchisor of the Holiday Inn, Holiday Inn Express, Holiday Inn Select and Crowne Plaza brands. We also have hotel franchise agreements with Marriott International, Hilton Hotels and three other national hospitality franchisors. We believe that, in addition to benefits in terms of guest loyalty and market share premiums, our hotels benefit from franchisors’ central reservation systems, their global distribution systems and their brand Internet booking sites. Furthermore, as an independent owner and operator of hotels, we have the flexibility to utilize the brands most suitable to a market or a property, subject to availability of the brand in that location.

Experienced Management Team. Our management consists of an experienced team of professionals with extensive lodging industry experience led by our president and chief executive officer, W. Thomas Parrington, who has been in the lodging industry for over 30 years, including most recently as chief executive officer of Interstate Hotels Company through 1998. Our chief operating officer, Michael W. Amaral, and our three regional vice presidents have a combined 90 years of industry experience and our vice president of sales and marketing has 20 years of industry experience. We will use the experience of our management team to improve property-level performance, implement our hotel renovation and repositioning program, dispose of hotels that do not fit our portfolio improvement strategy, identify potential acquisitions and maintain our relationships with our franchisors.

Reduced Leverage and Enhanced Financial Flexibility. We intend to utilize a portion of the net proceeds of this offering to redeem all of our outstanding mandatorily redeemable 12.25% cumulative Series A Preferred Stock, which had a balance of $142.2 million as of December 31, 2003. We also intend to use a portion of the net proceeds from our sale of selected assets to repay a portion of our existing indebtedness. We believe these actions will provide us with a stronger balance sheet and greater operating and financial flexibility. As of December 31, 2003, our total debt (including our Series A Preferred Stock) was approximately $621.1 million. Pro forma for the offering, our total debt will be $478.9 million, representing a 22.9% reduction in total debt.

Net Operating Loss Carryforwards Available to Offset Our Taxable Income. As of December 31, 2003, we have approximately $270 million of historical net operating loss carryforwards for federal income tax purposes that expire from 2004 through 2023. Subject to annual limitations, these losses are available to offset future income.

Growth Strategy

Internal Growth. We believe that occupancy and ADR, and consequently RevPAR, in our continuing operations will increase as a result of an expected improvement in lodging industry supply and demand fundamentals, our hotel renovation and repositioning program and our strong management team. We believe our planned capital expenditures and operational improvements will generate increased revenues and enhance our financial performance. Additionally, we will continue to monitor the ongoing performance of our hotels as part of our portfolio improvement strategy.

Growth from Hotel Acquisitions. Based on the expected improvement in lodging industry fundamentals, we believe it is an opportune time in the lodging industry cycle to own and acquire hotels. We intend to acquire or invest in additional hotels primarily through joint ventures with other investors. We believe that entering into joint ventures will enable us to increase our revenues and enhance our financial performance from both the management fees we would receive for managing the hotels owned by the joint ventures, as well as from our ownership interest in those hotels. Under certain circumstances, we also may seek to acquire select hotels on a wholly-owned basis.

We intend to focus our acquisition and investment efforts on limited service, midscale and upscale hotels that are less than five years old, contain approximately 100 to 250 rooms and enhance our brand diversification.

Corporate History

Lodgian was formed as a new parent company in a merger of Servico, Inc. and Impac Hotel Group, LLC in December 1998. Servico was incorporated in Delaware in 1956 and was an owner and operator of hotels under a series of different entities. Impac was a private hotel ownership, management and development company organized in Georgia in 1997 through a reorganization of predecessor entities. After the consummation of the merger, our portfolio consisted of 142 hotels.

Between December 1998 and the end of 2001, a number of factors, including our heavy debt load, a lack of available funds to maintain the quality of our hotels, a weakening U.S. economy, and the severe decline in travel after the terrorist attacks on September 11, 2001, combined to place adverse pressure on our cash flow and liquidity. As a result, on December 20, 2001, Lodgian and substantially all of our subsidiaries that owned hotels filed for voluntary reorganization under Chapter 11 of the Bankruptcy Code. At the time of the filing, our portfolio consisted of 106 hotels.

Following the consummation of our reorganization, we emerged from Chapter 11 with 97 hotels, eight of our hotels having been conveyed to a lender in satisfaction of outstanding debt obligations and one hotel having been returned to the lessor of a capital lease of the property. Of these 97 hotels, 78 hotels emerged from Chapter 11 on November 25, 2002, 18 hotels emerged from Chapter 11 on May 22, 2003 and one hotel never filed under Chapter 11.

Pursuant to our portfolio improvement strategy, during 2003 and the first two months of 2004, we sold five hotels and one office building, and we have identified 14 other hotels and three land parcels as held for sale. At March 1, 2004, our hotel portfolio consisted of 92 hotels, 78 of which are reflected in continuing operations (including one hotel that we do not consolidate).

Our Portfolio

Set forth below is a summary of our hotel portfolio as of March 1, 2004, organized by franchisor, with the brand, number of hotels and rooms represented by each, in continuing operations and discontinued operations (including one hotel that we do not consolidate):



		Continuing				Discontinued
		Operations				Operations				Total

		No. of		No. of		No. of		No. of		No. of		No. of
		Hotels		Rooms		Hotels		Rooms		Hotels		Rooms

InterContinental Hotels Group PLC (IHG)
	Holiday Inn		36		6,737		8		1,693		44		8,430
	Holiday Inn Express⁽¹⁾		4		504		1		214		5		718
	Holiday Inn Select		4		1,096		1		397		5		1,493
	Crowne Plaza⁽²⁾		7		1,902		—		—		7		1,902

Total IHG			51		10,239		10		2,304		61		12,543
Marriott International, Inc.
	Marriott		1		238		—		—		1		238
	Courtyard by Marriott		7		760		1		154		8		914
	Fairfield Inn by Marriott		5		563		—		—		5		563
	Residence Inn by Marriott		2		177		—		—		2		177

Total Marriott			15		1,738		1		154		16		1,892
Hilton Hotels Corporation
	Hilton		3		587		—		—		3		587
	DoubleTree		1		189		—		—		1		189

Total Hilton			4		776		—		—		4		776
Choice Hotels International, Inc.
	Clarion		2		590		—		—		2		590
	Quality		2		307		—		—		2		307

Total Choice			4		897		—		—		4		897
Starwood Hotels & Resorts Worldwide, Inc.
	Four Points		—		—		1		189		1		189
Carlson Companies
	Radisson		1		163		—		—		1		163
Non-Franchised Hotels			3		535		2		422		5		957

Total All Hotels			78		14,348		14		3,069		92		17,417

(1) Includes one property for which we have entered into a voluntary termination of the franchise agreement.

(2) Includes one property on which the existing debt matures on June 30, 2004 and for which we have escrowed foreclosure documents.

We believe the opportunity for growth in our results of operations can be illustrated by a comparison of the performance of our 25 top hotels (ranked by 2003 net operating income) to the performance of the 78 hotels included in our continuing operations. RevPAR in our top 25 hotels in 2003 was $59.46, compared with $44.35 for our continuing operations as a whole, representing a premium of 34.1%. Similarly, rooms revenue at our top 25 hotels was $116.2 million in 2003 and represented 50.0% of rooms revenue of our continuing operations.

The Offering


Common stock offered		shares

Common stock outstanding after this offering(1)		shares

Use of proceeds		We estimate that the net proceeds of this offering will be $ million, assuming an offering price of $ per share. We intend to use the net proceeds from this offering:

		• to redeem all of the shares of our outstanding mandatorily redeemable 12.25% cumulative Series A Preferred Stock, including accrued dividends and a 4% prepayment premium ($ million);

		• for capital expenditures related to renovations and repositionings of selected hotels ($ million); and

		• for general corporate purposes, including funding our growth strategy.

American Stock Exchange symbol		LGN

Risk Factors		See “Risk Factors” for a discussion of factors you should carefully consider before deciding to invest in our common stock.

(1) The number of shares of common stock outstanding after this offering is based on the total number of shares of our common stock outstanding as of , 2004, as adjusted to give effect to this offering and the 1-for- reverse stock split which will be effective , 2004. The number of shares outstanding after this offering excludes shares reserved for issuance under our Stock Incentive Plan, of which options to purchase shares at a weighted average option price of $ have been issued, and excludes shares reserved for issuance upon the exercise of outstanding warrants to purchase our common stock. In addition, the number of shares outstanding after this offering assumes that the underwriters’ overallotment option is not exercised. If the overallotment option is exercised in full, we will issue and sell an additional shares.

Summary Consolidated Financial and Operating Data

We present, in the table below, summary financial data derived from our historical financial statements for the three years ended December 31, 2003. On November 22, 2002, in connection with our emergence from Chapter 11 and in accordance with generally accepted accounting principles requiring fresh start reporting, we restated our assets and liabilities to reflect their fair values. As a result, our financial statements for the periods subsequent to November 22, 2002 are those of a new reporting entity and are not comparable with the financial statements for periods on or prior to November 22, 2002. For this reason, we use the term “successor” when we refer to periods subsequent to November 22, 2002 and the term “predecessor” when we refer to periods on or prior to November 22, 2002. In certain places in this prospectus, we have combined the predecessor’s results for the period January 1, 2002 to November 22, 2002 with the successor’s results for the period November 23, 2002 to December 31, 2002 and refer to it as the 2002 Combined Period.



		Successor						Predecessor

					November 23,			January 1, to
					to December 31,			November 22,
		2003			2002			2002			2001


		(in thousands, except per						(in thousands, except per
		share data)						share data)
Income statement data:
Revenues — continuing operations		$	311,414		$	25,306		$	299,267		$	351,072
Revenues — discontinued operations			61,137			6,441			78,757			96,484
Revenues — continuing and discontinued operations			372,551			31,747			378,024			447,556
(Loss) income — continuing operations			(27,074	)		(6,745	)		16,999			(87,537	)
Loss — discontinued operations			(4,603	)		(2,581	)		(4,633	)		(55,227	)
Net (loss) income			(31,677	)		(9,326	)		12,366			(142,764	)
Net (loss) income attributable to common stock			(39,271	)		(10,836	)		12,366			(142,764	)
(Loss) income from continuing operations attributable to common stock before discontinued operations			(34,668	)		(8,255	)		16,999			(87,537	)
Earnings per common share, basic and diluted:
	(Loss) income — continuing operations		(3.87	)		(0.96	)		0.60			(3.09	)
	Loss — discontinued operations, net of taxes		(0.66	)		(0.37	)		(0.17	)		(1.95	)
	Net (loss) income		(4.53	)		(1.33	)		0.43			(5.04	)
	Net (loss) income attributable to common stock		(5.61	)		(1.55	)		0.43			(5.04	)
(Loss) income from continuing operations attributable to common stock before discontinued operations			(4.95	)		(1.18	)		0.60			(3.09	)
Basic and diluted weighted average shares(1)			7,000			7,000			28,480			28,350
Balance sheet data (at period end):
Total assets		$	709,174		$	762,164		$	967,131		$	975,362
Assets held for sale			68,567			—			—			—
Long-term debt(2)			551,292			389,752			7,215			7,652
Liabilities related to assets held for sale			57,948			—			—			—
Liabilities subject to compromise(2)			—			93,816			926,387			925,894
Mandatorily redeemable 12.25% cumulative Series A Preferred Stock(3)			—			126,510			—			—
Total liabilities			666,248			553,581			990,682			982,043
Total liabilities and Series A Preferred Stock			666,248			680,091			990,682			982,043
Total stockholders’ equity (deficit)			40,606			78,457			(28,841	)		(6,681	)

(1) The number of shares in the successor period ended December 31, 2002 represents the shares issued on the consummation of the first of the two plans of reorganization in November 25, 2002. The 28,479,837 old shares were cancelled and 7,000,000 shares were issued.

(2) Reported long-term debt was affected in 2001 by our filing for Chapter 11. On the filing of Chapter 11, all our debts (except the debt relating to a non-filed entity) and certain other liabilities were classified as liabilities subject to compromise. On emergence from Chapter 11, some of our debt was discharged. The remaining long-term debt and other settled claims were reclassified out of liabilities subject to compromise to long-term debt (if long-term) and current liabilities (if short-term).

(3) The Series A Preferred Stock was issued on November 25, 2002. At December 31, 2002, the Series A Preferred Stock was classified between long-term debt and equity on our consolidated balance sheet, called the mezzanine section. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity which was effective on July 1, 2003, we reclassified the Series A Preferred Stock to long-term debt. The Series A Preferred Stock outstanding at December 31, 2003 was $142.2 million compared to $126.5 million at December 31, 2002. In addition, the dividend for the period July 1, 2003 to December 31, 2003 was reported in interest expense. In accordance with SFAS No. 150, we continued to show the dividends for the periods January 1, 2003 to June 30, 2003 and November 23, 2002 to December 31, 2002 as deductions from retained earnings.

We believe that results of operations in the lodging industry are best explained by three key performance measures: occupancy, average daily rate, or ADR, and revenue per available room, or RevPAR, levels. These measures are influenced by a variety of factors, including national, regional and local economic conditions, the degree 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 our hotels experience lower occupancy levels in the fall and winter months (November through February) generally resulting in lower revenues, lower net income and less cash flow during these months. RevPAR is derived by dividing room revenues by the number of available room nights for a given period or, alternatively, by multiplying the occupancy by the ADR.

Earnings before interest, taxes, depreciation and amortization, or EBITDA, is a widely used industry measure of performance and also is used in the assessment of hotel property values. EBITDA is not a GAAP (generally acceptable accounting principles in the U.S.) measure and should not be used as a substitute for measures such as net income (loss), cash flows from operating activities, or other measures computed in accordance with GAAP. We believe that EBITDA provides pertinent information to investors as an additional indicator of our performance.

Presented below are the following:

• Occupancy, ADR and RevPAR for the 78 hotels in our continuing operations for 2003, the 2002 Combined Period and 2001; and

• EBITDA for the 77 hotels that we consolidate in our continuing operations for 2003, the 2002 Combined Period and 2001 (we do not calculate EBITDA for our non-controlling equity interest in one hotel because we account for it under the equity method).


						2002
	No. of					Combined
	Hotels		2003			Period			2001

Occupancy		78		59.7	%		61.4	%		63.0	%
ADR		78	$	74.34		$	74.83		$	77.39
RevPAR		78	$	44.35		$	45.94		$	48.77
EBITDA (in thousands)(1)		77	$	50,953		$	43,763		$	41,862

(1) We present a reconciliation of EBITDA, a non-GAAP measure, with our (loss) income from continuing operations in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — EBITDA.” The 2003 and 2002 Combined Period EBITDA figures presented in the table include $1.4 million and $22.3 million of reorganization expenses, respectively, and $4.6 million and $0.8 million of post-emergence Chapter 11 related expenses, respectively, that were reported in general, administrative and other. The 2001 EBITDA figure presented in the table includes $21.7 million of reorganization expenses.

An investment in the shares of our common stock involves a high degree of risk. In addition to the other information in this prospectus, the following risk factors should be considered carefully in evaluating an investment in our common stock. If any of the following risks actually occur, our business, financial condition, results of operations, cash flow, liquidity and prospects are likely to suffer. In that case, the trading price of our common stock could decline and you may lose all or part of your investment in our common stock.

We operate substantially all of our hotels pursuant to franchise agreements with franchisors for nationally recognized hotel brands. The franchise agreements generally contain specific standards for, and restrictions and limitations on, the operation and maintenance of a hotel in order to maintain uniformity within the franchisor system. The standards are subject to change over time. Compliance with any new standards could cause us to incur significant expenses and capital expenditures.

If we do not comply with standards or terms of any of our franchise agreements, those franchise agreements may be terminated after we have been given notice and an opportunity to cure the noncompliance or default. As of March 1, 2004, we have been notified that we were not in compliance with some of the terms of ten of our franchise agreements and have received default and termination notices from franchisors with respect to an additional five hotels. We cannot assure you that we will be able to complete our action plans (which we estimate will cost approximately $6.4 million) to cure the alleged instances of noncompliance and default prior to the specified termination dates or be granted additional time in which to cure any defaults or other noncompliance.

In addition, as part of our bankruptcy reorganization proceedings, we entered into stipulations with each of our major franchisors setting forth a timeline for completion of capital expenditures for some of our hotels. However, as of March 1, 2004, we have not completed the required capital expenditures for 35 hotels in accordance with the stipulations and we estimate that the cost of completing these required capital expenditures is $26.1 million. The franchisor could therefore seek to declare its franchise agreement in default and could seek to terminate the franchise agreement.

If a franchise agreement is terminated, we will either select an alternative franchisor or operate the hotel independently of any franchisor. However, terminating or changing the franchise affiliation of a hotel could require us to incur significant expenses, including liquidated damages and capital expenditures. Moreover, the loss of a franchise agreement could have a material adverse effect upon the operations or the underlying value of the hotel covered by the franchise because of the loss of associated guest loyalty, name recognition, marketing support and centralized reservation systems provided by the franchisor. We also would be in default under one or more of our loan agreements if:


	•	we are unable to replace, in a timely fashion (which, in the case of hotels that secure our The Lehman Brothers Holdings, Inc. (“Lehman”) financing (the “Lehman Financing”), is only five days), a terminated franchise agreement with a new franchise agreement acceptable to the lender whose loan is secured by the affected hotel and we fail to prepay a contractually specified release value relating to that hotel to the lender; or

	•	in the case of hotels that secure our borrowings from Merrill Lynch Mortgage Lending, Inc. (“Merrill Lynch Mortgage”), we experience either:


	•	four franchise agreement terminations at one time, or

	•	one or more franchise agreement terminations for hotels whose allocated loan amounts represent 5% or more of the total allocated loan amounts.

Our current franchise agreements terminate at various times and have differing remaining terms. For example, the terms of seven, twelve and ten of our franchise agreements are scheduled to expire in 2004, 2005 and 2006, respectively. As a condition to renewal, the franchise agreements frequently contemplate a renewal application process, which may require substantial capital improvements to be made to the hotel and substantial increases in franchise fees payable to the franchisor. Significant unexpected capital expenditures and franchise fees would adversely affect us.

In order to maintain our hotels in good condition and attractive appearance, it is necessary to replace furnishings, fixtures and equipment periodically, generally every five to seven years, and to maintain and repair public areas and exteriors on an ongoing basis. Due to a lack of available funds, made worse by our heavy debt load, weakness in the U.S. economy, and the severe decline in travel in the aftermath of the terrorist attacks of September 11, 2001, we have deferred many capital expenditures on our hotels. If we do not make necessary maintenance, repairs and capital improvements, occupancy and room rates could fall, thereby adversely affecting our operating results, and we risk termination of franchise agreements at the affected hotels. Further, the process of renovating a hotel can be disruptive to operations, and a failure to properly plan and execute renovations and to schedule them during seasonal declines in business can result in renovation displacement, an industry term for a temporary loss of revenue due to implementing renovations.

As of December 31, 2003, we had $478.9 million of total long-term debt outstanding. We are subject to the risks normally associated with significant amounts of debt, such as:


	•	We may not be able to repay, refinance or extend our maturing indebtedness on favorable terms or at all. We have $17.3 million, $384.5 million and $5.2 million of indebtedness maturing in 2004, 2005 and 2006, respectively. Of these amounts, the Merrill Lynch Mortgage financing, which matures in November 2004 and is subject to three one-year extensions, totaled $299.3 million as of December 31, 2003 and currently is secured by 54 of our hotels. The first option to extend the maturity date of the Merrill Lynch Mortgage debt by up to one year (to November 2005) will be available to us as long as no events of default occur in respect of the payment of principal, interest and other required amounts. Because we intend to extend the maturity date and we believe we will be eligible for that extension, we report that debt as maturing in 2005. The second and third extension terms will be available to us only if no events of default of any type exist and minimum debt service coverage ratio and debt yield requirements are satisfied, which requirements we currently do not satisfy. The Lehman Financing, which matures in 2005 and is subject to a one-year extension, totaled $76.4 million as of December 31, 2003 and currently is secured by 15 of our hotels. The one-year extension will be available only if, at the time of electing to extend and at the initial maturity date, no events of default of any type exist, and we pay an extension fee in the amount of $3.0 million;

	•	If we are unable to refinance or extend the maturity of our maturing indebtedness, we may not otherwise be able to repay such indebtedness. Debt defaults could lead to us being forced to sell one or more of our hotels on unfavorable terms or, in the case of secured debt, convey the mortgaged hotel(s) to the lender, causing a loss of any anticipated income and cash flow from, and our invested capital in, such hotel(s);

	•	All of our hotels are pledged as collateral under existing mortgage loans totaling $469.5 million as of December 31, 2003, which represented 75.7% of the book value of our


		hotel property, plant and equipment, net, as of December 31, 2003, and, as a result, we have limited flexibility to sell our hotels to satisfy cash needs;

	•	Increased vulnerability to downturns in our business, the lodging industry and the general economy;

	•	Our cash flow from operations may be insufficient to make required debt service payments;

	•	Our ability to obtain other financing to fund future working capital, capital expenditures and other general corporate requirements may be limited;

	•	We may be required to dedicate a substantial portion of our cash flow from operations to debt service payments, reducing the availability of our cash flow to fund working capital, capital expenditures, and other needs and placing us at a competitive disadvantage with other companies that have greater resources and/or less debt;

	•	Our flexibility in planning for, or reacting to, changes in our business and industry may be restricted; and

	•	We currently are, and may in the future be, unable to pay dividends on our common stock.

Our outstanding debt instruments subject us to financial covenants, including leverage and coverage ratios. Our compliance with these covenants depends substantially upon the financial results of our hotels. In particular, our debt agreements with Merrill Lynch Mortgage, an affiliate of one of the underwriters, require a minimum debt yield and a minimum debt service coverage ratio. The senior and mezzanine debt agreements with Merrill Lynch Mortgage provide that when either (i) the debt yield for the trailing 12-month period is below 13.25% during the year ending November 2004 (and if the loan is extended, 13.50%, 13.75% and 14.00% during each of the next three years of the loan, respectively) or (ii) the debt service coverage ratio is below 1.20x, excess cash flows produced by the mortgaged hotels (after payment of operating expenses, management fees, required reserves, service fees, principal and interest) must be deposited in a restricted cash account. These funds can be used for the prepayment of aggregate outstanding borrowings under these debt agreements, capital expenditures reasonably approved by the lender, and up to an aggregate $3.0 million of scheduled principal and interest payments due under these agreements. Funds will no longer be deposited into the restricted cash account when the debt yield and the debt service coverage ratio are sustained above the minimum requirements for three consecutive months. On March 31, 2003, the debt yield fell below the 12.75% minimum threshold and, therefore, the excess cash flow produced by the mortgaged hotels was retained in the restricted cash account starting on May 1, 2003. The cash that was retained in the restricted cash account has since been released by Merrill Lynch Mortgage for capital expenditures and scheduled principal and interest payments. As of March 1, 2004, no cash was being retained in the restricted cash account. However, the debt yield and the debt service coverage ratio continue to remain below the minimum requirements.

Through our wholly-owned subsidiaries, we owe approximately $10.6 million under industrial revenue bonds secured by the Holiday Inns Lawrence, Kansas and Manhattan, Kansas hotels. For the year ended December 31, 2003, the cash flows of the two hotels were insufficient to meet the minimum debt service coverage ratio requirements. The trustee of the bonds may give notice of default, at which time we could remedy the default by depositing with the trustee an amount currently estimated at approximately $0.4 million. In the event a default is declared and not cured, the two hotels would be subject to foreclosure and we would be obligated to reimburse bondholders pursuant to a partial guaranty of approximately $1.4 million. In addition, we could be obligated to pay our franchisor liquidated damages in the amount of $1.3 million.

On September 30, 2003, mortgage debt of approximately $7.0 million of Macon Hotel Associates, L.L.C. became due, which maturity has been extended to June 30, 2004. We own 60% of Macon Hotel

The restrictive covenants in our debt documents may reduce our flexibility in conducting our operations and may limit our ability to engage in activities that may be in our long-term best interest. Our failure to comply with our debt documents, including these restrictive covenants, may result in additional interest being due and would constitute an event of default, in some cases with notice or the lapse of time, that, if not cured or waived, could result in the acceleration of the defaulted debt and the sale or foreclosure of the affected hotels. As noted above, under certain circumstances the termination of a hotel franchise agreement could also result in the same effects. A foreclosure would result in a loss of any anticipated income and cash flow from, and our invested capital in, the affected hotel. No assurance can be given that we will be able to repay, through financings or otherwise, any accelerated indebtedness or that we will not lose all or a portion of our invested capital in any hotels that we sell in such circumstances.

A significant portion of our indebtedness is subject to variable interest rates. In the future, we may incur additional indebtedness bearing interest at a variable rate, or we may be required to refinance our existing indebtedness at higher interest rates. Accordingly, increases in interest rates will increase our interest expense and adversely affect our cash flow, reducing the amounts available to make payments on our indebtedness, fund our operations and our capital expenditure program, make acquisitions or pursue other business opportunities.

Our ability to make payments on and to refinance our indebtedness and to fund our operations, planned capital expenditures and other needs will depend on our ability to generate cash in the future. Various factors could adversely affect our ability to meet operating cash requirements, many of which are subject to the operating risks inherent in the lodging industry and therefore are beyond our control. These risks include the following:


	•	Dependence on business and leisure travelers, which have been and continue to be affected by threats of terrorism, or other outbreaks of hostilities, and may otherwise fluctuate and be seasonal;

	•	Cyclical overbuilding in the lodging industry;

	•	Varying levels of demand for rooms and related services;

	•	Competition from other hotels, motels and recreational properties, some of which may be owned or operated by companies having greater marketing and financial resources than we do;

	•	Decreases in air travel;

	•	Fluctuations in operating costs;

	•	Changes in governmental laws and regulations that influence or determine wages or required remedial expenditures;

	•	Changes in interest rates and the availability of credit; and

	•	The perception of the lodging industry and companies in the debt and equity markets.

The value of our hotels is heavily dependent on their cash flows. If cash flow declines, the hotel values could suffer impairment and the ability to repay or refinance our debt could also be adversely affected. Factors affecting the performance of our hotels include, but are not limited to, construction of competing hotels in the markets served by our hotels, loss of franchise affiliations, the need for renovations, the effectiveness of renovations or repositionings in attracting customers, changes in travel patterns and adverse economic conditions.

We may not be able to fund future capital needs, including necessary working capital, funds for capital expenditures or acquisition financing, from operating cash flow. Consequently, we may need to rely on third-party sources to fund our capital needs. We may not be able to obtain the financing on favorable terms or at all, which could materially and adversely affect us. Any additional debt we incur will increase our leverage, which would reduce our operational flexibility and increase our risk exposure. Our access to third-party sources of capital depends, in part, on:


	•	general market conditions;

	•	the market’s perception of our growth potential;

	•	our current debt levels and property encumbrances;

	•	our current and expected future earnings;

	•	our cash flow and cash needs; and

	•	the market price per share of our common stock.

With the net proceeds of this offering, we intend to pursue a full range of growth opportunities, including identifying hotels for renovation, repositioning, acquisition or investment. We cannot assure you that the execution of our growth strategy will produce improved financial performance at the affected hotels. We compete for growth opportunities with national and regional hospitality companies, many of which have greater name recognition, marketing support and financial resources than we do. Our ability to make acquisitions and investments is dependent upon, among other things, our relationships with owners of existing hotels, our ability to identify suitable joint venture partners and to identify and consummate joint venture opportunities, financing acquisitions and successfully integrating new hotels into our operations. We cannot assure you that suitable hotels for acquisition, investment, management or rebranding, or a desired nationally recognized brand in a particular market, will be available on favorable terms or at all. Our failure to compete successfully for acquisitions, to finance those acquisitions on favorable terms, or to attract or maintain relationships with hotel owners and major hotel investors, or to achieve favorable returns on investments in hotel acquisitions, renovations and repositionings, could adversely affect our ability to expand our system of hotels. An inability to implement our growth strategy successfully would limit our ability to grow our revenues, net income and cash flow.

We currently have an ownership interest in five of our hotels through joint ventures. We anticipate that a significant portion of any future hotel acquisitions will be made through joint ventures, although no assurance can be given that we will identify suitable joint venture partners or opportunities or enter into joint venture agreements on favorable terms or at all. We generally will not be in a position to exercise sole decision-making authority regarding the hotels owned through such joint ventures. Investments in joint ventures may, under certain circumstances, involve risks not present when a third party is not involved, including the possibility that joint venture partners might become bankrupt or fail to fund their share of

required capital contributions. Joint venture partners may have business interests, strategies or goals that are inconsistent with our business interests, strategies or goals and may be, and in cases where we have a minority interest will be, in a position to take actions contrary to our policies, strategies or objectives. Joint venture investments also entail a risk of impasse on decisions, such as acquisitions or sales, because neither we nor our joint venture partner would have full control over the joint venture. Any disputes that may arise between us and our joint venture partners may result in litigation or arbitration that could increase our expenses and could prevent our officers and/or directors from focusing their time and effort exclusively on our business strategies. Consequently, actions by or disputes with our joint venture partners might result in subjecting hotels owned by the joint venture to additional risks. In addition, we may in certain circumstances be liable for the actions of our third-party joint venture partners.

In accordance with the requirements of SOP 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code, we adopted fresh start reporting effective November 22, 2002. Because SOP 90-7 required us to reset our assets and liabilities to current fair value, our financial position, results of operations and cash flows for periods ending after November 22, 2002 will not be comparable to the financial position, results of operations and cash flows reflected in our historical financial statements for periods ending on or prior to November 22, 2002 included elsewhere in this prospectus. The use of fresh start reporting will make it difficult to assess our future prospects based on historical performance.

On December 20, 2001, Lodgian and substantially all of our subsidiaries that owned hotels filed for voluntary reorganization under Chapter 11 of the Bankruptcy Code. Lodgian and affiliates owning 78 hotels officially emerged from bankruptcy on November 25, 2002. However, the adverse publicity and news coverage regarding our Chapter 11 reorganization and financial condition and performance could adversely affect our operations going forward. Our bankruptcy filing had an adverse affect on our credit standing with our lenders, certain suppliers and other trade creditors. This can increase our costs of doing business and can hinder our negotiating power with our lenders, certain suppliers and other trade creditors. The failure to negotiate favorable terms could adversely affect us. Though we have emerged from Chapter 11, the distribution of shares to the general unsecured creditors is not complete as we continue to reconcile the claims made by these creditors. Until this process is complete, we will continue to incur expenses with respect to the reorganization process.

We incurred cumulative net losses of $320.0 million from January 1, 1999 through December 31, 2003 and had an accumulated deficit of $50.1 million as of December 31, 2003. Our ability to improve our performance to achieve profitability is dependent upon a recovery in the general economy, combined with an improvement in the lodging industry specifically, and the successful implementation of our business strategy. Our failure to improve our performance could have a material adverse effect on our business, results of operations, financial condition, cash flow, liquidity and prospects. The economic downturn which commenced in early 2001 and the terrorist attacks of September 11, 2001 and the subsequent threat of terrorism resulted in a sharp decline in demand for hotels and continued to affect our results during 2002 and 2003. The lodging industry experienced some recovery during the second half of 2003, but we were not able to benefit fully from the recovery due to deferred capital expenditures and renovation displacement at some of our hotels. Although Smith Travel Research recently forecasted RevPAR growth for the U.S. lodging industry in 2004 due to rising occupancy and rates and an improving economy, this forecast does not apply specifically to our portfolio of hotels. As a result, we may not realize some or any of the benefits of that growth, particularly as some of our hotels are still under renovation and some need to be renovated.

The terrorist attacks of September 11, 2001 and the continued threat of terrorism, including changing threat levels announced by the U.S. Department of Homeland Security, have had a negative impact on the lodging industry and on our hotel operations from the third quarter of 2001 to the present. These events have caused a significant decrease in occupancy and ADR in our hotels due to disruptions in business and leisure travel patterns and concerns about travel safety. In particular, major metropolitan area and airport hotels have been adversely affected by concerns about air travel safety and a significant overall decrease in the amount of air travel. We believe the uncertainty associated with subsequent terrorist threats and incidents, military conflicts and the possibility of hostilities with other countries may continue to hamper business and leisure travel patterns and our hotel operations for the foreseeable future, and if these matters worsen the effects could become materially more adverse.

We currently have 14 hotels and three land parcels listed as assets available for sale; however, real estate assets generally cannot be sold quickly. No assurance can be given that we will be able to sell one or more of these hotels on favorable terms or at all or that franchisor approval for transfer of a brand can be obtained when requested. A franchisor may refuse to approve a transfer in its sole discretion. Furthermore, even if we are able to sell these hotels, we may not be able to realize any cash proceeds from the sales after paying off the related lenders. Additionally, we may not be able to sell these hotels in sufficient time to apply the proceeds to fund our working capital, capital expenditures and debt service needs. If a franchise agreement relating to a hotel is in default or is terminated by the franchisor, the value of the hotel could decline, perhaps substantially. In the future, we may not be able to vary our portfolio of hotels or other real estate promptly in response to changes in hotel performance or economic or other conditions. This inability to respond promptly could adversely affect us.

The expenses of owning a hotel are not necessarily reduced when circumstances such as market factors and competition cause a reduction in revenues from the hotel. We could be adversely affected by:


	•	Rising interest rate levels;

	•	The lack of available financing on favorable terms, or at all, to fund our working capital, debt service requirements, planned capital expenditures or other cash needs;

	•	Increased costs associated with wages, employee benefits and taxes, property taxes, utilities and insurance; and

	•	Changes in and the cost of compliance with government regulations, including those governing, environmental, usage, zoning and tax matters.

We may acquire or make investments in hotel companies or hotel portfolios that we believe complement our business. We lack experience in making these types of acquisitions. As a result, our ability to identify prospects, conduct acquisitions and properly manage the integration of acquisitions is unproven. If we fail to properly evaluate, execute and integrate hotel acquisitions or investments, we may


	•	Identifying suitable acquisition or investment candidates, performing appropriate due diligence, identifying potential liabilities and negotiating favorable terms for acquisitions and investments;

	•	Reducing our working capital and hindering our ability to expand or maintain our business, including making capital expenditures and funding operations;

	•	The potential distraction of our management, diversion of our resources and disruption of our business;

	•	Competing for acquisition opportunities with competitors that are larger than we are or have greater financing and other resources than we have;

	•	Accurately forecasting the financial impact of an acquisition or investment; and

	•	Effectively integrating acquired companies or investments and achieving expected performance.

We are self-insured up to certain amounts with respect to our insurance coverages. Should a material uninsured loss or a loss in excess of insured limits occur with respect to any particular property, we could lose our capital invested in the property, as well as the anticipated income and cash flow from the property and, in the case of debt which is with recourse to us, would remain obligated for any mortgage debt or other financial obligations related to the property. We cannot assure you that material losses in excess of insurance coverage or estimated reserves will not occur in the future or that we will not be required to pay a significant deductible for such coverage. Any such loss would have an adverse effect on us. In addition, if we are unable to maintain insurance that meets our debt and franchise agreement requirements, and if we are unable to amend or waive those requirements, it could have a material adverse effect on us.

There is no single competitor or small number of competitors that are dominant in the lodging industry. We generally operate in areas that contain numerous other competitors, some of which may have substantially greater resources than we have. Competitive factors in the lodging industry include, among others, supply in a particular market, franchise affiliation, reasonableness of room rates, quality of accommodations, service levels, convenience of locations and amenities customarily offered to the traveling public. There can be no assurance that demographic, geographic or other changes in markets will not adversely affect the convenience or desirability of the locales in which our hotels operate, competing hotels will not pose greater competition for guests than presently exists, or that new hotels will not enter such locales. New or existing competitors could offer significantly lower rates or greater conveniences, services or amenities or significantly expand or improve existing facilities or introduce new facilities in markets in which we compete. Any of these factors could materially and adversely affect us.

Our operating results depend upon our ability to achieve and maintain adequate room rates and occupancy levels in our hotels. Adverse economic or other conditions in markets, such as Pittsburgh, in which we have multiple hotels may negatively affect our occupancy and ADR, which in turn would negatively affect our revenue and could materially and adversely affect our results of operations. Our hotels

Demand for accommodations, and the resulting cash flow, vary seasonally. The high season tends to be the summer months for hotels located in colder climates and the winter months for hotels located in warmer climates. Aggregate demand for accommodations at the hotels in our portfolio is, however, lowest during the winter months. Levels of demand are dependent upon many factors that are beyond our control, including general and local economic conditions and changes in levels of leisure and business-related travel. Our hotels depend on both business and leisure travelers for revenues. Additionally, our hotels operate in areas that contain numerous other competitive lodging facilities.

There have been a number of changes in our senior management team during the last two years and since our emergence from bankruptcy. Our chief executive officer was hired in July 2003 and our chief financial officer and our chief operating officer were promoted to their positions in October 2003 and May 2002, respectively. If our new management team is unable to develop successful business strategies, achieve our business objectives or maintain effective relationships with employees, suppliers, creditors and customers, our ability to grow our business and successfully meet operational challenges could be impaired.

Our ability to maintain or enhance our competitive position will depend to a significant extent on the efforts and ability of our executive and senior management, particularly our chief executive officer. Our future success and our ability to manage future growth will depend in large part upon the efforts of our management team and on our ability to attract and retain other highly qualified personnel. Competition for personnel is intense, and we may not be successful in attracting and retaining our personnel. Our inability to retain our current management team and attract and retain other highly qualified personnel could hinder our business.

Some of our hotel rooms are booked through third-party travel websites such as Travelocity.com, Expedia.com, Priceline.com and Hotels.com. If these Internet bookings increase, these intermediaries may be able to obtain higher commissions, reduced room rates or other significant contract concessions from us. Moreover, some of these Internet travel intermediaries are attempting to offer hotel rooms as a commodity, by increasing the importance of price and general indicators of quality (such as “three-star downtown hotel”) at the expense of brand identification. We believe that the goal of these Internet intermediaries is to have consumers eventually develop brand loyalties to their reservation systems rather than to our brands. Although most of the business for our hotels is expected to be derived from traditional channels, if the amount of sales made through Internet intermediaries increases significantly, room revenues may flatten or decrease and our profitability may be adversely affected.

As of December 31, 2003, we had approximately $270 million of historical net operating loss carryforwards for federal income tax purposes. To the extent that we do not have sufficient future taxable income to offset these net operating loss carryforwards, unused losses will expire between 2004 and 2023.

A number of states and local governments regulate the licensing of hotels and restaurants, including occupancy and liquor license grants, by requiring registration, disclosure statements and compliance with specific standards of conduct. Occupancy licenses are obtained prior to the opening of a hotel but may require renewal if there is a major renovation. We believe that our hotels are substantially in compliance with these requirements or, in the case of liquor licenses, that they have or will promptly obtain the appropriate licenses. Operators of hotels also are subject to employment laws, including minimum wage requirements, overtime, working conditions and work permit requirements. Compliance with, or changes in, these laws could increase the cost of operating the affected hotels and/or reduce the revenue from our hotels and could otherwise adversely affect our results of operations and financial condition.

Under the Americans with Disabilities Act, or ADA, all public accommodations are required to meet federal requirements related to access and use by disabled persons. These requirements became effective in 1992. Although we have invested and continue to invest significant amounts in connection with ADA-required upgrades to our hotels, a determination that any of our hotels are not in compliance with the ADA could result in a judicial order requiring compliance, imposition of fines or an award of damages to private litigants.

Under various federal, state, local and foreign environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for noncompliance with applicable environmental and health and safety requirements and for the costs of investigation, monitoring, removal or remediation of hazardous or toxic substances. These laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of hazardous or toxic substances. The presence of these hazardous or toxic substances on a property could also result in personal injury or property damage or similar claims by private parties. In addition, the presence of contamination, or the failure to report, investigate or properly remediate contaminated property, may adversely affect the operation of the property or the owner’s ability to sell or rent the property or to borrow funds using the property as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of those substances at the disposal or treatment facility, whether or not that facility is or ever was owned or operated by that person.

The operation and removal of underground storage tanks also are regulated by federal, state and local laws. In connection with the ownership and operation of our hotels, we could be held liable for the costs of remedial action for regulated substances and storage tanks and related claims.

Some of our hotels contain asbestos-containing building materials, or ACBMs. Environmental laws require that ACBMs be properly managed and maintained, and may impose fines and penalties on building owners or operators for failure to comply with these requirements. Third parties may be permitted by law to seek recovery from owners or operators for personal injury associated with exposure to contaminants, including, but not limited to, ACBMs. Operation and maintenance programs have been developed for those hotels which are known to contain ACBMs.

Many, but not all, of our hotels have undergone Phase I environmental site assessments, which generally provide a nonintrusive physical inspection and database search, but not soil or groundwater analyses, by a qualified independent environmental consultant. The purpose of a Phase I assessment is to identify potential sources of contamination for which the hotel owner or others may be responsible. None of the Phase I environmental site assessments revealed any past or present environmental liability that we

Some of our hotels may contain microbial matter such as mold, mildew and viruses. The presence of microbial matter could adversely affect our results of operations. Phase I assessments performed on certain of our hotels in connection with our recent refinancings identified mold in four of our hotels. We have completed all necessary remediation for these properties. In addition, if any hotel in our portfolio is not properly connected to a water or sewer system, or if the integrity of such systems are breached, microbial matter or other contamination can develop. If this were to occur, we could incur significant remedial costs and we may also be subject to private damage claims and awards.

Any liability resulting from noncompliance or other claims relating to environmental matters could have a material adverse effect on us and our insurability for such matters in the future.

The public offering price of the shares of common stock is substantially higher than the net tangible book value per share of our common stock. As a result, each stockholder purchasing in this offering will experience immediate dilution of $ per share of our common stock. Dilution is the difference between the public offering price per share and the net tangible book value per share of common stock. For more information about how net tangible book value per share is calculated, please see “Dilution” below.

Four stockholders, including our affiliates Oaktree Capital Management, LLC (“Oaktree”) and The Blackstone Group (“Blackstone”), beneficially owning an aggregate of approximately 3,817,807 shares of our common stock, are parties to a registration rights agreement with us that provides for mandatory and supplemental registration rights for such stockholders’ shares until they can be sold without restriction under Rule 144(k) under the Securities Act of 1933. We have filed a resale registration statement with respect to those shares. That registration statement is not yet effective, but may be declared effective promptly. Three of the four stockholders who are parties to the registration rights agreement, beneficially owning approximately 3,736,197 shares of common stock, are also parties to lock-up agreements with respect to their shares covered by that agreement until the earlier of December 15, 2004 or the date that is 180 days after the effectiveness of the registration statement of which this prospectus is a part. See “Shares Eligible for Future Sale — Lock-Up Agreements.” However, subject to these lock-up agreements, the holders of shares of common stock with registration rights may, upon effectiveness of our resale registration statement, sell those shares in the public market. Sales of substantial amounts of common stock or the perception that those sales could occur may adversely affect the market price for our common stock.

Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”), which is serving as sole book-running and lead managing underwriter for this offering, and its affiliates will receive benefits from this offering in addition to the underwriting discounts for the shares of common stock offered hereby. In November 2002, in connection with our emergence from Chapter 11 bankruptcy, we received exit financing of $302.7 million of senior and mezzanine debt from Merrill Lynch Mortgage, an affiliate of Merrill Lynch. This financing is currently secured by 54 of our hotels and as of December 31, 2003 had an outstanding balance of $299.3 million. In addition, Merrill Lynch is the owner of 781,836 shares of our common stock, including warrants to purchase 12,864 shares of our common stock. A portion of the net

The rules of the American Stock Exchange allow the exchange to de-list securities if it determines that a company’s securities fail to meet its guidelines in respect of corporate net worth, public float, number of shareholders, aggregate market value of shares or price per share. We cannot assure purchasers of our common stock that we will continue to meet the American Stock Exchange listing requirements. If our common stock is delisted from the American Stock Exchange, it would likely trade on the OTC Bulletin Board, which is a quotation service for securities that are not listed or traded on a national securities exchange. The OTC Bulletin Board is viewed by most investors as less desirable and a less liquid marketplace. Thus, delisting from the American Stock Exchange could result in investors being unable to liquidate their investment or make trading our shares more difficult or expensive for investors, leading to declines in share price. It would also make it more difficult for us to raise additional capital. In addition, we would incur additional costs under state blue sky laws to sell equity if our common stock is not traded on a national securities exchange.

The market price of our common stock could decline and fluctuate significantly in response to various factors, including:


	•	Actual or anticipated variations in our results of operations;

	•	Announcements of new services or products or significant price reductions by us or our competitors;

	•	Market performance by our competitors;

	•	Future issuances of our common stock, or securities convertible into or exchangeable or exercisable for our common stock, by us directly, or the perception that such issuances are likely to occur;

	•	Sales of our common stock by stockholders or the perception that such sales may occur in the future;

	•	The size of our market capitalization;

	•	Loss of our franchises;

	•	Default on our indebtedness and/or foreclosure of our properties;

	•	Changes in financial estimates by securities analysts; and

	•	Domestic and international economic, legal and regulatory factors unrelated to our performance.

We have not yet paid any dividends on our common stock, and we do not intend to do so in the foreseeable future. As a result, a purchaser’s only return on its investment, if any, will occur on the sale of our common stock.

Our certificate of incorporation and bylaws, as well as Delaware corporate law, contain provisions that could delay or prevent changes in our management or a change of control that you might consider favorable and may prevent you from receiving a takeover premium for your shares. These provisions include, for example:


	•	Authorizing the issuance of preferred stock, the terms of which may be determined at the sole discretion of the board of directors;

	•	Establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted on by stockholders at meetings; and

	•	Requiring all stockholder action to be taken at a duly called meeting, not by written consent.

In addition, we have entered, or will enter, into employment contracts with certain of our employees that contain change of control provisions. See “Management — Employment Agreements.”

This prospectus contains forward-looking statements. These statements include statements relating to our plans, strategies, objectives, expectations, intentions and adequacy of resources, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words “believes,” “anticipates,” “expects,” “intends,” “plans,” “estimates,” and “projects” and similar expressions are intended to identify forward-looking statements. These forward-looking statements reflect our current views with respect to future events and the impact of those events on our business, financial condition, results of operations, cash flow, liquidity and prospects and are subject to many risks and uncertainties, including, among other things:


	•	Matters identified under “Risk Factors” in this prospectus;

	•	The effects of regional, national and international economic conditions, including economic conditions in our individual markets;

	•	Competitive conditions in the lodging industry and increases in room capacity;

	•	The effects of actual and threatened terrorist attacks and international conflicts and their impact on domestic and international travel;

	•	The effectiveness of changes in management and our ability to retain qualified individuals to serve in senior management positions;

	•	Requirements of franchise agreements, including the right of franchisors to immediately terminate their respective agreements if we breach certain provisions, and the cost of franchise renewals;

	•	Seasonality of the hotel business;

	•	The financial condition of the airline industry and its impact on air travel;


	•	The effect that Internet reservation channels may have on the rates that we are able to charge for hotel rooms;

	•	Increases in the cost of debt and our continued compliance with the terms of our loan agreements;

	•	Our high level of secured debt;

	•	Our ability to continue to meet the listing requirements of the American Stock Exchange;

	•	The effect of self-insured claims in excess of our reserves, or our ability to obtain adequate property and liability insurance to protect against losses or to obtain insurance at reasonable rates;

	•	Potential litigation, environmental claims, and/or governmental inquiries and investigations;

	•	Laws and regulations applicable to our business, including federal, state and local hotel, resort, restaurant and land use regulations, environmental, employment, labor and disability laws and regulations; and

	•	The short time that the public market for our common stock has existed.

Any of these risks and uncertainties could cause actual results to differ materially from historical results or those anticipated. Although we believe the expectations reflected in these forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be attained and caution you not to place undue reliance on such statements. We undertake no obligation to publicly update or revise any forward-looking statements to reflect current or future events or circumstances or their impact on our business, financial condition, results of operations, cash flow, liquidity and prospects.

We estimate that the net proceeds of this offering will be $ million, assuming an offering price of $ per share. We intend to use approximately $ million of the net proceeds to redeem all of the shares of our outstanding mandatorily redeemable 12.25% cumulative Series A Preferred Stock (the “Preferred Stock”). We intend to use approximately $ million of the net proceeds for capital expenditures related to renovations and repositionings of selected hotels. We will use any remaining net proceeds for general corporate purposes, including funding our growth strategy.

Merrill Lynch, which is serving as sole book-running and lead managing underwriter for this offering, owns 473,867 shares of Preferred Stock that will be redeemed with approximately $ million of the net proceeds from this offering. In addition, Oaktree and Blackstone, representatives of which serve on our board of directors, and/or affiliates own 1,785,082 shares and 789,779 shares, respectively, of Preferred Stock that will be redeemed with approximately $ million and $ million of the net proceeds from this offering, respectively.

See also “Related Party Transactions” and “Underwriting” for more information on relationships between us and Merrill Lynch, Oaktree and/or Blackstone, as the case may be.

We emerged from reorganization proceedings under Chapter 11 on November 25, 2002. Pursuant to our First Amended Joint Plan of Reorganization confirmed by the Bankruptcy Court on November 5, 2002 (the “Joint Plan of Reorganization”), our previous common stock was cancelled and new common stock became available for issuance. The new common stock began trading on the American Stock Exchange on January 28, 2003 under the symbol “LGN.” The following table sets forth, for the periods indicated, the high and low closing prices of our common stock reported on the American Stock

There is no meaningful market information relating to the price of our common stock prior to the listing of the new common stock on the American Stock Exchange on January 28, 2003.

As of March 1, 2004, there were 6,843,149 shares of our common stock issued and outstanding that were held by approximately 1,664 stockholders of record. On , the last reported sale price of our common stock on the American Stock Exchange was $ per share, after giving effect to the reverse stock split.

We have not declared or paid any cash dividends on our common stock and our board of directors does not anticipate declaring or paying any cash dividends in the foreseeable future. We anticipate that all of our earnings and other cash resources, if any, will be retained to fund our business and will be available for other strategic opportunities that may develop. Future dividend policy will be subject to the discretion of our board of directors, and will be contingent upon our results of operations, financial position, cash flow, liquidity, capital expenditure plan and requirements, general business conditions, restrictions imposed by financing arrangements, if any, legal and regulatory restrictions on the payment of dividends and other factors that our board of directors deems relevant.


	•	On an actual basis, which reflects our capitalization as of December 31, 2003 without any adjustments to reflect subsequent or anticipated events; and

	•	On an as adjusted basis, which reflects the issuance and sale by us of shares of common stock in this offering at an assumed offering price of $ per share, deduction of the estimated underwriting discounts and commissions and offering expenses payable by us and the application of the estimated net proceeds to us, as described above under “Use of Proceeds.”

You should read the information in this table together with our consolidated financial statements, including the notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus.


	•	shares of our common stock reserved for issuance under our stock incentive plan or our outstanding warrants;

	•	shares of our common stock issuable by us if the underwriters exercise their overallotment option;

	•	$53.2 million of long-term debt associated with properties held for sale, in accordance with U.S. generally accepted accounting principles (“GAAP”); and

	•	$16.6 million of current portion of long-term debt.

As of December 31, 2003, our net tangible book value was approximately $ million, or $ per share of common stock. Net tangible book value per share represents the amount of our total tangible assets (which includes deferred acquisition costs) less total liabilities, divided by the number of shares of common stock outstanding. Dilution in net tangible book value per share represents the difference between the public offering price per share and the net tangible book value per share immediately after this offering.

After giving effect to the sale of shares of common stock at an assumed public offering price of $ per share and before deducting underwriting discounts and estimated offering expenses, our pro forma net tangible book value at December 31, 2003 would have been approximately $ million, or $ per share of common stock. This represents an immediate increase in net tangible book value of $ per share to existing common stockholders and an immediate decrease in net tangible book value of $ per share to new investors purchasing shares of common stock in this offering. The following table illustrates this per share dilution to new investors:

The following table sets forth, as of December 31, 2003, the differences between our existing stockholders and new investors with respect to the number of shares issued by us, the total consideration paid and the average price per share:

Assuming full exercise of the underwriters’ overallotment option, the percentage of shares held by existing common stockholders would be % of the total number of shares of common stock to be outstanding after this offering, and the number of shares held by new investors would be increased to % of the total number of shares of common stock to be outstanding after the offering.

We present, in the table below, selected financial data derived from our historical financial statements for the five years ended December 31, 2003. On November 22, 2002, in connection with our emergence from Chapter 11 and in accordance with generally accepted accounting principles requiring fresh start reporting, we restated our assets and liabilities to reflect their fair values. As a result, our financial statements for periods subsequent to November 22, 2002 are those of a new reporting entity and are not comparable with the financial statements for the periods on or prior to November 22, 2002. For this reason, we use the term “successor” when we refer to periods subsequent to November 22, 2002 and the term “predecessor” when we refer to periods prior on or prior to November 22, 2002.

In addition, in accordance with generally accepted accounting principles, our results of operations distinguish between the results of operations of those properties which we plan to retain in our portfolio for the foreseeable future, referred to as “continuing operations,” and the results of operations of those properties which have been sold or have been identified for sale, referred to as “discontinued operations.”

You should read the financial data below in conjunction with our consolidated financial statements, including the notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus.

The financial data were extracted from our audited financial statements as of December 31, 2003 and 2002 and for the year ended December 31, 2003, the period November 23, 2002 to December 31, 2002, the period January 1, 2002 to November 22, 2002, and the year ended December 31, 2001. The income statement data for 2000 and the balance sheet data as of December 31, 2001 and 2000 were based upon financial statements previously reported by us but were subsequently adjusted to distinguish between our continuing operations and our discontinued operations. The financial data for 1999 were based upon financial statements previously reported by us but were subsequently adjusted to distinguish between our continuing operations and our discontinued operations.


(1)	The number of shares in the successor period ended December 31, 2002 represents the shares issued on the consummation of the first of the two plans of reorganization in November 25, 2002. The 28,479,837 old shares were cancelled and 7,000,000 shares were issued.

(2)	Reported long-term debt was affected in 2001 by our filing for Chapter 11. On the filing of Chapter 11, all our debts (except the debt relating to a non-filed entity) and certain other liabilities were classified as liabilities subject to compromise. On emergence from Chapter 11, some of our debt was discharged. The remaining long-term debt and other settled claims were reclassified out of liabilities subject to compromise to long-term debt (if long-term) and current liabilities (if short-term).

(3)	The Preferred Stock was issued on November 25, 2002. At December 31, 2002, the Preferred Stock was classified between long-term debt and equity on our consolidated balance sheet, called the mezzanine section. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 150, which was effective on July 1, 2003, we reclassified the Preferred Stock to long-term debt. The Preferred Stock outstanding at December 31, 2003 was $142.2 million compared to $126.5 million at December 31, 2002. In addition, the dividend for the period July 1, 2003 to December 31, 2003 was reported in interest expense. In accordance with SFAS No. 150, we continued to show the dividends for the periods January 1, 2003 to June 30, 2003 and November 23, 2002 to December 31, 2002 as deductions from retained earnings.

The following discussion should be read in conjunction with our consolidated financial statements and accompanying notes, which appear elsewhere in this prospectus. It contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward looking statements as a result of various factors, including those discussed below and elsewhere in this prospectus, particularly under the heading “Risk Factors.”

We are one of the largest independent owners and operators of full-service hotels in the United States in terms of our number of guest rooms and gross annual revenues, as reported by Hotel & Motel Management Magazine in September 2003. We are considered an independent owner and operator because we do not operate our hotels under our own name. We operate substantially all of our hotels under nationally recognized brands, such as “Crowne Plaza,” “Holiday Inn” and “Marriott.” As of March 1, 2004, we operated 92 hotels with an aggregate of 17,417 rooms, located in 30 states and Canada. Of the 92 hotels, 78 hotels, with an aggregate of 14,348 rooms, are part of our continuing operations, while 14 hotels, with an aggregate of 3,069 rooms, are being held for sale and classified as discontinued operations. Our portfolio of 92 hotels consists of:


	•	87 hotels that we wholly own and operate through subsidiaries;

	•	four hotels that we operate in joint ventures in which we have a 50% or greater voting equity interest and exercise control; and

	•	one hotel that we operate in a joint venture in which we have a 30% non-controlling equity interest.

We consolidate all of these entities in our financial statements, other than the one entity in which we hold a non-controlling equity interest and for which we account under the equity method.

On December 20, 2001, due to a number of factors, including our heavy debt load, a lack of available funds to maintain the quality of our hotels, a weakening U.S. economy, and the severe decline in travel in the aftermath of the terrorist attacks on September 11, 2001, we filed for voluntary reorganization under Chapter 11 of the Bankruptcy Code. At the time of the Chapter 11 filing, our portfolio consisted of 106 hotels.

Following the consummation of our two plans of reorganization, we emerged from Chapter 11 with 97 hotels, eight of the hotels having been conveyed to a lender in satisfaction of outstanding debt obligations and one having been returned to the lessor of a capital lease. Of the portfolio of 97 hotels, 78 hotels emerged from Chapter 11 on November 25, 2002, 18 hotels emerged from Chapter 11 on May 22, 2003 and one hotel never filed under Chapter 11.

Our strategy is to own and operate a portfolio of profitable, well-maintained and appealing hotels at superior locations in strong markets. In 2003, we developed a portfolio improvement strategy to accomplish this by:


	•	renovating and repositioning certain of our existing hotels to improve performance;

	•	divesting hotels that do not fit this strategy or that are unlikely to do so without significant effort or expense; and

	•	acquiring selected hotels that better fit this strategy.

In accordance with this strategy and our efforts to reduce debt and interest costs, in 2003 we identified 19 hotels, our only office building property and three land parcels for sale. During 2003 and the first two months of 2004, we sold five hotels and the office building for an aggregate sales price of $24.6 million. Of the $23.2 million aggregate net proceeds from the sales of these assets, we used

Below is a summary of our results of operations, which are presented in more detail in “— Results of Operations — Continuing Operations”:


	•	Revenues declined in 2003 and the 2002 Combined Period as a result of a lack of available funds to maintain the quality and competitiveness of our hotels, the weak U.S. economy and the severe decline in the lodging industry in the aftermath of the terrorist attacks of September 11, 2001. Though the lodging industry experienced some recovery during the second half of 2003, we were not able to benefit fully from the recovery due to deferred capital expenditures and renovation displacement at some of our hotels.

	•	Operating expenses declined in 2003 and the 2002 Combined Period primarily as a result of lower revenues. As revenues declined, variable expenses also fell. Operating expenses also declined, in part, as a result of our cost reduction efforts in the wake of the weak economy and lower revenues.

	•	Interest expense declined in 2003 and the 2002 Combined Period because we were able to reorganize our debt as part of the Chapter 11 proceedings. The reorganization resulted in lower principal amounts on some of our debt due to debt forgiveness, and lower interest rates on other of our debt. Also, during the bankruptcy proceedings, we did not pay interest on certain debt, as approved by the Bankruptcy Court.

	•	Depreciation and amortization expense declined in 2003 and the 2002 Combined Period due to the restatement of our assets to fair value as part of fresh start reporting. Since we are depreciating a lower asset base, our depreciation in 2003 was significantly less than in the 2002 Combined Period.

	•	During 2003, after identifying assets held for sale, we recorded impairment charges where the carrying values exceeded the estimated selling prices, net of selling costs. We also analyzed our assets held for use at December 31, 2003 and recorded impairment charges, as appropriate, when the carrying values exceeded their undiscounted future cash flows. During the 2002 Combined Period, we recorded a significant write down of our hotels as part of our fresh start reporting. We also recorded significant impairment losses in 2001.

As previously discussed, pursuant to the terms of the plan of reorganization approved by the Bankruptcy Court on November 5, 2002, we conveyed eight wholly-owned hotels to the lender in January 2003 in satisfaction of outstanding debt obligations and one wholly-owned hotel was returned to the lessor of a capital lease. The results of operations of these nine hotels are reported in discontinued operations in our consolidated statement of operations. Due primarily to the application of fresh start reporting in November 2002, in which these and other assets were adjusted to their respective fair values, there were no gains or losses on these transactions.

In addition, pursuant to the strategy outlined above, at December 31, 2003, 18 of our hotels and three land parcels were held for sale and reported in discontinued operations. Discontinued operations also include one hotel and one office building sold in 2003. Accordingly, as of December 31, 2003, there were 28 hotels and one office building reported in discontinued operations. The assets held for sale at December 31, 2003 and the liabilities related to these assets are separately disclosed as current assets and current liabilities, respectively, in our consolidated balance sheet.

Where the carrying values of the assets held for sale exceeded their estimated fair values, net of selling costs, we reduced the carrying values and recorded impairment charges. Fair values were determined using market prices and where the estimated selling prices, net of selling costs, exceeded the carrying values, no adjustments were recorded. We classify an asset as held for sale if we expect to dispose of it within one year and it satisfies the other criteria specified by SFAS No. 144. While we believe the completion of these dispositions is probable, the sale of these assets is subject to market conditions and we cannot provide assurance that we will finalize the sale of all or any of these assets on favorable terms or at all.

Summarized below is certain financial data related to the five hotels and one office building sold between November 1, 2003 and March 1, 2004:

The results of operations of the other 78 hotels, 77 of which we consolidate in our financial statements and one for which we account under the equity method, are reported in continuing operations. Our continuing operations reflect the results of operations of those hotels which we plan to retain in our portfolio for the foreseeable future and exclude results of operations of those hotels held for sale.

Our financial statements are prepared in accordance with GAAP. As we prepare our financial statements, we make estimates and assumptions which 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. Actual results could differ from our estimates. A summary of our significant accounting policies and estimates is included in Note 1 of the notes to our consolidated financial statements. We consider the following to be our critical accounting policies and estimates:

Consolidation policy — All of our hotels are owned by operating subsidiaries. We consolidate the assets, liabilities and results of operations of those hotels where we own at least 50% of the voting equity interest and we exercise control. All of the subsidiaries are wholly owned except for five joint ventures, one of which is not consolidated but is accounted for under the equity method.

When we consolidate hotels in which we own less than 100% of the voting equity interest, we include the assets and liabilities of those hotels in our consolidated balance sheet. The third party interests in the net assets of those hotels are reported as minority interest on our consolidated balance sheet. In addition, our consolidated statement of operations reflects the full revenues and expenses of those hotels and the third party portion of the net income or loss is reported as minority interest in our consolidated statements of operations. If the loss applicable to the minority interest exceeds the minority’s equity, we report the entire loss in our consolidated statement of operations.

When we account for an entity under the equity method, we record only our share of the investment on our consolidated balance sheet and our share of the net income or loss in our consolidated statement of operations. We own a 30% non-controlling equity interest in an unconsolidated joint venture and have included our share of this investment in “other assets” on our consolidated balance sheet. Our share of the net income or loss of the unconsolidated joint venture is shown in “interest income and other” in our consolidated statements of operations. Our investment in this entity at December 31, 2003 was $0.2 million and our share of the loss was $20,000.

Deferral policy — We defer franchise application fees on the acquisition or renewal of a franchise as well as loan origination costs related to new or renewed loan financing arrangements. Deferrals relating to the acquisition or renewal of a franchise are amortized on a straight-line basis over the period of the

Asset impairment — We invest significantly in real estate assets. Property, plant and equipment represent approximately 80% of the total assets on our consolidated balance sheet. Our policy on asset impairment is, therefore, considered critical. Under GAAP, real estate assets are stated at the lower of depreciated cost or fair value, if deemed impaired. We periodically evaluate our real estate assets to determine if there has been any impairment in the carrying value. We record impairment charges if there are indicators of impairment and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying values.

As part of this evaluation, and in accordance with SFAS No. 144, we classify our properties into two categories, assets held for sale and assets held for use.

The fair values of the assets held for sale are based on the estimated selling prices less estimated costs to sell. We determine the estimated selling prices in conjunction with our real estate brokers. The estimated selling costs are based on our experience with similar asset sales. We record impairment charges and write-down respective hotel assets if their carrying values exceed the estimated selling prices less costs to sell. As a result of this evaluation, during 2003, we recorded impairment losses of $5.4 million on assets held for sale.

With respect to assets held for use, we estimate the undiscounted cash flows to be generated by these assets. We then compare the estimated undiscounted cash flows for each hotel with their respective carrying values to determine if there are indicators of impairment. If there are indicators of impairment, we determine the estimated fair values of these assets in conjunction with our real estate brokers. As a result of this evaluation, we recorded impairment losses during 2003 of $12.7 million on assets held for use. In connection with our emergence from Chapter 11, and the application of fresh start reporting in which we were required to restate our assets to fair values, we recorded a net write-down of $222.1 million on our real estate assets during 2002. In 2001, we recorded impairment losses of $67.3 million.

Reorganization items — In accordance with GAAP, income and expenses related to our Chapter 11 proceedings were classified as reorganization items while the respective hotels were in Chapter 11. We continue to incur expenses as a result of the Chapter 11 proceedings but now classify these as general, administrative and other expenses. The classification between reorganization items and operating expenses while we were in Chapter 11 involved judgment on the part of management. In addition, as a result of the separation required between continuing operations and discontinued operations, we allocated the reorganization items incurred during the Chapter 11 proceedings between continuing operations and discontinued operations based on the values assigned to the respective properties subsequent to their emergence from Chapter 11.

Accrual of self-insured obligations — We are self-insured up to certain amounts with respect to employee medical, employee dental, property insurance, general liability insurance, personal injury claims, workers’ compensation, automobile liability and other coverages. We establish reserves for our estimates of the loss that we will ultimately incur on reported claims as well as estimates for claims that have been incurred but not yet reported. Our reserves, which are reflected in accrued liabilities in our consolidated balance sheet, are based on actuarial valuations and our history of claims. Our actuaries incorporate historical loss experience and judgments about the present and expected levels of costs per claim. Trends in actual experience are an important factor in the determination of these estimates. We believe that our estimated reserves for such claims are adequate, however, actual experience in claim frequency and amount could materially differ from our estimates and adversely affect our results of operations, cash flow, liquidity and financial condition. As of December 31, 2003, we had approximately $10 million reserved for such claims.

On November 22, 2002, in connection with our emergence from Chapter 11 and in accordance with GAAP, we applied fresh start reporting. Under fresh start reporting, assets and liabilities are restated to reflect their fair values. As a result, for accounting purposes, our financial statements for periods subsequent to November 22, 2002 are considered to be those of a new reporting entity and are not considered to be comparable with the financial statements for periods on or prior to November 22, 2002. For this reason, we use the term “successor” when we refer to periods subsequent to November 22, 2002, and the term “predecessor” when we refer to periods on or prior to November 22, 2002. Although we are required to make this distinction under GAAP, for purposes of the discussion of results below, we have combined the predecessor’s results for the period January 1, 2002 to November 22, 2002 with the successor’s results for the period November 23, 2002 to December 31, 2002 and refer to it as the “2002 Combined Period.” The differences between periods due to fresh start reporting are explained where necessary.

The discussion below focuses primarily on our continuing operations. In the continuing operations discussions, we compare the results of operations for the last three years for the 77 consolidated hotels that we plan to retain in our portfolio for the foreseeable future.


	•	Room revenues — derived from guest room rentals;

	•	Food and beverage revenues — derived from hotel restaurants, room service, hotel catering and meeting room rentals; and

	•	Other revenues — derived from guests’ long-distance telephone usage, laundry services, parking services, in-room movie services, vending machine commissions, leasing of hotel space and other miscellaneous revenues.

Transient revenues, which generally account for approximately 70% of our room revenues, are revenues derived from individual guests who stay only for brief periods of time without a long-term contract. Demand from groups makes up approximately 23% of our room revenues while our contract revenues (such as contracts with airlines for crew rooms) account for the remaining 7%.

We believe revenues in the hotel industry are best explained by the following three key performance indicators:


	•	Occupancy — computed by dividing total room nights sold by the total available room nights;

	•	Average daily rate (ADR) — computed by dividing total room revenues by total room nights sold; and

	•	Revenue per available room (RevPAR) — computed by dividing total room revenues by total available room nights. RevPAR can also be obtained by multiplying the occupancy by the ADR.

To obtain available room nights for a year, we multiply the number of rooms in our portfolio by the number of days in the year. To obtain available room nights for a hotel sold during the year, we multiply the number of rooms in the hotel by the number of days between January 1 and the date the hotel was sold.

These measures are influenced by a variety of factors, including national, regional and local economic conditions, the degree 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 our hotels experience lower occupancy levels in the fall and winter months (November through


	•	Direct expenses — these expenses tend to vary with available rooms and occupancy. However, hotel level expenses contain significant elements of fixed costs and, therefore, do not decline proportionately with revenues. Direct expenses are further categorized as follows:


	•	Rooms expenses — expenses incurred in generating room revenues;

	•	Food and beverage expenses — expenses incurred in generating food and beverage revenues; and

	•	Other direct expenses — expenses incurred in generating the revenue activities classified in “other revenues.”


	•	Salaries for hotel management;

	•	Advertising and promotion;

	•	Franchise fees;

	•	Repairs and maintenance;

	•	Utilities;

	•	Equipment, ground and building rentals;

	•	Insurance;

	•	Property and other taxes;

	•	Legal and professional fees; and

	•	Corporate overhead, including corporate salaries and benefits, accounting services, directors’ fees, costs for office space and information technology costs. Also included in general, administrative and other expenses for the year ended December 31, 2003 are expenses relating to post-emergence Chapter 11 activities.


	•	Depreciation and amortization expense — depreciation of fixed assets (primarily hotel assets) and amortization of deferred franchise fees.

	•	Impairment charges — charges which were required to write down hotel carrying values to their fair values.


	•	Interest expense, Preferred Stock dividends and amortization of deferred loan fees;

	•	Gain on disposal of assets;

	•	Interest income;

	•	Our 30% share of the income or loss of our non-controlling equity interest in one hotel, for which we account under the equity method; and

	•	Minority interests — our equity partners’ share of the income or loss of the four hotels owned by joint ventures that we consolidate.

The 3.5% decline in room revenues results from the decline in occupancy and ADR. Occupancy declined by 2.6% while ADR declined by 0.8%. The decline in occupancy reflected the general decline in the lodging industry but also reflected, in part, some loss in volume due to renovations being performed at some of our hotels, brand changes and reduced performance at some hotels due to their need for renovation. The decline in ADR was due to lower demand for hotels as well as a change in buying patterns with more guests purchasing discounted rooms via the Internet.

Food and beverage and other revenues were also affected by the decline in occupancy and a reduction in group banquet and catering functions. Other revenues, which declined by 12.2%, were affected by a decline in telephone revenues as a result of the increased usage of cell phones by our guests as well as the availability of free high speed Internet access at some of our hotels.

Some positive signs have started to emerge for the lodging industry. Smith Travel Research recently forecasted RevPAR growth in 2004 due to rising occupancy and room rates and improving supply and demand fundamentals. We expect to realize some of the benefits of that growth but believe that we will not benefit fully from the recovery, particularly as some of our hotels are still under renovation and some need to be renovated. Some of our hotels recently have been renovated and we expect that these and others will benefit from the recovery.

To assist us in isolating the temporary effects on hotels which have undergone major change or are undergoing change, we have identified a group of hotels as “stabilized hotels.” Stabilized hotels are those hotels included in our portfolio on December 31, 2003 which:


	•	Were not held for sale;

	•	Were not undergoing major renovation during 2002 or 2003 (we consider a major renovation to be a renovation which in the aggregate exceeded $5,000 per room); or

	•	Were not subject to brand changes during 2002 or 2003.

The decline in occupancy for our stabilized hotels was lower than the decline in occupancy for our hotels included in continuing operations, as stabilized hotels were not affected by displacements from hotel renovations. However, ADR of stabilized hotels declined more than ADR for all hotels in continuing operations because stabilized hotels included a higher proportion of hotels in need of renovation, resulting in the decline in RevPAR for our stabilized hotels being the same as for all hotels included in our continuing operations.

Direct operating expenses, which vary with revenues, were lower due to lower revenues. However, these expenses were not reduced proportionately with revenues due to fixed costs and the need to maintain minimum levels of service regardless of occupancy declines. Fixed costs primarily relate to salaried employees and benefits.

Rooms expenses on an actual cost per occupied room basis increased as a result of increases in benefit costs (28% of the total increase), enhanced complimentary food and beverage items to guests enrolled in our brand loyalty programs (31% of the total increase) and general cost increases for expendable items used in the rooms department. Benefit costs include group health insurance, our 401(k) plan and workers’ compensation. Due to declining room demand in the first half of 2003 and a shift in room demand to Internet booking sites that provide discounted room rates, we were unable to achieve gains in ADR to offset these cost increases.

The food and beverage department benefited from our improved purchasing program and greater controls on inventory, partially offset by increased benefit costs.

Other expenses decreased by $0.7 million due in part due to a $0.4 million decline in telephone expenses as a result of increased usage of cell phones by our guests.

We continued to realize cost efficiencies through the negotiation of national purchase contracts for all of our hotels. Through such contracts, we have benefited from lower unit costs on some of our routinely purchased items.

General, administrative and other expenses were $5.7 million higher in 2003 as a result of increases in the following:


	•	We incurred $4.6 million in legal, professional and other costs related to the Chapter 11 proceedings. Prior to our emergence from Chapter 11, these costs would have been classified as reorganization expenses.

	•	Insurance costs increased $1.7 million due to increased insurance premium costs and safety training programs;

	•	Utility costs increased $1.6 million due to increases in rates and increases in consumption caused by severe weather conditions in the Northeast;

	•	Ground and property rent increased $0.5 million due to escalation clauses in the lease agreements; and

	•	Repairs and maintenance costs increased $0.4 million due to enhanced preventative maintenance programs as well as to delayed renovations on some of our hotels.


	•	Legal and other professional fees decreased by approximately $1.2 million partially as a result of our reduced reliance on external professional services and also as a result of the resolution of a number of litigation cases through the Chapter 11 proceedings;

	•	Equipment rentals decreased by $0.5 million as a result of the initiation of improved lease programs for hotel vans, copiers and other equipment;

	•	Franchise fees decreased by $0.4 million. Substantially all of our franchise fees are revenue-based and, therefore, fell as a result of the reduction in revenues; and

	•	Bad debt expense decreased by $1.8 million. This was partially due to the release of a previous reserve during 2003 of $0.8 million that was no longer needed and an improvement in our portfolio as compared to the 2002 Combined Period.

Depreciation and amortization expense declined by $13.9 million. Depreciation expense was reduced as a result of fresh start reporting. As part of fresh start reporting, we were required to adjust our assets to fair values and, as a result, recorded a net write-down of fixed assets of $193.2 million. After implementing fresh start reporting, our monthly depreciation decreased by $1.2 million ($14.4 million annualized). This decrease was partially offset by an increase in amortization of deferred franchise fees due to an increase in the fair values of deferred franchise fees. Amortization of deferred franchise fees increased by approximately $34,000 per month ($0.4 million annualized).

The impairment of long-lived assets of $12.7 million recorded during 2003 represents reductions made to the carrying values of certain hotels held for use, to bring them in line with their estimated fair values.

Interest income and other for the 2002 Combined Period included $4.4 million of gain on extinguishment of debt. This gain related to discharge of a promissory note in the name of Macon Hotel Associates, LLC (“MHA”), a 60% owned subsidiary. The lender discharged the indebtedness of $3.9 million plus related accrued interest approximating $0.7 million in exchange for payment by MHA of $0.2 million.

The Preferred Stock dividend relates to dividends on the Preferred Stock issued on November 25, 2002. Dividends for the period January 1, 2003 to December 31, 2003 totaled $15.7 million. In accordance with SFAS No. 150, effective for us on July 1, 2003, dividends relating to the period after the effective date are reported as interest expense. Dividends for the period prior to the effective date continue to be shown as a deduction from retained earnings with no effect on our results of operations. As a result, the $8.1 million dividend accrued for the period July 1, 2003 to December 31, 2003 is reported in interest expense while the $7.6 million dividend accrued for the periods January 1, 2003 to June 30, 2003 are shown as deductions from retained earnings.

Included in other interest expense for 2003 is amortization of loan fees of $3.9 million. For the 2002 Combined Period, amortization of loan fees were de minimus because we wrote off all deferred loan fees when we filed for Chapter 11 in December 2001.

A significant portion of our debt is variable based primarily on one month LIBOR. Our variable rate debt at December 31, 2003 approximated $382.8 million. Interest expense on our variable rate debt fell as a result of reductions in LIBOR and reductions in the interest rate spread. LIBOR averaged 1.25% for 2003 and 1.77% for the 2002 Combined Period. Also, the interest rate spread on the Merrill Lynch Mortgage debt incurred in November 2002 is approximately 200 basis points, or 2%, lower than the interest rate spread on the variable rate debt that it replaced. The interest expense associated with the Lehman Financing obtained in May 2003 served to offset the reduction in interest discussed above. Though the Lehman Financing replaced previous debt, we paid no interest during 2002 on the debt that it replaced, as approved by the Bankruptcy Court.

The gain on asset dispositions for 2003 relates to consideration received for condemned land less the carrying values.

Reorganization items for 2003 of $1.4 million represent Chapter 11 expenses incurred between January 1, 2003 and May 22, 2003 relating to the 18 hotels that emerged from Chapter 11 on May 22, 2003. We continue to incur expenses related to the Chapter 11 proceedings but currently report these expenses as part of general, administrative and other expenses. In accordance with GAAP, all expenses related to the Chapter 11 proceedings between January 1, 2002 and November 22, 2002 were reported as reorganization items, including the fair value adjustments recorded on the implementation of fresh start reporting.


	•	Adjustments recorded on the application of fresh start reporting of $33.3 million consisting of a gain on extinguishment of debt of $223.1 million offset by fixed asset write downs and other fresh start adjustments of $189.8 million; and

	•	Expenses incurred as a result of the Chapter 11 proceedings of approximately $22.3 million, consisting mainly of legal and professional fees.

Minority interests represent the third party owners’ share of the net income or loss of the four joint ventures in which we have a controlling equity interest. The increase of $1.0 million relates primarily to one joint venture owning one hotel. The net loss of this joint venture was higher in 2003 as a result of an impairment charge recorded to write down the carrying value of the hotel.


*	Revenues for 2001 in the table above include the revenues of six hotels sold in 2001, while occupancy, ADR and RevPAR in the table exclude the six hotels sold in 2001. Revenues in 2001 for these six hotels were:

After excluding the $5.0 million from the 2001 room revenues for six hotels sold in 2001, thereby producing room revenues for a comparable portfolio, the decline in room revenues was 5.7%. This reduction in room revenues resulted from declines in both occupancy and ADR. Occupancy declined by 2.4% while ADR declined by 3.3%. These reductions reflected the general decline in the economy and the lodging industry in the aftermath of the terrorist attacks of September 11, 2001 and hotel quality issues due to the liquidity constraints which led to our Chapter 11 filing. Occupancy, ADR and RevPAR were also affected by renovation displacement at some of our hotels.

The lower food and beverage revenues were due to the lower occupancy levels in the 2002 Combined Period. Other revenues declined in the 2002 Combined Period primarily due to a $1.3 million reduction in telephone revenues resulting from increased cell phone usage.

The decline in occupancy for our stabilized hotels was lower than the decline in occupancy for all hotels included in our continuing operations, as stabilized hotels were not affected by renovation displacements. In addition, ADR of stabilized hotels declined more than ADR of all hotels in continuing operations because stabilized hotels included a higher proportion of hotels in need of renovation, resulting in the decline in RevPAR for our stabilized hotels being greater than the decline in RevPAR for all hotels included in our continuing operations.


*	Direct operating expenses for 2001 in the table above include the direct operating expenses of six hotels sold in 2001. Direct operating expenses in 2001 for these six hotels were:

After excluding the $1.8 million from the 2001 room expenses for six hotels sold in 2001, thereby producing room expenses for a comparable portfolio, the decline in room expenses was 2.7%. As a percentage of room revenues, our room expenses increased in the 2002 Combined Period but the actual cost per occupied room declined. Our margins were also affected by the decline in ADR.

Food and beverage margins were negatively affected by a decline in banquet catering and meetings business in the 2002 Combined Period. The banquet catering and meetings business is the most profitable area of our food and beverage operations.

Other operating expenses remained flat despite lower sales due to our inability to offset a large portion of fixed expenses in this department.

General, administrative and other expenses decreased by $22.1 million. Of the $22.1 million decrease, $3.3 million related to six hotels sold in 2001. In addition, the property level component of general, administrative and other expenses was lower in the 2002 Combined Period, primarily as a result of reductions in revenues. General, administrative and other expenses for the 2002 Combined Period also declined as a result of reductions in corporate overhead due to cost reductions at the corporate office. These initiatives included reductions in staffing, office space and technology.

Depreciation and amortization expense for the 2002 Combined Period decreased by $2.4 million. Of the $2.4 million decrease, $0.6 million was attributable to six hotels sold in 2001. The reduction in depreciation and amortization expense was also due to the reduced carrying values of certain assets arising from impairment charges recorded in the fourth quarter of 2001. This decrease was partially offset by additional depreciation related to capital improvements. Also, depreciation for the period November 23, 2002 to December 31, 2002 declined as a result of the write-down of fixed assets recorded when we implemented fresh start reporting.


	•	A $6.6 million charge related to revised estimates of fair value for properties held for sale;

	•	A $4.0 million charge related to one property which was identified as held for sale and also sold in 2001; and

	•	Impairment charges on assets held for use of $21.7 million, offset by a recapture of $11.8 million of impairment charges related to assets previously held for sale that were no longer being actively marketed for sale.

Interest income and other increased significantly in the 2002 Combined Period primarily as the result of a discharge of indebtedness in respect of MHA, a 60% owned subsidiary. The resulting gain on extinguishment of this indebtedness was $4.4 million and resulted from the exchange of a promissory note

Interest expense for the 2002 Combined Period decreased as a result of the suspension of interest payments on debt secured by highly leveraged hotels while we were in Chapter 11. Where the estimated value of the underlying collateral in respect of certain debts was considered to be less than the carrying value of that debt, we ceased accruing interest on those debts. Contractual interest expense in respect of those debts that was not recorded for the 2002 Combined Period (excluding interest on our Convertible Redeemable Equity Structured Trust Securities (“CRESTS”)) approximated $28.2 million. Recorded interest expense for the 2002 Combined Period also declined as a result of decreasing interest rates on our variable rate debt. LIBOR for the 2002 Combined Period averaged 1.77% while the average for 2001 was 3.71%.

The gain on asset disposition for 2001 related primarily to the sale of one hotel in the first quarter of 2001 and represents the excess of the net proceeds of the sale over the net book value of assets sold.


	•	Adjustments recorded on the application of fresh start reporting of $33.3 million, consisting of gain on extinguishment of debt of $223.1 million offset by fixed asset write downs and other fresh start adjustments of $189.8 million; and

	•	Expenses incurred as a result of the Chapter 11 proceedings of approximately $22.3 million, consisting mainly of legal and professional fees.

Reorganization items for 2001 consisted of write-offs of deferred loan fees of $18.7 million and expenses incurred as a result of the Chapter 11 proceedings of approximately $3.0 million.

Minority interest differed significantly in the 2002 Combined Period compared to 2001 as a result of the non-accrual of interest on the CRESTS. We ceased accruing interest on the CRESTS while we were in Chapter 11 as these were unsecured debts. CRESTS interest not accrued for the 2002 Combined Period approximated $12.7 million.

Discontinued operations include results of operations for both assets sold during the reporting period and assets that have been identified for sale. Consequently, the 18 hotels and three land parcels that were held for sale at December 31, 2003, as well as the ten hotels and the office building that were sold or otherwise disposed of during 2003, are included in discontinued operations. We present the current year’s results of these hotels as discontinued operations as well as the comparative results for the previous two years.

Set forth below is the condensed combined statement of operations for properties classified as discontinued operations:


(1)	The 2003 revenues and expenses in the table above include de minimus amounts of the eight hotels conveyed to a lender in January 2003 and the one hotel returned to the lessor of a capital lease, also in January 2003.

The disposition of nine hotels in January 2003 adversely affects comparability between periods of results of operations for the properties included in discontinued operations. Results of operations for our

Revenues and expenses included in discontinued operations were affected by hotel dispositions in January 2003.

The 2002 Combined Period results include the following revenues and expenses for eight hotels conveyed to a lender in satisfaction of related debt and one hotel returned to the lessor of a capital lease in January 2003:

Substantially all of the total revenue, direct expense, and general, administrative and other expense differences between 2003 and the 2002 Combined Period are a result of the disposition of these nine hotels. Of the $10.2 million decrease in depreciation and amortization expense between 2003 and the 2002 Combined Period, $2.9 million was attributable to the disposition of these nine hotels. Additionally, the lower asset base as a result of fresh start reporting and the effect of not depreciating assets once they are identified for sale accounted for an additional $4.8 million and $2.3 million of the decrease, respectively.

The impairment of long-lived assets of $5.4 million recorded in 2003 represents the write-down of assets held for sale. In accordance with GAAP, assets identified for sale are valued at the lower of their estimated selling prices, less costs to sell, and their carrying values. Where the estimated net selling prices exceeded the carrying values, no gain was recorded.

Gain on asset dispositions of $3.1 million represents gain on the sale of one hotel and one office building in November 2003. The gain represents the excess of the net proceeds of the sale over the carrying values of these two properties. The income tax benefit for the 2002 Combined Period related to a hotel sold during 2001 and represented reductions of accruals for state income tax provisions recorded during 2001.

The reduction in depreciation and amortization expense between the 2002 Combined Period and 2001 was due to the reduced carrying values of certain assets arising from impairment charges recorded in the fourth quarter of 2001. This decrease was partially offset by additional depreciation related to capital improvements. Also, depreciation for the period November 23, 2002 to December 31, 2002 declined as a result of the write-down of fixed assets recorded on the implementation of fresh start reporting.

Of the impairment charges of $46.8 million for 2001, $47.3 million related to assets held for use, offset by a recapture of $0.5 million of impairment charges related to assets previously held for sale that were no longer being actively marketed for sale.


	•	Adjustments recorded on the application of fresh start reporting of $5.0 million, consisting of gain on extinguishment of debt of $33.3 million offset by fixed asset write downs and other fresh start adjustments of $28.3 million; and

	•	Expenses incurred as a result of the Chapter 11 proceedings of approximately $3.3 million, consisting mainly of legal and professional fees.

Reorganization items for 2001 consisted of write-offs of deferred loan fees of $2.8 million and expenses incurred as a result of the Chapter 11 proceedings of approximately $0.5 million.

Because we incurred net losses, we paid no federal income tax for the year ended December 31, 2003, the 2002 Combined Period or the year ended December 31, 2001. At December 31, 2003, we had available net operating loss carryforwards of approximately $270 million for federal income tax purposes, which will expire in 2004 through 2023. Under our plans of reorganization, substantial amounts of net operating loss carryforwards were utilized to offset income from debt cancellations in the 2002 Combined Period. Also, our reorganization under Chapter 11 resulted in an ownership change, as defined in Section 382 of the Internal Revenue Code. Consequently, our ability to use the net operating loss carryforwards to offset future income is subject to certain annual limitations. Due to these limitations, a portion or all of these net operating loss carryforwards could expire unused. At December 31, 2003, we established a valuation allowance of $140.0 million to fully offset our net deferred tax asset.

In addition, we recognized an income tax provision of $0.2 million for 2003, a benefit of $1.3 million for the 2002 Combined Period and a provision of $2.8 million for 2001. The benefit for the 2002 Combined Period related primarily to a reduction of the provision recorded in 2001, while the 2003 and 2001 provisions related primarily to liabilities for state income taxes.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is a widely-used industry measure of performance and also is used in the assessment of hotel property values. EBITDA is a non-GAAP measure and should not be used as a substitute for measures such as net income (loss), cash flows from operating activities, or other measures computed in accordance with GAAP. Depreciation and amortization are significant non-cash expenses for us as a result of the high proportion of our assets which are long-lived, including property, plant and equipment. We depreciate property, plant and equipment over their estimated useful lives and amortize deferred financing and franchise fees over the term of the applicable agreements. We believe that EBITDA provides pertinent information to investors as an additional indicator of our performance.

The following table presents EBITDA, a non-GAAP measure, for 2003, the 2002 Combined Period and 2001 and provides a reconciliation with our (loss) income from continuing operations, a GAAP measure:

EBITDA for the three periods presented above were negatively affected by the following reorganization expenses:

In addition, EBITDA for 2003 and the 2002 Combined Period were affected by other Chapter 11 expenses (included in general, administrative and other) of $4.6 million, and EBITDA for the 2002 Combined Period was affected by other Chapter 11 expenses of $0.8 million.

The following table presents certain quarterly data for the eight quarters ended December 31, 2003. The data have been derived from our unaudited condensed consolidated financial statements for the periods indicated. Our unaudited consolidated financial statements have been prepared on substantially the same basis as our audited consolidated financial statements included elsewhere in this prospectus and include all adjustments, consisting primarily of normal recurring adjustments, that we consider to be necessary to present fairly this information when read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this prospectus. The results of operations for any quarter are not necessarily indicative of the results to be expected for future periods. Total revenues and total expenses for each quarter were as reported in our quarterly filings with the Securities and Exchange Commission. However, the allocation of the revenues and expenses between our continuing operations and discontinued operations are not as reported in our quarterly filings because the results of discontinued operations, in the tables below, are based on the hotels held for sale as of December 31, 2003. The allocation of results of operations between our continuing operations and discontinued operations, at the time of the quarterly filings, was based on the assets held for sale, if any, as of the dates of those filings.


*	There were no extraordinary items or cumulative effect of accounting change adjustments, during the above periods.

Historically, our operations and related revenues and operating results have varied substantially from quarter to quarter. We expect these variations to continue for a variety of reasons, primarily seasonality. However, due to the fixed nature of certain expenses, such as marketing and rent, our operating expenses do not vary as significantly from quarter to quarter.

We use our cash flows primarily for operating expenses, debt service, and capital expenditures. Currently, our principal sources of liquidity consist of cash flows from operations, existing cash balances and a $2.0 million working capital revolving credit facility that expires on May 1, 2004. Cash flows from operations may be adversely affected by factors such as a reduction in demand for lodging or certain large

scale renovations being performed at our hotels. To the extent that significant amounts of our accounts receivable are due from airline companies, a further downturn in the airline industry also could materially and adversely affect the collectibility of our accounts receivable, and hence our liquidity. At December 31, 2003, airline receivables represented approximately 25% of our accounts receivable, net of allowances. A further downturn in the airline industry could also affect our revenues by decreasing the aggregate levels of demand for travel. We expect that the sale of certain assets will provide additional cash to pay down outstanding debt and to fund a portion of our capital expenditures. One of our hotels and an office building were sold during 2003, four hotels were sold between January 1, 2004 and March 1, 2004 and we have 14 hotels and three land parcels held for sale. Of the five hotels and one office building sold between November 1, 2003 and March 1, 2004, the aggregate net proceeds received were $23.2 million, $14.6 million of which was used to pay down debt and $8.6 million of which was used for general corporate purposes, including capital expenditures.

Our ability to make scheduled debt service payments and fund operations and capital expenditures depends on our future performance and financial results, including the successful implementation of our business strategy and, to a certain extent, the general condition of the lodging industry and the general economic, political, financial, competitive, legislative and regulatory environment. In addition, our ability to refinance our indebtedness depends to a certain extent on these factors as well. Many factors affecting our future performance and financial results, including the severity and duration of macroeconomic downturns, are beyond our control. See “Risk Factors — Risks Related to Our Business.”

We intend to use approximately $ million of the net proceeds of this offering to redeem all of the shares of our Preferred Stock, which includes accrued dividends and a 4% prepayment premium. We also intend to invest approximately $ million of the net proceeds of this offering for capital expenditures related to renovations and repositionings of selected hotels. We will use any remaining net proceeds for general corporate purposes, including funding our growth strategy.

We intend to continue to use our cash flow to make scheduled debt service payments and fund our operations and capital expenditures and, therefore, do not anticipate paying dividends on our common stock in the foreseeable future. As provided by the terms of the Preferred Stock, we paid the dividends that were due on our Preferred Stock on November 21, 2003 by the issuance of additional shares of Preferred Stock, with fractional shares paid in cash.

Although we have emerged from Chapter 11, the distribution of shares to the general unsecured creditors is not complete as we continue to reconcile the claims made by those creditors. We have established a disputed claims reserve out of which those claims will be paid. Until this process is complete, we will continue to incur expenses in respect of these claims as well as Bankruptcy Court fees and professional fees.

In accordance with GAAP, all assets held for sale, including assets that would normally be classified as long-term assets in the ordinary course of business, were reported as “assets held for sale” in current assets. Similarly, all liabilities related to assets held for sale were moved to the current liability category, including debt that would otherwise be classified as long-term liabilities in the ordinary course of business.

At December 31, 2003, after reclassifying assets held for sale as current assets and liabilities related to the assets held for sale as current liabilities, we had working capital (current assets less current liabilities) of $2.4 million, compared with a working capital deficit of $6.8 million at December 31, 2002. See “— Debt, contractual obligations and franchise agreements — Exit Financing” with respect to our decision to include the Merrill Lynch Mortgage debt financing in our long-term debt.

Although there was some recovery in the hotel industry during the second half of 2003, the weak U.S. economy and the severe decline in the lodging industry after the terrorist attacks on September 11, 2001 continued to negatively affect lodging demand during 2003. It is difficult to predict how long it will take for the industry to recover fully and for our revenues from continuing operations to reach satisfactory levels. We continue to focus on hotel renovations and repositionings, both as a means of improving our

We believe that the combination of our current cash, cash flows from operations, capital expenditure escrows, and the proceeds of asset sales will be sufficient to meet our liquidity needs for the next 24 months. If we fail to qualify for extensions of maturity on our debt obligations to Merrill Lynch Mortgage and/or Lehman, we will seek to refinance those obligations with other lenders. If we are unable to refinance those obligations with other lenders, we will pursue asset sales to reduce total indebtedness and loan-to-value ratios, and then seek to refinance the remaining debt. It may not be possible to effect those asset sales in a timely fashion; further, large-scale sales of hotels might adversely affect our business. We cannot provide assurance that we will qualify for extensions of maturity on either the Merrill Lynch or Lehman debt, or that, if we do not so qualify, we would be able to refinance those obligations with third parties on favorable terms, or at all.

Our ability to meet our longer-term cash needs is dependent on the recovery of the economy and the lodging industry, improved operating results, the successful implementation of our portfolio improvement strategy and our ability to obtain third party sources of capital on favorable terms as and when needed. Our future liquidity needs and sources of working capital are subject to uncertainty and we can provide no assurance that we will have sufficient liquidity to be able to meet our operating expenses, debt service requirements, including scheduled maturities, and planned capital expenditures. We could lose the right to operate certain hotels under nationally recognized brand names, and furthermore, the termination of one or more franchise agreements could lead to defaults and acceleration under one or more of our loan agreements as well as obligations to pay liquidated damages under the franchise agreements. See “Risk Factors” for further discussion of conditions that could adversely affect our estimates of future liquidity needs and sources of working capital.

During 2003, operating activities generated $34.8 million in cash, while cash flows used in operating activities for the 2002 Combined Period was $6.0 million. The increase in cash provided by operating activities is partially attributable to the availability in 2003 of cash which was previously restricted and also to the reduction in Chapter 11 expenses.

Investing activities accounted for an outlay of approximately $22.9 million for 2003 compared with $30.6 million for the 2002 Combined Period. Due primarily to large scale renovations performed at some of our hotels during 2003, capital expenditures totaled $30.8 million, $7.5 million higher than the $23.3 million spent in the 2002 Combined Period. Capital expenditures in 2003 were partially funded by withdrawals of $7.2 million from lender-controlled capital expenditure escrows, while in the 2002 Combined Period, these escrow balances were increased by $6.2 million. We also received proceeds of $0.8 million in 2003 as compensation for the condemnation of land. Net proceeds from the sale of a hotel and an office building totaled $12.3 million. Though the net sale proceeds of $12.3 million formed part of our cash provided from investing activities, on a consolidated basis, this is not reflected in the investing activities for our continuing operations on our consolidated statement of cash flows since it forms part of the cash flows of our discontinued operations. Other investing activities consisted primarily of other deposits and payments of franchise application fees net of refunds.

Cash flows used in financing activities were $11.8 million for 2003 while cash provided by financing activities was $33.7 million for the 2002 Combined Period. Financing activities for 2003 consisted primarily of proceeds of long-term debt of $80.0 million relating to the Lehman Financing and proceeds

On September 18, 2003, we drew down the full availability of $2.0 million under a revolving loan agreement with OCM Real Estate Opportunities Fund II, L.P. (“OCM Fund II”). The facility is secured by two land parcels located in California and New Jersey and expires on May 1, 2004. Borrowings under the facility bear interest at the fixed rate of 10% per annum and were repaid in December 2003 out of the proceeds we received from the sale of an office building. As of March 1, 2004, the full amount was available on the facility.

Oaktree may be deemed to be the beneficial owner of 1,664,752 shares of our common stock, including 1,578,611 shares owned by OCM Fund II. Oaktree is the general partner of the OCM Fund II; accordingly, Oaktree may be deemed to beneficially own the shares owned by the OCM Fund II. Oaktree disclaims any such beneficial ownership. Russel S. Bernard, a principal of Oaktree, and Sean F. Armstrong, a managing director of Oaktree, are also directors of Lodgian.


(1)	Discussed below under the caption “Exit Financing.”
(2)	Discussed below under the caption “Lehman Financing.”
(3)	Discussed below under the caption “Other Financings.”
(4)	Comprised of deferred interest related to the Lehman Financing of $4.3 million, a long-term ground lease ($2.5 million), unsecured notes payable of $2.0 million and other deferred credits of $0.6 million.
(5)	Discussed below under the caption “Preferred Stock.”
(6)	In the table above, we report the Merrill Lynch Mortgage debt as maturing in November 2005 because we intend to extend the maturity date and we believe we will be eligible for that extension. See also “Risk Factors — Risks Relating to Our Business.”


	•	Interest obligations — A substantial portion of our interest payments vary with LIBOR and would be difficult to project. For 2003, interest paid with respect to our continuing operations was $29.8 million;

	•	Franchise fees — Substantially all of our franchise fees vary with our revenues. Franchise fees expense for 2003 relating to our continuing operations are shown below under the caption “Franchise Agreements and Capital Expenditures.”

	•	Equipment rentals and costs relating to our maintenance contracts — These items are of a short-term nature and are cancellable by us. For 2003, costs relating to equipment rentals and maintenance contracts for our continuing operations were approximately $1.9 million and $4.6 million, respectively; and

	•	Property and income taxes — These taxes vary from year to year and are not estimable. For 2003, property taxes relating to our continuing operations were $12.2 million. We paid no federal income taxes for 2003. State income taxes paid, net of refunds, for 2003 were $0.2 million.

	•	Other purchase obligations — As of December 31, 2003, we had no material purchase obligations.

On November 25, 2002, we received exit financing of $309.0 million comprised of three separate components as follows:


	•	Senior debt of $224.0 million from Merrill Lynch Mortgage, accruing interest at the rate of LIBOR plus 2.24%, secured by, among other things, first mortgage liens on the fee simple or leasehold interests in 55 of our hotels;

	•	Mezzanine debt of $78.7 million from Merrill Lynch Mortgage, accruing interest at the rate of LIBOR plus 9.00%, secured by the equity interest in the subsidiaries owning 56 of our hotels (the 55 hotels which secure the senior debt and one additional hotel); and

	•	Debt provided through Computershare Trust Company of Canada, a Canadian lender, of $10.0 million Canadian dollars (approximately $6.3 million U.S. dollars at inception) maturing in December 2007, accruing interest at the fixed rate of 7.88% and secured by a mortgage on the property located in Windsor, Canada.

In March 2003, as permitted by the terms of the senior and mezzanine debt agreements, Merrill Lynch Mortgage exercised its right to “resize” the senior and mezzanine debt amounts, prior to the securitization of the mortgage loan. As a result, the principal amount of the senior debt was decreased from $223.7 million (initially $224.0 million less $0.3 million of principal payments) to $218.1 million, and the principal amount of the mezzanine debt was increased from $78.6 million (initially $78.7 million less $0.1 million of principal payments) to $84.1 million. Though the blended interest rate on the Merrill Lynch Mortgage debt remained at LIBOR plus 4.00% at the date of the resizing, the interest rate on the senior debt was modified to LIBOR plus 2.36% and the interest rate on the mezzanine debt was modified to LIBOR plus 8.25%. The interest rate on the mezzanine debt increased to LIBOR plus 8.79% as of December 1, 2003. Therefore, the new blended rate on the Merrill Lynch Mortgage debt is LIBOR plus 4.15%. Furthermore, as a result of the securitization of the mortgage loan, Merrill Lynch Mortgage no longer has the right to amend or waive provisions thereunder.

The senior and mezzanine debt matures in November 2004, but we have three one-year options which could extend the maturity date for an additional three years. The first option to extend the maturity date of the senior and mezzanine debt by up to one year (to November 2005) is available to us provided no events of default occur in respect of the payment of principal, interest and other required amounts. Because we intend to extend the maturity date and we believe we will be eligible for that extension, we report the senior and mezzanine debt as maturing in 2005. The second and third extension terms will be

The senior and mezzanine debt agreements provide that when either (i) the debt yield for the trailing 12-month period is below 13.25% during the year ending November 2004 (and if the loan is extended, 13.50%, 13.75% and 14.00% during each of the next three years of the loan, respectively) or (ii) the debt service coverage ratio is below 1.20x, excess cash flows produced by the mortgaged hotels (after payment of operating expenses, management fees, required reserves, service fees, principal and interest) must be deposited in a restricted cash account. These funds can be used for the prepayment of aggregate outstanding borrowings, capital expenditures reasonably approved by the lender, and up to an aggregate $3.0 million of scheduled principal and interest payments due under these agreements. Funds will no longer be deposited into the restricted cash account when the debt yield and the debt service coverage ratio are sustained above the minimum requirements for three consecutive months. On March 31, 2003, the debt yield for the hotels securing this debt fell below the then applicable 12.75% minimum threshold and, therefore, the excess cash flow produced by the hotels securing the debt was retained in the restricted cash account starting on May 1, 2003. The restricted cash balance in this account as of December 31, 2003 was $0.9 million. During 2003, $7.5 million was released from the restricted cash account for capital expenditures and scheduled interest and principal payments. As of March 1, 2004, no cash was being retained in the restricted cash account. At December 31, 2003, the debt yield and the debt service coverage ratio remained below the minimum requirements. Further, the mezzanine debt agreement with Merrill Lynch Mortgage requires that we maintain a minimum net worth of at least $10.0 million.

On May 22, 2003, we completed the $80.0 million Lehman Financing, which was primarily used to settle debts secured by 18 hotels. The Lehman Financing, provided to 18 newly-formed subsidiaries (one for each hotel), is a two-year term loan with an optional one-year extension and bears interest at the higher of 7.25% or LIBOR plus 5.25%. The one-year extension is only available if, at the time of electing to extend and at the initial maturity date, there are no events of default. If we opt for the one-year extension, an extension fee of $3.0 million is payable. Pursuant to the terms of the agreement, additional interest of $4.4 million is also payable upon the maturity date (May 22, 2005, or the new maturity date if we opt for the extension). Payments of principal and interest on the Lehman Financing are due monthly. If an event of default occurs, the interest rate increases by 325 basis points, or 3.25%, for the period of the default. At maturity in May 2005, we will either exercise this extension option with Lehman or seek to refinance these loans with a new lender.

On November 25, 2002, loans approximating $83.5 million, secured by 20 hotels, were substantially reinstated on their original terms, except for the extension of certain maturities. The terms of one other loan, in the amount of $2.5 million and secured by one hotel, were amended to provide for a new interest rate and a new maturity date.

Our indebtedness to J.P. Morgan Chase of approximately $10.6 million represents industrial revenue bonds issued on the Holiday Inn Lawrence and Holiday Inn Manhattan, both Kansas properties. The industrial revenue bonds require a minimum debt service coverage ratio, calculated as of the end of each calendar year. For the year ended December 31, 2003, the cash flows of both hotels were insufficient to meet the minimum debt service coverage ratio requirements. The trustee of the industrial revenue bonds may give notice of default, at which time we could remedy the default by depositing with the trustee an amount currently estimated at approximately $0.4 million. In the event a default is declared and not cured, the properties would be subject to foreclosure and we would be obligated to reimburse bondholders, pursuant to a partial guaranty, of approximately $1.4 million. In addition, we could be obligated to pay our franchisor liquidated damages in the amount of $1.3 million. Total revenues for these two hotels for the

On September 30, 2003, first mortgage debt of approximately $7.0 million of MHA became due. We own 60% of MHA, and MHA’s sole asset is the Crowne Plaza Hotel in Macon, Georgia. The lender initially agreed to extend the term of the debt to December 31, 2003, and then to June 30, 2004, while we explore alternative financing opportunities. We have escrowed foreclosure documents that will allow the lender to foreclose on the property on June 30, 2004 if we have not repaid the mortgage debt by that date. There can be no assurance that we will complete a refinancing on or before the due date or that the lender will grant further extensions. If we are not able to refinance the debt and the lender does not grant further extensions, the property would be subject to foreclosure. A foreclosure on the property would constitute a default of the franchise agreement; therefore, we may be liable for $0.9 million in liquidated damages under the franchise agreement. Total revenues for the Crowne Plaza Hotel in Macon, Georgia for the year ended December 31, 2003, the 2002 Combined Period and the year ended December 31, 2001 were $5.6 million, $5.9 million and $6.0 million, respectively. The debt of approximately $7.0 million is included in the current portion of long-term debt in our consolidated balance sheet.

Set forth below, by debt pool, is a summary of our long-term debt (including current portion) with the applicable interest rates and the carrying values of the property, plant and equipment which collateralize the long-term debt:


(1)	Long-term obligations and property, plant and equipment of the one hotel in which we have a non-controlling equity interest and do not consolidate are excluded from the table above.
(2)	Represents the annual weighted average cost at December 31, 2003.

The documents governing the terms of both the Merrill Lynch Mortgage debt and the Lehman Financing contain covenants that place restrictions on certain of our subsidiaries’ activities, including acquisitions, mergers and consolidations, the sale of our assets, and the incurrence of liens. Failure to comply with the covenants under a loan agreement would, and franchise agreement terminations could, constitute an event of default that would permit acceleration by a lender. Acceleration of a loan agreement could materially and adversely affect us. See “Risk Factors — Risks Related to Our Business.”

On November 25, 2002, we issued 5,000,000 shares of Preferred Stock with a par value of $0.01 at $25.00 per share. Each share of Preferred Stock has a liquidation preference over our common stock. The dividend is cumulative, compounded annually and is payable at the rate of 12.25% per annum on November 21 of each year. As provided by the terms of the Preferred Stock, the first dividend was paid on November 21, 2003 by means of the issuance of additional shares of Preferred Stock, with fractional shares paid in cash. We thus issued 594,299 shares of Preferred Stock as dividends and paid cash dividends of approximately $18,500 for fractional shares. We expect to issue an additional 17,461 shares of Preferred Stock as dividends to those general unsecured creditors who have not yet received their shares of Preferred Stock. If any Preferred Stock is then outstanding, the board of directors will determine whether the dividends due November 21, 2004 and 2005 will be paid in cash or in kind via the issuance of additional shares of Preferred Stock. The Preferred Stock is subject to redemption at any time at our option and to mandatory redemption on November 21, 2012. If we redeem the Preferred Stock prior to November 21, 2004, the redemption price will be 104% of the liquidation value per share of the Preferred Stock. The liquidation value is $25.00 per share plus accrued dividends. The redemption price is reduced by 1% for each succeeding twelve-month period through November 20, 2007, after which the Preferred Stock is redeemable for the liquidation value. We intend to use a portion of the net proceeds from this offering to redeem all of our Preferred Stock.

On July 1, 2003, in accordance with SFAS No. 150, we reclassified the Preferred Stock to the liability section of our consolidated balance sheet and began presenting the related dividends in interest expense, which totaled $8.1 million for the period July 1, 2003 to December 31, 2003. Prior to the adoption of SFAS No. 150, we presented the Preferred Stock between liabilities and equity in our consolidated balance sheet (called the “mezzanine” section) and reported the Preferred Stock dividend as a deduction from retained earnings, with no effect on our results of operations. In accordance with SFAS No. 150, the Preferred Stock and the dividends for the period prior to July 1, 2003, have not been reclassified.

We benefit from the superior brand qualities of the Crowne Plaza, Holiday Inn, Marriott, Hilton and other brands, including the reputation of these brands, reservation bookings through their central reservation systems, global distribution systems, guest loyalty programs and brand Internet booking sites. Reservations made by means of these franchisor facilities generally account for approximately 30% of our total reservations.

To obtain these franchise affiliations, we enter into franchise agreements with hotel franchisors that generally have terms of between 10 and 20 years. These franchise agreements typically authorize us to operate a hotel under the franchise name, at a specific location or within a specified area, and require that we operate the hotel in accordance with the standards specified by the franchisor. As part of our franchise agreements, we are generally required to pay a royalty fee, an advertising/marketing fee, a fee for the use of the franchisor’s nationwide reservation system and certain ancillary charges. Royalty fees generally range from 3.0% to 6.0% of gross room revenues, advertising/marketing fees generally range from 1.0% to 4.5% of gross room revenues and reservation system fees generally range from 1.0% to 2.0% of gross room revenues. In the aggregate, royalty fees, advertising/marketing fees and reservation fees for the various brands under which we operate our hotels range from 5.0% to 12.5% of gross room revenues.

The costs incurred in connection with these agreements are primarily monthly payments due to the franchisors based on a percentage of room revenues. These costs vary with revenues and are not fixed commitments. Franchise fees incurred for the year ended December 31, 2003 and the comparative periods were:

During the term of the franchise agreements, the franchisors may require us to upgrade facilities to comply with their current standards. Our current franchise agreements terminate at various times and have differing remaining terms. For example, the terms of seven, twelve and ten of our franchise agreements are scheduled to expire in 2004, 2005 and 2006, respectively. As franchise agreements expire, we may apply for a franchise renewal. In connection with renewals, the franchisor may require payment of a renewal fee, increased royalty and other recurring fees and substantial renovation of the facilities, or the franchisor may elect at its sole discretion not to renew the franchise.

If we do not comply with the terms of a franchise agreement, following notice and an opportunity to cure the noncompliance or default, the franchisor has the right to terminate the agreement, which could lead to a default and acceleration under one or more of our loan agreements, which could materially and adversely affect us. In the past, we have been able to cure most cases of noncompliance and most defaults within the cure periods. If we perform an economic analysis of the hotel and determine that it is not economically justifiable to comply with a franchisor’s requirements, we will either select an alternative franchisor or operate the hotel without a franchise affiliation. This could adversely affect us. See “Risk Factors — Risks Related to Our Business.”

As of March 1, 2004, we have been notified that we were not in compliance with some of the terms of ten of our franchise agreements and have received default and termination notices from franchisors with respect to an additional five hotels. We cannot assure you that we will be able to complete our action plans (which we estimate will cost approximately $6.4 million) to cure the alleged instances of noncompliance and default prior to the specified termination dates or be granted additional time in which to cure any defaults or other noncompliance. We believe we are in compliance with our other franchise agreements.

In addition, as part of our bankruptcy reorganization proceedings, we entered into stipulations with each of our major franchisors setting forth a timeline for completion of capital expenditures for some of our hotels. However, we have not completed the required capital expenditures for 35 hotels in accordance with the stipulations and estimate that the cost of completing the required capital expenditures is $26.1 million. The franchisor could therefore seek to declare its franchise agreement in default and could seek to terminate the franchise agreement.

With the exception of one hotel held for sale, we believe that we will cure the noncompliance and defaults on these hotels before the applicable termination dates, but we cannot provide assurance that we will be able to do so or that we will be able to obtain additional time in which to do so. If a franchise agreement is terminated, we will either select an alternative franchisor or operate the hotel independently of any franchisor. However, terminating or changing the franchise affiliation of a hotel could require us to incur significant expenses, including liquidated damages, and capital expenditures.

To comply with the requirements of our franchisors and to improve our competitive position in the individual markets, we plan to enhance our capital expenditures in 2004.

We are exposed to interest rate risks on our variable rate debt. At December 31, 2003 and December 31, 2002, we had outstanding variable rate debt of approximately $382.8 million and $310.2 million, respectively.

In order to manage our exposure to fluctuations in interest rates on the U.S. portion of the exit financing received in November 2002 ($299.3 million and $302.7 million at December 31, 2003 and December 31, 2002, respectively), we entered into two interest rate cap agreements, which allowed us to obtain exit financing at floating rates and effectively cap them at LIBOR of 6.44% plus the spread (See “— Liquidity and Capital Resources”). Thus, we will earn periodic settlement payments under our interest rate caps when LIBOR exceeds 6.44% at specified intervals set forth in the caps, which generally coincide with the dates on which interest is payable on the underlying debt. When LIBOR is below 6.44%, there is no settlement from the interest rate caps. We are exposed to interest rate risks on the exit financing debt for increases in LIBOR up to 6.44%. The one-month LIBOR as of December 31, 2003 was 1.13%. The notional principal amount of the interest rate caps outstanding was $302.2 million and $302.8 million at December 31, 2003 and at December 31, 2002, respectively.

On May 22, 2003, we finalized an $80.0 million financing with Lehman. The Lehman Financing is a two-year term loan with an optional one-year extension and bears interest at the higher of 7.25% or LIBOR plus 5.25%. In order to manage our exposure to fluctuations in interest rates with the Lehman Financing, we entered into an interest rate cap agreement, which allowed us to obtain this financing at a partial floating rate and effectively caps the interest rate at LIBOR of 5.00% plus 5.25%. When LIBOR exceeds 5.00%, the contracts require settlement of net interest receivable at specified intervals, which generally coincide with the dates on which interest is payable on the underlying debt. When LIBOR is below 5.00%, there is no settlement from the interest rate cap. We are exposed to interest rate risks on the Lehman Financing for LIBOR of between 2.00% and 5.00%. The notional principal amount of the interest rate cap outstanding was $80.0 million at December 31, 2003.

With respect to the fair market value of the three interest rate caps (the two related to the exit financing and the one related to the Lehman Financing), we believe that our interest rate risk at December 31, 2003 and December 31, 2002 was minimal. The impact on annual results of operations of a hypothetical one-point interest rate reduction on the interest rate caps as of December 31, 2003 would be a reduction in net income of approximately $14,000. These derivative financial instruments are viewed as risk management tools and are entered into for hedging purposes only. We do not use derivative financial instruments for trading or speculative purposes. However, we have not elected to follow the hedging requirements of SFAS No. 133.

The fair value of the three interest rate caps as of December 31, 2003 and the two interest rate caps at December 31, 2002 were approximately $15,000 and $100,000, respectively. The fair values of the interest rate caps were recognized on the balance sheet in other assets. Adjustments to the carrying values of the interest rate caps are reflected in interest expense.

The nature of our fixed rate obligations does not expose us to fluctuations in interest payments. The impact on the fair value of our fixed rate obligations of a hypothetical one-point interest rate increase on the outstanding fixed-rate debt as of December 31, 2003 and December 31, 2002 would be a reduction in value, to the holders of the debt, of approximately $3.0 million and $3.1 million, respectively.

In addition, the hotel business is inherently capital intensive and the hotels which constitute the vast majority of assets are long-lived. Our exposure to market risk associated with changes in interest rates relates primarily to our debt obligations. Approximately 80% of the long-term mortgage debt (including current portion) carries floating rates of interest. For the balance of long-term debt, the nature of fixed rate obligations does not expose us to the risk of changes in the fair value of these instruments. Our

The table below provides information about our debt obligations (including current portion) at December 31, 2003:

At December 31, 2003, approximately $382.8 million of debt instruments outstanding were subject to changes in LIBOR or the prime rate. Without regard to additional borrowings under those instruments or scheduled amortization, the annualized effect of each 25 basis point increase in LIBOR and the prime rate would be a reduction in income before income taxes of approximately $1.0 million. The fair value of the fixed rate debt (book value $86.8 million) at December 31, 2003 is estimated at $86.7 million.

The table below summarizes recent accounting pronouncements and their effects on us:

We are one of the largest independent owners and operators of full-service hotels in the United States in terms of our number of guest rooms and gross annual revenues, as reported by Hotel & Motel Management Magazine in September 2003. We are considered an independent owner and operator because we do not operate our hotels under our own name. We operate substantially all of our hotels under nationally recognized brands, such as “Crowne Plaza,” “Holiday Inn” and “Marriott.” As of March 1, 2004, we operated 92 hotels with an aggregate of 17,417 rooms, located in 30 states and Canada. Of the 92 hotels, 78 hotels, with an aggregate of 14,348 rooms, are part of our continuing operations, while 14 hotels, with an aggregate of 3,069 rooms, are held for sale. Our portfolio of 92 hotels consists of:


	•	87 hotels that we wholly own and operate through subsidiaries;

	•	four hotels that we operate in joint ventures in which we have a 50% or greater voting equity interest and exercise control; and

	•	one hotel that we operate in a joint venture in which we have a 30% non-controlling equity interest.

We consolidate all of these entities in our financial statements, other than the one entity in which we hold a non-controlling equity interest and for which we account under the equity method.

Our hotels are primarily full-service properties that offer food and beverage services, meeting space and banquet facilities and compete in the midscale and upscale market segments of the lodging industry. We operate all but five of our hotels under franchises obtained from nationally recognized hospitality franchisors. We operate sixty-one of our hotels under franchises obtained from InterContinental Hotels Group as franchisor of the Crowne Plaza, Holiday Inn, Holiday Inn Select and Holiday Inn Express brands. We operate sixteen of our hotels under franchises from Marriott International as franchisor of the Marriott, Courtyard by Marriott, Fairfield Inn by Marriott and Residence Inn by Marriott brands. We operate another 10 hotels under other nationally recognized brands. We believe that these strong national brands afford us many benefits, such as guest loyalty and market share premiums.

Our management consists of an experienced team of professionals with extensive lodging industry experience led by our president and chief executive officer, W. Thomas Parrington, who has been in the lodging industry for over 30 years, including most recently as chief executive officer of Interstate Hotels Company through 1998. Our chief operating officer, Michael Amaral, and our three regional vice presidents have a combined 90 years of industry experience and our vice president of sales and marketing has 20 years of industry experience. We will use the experience of our management team to improve property-level performance, implement our hotel renovation and repositioning program, dispose of hotels that do not fit our strategy, identify potential acquisitions and maintain our relationships with our franchisors.

Our operations team is responsible for the management of our properties. Our chief operating officer and three regional vice presidents of operations are responsible for the supervision of our general managers, who oversee the day-to-day operations of our hotels. Our corporate office is located in Atlanta, Georgia. The centralized management services provided by our corporate office include sales and marketing, purchasing, finance and accounting, information technology, renovations, human resources, legal services, training and quality programs. We believe that our centralized services and functions provide significant cost savings due to economies of scale.

Our corporate management team coordinates the financial and accounting functions of our business. These functions include internal audits, insurance and contract review and overseeing the budgeting and forecasting for our hotels. The corporate management team also identifies new systems and

We use information systems at the corporate office to track each hotel’s daily occupancy, ADR, room revenues and food and beverage revenues. By having current information available, we are better able to respond to changes in each market by focusing sales efforts and making appropriate adjustments to control expenses and maximize profitability.

Creating cost and guest service efficiencies in each hotel is a top priority. With a total of 92 hotels in our portfolio, we believe we are able to realize significant cost savings due to economies of scale and that we are able to secure volume pricing from vendors that may not be available to smaller hotel companies.

Between December 1998 and the end of 2001, a number of factors, including our heavy debt load, a lack of available funds to maintain the quality of our hotels, a weakening U.S. economy, and the severe decline in travel in the aftermath of the terrorist attacks of September 11, 2001, combined to place adverse pressure on our cash flow and liquidity. As a result, on December 20, 2001, Lodgian and substantially all of our subsidiaries that owned hotels filed for voluntary reorganization under Chapter 11 of the Bankruptcy Code. At the time of the Chapter 11 filing, our portfolio consisted of 106 hotels.

Following the consummation of our reorganization, we emerged from Chapter 11 with 97 hotels, eight of our hotels having been conveyed to a lender in satisfaction of outstanding debt obligations and one having been returned to the lessor of a capital lease of the property. Of these 97 hotels, 78 hotels emerged from Chapter 11 on November 25, 2002, 18 hotels emerged from Chapter 11 on May 22, 2003 and one hotel never filed under Chapter 11.

Pursuant to our portfolio improvement strategy, during 2003 and the first two months of 2004, we sold five hotels and one office building, and we have identified 14 other hotels and three land parcels as held for sale. At March 1, 2004, our portfolio consisted of 92 hotels, 78 of which are reflected in continuing operations (including one hotel that we do not consolidate).

We operate substantially all of our hotels under nationally recognized brands. We believe that in addition to benefits in terms of guest loyalty and market share premiums, our hotels benefit from franchisors’ central reservation systems, their global distribution systems and their brand Internet booking sites. Reservations made by means of these franchisor facilities generally account for approximately 30% of our total reservations.

We enter into franchise agreements, generally for terms of between 10 and 20 years, with hotel franchisors. The franchise agreements typically authorize us to operate a hotel under the franchise name, at a specific location or within a specified area, and require that we operate the hotel in accordance with the standards specified by the franchisor. As part of our franchise agreements, we are generally required to pay a royalty fee, an advertising/marketing fee, a fee for the use of the franchisor’s nationwide reservation system and certain ancillary charges. Royalty fees generally range from 3.0% to 6.0% of gross room revenues, advertising/marketing fees generally range from 1.0% to 4.5% of gross room revenues and

Set forth below is a summary of our hotel portfolio as of March 1, 2004, organized by franchisors, with the brands, number of hotels and rooms represented by each, in continuing operations and discontinued operations (including one hotel that we do not consolidate):


(1)	Includes one hotel in discontinued operations for which we have entered into a voluntary termination of the franchise agreement.

(2)	Includes one hotel on which the existing debt matures on June 30, 2004 and for which we have escrowed foreclosure documents.

During the term of our franchise agreements, the franchisors may require us to upgrade facilities to comply with their current standards. Our current franchise agreements terminate at various times and have differing remaining terms. For example, the terms of seven, twelve and ten of our franchise agreements are scheduled to expire in 2004, 2005 and 2006, respectively. As franchise agreements expire, we may apply for a franchise renewal. In connection with renewals, the franchisor may require payment of a renewal fee, increased royalty and other recurring fees and substantial renovation of the facilities, or the franchisor may elect at its sole discretion not to renew the franchise.

In addition, as part of our bankruptcy reorganization proceedings, we entered into stipulations with each of our major franchisors setting forth a timeline for completion of capital expenditures for some of our hotels. However, as of March 1, 2004, we have not completed the required capital expenditures for 35 hotels in accordance with the stipulations and estimate that the cost of completing the required capital expenditures is $26.1 million. A franchisor could therefore seek to declare its franchise agreement in default and could seek to terminate the franchise agreement.

We market our hotels through national marketing programs that we coordinate with local sales managers and a director of sales at most of our hotels. Although we make periodic modifications to our marketing plans in order to address local differences and maintain a sales organization structure based on market needs and local preferences, we generally utilize the same major marketing plans throughout the country. We develop these concepts at our headquarters, while modifications are implemented by our hotels’ regional managers and local sales force, all of whom are experienced in hotel marketing. Our local sales force reacts promptly to local changes and market trends in order to customize marketing programs to meet each hotel’s competitive needs. The local sales force is also responsible for developing and implementing marketing programs targeted at specific customer segments within their respective markets. Our marketing efforts focus primarily on business travelers, who account for roughly half of the rooms rented in our hotels.

Our core market consists of business travelers who visit a given area several times per year, such as sales people who cover a regional territory, government and military personnel, and technicians. We believe that business travelers are attracted to our hotels because of their convenient locations, their proximity to corporate headquarters, plants, convention centers or other major facilities, the availability of ample meeting space and our high level of service. Our sales force markets to organizations that can utilize a high volume of room nights and that have a significant number of individuals traveling in our operating regions. We also target groups and conventions by focusing on the proximity of our hotels to nearby convention or trade centers. Our hotels’ group meeting logistics include flexible space readily adaptable to groups of varying size, up-to-date audio-visual equipment and on-site catering facilities.

In addition to the business market, our targeted customers include leisure travelers looking for comfortable and convenient lodging at an affordable price.

Our franchised hotels use the centralized reservation systems of our franchisors, which we believe are among the more advanced reservation systems in the lodging industry. The franchisors’ reservation systems receive reservation requests entered (1) on terminals located at all of their respective properties,

As of March 1, 2004, we operate four hotels in joint ventures in which we have a 50% or greater voting equity interest and exercise control, and we operate one hotel in a joint venture in which we have a 30% non-controlling equity interest. In each joint venture, we share decision making authority with our joint venture partner and may not, and in the case of our hotel in which we do not have a controlling interest, have sole discretion with respect to a hotel’s disposition.

We believe that occupancy and ADR, and consequently RevPAR, in our continuing operations will increase as a result of an expected improvement in lodging industry supply and demand fundamentals, our hotel renovation and repositioning program and our strong management team. We believe our planned capital expenditures and operational improvements will generate increased revenues and enhance our financial performance. Additionally, we will continue to monitor the ongoing performance of our hotels as part of our portfolio improvement strategy.

Based on the expected improvement in lodging industry fundamentals, we believe it is an opportune time in the lodging industry cycle to own and acquire hotels. We intend to acquire or invest in additional hotels primarily through joint ventures with other investors. We believe that entering into joint ventures will enable us to increase our revenues and enhance our financial performance from both the management fees we would receive for managing the hotels owned by the joint ventures, as well as from our ownership interest in those hotels. Under certain circumstances, we also may seek to acquire select hotels on a wholly-owned basis.

The hotel business is highly competitive. Each of our hotels competes in its market area with numerous other hotels operating under various lodging brands, and with other lodging establishments. National chains, including in many instances chains from which we obtain franchises, may compete with us in various markets. There is, however, no single competitor or group of competitors of our hotels that is consistently located nearby and competing with most of our hotels. Our competition is highly fragmented and is comprised of public companies, privately-held equity funds, and relatively small, private owners and operators of hotels. Competitive factors in the lodging industry include, among others, supply in a particular market, franchise affiliations, reasonableness of room rates, quality of accommodations, service levels, convenience of locations and amenities customarily offered to the traveling public. In addition, the development of travel-related Internet websites has increased price awareness among travelers and price competition among similarly located, comparable hotels.

Demand for accommodations, and the resulting cash flow, vary seasonally. The high season tends to be the summer months for hotels located in colder climates and the winter months for hotels located in warmer climates. Aggregate demand for accommodations in our portfolio is, however, lowest during the winter months. Levels of demand are dependent upon many factors that are beyond our control, including general and local economic conditions and changes in levels of leisure and business-related travel. Our hotels depend on both business and leisure travelers for revenues.

We also compete with other hotel owners and operators with respect to obtaining desirable franchises for upscale and midscale hotels in targeted markets and acquiring hotels to renovate and reposition.

We believe that we have passed the bottom of the U.S. economic and lodging industry cycle, based on industry forecasts, general economic forecasts and historical data. After two consecutive years of declines in 2001 and 2002 in RevPAR, the U.S. lodging industry showed signs of recovery in the second half of 2003, with full year RevPAR growth of 0.5% according to Smith Travel Research. For 2004, Smith Travel Research recently forecasted annual U.S. lodging industry RevPAR growth of 4.5% and an annual increase in demand, as measured by average daily rooms sold, of 4.0%, which it forecasted will outpace the annual net change in supply of 1.4%. Although these are only industry forecasts, and do not apply specifically to our portfolio of hotels, based on forecasted industry fundamentals, we believe that it is an opportune time in the business cycle to own, acquire and reinvest in hotels.

As illustrated by the graph below, the U.S. lodging industry enjoyed nine years of consecutive positive RevPAR growth from 1992 through 2000 following the economic recession of 1991. The periods of greater RevPAR growth over this time period generally occurred when growth in room demand exceeded new supply growth.

We retain responsibility for all aspects of the day-to-day management of each of our hotels. We establish and implement standards for hiring, training and supervising staff, developing and maintaining


(1)	The existing debt for this hotel matures on June 30, 2004, and we have escrowed foreclosure documents with respect to this debt.
(2)	These hotels are held for sale and accounted for in discontinued operations.
(3)	We have entered into a voluntary termination of the franchise agreement for this hotel.
(4)	Renovations planned for 2004.


	•	Holiday Inn Baltimore West, MD;

	•	Holiday Inn Market Center, Dallas, TX;

	•	Holiday Inn Syracuse, NY; and

	•	Holiday Inn Fort Mitchell, KY.

Fourteen of our hotels are located on land subject to long-term leases. Generally, these leases are for terms in excess of the depreciable lives of the building. We also have a right of first refusal on several leases if a third party offers to purchase the land. We pay fixed rents on some of these leases; on others, we pay fixed rents plus additional rents based on a percentage of revenue or cash flow. Some of the leases are subject to periodic rate increases. The leases generally require us to pay the cost of repairs, insurance and real estate taxes.

During 2001, prior to our Chapter 11 filing, we sold six hotels. In January 2003, in connection with our emergence from Chapter 11, eight hotels were conveyed to a secured lender in satisfaction of indebtedness and one hotel was returned to the lessor of a capital lease. During 2003, we developed a plan to reduce debt and interest costs, and to implement a portfolio improvement strategy, in order to enhance our future growth. Pursuant to this strategy, during 2003 and the first two months of 2004, we sold five hotels and one office building, and we have identified 14 hotels and three land parcels as held for sale. As of March 1, 2004, our portfolio consisted of 92 hotels, 78 of which are reflected in continuing operations (including one hotel that we do not consolidate).

As previously discussed, 14 hotels and three land parcels remain held for sale as of March 1, 2004.

The following two tables present data on occupancy, ADR and RevPAR for the hotels in our portfolio (including one hotel that we do not consolidate) at December 31, 2003, by market segment for 2003, the 2002 Combined Period and 2001. During the first two months of 2004, we sold four of the hotels included in the following table as part of our discontinued operations.

The categories in the tables above are based on the Smith Travel Research Chain Scales and are defined as:


	•	Upper Upscale: Hilton and Marriott;

	•	Upscale: Courtyard by Marriott, Crowne Plaza, Radisson and Residence Inn by Marriott;

	•	Midscale with Food & Beverage: Clarion, DoubleTree, Four Points, Holiday Inn, Holiday Inn Select, Holiday Inn SunSpree Resort and Quality Inn; and

	•	Midscale without Food & Beverage: Fairfield Inn by Marriott and Holiday Inn Express.

The following two tables present data on occupancy, ADR and RevPAR for the hotels in our portfolio (including one hotel that we do not consolidate) at December 31, 2003, by geographic region for 2003, the 2002 Combined Period and 2001. During the first two months of 2004, we sold four of the hotels included in the following table as part of our discontinued operations.


	•	Northeast: Canada, Connecticut, Massachusetts, Maryland, New Hampshire, New York, Ohio, Pennsylvania, Vermont, West Virginia;

	•	Southeast: Alabama, Florida, Georgia, Kentucky, Louisiana, South Carolina, Tennessee;

	•	Midwest: Arkansas, Iowa, Illinois, Indiana, Kansas, Michigan, Minnesota, Missouri, Oklahoma, Texas; and

	•	West: Arizona, California, Colorado, New Mexico.

All of our hotels are pledged as collateral to secure long-term debt. The following table summarizes the book values of our hotel assets (except for one hotel that we do not consolidate) along with the related long-term debt (including current portion) which they collateralize as of December 31, 2003. “Book value” means the value at which the asset is reflected in our consolidated financial


(1)	Excluded are long-term obligations and property, plant and equipment of one hotel in which we have a non-controlling equity interest and do not consolidate.


	•	general liability;

	•	property damage;

	•	directors’ and officers’ liability;

	•	liquor liability;

	•	workers’ compensation;

	•	fiduciary liability;


	•	business automobile; and

	•	environmental insurance (on certain properties).

We are self-insured up to certain amounts with respect to our insurance coverages. We establish liabilities for these self-insured obligations annually, based on actuarial valuations and our history of claims. If these claims exceed our estimates, our future financial condition and results of operations would be adversely affected. As of December 31, 2003, we had an accrued balance of approximately $10 million for these expenses.

There are other types of losses for which we cannot obtain insurance at all or at a reasonable cost, including losses caused by acts of war. If an uninsured loss or a loss that exceeds our insurance limits were to occur, we could lose both the revenues generated from the affected hotel and the capital that we have invested. We also could be liable for any outstanding mortgage indebtedness or other obligations related to the hotel. Any such loss could materially and adversely affect our financial condition and results of operations.

We believe that we maintain sufficient insurance coverage for the operation of our business.

Our hotels are subject to certain federal, state and local regulations which require us to obtain and maintain various licenses and permits. These licenses and permits must be periodically renewed and may be revoked or suspended for cause at any time.

Occupancy licenses are obtained prior to the opening of a hotel and may require renewal if there has been a major renovation. The loss of the occupancy license for any of the larger hotels in our portfolio could have a material adverse effect on our financial condition and results of operations. Liquor licenses are required for hotels to be able to serve alcoholic beverages and are generally renewably annually. We believe that the loss of a liquor license for an individual hotel would not have a material effect on our financial condition and results of operations. We are not aware of any reason why we should not be in a position to maintain our licenses.

We are 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, we are subject to certain federal, state and local health laws and regulations. We believe that we comply in all material respects with these laws and regulations. We are also subject in certain states to dramshop statutes, which may give an injured person the right to recover damages from us if we wrongfully serve alcoholic beverages to an intoxicated person who causes an injury. We believe that our insurance coverage relating to contingent losses in these areas is adequate.

Our hotels also are subject to environmental regulations under federal, state and local laws. These environmental regulations have not had a material adverse effect on our operations. However, such regulations potentially impose liability on property owners for cleanup costs for hazardous waste contamination. If material hazardous waste contamination problems exist on any of our properties, we would be exposed to liability for the costs associated with the cleanup of those sites.

At December 31, 2003, we had 4,467 full-time and 2,523 part-time employees. We had 125 full-time employees engaged in administrative and executive activities. The balance of our employees manage, operate and maintain our properties. At December 31, 2003, 729 of our full and part-time employees located at eight hotels were covered by collective bargaining agreements. These agreements expire between 2004 and 2006, except for three agreements covering approximately 200 employees which have expired and are currently being renegotiated. We consider relations with our employees to be satisfactory.

On December 20, 2001, Lodgian and substantially all of our subsidiaries that owned hotels filed for voluntary reorganization under Chapter 11 of the Bankruptcy Code in the Southern District of New York. At the time of the filing, our portfolio included 106 hotels.

Less than one year after filing for bankruptcy, on November 5, 2002, the Bankruptcy Court confirmed the Joint Plan of Reorganization and, on November 25, 2002, Lodgian and our subsidiaries owning 78 of our hotels emerged from Chapter 11. Pursuant to the terms of the Joint Plan of Reorganization, eight of our wholly-owned hotels were conveyed to a lender in satisfaction of outstanding debt obligations and one hotel was transferred to the lessor of a capital lease secured by the property in January 2003 .

Pursuant to the Joint Plan of Reorganization, the following significant events took effect upon our emergence from reorganization proceedings:


	•	5,000,000 shares of Preferred Stock, par value $0.01, initial liquidation value $25 per share, were issued or reserved for issuance in satisfaction of outstanding debt and other obligations;

	•	7,000,000 shares of common stock, par value $0.01 per share, were issued or reserved for issuance in satisfaction of outstanding debt and other obligations;

	•	Class A warrants to purchase an aggregate of 1,510,638 shares of common stock at $18.29 per share were made available for issuance in satisfaction of outstanding debt and other obligations;

	•	Class B warrants to purchase an aggregate of 1,029,366 shares of common stock at $25.44 per share were made available for issuance in satisfaction of outstanding debt and other obligations;

	•	Our previous equity, consisting of an aggregate of 28,479,837 shares, was cancelled, and in exchange our stockholders received their pro rata share of 207,900 shares of common stock, plus Class A warrants to purchase an aggregate of 251,823 shares of common stock and Class B warrants to purchase an aggregate of 778,304 shares of common stock;

	•	Our CRESTS were cancelled and the holders received their pro rata share of 868,000 shares of the common stock, plus Class A warrants to purchase 1,258,815 shares of common stock and Class B warrants to purchase 251,062 shares of common stock;

	•	Our 12.25% Senior Subordinated Notes were cancelled and the holders of the notes received their pro rata share of 4,690,600 shares of Preferred Stock and 5,557,511 shares of common stock;

	•	The holders of allowed general unsecured claims became entitled to 309,400 shares of Preferred Stock and 366,589 shares of common stock, referred to as the “disputed claims reserve.” Until distributed, these shares are part of the disputed claims reserve for the pre-bankruptcy petition general unsecured creditors. These shares are periodically distributed as the disputed claims are resolved;

	•	We closed on $302.7 million of exit financing arrangements with Merrill Lynch Mortgage which was used to repay previous debt obligations, fund payments of certain allowed claims and fund portions of certain required cash escrows. These financings were secured by 56 (54 as of March 1, 2004) of our hotels;

	•	We closed on a $6.3 million exit financing arrangement with Computershare Trust Company of Canada, secured by one of our hotels;


	•	Loans from lenders approximating $86.0 million, secured by 21 of our hotels, were reinstated on their previous terms, except for the extension of certain maturities and, in the case of one loan, a new interest rate; and

	•	In accordance with AICPA, Statement of Position 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code, we implemented fresh start reporting effective November 22, 2002 (the date on which the exit financing agreement was signed). As a result, our assets and liabilities have been recorded based on fair values. Our consolidated financial statements since our emergence from Chapter 11 are those of a new reporting entity (referred to as the “successor”) and are not comparable with our financial statements on or prior to the effective date of the Joint Plan of Reorganization (our former reporting entity is referred to as the “predecessor”).

Eighteen additional hotels previously owned by two subsidiaries, Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C., were not part of the Joint Plan of Reorganization. On April 24, 2003, the Bankruptcy Court confirmed a plan of reorganization relating to these 18 hotels (the “Impac Plan of Reorganization”). These 18 hotels remained in Chapter 11 until May 22, 2003, the date on which we finalized the Lehman Financing. We used the proceeds from the Lehman Financing primarily to satisfy the remaining amounts due to the lender of the debt secured by these hotels. The Impac Plan of Reorganization also provided for a pool of funds of approximately $0.3 million to be paid in cash to the general unsecured creditors of the 18 hotels.

From time to time, as we conduct our business, legal actions and claims are brought against us. The outcome of these matters is uncertain. However, we believe that all currently pending matters will be resolved without a material adverse effect on our results of operations or financial condition. Claims relating to the period before we filed for Chapter 11 are limited to the amounts approved by the Bankruptcy Court for settlement of such claims and are payable out of the disputed claims reserve, which, in the case of the Joint Plan of Reorganization, consists of our securities, and in the case of the Impac Plan of Reorganization, consists of $0.3 million of cash. We have reserved for all claims approved by the Bankruptcy Court that have not yet been paid.

The table below sets forth the names and ages of our directors, executive officers and other senior management, 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.


(1)	Member of the executive committee.

(2)	Member of the compensation committee.

(3)	Member of the audit committee.

(4)	Member of the nominating committee.

W. Thomas Parrington, 59, has served as our president and chief executive officer since July 2003, following service as our interim chief executive officer from May 2003 until that date, and has been a director since our emergence from Chapter 11 on November 25, 2002. Mr. Parrington has been involved in the lodging industry for over 30 years. Until December 1998, Mr. Parrington was president and chief executive officer of Interstate Hotels Company, a publicly traded company that merged with Wyndham Hotels in June 1998. During his 17-year tenure with Interstate, Mr. Parrington also served as chief financial officer and chief operating officer. Since leaving Interstate, Mr. Parrington has focused on real estate investments (primarily hotels) and consultancy.

Sean F. Armstrong, 41, has been a director of Lodgian since our emergence from Chapter 11 on November 25, 2002. Mr. Armstrong also is chairman of the executive committee of our board of directors. He is a managing director of Oaktree with which he has been associated since 1995. Prior to joining Oaktree, Mr. Armstrong was a vice president of Trust Company of the West.

Russel S. Bernard, 46, has been a director and chairman of the board of directors of Lodgian since our emergence from Chapter 11 on November 25, 2002. He is a principal of Oaktree, with which he has been associated since 1995, and is the portfolio manager of Oaktree’s real estate and mortgage funds. Prior to joining Oaktree, Mr. Bernard was a managing director of Trust Company of the West. Under sub-

Stewart J. Brown, 56, has been a director of Lodgian since our emergence from Chapter 11 on November 25, 2002. Since December 2002, he has been serving as a senior consultant with Booz Allen Hamilton as part of its Defense Team. He served active duty as a Colonel in the United States Army Reserve from September 2001 until he joined Booz Allen Hamilton in December 2002. During this time, he served as Chief of the Crisis Action Team in the Army Operation Center. Colonel Brown had previously served in the Army and Army Reserves between 1970 and 2002 where, among other duties, he served as Director of Training and Education in the Strategic Readiness System. Between 1997 and 2001, Colonel Brown served as principal and president of Real Estate Capital Services, LLC, a real estate consulting and finance firm. Colonel Brown has extensive experience in strategic and tactical planning, operational implementation, crisis management and turn around situations.

Kenneth A. Caplan, 30, has been a director of Lodgian since our emergence from Chapter 11 on November 25, 2002. Mr. Caplan also is chairman of the compensation committee of our board of directors. Mr. Caplan is a principal at The Blackstone Group, with which he has been associated since 1997. Mr. Caplan has been involved in a variety of real estate investments and investment initiatives, including property acquisitions, hotel investments and corporate ventures. Prior to joining Blackstone, he was an analyst in the real estate investment banking group of Lazard Frères & Co.

Stephen P. Grathwohl, 56, has been a director of Lodgian since our emergence from Chapter 11 on November 25, 2002. Mr. Grathwohl also is chairman of the audit committee of our board of directors. Mr. Grathwohl has been principal of Burr Street Equities, LLC, a boutique real estate advisory company, since 1997 and is a director of ShoreBank, a commercial bank chartered by the State of Illinois and headquartered in Chicago, Illinois. He also is a director of Shorebank Development Corporation, a Chicago based real estate development and management company, and Shorebank Advisory Services, an international financial research and consulting company, each an affiliate of ShoreBank.

Jonathan D. Gray, 34, has been a director of Lodgian since our emergence from Chapter 11 on November 25, 2002. He is a senior managing director at The Blackstone Group, with which he has been associated since 1992. Mr. Gray oversees the domestic investment activities of Blackstone Real Estate Advisors, a major investment manager of commercial real estate. He also is a member of the board of directors of The Savoy Group and Homestead Studio Suites. Mr. Gray also has worked in the Mergers & Acquisitions Advisory group and the Private Equity group at Blackstone.

Kevin C. McTavish, 46, has been a director of Lodgian since our emergence from Chapter 11 on November 25, 2002. Mr. McTavish is a principal of Summit Capital, LLC, a real estate investment firm based in Dallas, Texas. From 1995 to 2003, he was a principal at Colony Capital, LLC, an opportunistic real estate firm, where he sourced domestic and international opportunities. In addition to focusing on new investments during his seven years at Colony Capital, he was chief operating officer of Colony Advisors, the related asset management company to Colony Capital, from 1996 until 1998. In this capacity he was responsible for managing a 50 person asset management group and over $5 billion of real estate assets. He was a member of the Investment Committee and Major Asset Review Committee. Prior to Colony, Mr. McTavish worked with the Robert M. Bass Group in Fort Worth, Texas. There, he was a founder of Brazos Asset Management, LP which purchased, managed and sold over $3 billion of real estate assets during his five years with the firm. He is a member of the Pension Real Estate Association, the Urban Land Institute and the Samuel Zell Real Estate Center at the Wharton Business School.

Michael W. Amaral, 46, was appointed senior vice president of operations in November 2001 and executive vice president and chief operating officer of Lodgian in May 2002. Mr. Amaral brings over 20 years of hospitality experience to his position. Prior to November 2001, he was the vice president of operations for our Eastern Region, a position he held from December 1998. Between August 1990 and December 1998, Mr. Amaral was employed by Servico Inc., our predecessor company, where he held the position of regional vice president of the Pittsburgh Region. Prior to joining Servico, Mr. Amaral held other senior positions within the lodging industry including general manager of Atlantic Hospitality and

Manuel E. Artime, 38, was appointed executive vice president and chief financial officer of Lodgian on October 13, 2003. He joined Lodgian in December 2001 as vice president and controller. Mr. Artime assisted in the Chapter 11 restructuring for Mariner Health Care Inc., serving as its Director of Financial Restructuring between February 2000 and December 2001. Between May 1993 and February 2000, Mr. Artime served in the Financial Advisory Services Group of Ernst & Young in Atlanta. Mr. Artime is a Certified Public Accountant. In addition to his undergraduate degree, Mr. Artime holds a Masters of Business Administration degree from Georgia State University.

Samuel J. Davis, 44, was appointed senior vice president of construction and development in November 2001. He joined Lodgian in December 1998 as vice president of construction and development. Mr. Davis served as Vice President of Design and Construction with Impac Hotel Group, LLC from 1982 to December 1998. Prior to that, he was with the United States Navy where he served as an engineer.

Daniel E. Ellis, 35, was appointed senior counsel of Lodgian in July 1999. He was appointed secretary and vice president of legal affairs in November 2001. In March 2002, he was promoted to senior vice president, general counsel and secretary. Between 1995 and 1997, Mr. Ellis served as Assistant District Attorney for the State of Georgia and as attorney in private practice between 1997 and 1999. Mr. Ellis holds a law degree from the University of Mississippi and a Masters of Business Administration degree from Mercer University.

Linda Borchert Philp, 41, was appointed vice president and chief accounting officer in November 2003. She joined Lodgian in May 2002 as vice president and treasurer. Ms. Philp was a consultant for Lodgian from October 2001 to May 2002. From 1987 to 2001, Ms. Philp worked for consumer product companies PepsiCo, Kraft, Pizza Hut and Campbell Soup in finance, marketing, logistics and strategic planning roles. Ms. Philp is a Certified Public Accountant. In addition to her undergraduate degree, Ms. Philp holds a Masters in Business Administration from the University of Wisconsin — Madison.

Daniel K. Abernethy, 41, joined Lodgian in October 1998 as regional director of sales. After leaving the company briefly In June 2001 to serve as Director of Marketing at Wyndham Orlando Resort, Mr. Abernethy returned to Lodgian in December 2001 as regional director of sales, and was promoted to vice president of sales & marketing in October 2002. Mr. Abernethy has over 20 years of experience in the hospitality industry. His career began in hotel operations at Hilton and Marriott hotels. He moved over to sales and marketing and has worked as a property Director of Sales for Radisson and Sheraton hotels.

Deborah N. Ethridge, 34, joined Lodgian in June 2001, has served as vice president of strategic planning, and was appointed vice president, finance and investor relations in October 2003. Prior to joining Lodgian, Ms. Ethridge served in various development, finance and strategic positions with InterContinental Hotels Group from March 1994 to May 2000. Previously she was with the public accounting firm of PricewaterhouseCoopers LLP. Ms. Ethridge is a Certified Public Accountant. In addition to her undergraduate degree, Ms. Ethridge holds a Masters of Business Administration degree from Emory University.

Mark T. DiPiazza, 46, joined Lodgian in 1996, has served as a general manager, area general manager, regional operations manager, and was appointed vice president of operations in 2003. Mr. DiPiazza has over 20 years of experience in the hospitality industry including 14 years at Marriott International and eight years at Lodgian. At Marriott, Mark had multiple roles and assignments including nine years in the field and five years in the corporate office.

Paul J. Hitselberger, 43, joined Lodgian in 1998 as a regional operations manager, and was promoted to vice president of operations in June 2001. Mr. Hitselberger has over 22 years experience in the hospitality industry. In 1982 Paul began his hospitality career as a chef and has an extensive background in food and beverage operations including a first place award at the 1984 New York International Culinary Salon. In December 1984 he moved into hotel operations with Tollman Hundley Hotels.

David T. Robinson, 51, joined Lodgian in 1999 as a regional operations manager and was promoted to vice president of operations and food and beverage in 1999. After leaving the company briefly in January 2000 to serve as Vice President of Bayshore Development, a family business consisting of 3 hotels and 2 entertainment complexes, he returned to Lodgian in June 2002 as vice president of food and beverage and in November 2002 as also was named vice president of operations. Mr. Robinson has extensive experience operating Holiday Inn, Hilton and Sheraton hotels as a General Manager.

The board of directors currently consists of eight members, each of whom is elected for a one-year term that will expire upon the election and qualification of successor directors at the next annual meeting of stockholders. There are no family relationships between any of the directors or executive officers.

Compensation Committee. The board of directors has established a compensation committee, composed of independent directors, on which Kenneth A. Caplan (Chairman), Kevin C. McTavish and Sean F. Armstrong serve. The principal functions of the compensation committee are to approve, or in some cases to recommend to the board of directors, remuneration arrangements and compensation plans involving our directors and executive officers, review bonus criteria and bonus recommendations, review compensation of directors and administer our Stock Incentive Plan.

Audit Committee. The board of directors also has established an audit committee, comprised of independent directors, on which Stephen P. Grathwohl (Chairman), Stewart J. Brown and Kevin C. McTavish serve. The audit committee is responsible, under its written charter, for:


	•	Engaging independent auditors to audit our financial statements and perform other services related to the audit, including a determining the compensation to be paid to such independent auditors;

	•	Reviewing the scope and results of the audit with the independent auditors;

	•	Preapproving all non-audit services provided to Lodgian by the independent auditors;

	•	Periodically assessing the independence of Lodgian’s auditors;

	•	Reviewing and discussing with management and the independent auditors quarterly and annual financial statements, audit results and reports;

	•	Establishing guidelines for our internal audit function and periodically reviewing the adequacy of our internal controls;

	•	Establishing clear policies for Lodgian to follow in hiring employees or former employees of the independent auditors;

	•	Reviewing and periodically updating our Code of Ethics;

	•	Considering changes in accounting practices;

	•	Reviewing any correspondence, report, complaint or concern that raises issues regarding our financial statements or accounting policies and establishing procedures for (1) the receipt, retention and treatment of such complaints, and (2) the confidential, anonymous submission by employees of such concerns; and

	•	Reviewing and reassessing the adequacy of the Audit Committee Charter on an annual basis.

Executive Committee. The board of directors also has established an executive committee, on which Sean F. Armstrong (Chairman), Kenneth A. Caplan, Stephen P. Grathwohl and W. Thomas Parrington serve. The executive committee has the right to exercise all of the powers of the full board of

Nominating Committee. The board of directors also has established a nominating committee, on which Sean F. Armstrong, Kenneth A. Caplan and Kevin C. McTavish serve. The nominating committee is responsible for assisting the board of directors in identifying, screening and recommending qualified candidates to serve as directors.

None of the members of our compensation committee is or has been an executive officer of Lodgian or any of our subsidiaries, and no interlocking relationships exist between any such person and the directors or executive officers of any other company.

We pay the non-employee members of the board of directors an quarterly retainer of $6,000, 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. We also reimburse each director for reasonable out-of-pocket expenses incurred in attending meetings of the board of directors and any of its committees. Directors who are employees do not receive any compensation for services performed in their capacity as directors. On September 5, 2003, we granted options to purchase 5,000 shares of common stock to each of the members of the audit committee of the board of directors. The options were immediately vested as to one-third of the grant amount, with the remainder vesting in equal installments over two years on each of the anniversary dates of the grant date.

The following table sets forth certain summary information concerning compensation paid or accrued by us, for each of the last three fiscal years, to or on behalf of each person who served as our chief executive officer during 2003 and to each of our four most highly compensated executive officers other than the chief executive officer during 2003, and one person who was an executive officer during 2003 but was not serving as an executive officer at the end of the 2003 fiscal year (the “Named Executive Officers”).


(1)	For the fiscal year ended December 31, 2002, substantially all of the bonuses were awarded in recognition of efforts in connection with our successful restructuring, including restructuring bonuses of $1,000,000 for Mr. Hawthorne, $500,000 each for Messrs. Cartoon and Amaral, $100,000 each for Messrs. Artime and Ellis and $30,000 for Ms. Philp.

(2)	Mr. Parrington was named interim chief executive officer in May 2003, with permanent appointment as president and chief executive officer in July 2003. Pursuant to the employment agreement we entered into with Mr. Parrington in July 2003, we awarded Mr. Parrington a signing bonus in the form of (1) the right to receive 200,000 restricted shares of common stock, (2) an option to purchase an additional 100,000 shares of common stock and (3) $100,000 in cash payable in two payments on each of April 1, 2004 and April 1, 2005. The restricted shares and the option each vest as to one-third of the original award on each of July 15, 2004, 2005 and 2006. As of December 31, 2003, no shares of Mr. Parrington’s restricted stock were vested or issued; however, the value of the restricted shares was $600,000 based on a price of $3.00 per share, which is the closing price of the common stock as reported on the American Stock Exchange as of July 15, 2003, the date our board of directors approved the issuance of the shares. Mr. Parrington also will receive a bonus for 2003 of $100,000 in cash which is payable no later than April 15, 2004. The amount shown under “All Other


	Compensation” includes $683 for premiums paid for life insurance over $50,000 and $13,500 in director fees paid before his appointment as chief executive officer.


(3)	Mr. Hawthorne began his employment in October 2001 (as interim chief executive officer and president with formal appointment in November 2001). He resigned from all of his positions in May 2003 and received a severance payment of $800,000 in accordance with his employment agreement. Mr. Hawthorne was granted options to acquire 1,000,000 shares of our common stock, which were to vest equally over a period of three years. However, in accordance with his employment agreement, the options terminated automatically upon our commencement of bankruptcy proceedings.

(4)	Mr. Cartoon joined Lodgian in October 2001 and resigned from his employment in October 2003. The amount shown as salary for 2002 represents fees charged by Richard Cartoon, LLC for the services of Richard Cartoon from January 1, 2002 to December 31, 2002. The amount shown for 2001 represents fees charged by Richard Cartoon, LLC for the services of Mr. Cartoon from October 4, 2001 to December 31, 2001.

(5)	Mr. Artime joined Lodgian in December 2001 as vice president and controller. He was appointed executive vice president and chief financial officer in October 2003.

(6)	Ms. Philp joined Lodgian in May 2002 as vice president and treasurer. She was appointed vice president and chief accounting officer in November 2003.

(7)	The amounts represent life insurance premiums we paid on behalf of these employees for life insurance with a death benefit in excess of $50,000.

The following table sets forth all individual grants of stock options during the fiscal year ended December 31, 2003, to each of the Named Executive Officers:


(1)	Mr. Parrington’s options become exercisable in equal installments beginning on the first anniversary of the date of grant and continuing for two years thereafter until fully vested.

(2)	These grants were exercisable immediately for one-third of the grant amount, with the remainder becoming exercisable in equal installments on each of the first and second anniversary of the date of grant.

(3)	The exercise price of the options granted was equal to fair market value of the underlying stock on the date of grant.

(4)	Amounts represent hypothetical gains that could be achieved for the respective options if exercised at the end of the option term. These gains are based on the fair market value per share on the date of grant and assumed rates of stock price appreciation of 5% and 10% compounded annually from the date the respective options were granted to their expiration date. These assumptions are mandated by the rules of the Securities and Exchange Commission and are not intended to forecast future

appreciation of our stock price. The potential realizable value computation is net of the applicable exercise price, but does not take into account federal or state income tax consequences and other expenses of option exercises or sales of appreciated stock. Actual gains, if any, are dependent upon the timing of such exercises and the future performance of our common stock. There can be no assurance that the rates of appreciation in this table can be achieved. This table does not take into account any appreciation in the price of our common stock to date.

The following table sets forth information concerning option exercises and the year-end values of unexercised options, including the aggregate dollar value of in-the-money options, held by the Named Executive Officers as of December 31, 2003.

(1)

Amounts disclosed in this column do not reflect amounts actually received by the Named Executive Officers but are calculated based on the difference between the fair market value on December 31, 2003 and the exercise price of the options. The Named Executive Officers will receive cash only if and when they sell the common stock issued upon exercise of the options, and the amount of cash received by such individuals is dependent on the price of the common stock at the time of such sale. The values are based on the closing price of the common stock on December 31, 2003 of $5.25 per share as reported on the American Stock Exchange, less the exercise price payable upon exercise of such options. The values do not include options that were not in-the-money as of December 31, 2003.

On November 25, 2002, we adopted the Lodgian, Inc. 2002 Stock Incentive Plan which replaced the option plan previously in place. The Stock Incentive Plan was not approved, nor was it required to be approved, by our stockholders, because it was approved by the Bankruptcy Court in connection with the Joint Plan of Reorganization. In accordance with the Stock Incentive Plan, awards to acquire up to 1,060,000 shares of common stock may be granted to our directors, officers or other key employees or consultants. Awards may consist of stock options, stock appreciation rights, stock awards, performance share awards, section 162(m) awards or other awards determined by our compensation committee. Stock options granted pursuant to the Stock Incentive Plan cannot be granted at an exercise price which is less than 100% of the fair market value per share on the date of the grant. Vesting, exercisability, payment and other restrictions pertaining to any awards made pursuant to the Stock Incentive Plan are determined by the compensation committee.

As of March 1, 2004, options to purchase 470,999 shares of our common stock were outstanding under the Stock Incentive Plan. Additionally, pursuant to our employment agreement with Mr. Parrington, we have agreed to issue 200,000 shares of restricted common stock under the Stock Incentive Plan and subject to certain vesting requirements. We have not yet issued these shares. The employment agreement further requires that, subject to the approval of our board of directors, we grant to Mr. Parrington options to purchase up to an additional 150,000 shares of common stock, or an equivalent number of shares of

W. Thomas Parrington is employed by us pursuant to a written employment agreement. Mr. Parrington’s employment agreement has an initial term of three years beginning July 1, 2003 and is automatically renewed for an additional one-year period unless either party provides written notice of termination at least 60 days in advance of the expiration date of the current term. We will pay Mr. Parrington an annual base salary of not less than $650,000. On July 15, 2003, we awarded Mr. Parrington a signing bonus in the form of (1) the right to receive up to 200,000 restricted shares of common stock, (2) an option to purchase an additional 100,000 shares of common stock and (3) $100,000 payable in cash in two payments on each of April 1, 2004 and April 1, 2005. The restricted shares and the option each vest as to one-third of the original award on each of July 15, 2004, 2005 and 2006. Subject to the approval of our board of directors, we have also agreed to grant Mr. Parrington additional options to purchase up to 150,000 additional shares of common stock over the next three years, the number of such shares and vesting of which will be determined based on the achievement of company performance objectives. If the company performance goals and certain other conditions are met, Mr. Parrington will have the right to receive restricted shares of common stock in an amount determined by a formula as set forth in his employment agreement and, in that event, an equal number of shares of common stock covered by such option will lapse.

Mr. Parrington also is eligible for an annual bonus of up to 100% of his base salary, payable 75% in cash and 25% in restricted shares of common stock, to be determined based on the achievement of certain company performance objectives. For 2003 Mr. Parrington will receive a minimum bonus of $100,000 in cash that is not based on performance achievements. This bonus is payable no later than April 15, 2004. Following Mr. Parrington’s termination from employment in certain events, such as termination without cause or his resignation for good reason, which includes a change of control of Lodgian (as defined in the employment agreement), his employment agreement provides for our continued payment of his base salary, unpaid cash signing bonus, medical benefits and eligible annual performance bonus through the expiration of the date of the agreement or two years, whichever is shorter. In addition, Mr. Parrington’s outstanding options and restricted stock awards will be vested in full in the event of such termination of employment. The employment agreement also includes post-employment restrictive covenants not to disclose our confidential information or recruit our employees.

We intend to enter into employment agreements with certain of our other executive officers. These employment agreements will have an initial term of two years and will automatically renew for additional one-year periods unless either party provides written notice of termination at least 180 days in advance of the expiration of the current term. In the event of a termination of employment in certain circumstances, such as termination without cause, resignation for good reason, death, or disability, the agreements will provide for a lump sum severance payment equal to 100% of annual base salary. In addition, the severance benefit provides for acceleration of unvested options and payment of a pro rated portion of any earned bonus. In the event the employee is terminated within 60 days before or 180 days after a change of control (to be defined in the agreements), the employee will be entitled to payment equal to 100% of annual base salary, acceleration of unvested options, and payment of any earned bonus. If we choose not to renew an employment agreement, the employees would be entitled to a lump sum payment equal to 50% of base salary upon expiration of the agreement, plus acceleration of unvested options.

Our certificate of incorporation and bylaws provide that we will indemnify our directors and officers to the fullest extent permitted by Delaware law. We believe that the provisions in our certificate of incorporation and bylaws are necessary to attract and retain qualified persons as directors and officers.

The following table sets forth certain information regarding ownership of our equity securities as of March 1, 2004, by (i) each person known to us to be the beneficial owner of more than 5% of the issued and outstanding common stock, (ii) each of the members of the board of directors, (iii) each of the Named Executive Officers in the summary compensation table and (iv) all directors and executive officers of as a group. All shares were owned directly with sole voting and investment power unless otherwise indicated.


	(1)	Ownership percentages are based on 6,843,149 shares of common stock outstanding and 5,461,597 shares of Preferred Stock outstanding, in each case as of March 1, 2004. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission that deem shares to be beneficially owned by any person or group who has or shares voting or investment power with respect to such shares and includes any security that such person or persons have or have the right to acquire within 60 days.

	(2)	Oaktree Capital Management, LLC filed a Schedule 13D/ A with the Securities and Exchange Commission on June 25, 2003, reporting beneficial ownership of 1,664,752 shares of common stock and 1,590,275 shares of Preferred Stock. Oaktree now beneficially owns 1,785,082 shares of Preferred Stock following our payment of an in kind dividend on November 21, 2003. The shares of common stock include 1,578,611 shares owned by OCM Real Estate Opportunities Fund II, L.P. (“OCM Fund II”) and 86,141 shares owned by a third party separate account (the “Account”). The shares of Preferred Stock include (i) 1,495,578 shares owned by OCM Fund II, (ii) 201,657 shares owned by OCM Real Estate Opportunities Fund III, L.P. (“OCM Fund III”), (iii) 6,237 shares owned by


		OCM Real Estate Opportunities Fund IIIA, L.P. (“OCM Fund IIIA”), and (iv) 81,610 shares owned by the Account. Oaktree is (x) the general partner of OCM Fund II, (y) the managing member of OCM Real Estate Opportunities Fund III GP, LLC, which is the general partner of OCM Fund III and OCM Fund IIIA, and (z) the investment manager for the Account. Accordingly, Oaktree may be deemed to beneficially own the shares of common stock owned by OCM Fund II and the Account, and the shares of Preferred Stock owned by OCM Fund II, OCM Fund III, OCM Fund IIIA and the Account. Oaktree disclaims any such beneficial ownership. To the extent that Russel S. Bernard, a principal of Oaktree, and Sean F. Armstrong, a managing director of Oaktree, participate in the process to vote or to dispose of shares of common stock and Preferred Stock beneficially owned by Oaktree, each may be deemed to be a beneficial owner of such shares of common stock and Preferred Stock. Messrs. Bernard and Armstrong, each of whom is a director of Lodgian, disclaim any such beneficial ownership. Oaktree’s business address is 333 South Grand Avenue, 28th Floor, Los Angeles, California 90071.

	(3)	Third Avenue Management, LLC filed a Schedule 13G/A with the Securities and Exchange Commission on January 16, 2004, reporting beneficial ownership of 1,319,428 shares of common stock, which includes 714,898 shares of common stock issuable upon exercise of outstanding warrants with an exercise price of $18.29 per share and 142,581 shares of common stock issuable upon exercise of outstanding warrants with an exercise price of $25.44 per share. Third Avenue Management’s business address is 767 Third Avenue, New York, New York 10017-2023.

	(4)	BRE/HY Funding LLC filed a Schedule 13D with the Securities and Exchange Commission on December 5, 2002, reporting beneficial ownership of 833,627 shares of common stock and 703,590 shares of Preferred Stock. BRE/HY now owns 789,779 shares of Preferred Stock following our payment of an in kind dividend on November 21, 2003. BRE/HY’s business address is 345 Park Avenue, 31st Floor, New York, New York 10154. Jonathan D. Gray, a senior managing director of The Blackstone Group L.P., an affiliate of BRE/HY, and Kenneth A. Caplan, a managing director of Blackstone, each may be deemed to be a beneficial owner of securities owned by BRE/HY. Messrs. Gray and Caplan, each of whom is a director of Lodgian, disclaim any such beneficial ownership.

	(5)	Merrill Lynch, Pierce, Fenner & Smith Incorporated filed a Schedule 13G/ A with the Securities and Exchange Commission on March 4, 2004, reporting beneficial ownership of 781,836 shares of common stock, which includes 10,714 shares of common stock issuable upon exercise of outstanding warrants with an exercise price of $18.29 per share and 2,150 shares of common stock issuable upon exercise of outstanding warrants with an exercise price of $25.44 per share. Merrill Lynch filed a Form 4 on June 18, 2003 reporting beneficial ownership of 422,155 shares of Preferred Stock. Merrill Lynch now owns 473,867 shares of Preferred Stock following our payment of an in kind dividend on November 21, 2003. Merrill Lynch’s business address is 4 World Financial Center, North Tower, 12th Floor, New York, New York, 10080.

	(6)	Northeast Investors Trust filed a Schedule 13G with the Securities and Exchange Commission on February 13, 2004, reporting beneficial ownership of 514,070 shares of common stock. Northeast Investors Trust’s business address is 50 Congress Street, Boston, Massachusetts 02109-4096.

	(7)	This number includes 41 shares of common stock issuable upon exercise of outstanding warrants with an exercise price of $18.29 per share, 126 shares of common stock issuable upon exercise of outstanding warrants with an exercise price of $25.44 per share and 13,334 shares subject to exercisable options held by Mr. Amaral. This number excludes 26,666 shares subject to options held by Mr. Amaral that are not exercisable within 60 days. Mr. Amaral’s business address is c/o Lodgian, Inc., 3445 Peachtree Road, N.E., Suite 700, Atlanta, Georgia 30326.

	(8)	This number includes 10,000 shares subject to exercisable options held by Mr. Artime. This number excludes 20,000 shares subject to options held by Mr. Artime that are not exercisable within 60 days. Mr. Artime’s business address is c/o Lodgian, Inc., 3445 Peachtree Road, N.E., Suite 700, Atlanta, Georgia 30326.


	(9)	This number includes 1,667 shares of common stock subject to exercisable options held by Mr. Brown. This number excludes 3,333 shares of common stock subject to options held by Mr. Brown that are not exercisable within 60 days. Mr. Brown’s business address is c/o Booz Allen Hamilton, 3190 Fairview Park Drive, Falls Church, Virginia 22042.


(10)	This number includes 12 shares of common stock issuable upon exercise of outstanding warrants with an exercise price of $18.29 per share, 39 shares of common stock issuable upon exercise of outstanding warrants with an exercise price of $25.44 per share, and 8,334 shares subject to exercisable options held by Mr. Ellis. This number excludes 16,666 shares subject to options held by Mr. Ellis that are not exercisable within 60 days. Mr. Ellis’s business address is c/o Lodgian, Inc., 3445 Peachtree Road, N.E., Suite 700, Atlanta, Georgia 30326.

(11)	This number includes 1,667 shares subject to exercisable options held by Mr. Grathwohl. This number excludes 3,333 shares subject to options held by Mr. Grathwohl that are not exercisable within 60 days. Mr. Grathwohl’s business address is c/o Burr Street Equities, LLC, 1178 Burr Street, Fairfield, Connecticut 06824.

(12)	This number includes 1,667 shares of common stock subject to exercisable options held by Mr. McTavish. This number excludes 3,333 shares of common stock subject to options held by Mr. McTavish that are not exercisable within 60 days. Mr. McTavish’s business address is c/o Summit Capital, LLC, 5400 LBJ Freeway, Suite 1470, Dallas, Texas 75240.

(13)	This number excludes 100,000 shares subject to an option that is not exercisable within 60 days and 200,000 shares of restricted common stock that Mr. Parrington has the right to receive subject to certain conditions. Mr. Parrington’s business address is c/o Lodgian, Inc., 3445 Peachtree Road, N.E., Suite 700, Atlanta, Georgia 30326.

(14)	This number includes 2,500 shares subject to exercisable options held by Ms. Philp. This number excludes 5,000 shares subject to options held by Ms. Philp that are not exercisable within 60 days. Ms. Philp’s business address is c/o Lodgian, Inc., 3445 Peachtree Road, N.E., Suite 700, Atlanta, Georgia 30326.

(15)	This number includes 53 shares of common stock issuable upon exercise of outstanding warrants with an exercise price of $18.29 per share, 165 shares of common stock issuable upon exercise of outstanding warrants with an exercise price of $25.44 per share and 44,169 shares of common stock subject to exercisable options.

Richard Cartoon, who served as our executive vice president and chief financial officer from October 2001 to October 2003, is a principal in Richard Cartoon, LLC, which we retained in October 2001 to provide Mr. Cartoon’s services as chief financial officer and other restructuring support and services. In addition to Mr. Cartoon’s salary, we paid approximately $225,000 in 2003 for support and services provided by Richard Cartoon, LLC. This entity continues to provide restructuring and other support to us.

We have a revolving loan agreement with OCM Fund II that allows us to borrow up to $2 million; however, all of our borrowings under that agreement were repaid in full in December 2003, and there are currently no borrowings outstanding. The interest rate on the loan is 10% per annum, and in 2003 we paid $42,222 in interest to OCM Fund II on our borrowings. This loan is secured by two land parcels, and will expire on May 1, 2004 unless we negotiate an extension. OCM Fund II is a greater than 10% stockholder, and Oaktree is the general partner of OCM Fund II. Russell S. Bernard, a principal of Oaktree, and Sean F. Armstrong, a managing director of Oaktree, are directors of Lodgian.

Merrill Lynch, which is serving as sole book-running and lead managing underwriter in this offering, is the owner of 781,836 shares of our common stock, including warrants to purchase 12,864 shares of our common stock, and 473,867 shares of Preferred Stock. A portion of the net proceeds from this offering will be used to redeem all of the outstanding shares of Preferred Stock, including those held by

Our Policy on Business Ethics addresses any conflicts of interests on the part of any employees that might cast doubt on an employee’s ability to act objectively when representing us. In addition to setting guidelines, the Policy on Business Ethics provides that each potential conflict of interest will be reviewed and the final decision as to the existence of a conflict made by our chief executive officer. Further, all related party transactions involving our directors or executive officers are reviewed by the audit committee, in accordance with the corporate governance rules of the American Stock Exchange.

Our certificate of incorporation authorizes the issuance of up to 30,000,000 shares of common stock, $.01 par value per share, and 10,000,000 shares of preferred stock, $.01 par value per share, of which 7,100,000 shares have been designated Series A Preferred Stock. At our 2004 annual meeting, we will seek shareholder approval for an amendment to our certificate of incorporation to increase the number of authorized shares of common stock to 60,000,000 shares. As of the date of this prospectus, 6,843,149 shares of common stock and 5,461,597 shares of Preferred Stock are outstanding. In addition, 158,352 shares of common stock and 150,163 shares of Preferred Stock are held in the disputed claims reserve pending final resolution of Chapter 11 claims.

Holders of record of common stock are entitled to one vote per share on all matters upon which stockholders have the right to vote. The rights attached to the shares of common stock do not provide for cumulative voting rights or preemptive rights. Therefore, holders of more than 50% of the shares of common stock are able to elect all our directors eligible for election each year. All issued and outstanding shares of our common stock are, and the common stock to be sold in this offering, when issued and paid for, will be, validly issued, fully paid and non-assessable. Subject to the rights of any holders of outstanding preferred stock, holders of our common stock are entitled to such dividends as may be declared from time to time by our board of directors out of funds legally available for that purpose. Upon dissolution, holders of our common stock are entitled to share pro rata in our assets remaining after payment in full of all of our liabilities and obligations, including payment of the liquidation preference, if any, on any preferred stock then outstanding. There are no redemption or sinking fund provisions applicable to the common stock.

We have designated 7,100,000 shares of our authorized preferred stock, par value of $0.01 per share, as Series A Preferred Stock. This class of preferred stock accumulates dividends at the rate of 12.25% per year on the liquidation value of the Preferred Stock (initially $25.00 per share). Dividends are cumulative and compounded annually. We pay accrued and unpaid dividends on November 21 of each year. On the first dividend payment date, November 21, 2003, we were required to pay the accrued dividends in kind by the issuance of additional shares of Preferred Stock. If the Preferred Stock is then outstanding, on each of the two succeeding dividend payment dates, our board of directors may elect whether to pay the accrued and unpaid dividends in kind by the issuance of additional shares of Preferred Stock or in cash, to the extent permitted by law. If the Preferred Stock is then outstanding, following the third dividend payment date, we will pay accrued and unpaid dividends in cash, to the extent permitted by law. If we do not have sufficient funds to pay the accrued and unpaid dividends in cash on the dividend payment date, we will continue to accrue and accumulate the unpaid dividends.

On November 21, 2003, our first dividend payment date, we issued 594,299 shares of Preferred Stock as dividends and cash of approximately $18,500 in lieu of fractional shares, and we expect to issue

At any time prior to November 21, 2012, we may, at our option, redeem for cash the Preferred Stock, in whole or in part. On November 21, 2012, we are required to redeem for cash all shares of Preferred Stock then outstanding. If we redeem the Preferred Stock prior to November 21, 2004, the redemption price will be 104% of the liquidation value per share of the Preferred Stock ($25.00 per share plus accrued dividends). The redemption price is reduced by 1% for each succeeding twelve-month period through November 20, 2007, after which the Preferred Stock is redeemable for the liquidation value.

The holders of the Preferred Stock are also entitled to approve, by majority vote, certain of our corporate actions, including increasing the number of authorized shares of capital stock, amendment of our certificate of incorporation or bylaws or entering into a share exchange, reorganization, recapitalization or similar transaction that affects the Preferred Stock or a consolidation, merger, sale of assets or other change of control transaction in which we are not the surviving corporation.

Pursuant to the Joint Plan of Reorganization, we issued Class A warrants to purchase an aggregate of 1,510,638 shares of our common stock, at an exercise price of $18.29 per share, and Class B warrants to purchase an aggregate of 1,029,366 shares of our common stock, at an exercise price of $25.44 per share, to holders of our old equity and CRESTS. The Class A warrants are exercisable through November 25, 2007, and the Class B warrants are exercisable through November 25, 2009. The number of shares of common stock for which the Class A and Class B warrants are exercisable and the exercise price are subject to adjustment upon the payment of dividends of common stock to all holders of common stock, stock splits or reverse splits, upon certain other distributions or securities issuances to all holders of common stock, or upon certain issuances of common stock, or securities convertible into or exercisable for common stock, at a price per share of less than 90% of the current market price of the common stock, as well as upon a reorganization, reclassification, merger, consolidation or disposition of assets. We entered into Warrant Agreements with Wachovia Bank, N.A., dated as of November 25, 2002, in which Wachovia Bank agreed to act as Warrant Agent for the issuance, transfer and exercise of Class A and Class B warrants.

On November 25, 2002, we adopted a new Stock Incentive Plan which replaced the option plan previously in place. The Stock Incentive Plan was not approved, nor was it required to be approved, by our security holders, because it was approved by the Bankruptcy Court in connection with the Joint Plan of Reorganization. In accordance with the Stock Incentive Plan, awards to acquire up to 1,060,000 shares of common stock may be granted to our non-employee directors, officers or other key employees or consultants. Awards may consist of stock options, stock appreciation rights, stock awards, performance share awards, section 162(m) awards or other awards determined by our compensation committee. Stock options granted pursuant to the Stock Incentive Plan cannot be granted at an exercise price which is less than 100% of the fair market value per share on the date of the grant. Vesting, exercisability, payment and other restrictions pertaining to any awards made pursuant to the Stock Incentive Plan are determined by the compensation committee. As of March 1, 2004, options to purchase 470,999 shares of our common stock were outstanding under the Stock Incentive Plan. In addition, we have agreed to issue 200,000 shares of restricted common stock in connection with Mr. Parrington’s employment agreement. The employment agreement further requires that, subject to the approval of our board of directors, we grant to Mr. Parrington options to purchase up to an additional 150,000 shares of common stock, or an equivalent number of shares of restricted common stock, over the next three years, the number of such shares and vesting of which will be determined based on the achievement of certain company performance objectives. After taking into account the outstanding options, previously exercised options and the options and shares of restricted common stock that we have agreed to grant in the future under the Stock Incentive Plan, we have 237,500 shares of common stock reserved and available for grant under the Stock

Our board of directors, without stockholder approval, has the authority under our certificate of incorporation to issue preferred stock with rights superior to the rights of holders of common stock. As a result, preferred stock could be issued quickly and easily, could adversely affect the rights of holders of common stock and could be issued with terms calculated to delay or prevent a change of control of Lodgian or make removal of our management more difficult.

Under Delaware law, all stockholder actions must be effected at a properly called annual or special meeting or by written consent; however, our bylaws provide that stockholder action may not effected by written consent. In addition, our bylaws establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of stockholders, including proposed nominations of persons for election to the board.

These provisions of our bylaws are intended to enhance the likelihood of continuity and stability in the composition of our board of directors and in the policies formulated by the board of directors and to discourage certain types of transactions that may involve an actual or threatened change of control. Such provisions are designed to reduce vulnerability to an unsolicited acquisition proposal and, accordingly, could discourage potential acquisition proposals and could delay or prevent a change in control. These provisions may also have the effect of preventing changes in our management.

Under Delaware law, we may not engage in a “business combination,” which includes a merger or sale of more than 10% of our assets, with any “interested stockholder,” namely, a stockholder who owns 15% or more of our outstanding voting stock, as well as affiliates and associates of any of these persons, for three years following the time that stockholder became an interested stockholder unless:


	•	The transaction in which the stockholder became an interested stockholder is approved by our board of directors prior to the time the interested stockholder attained that status;

	•	Upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, excluding those shares owned by persons who are directors and also officers; or

	•	At or after the time the stockholder became an interested stockholder the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder.

At our 2004 annual meeting, we will seek shareholder approval for an amendment to our certificate of incorporation to opt out of this statute.

Our common stock and Preferred Stock are listed on the American Stock Exchange under the symbols “LGN” and “LGN.pr,” respectively.

Wachovia Corporation is the transfer agent and registrar for our common stock. Their address is 1525 West W.T. Harris Blvd., Charlotte, North Carolina 28288 and their telephone number is (800) 829-8432.

Upon completion of this offering, we will have outstanding an aggregate of shares of common stock. Subject to the lock-up agreements described below, all of the shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act of 1933, as amended, unless these shares are held by our affiliates (within the meaning of Rule 144 under the Securities Act). Shares held by affiliates may generally only be sold in compliance with the limitations of Rule 144 of the Securities Act.

We, and each of our officers and certain of our other stockholders, who in the aggregate hold shares of common stock, have agreed, subject to limited exceptions, that until the earlier of December 15, 2004 or the date that is 180 days after effectiveness of the registration statement of which this prospectus is a part, not to, without the prior written consent of Merrill Lynch:


	•	Directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, lend or otherwise dispose of or transfer any shares of common stock or any securities exercisable or exchangeable for or convertible into shares of common stock; or

	•	Enter into any swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of any common stock, whether any such swap or other arrangement is to be settled by the delivery of common stock or other securities, in cash or otherwise.

This agreement does not extend to bona fide gifts to immediate family members of such persons who agree to be bound by such restrictions, or to limited partners or stockholders, who agree to be bound by such restrictions. During the lock-up period, we may grant options and issue common stock under our Stock Incentive Plan and issue common stock upon exercise of our outstanding warrants.

Merrill Lynch will take into account various factors, including the number of shares requested to be sold, the anticipated manner and timing of sale, the potential impact of the sale on the market for the common stock, and market conditions generally, in determining whether to consent to a transaction prohibited by these restrictions.

Four stockholders who beneficially own approximately 3,817,807 shares of our common stock are parties to a registration rights agreement with us that provides for mandatory and supplemental registration rights for such stockholders’ shares until they can be sold without restriction under Rule 144(k) under the Securities Act of 1933. We have filed a resale registration statement with respect to those shares. That registration statement is not yet effective, but may be declared effective promptly. Three of the four stockholders who are parties to the registration rights agreement, beneficially owning approximately 3,736,197 shares of common stock, are also parties to lock-up agreements in connection with this offering, as described above under “— Lock-Up Agreements.” However, subject to these lock-up agreements, the holders of shares of common stock with registration rights may, upon effectiveness of our resale registration statement, sell those shares in the public market. Sales of substantial amounts of common stock or the perception that those sales could occur may adversely affect the market price for our common stock.

In general, under Rule 144 as currently in effect, a person who has beneficially owned shares of our common stock for at least one year would be entitled to sell within any three-month period a number of shares that does not exceed the greater of:


	•	1% of the number of shares of our common stock then outstanding, which will equal approximately shares immediately after this offering; or

	•	The average weekly trading volume of our common stock on the American Stock Exchange during the four calendar weeks preceding the filing of a notice on Form 144 concerning that sale.

Sales under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current public information about our company.

Under Rule 144(k) as currently in effect, a person who has not been one of our affiliates at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior owner other than an affiliate, is entitled to sell those shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144. Therefore, unless otherwise restricted, Rule 144(k) shares may be sold immediately upon the completion of this offering.

Shortly after this offering, we intend to file a registration statement on Form S-8 covering the shares of common stock reserved for issuance under our Stock Incentive Plan. This registration statement will become effective automatically upon filing. Shares issued under our Stock Incentive Plan, after the filing of a registration statement on Form S-8, may be sold in the open market, subject, in the case of certain holders, to the Rule 144 limitations applicable to affiliates, the above-referenced lock-up agreements and vesting restrictions imposed by us.

We intend to offer the shares of common stock being sold in this offering through the underwriters. Merrill Lynch and are acting as representatives of the underwriters named below. Subject to the terms and conditions described in a purchase agreement between us and the underwriters, we have agreed to sell to the underwriters, and the underwriters severally have agreed to purchase from us, the number of shares listed opposite their names below.

The underwriters have agreed to purchase all of the shares sold under the purchase agreement if any of these shares are purchased. If an underwriter defaults, the purchase agreement provides that the purchase commitments of the nondefaulting underwriters may be increased or the purchase agreement may be terminated.

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act of 1933, or to contribute to payments the underwriters may be required to make in respect of those liabilities.

The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the shares, and other conditions contained in the purchase agreement, such as the receipt by the underwriters of officer’s certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.

The representatives have advised us that the underwriters initially propose to offer the shares to the public at the offering price on the cover page of this prospectus and to dealers at that price less a concession not in excess of $. per share. The underwriters may allow, and the dealers may reallow, a discount not in excess of $. per share to other dealers. After this offering, the public offering price, concession and discount may be changed.

The following table shows the public offering price, underwriting discount and proceeds before expenses to us. The information assumes either no exercise or full exercise by the underwriters of their overallotment option.

The expenses of this offering, not including the underwriting discount, are estimated at approximately $ and are payable by us.

We have granted an option to the underwriters to purchase up to additional shares at the public offering price less the underwriting discount. The underwriters may exercise this option for 30 days from the date of this prospectus solely to cover any overallotments.

If the underwriters exercise this option, each will be obligated, subject to conditions contained in the purchase agreement, to purchase a number of additional shares proportionate to that underwriter’s initial amount reflected in the above table.


	•	Directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, lend or otherwise dispose of or transfer any shares of common stock or any securities exercisable or exchangeable for or convertible into shares of common stock; or

	•	Enter into any swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of any common stock, whether any such swap or other arrangement is to be settled by the delivery of common stock or other securities, in cash or otherwise.

The shares are listed on the American Stock Exchange under the symbol “LGN.”

The public offering price has been determined through negotiations between us and the representatives. In addition to prevailing market conditions and our then existing stock price, the factors considered in determining the public offering price were:


	•	the valuation multiples and dividend yields of publicly traded companies that the representatives believe to be comparable to us;

	•	our historical financial information and prospects for, and timing of, improved financial performance;

	•	the history of, and the prospects for, our company and the industry in which we compete;

	•	an assessment of our management, its past and present operations; and

	•	the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours.

An active trading market for the shares may not develop or, if one develops, may not be liquid or maintained. It is also possible that after the offering, the shares of our common stock will not trade in the public market at or above the public offering price.

The underwriters do not expect to sell more than 5% of the shares of common stock in the aggregate to accounts over which they exercise discretionary authority.

Until the distribution of the shares is completed, rules of the Securities and Exchange Commission may limit underwriters and selling group members from bidding for and purchasing our common stock. However, the representatives may engage in transactions that stabilize the price of the common stock, such as bids or purchases to peg, fix or maintain that price.

If the underwriters create a short position in the common stock in connection with the offering, i.e., if they sell more shares than are listed on the cover of this prospectus, the representatives may reduce that short position by purchasing shares in the open market. The representatives may also elect to reduce any short position by exercising all or part of the overallotment option described above. Purchases of the common stock to stabilize its price or to reduce a short position may cause the price of the common stock to be higher than it might be in the absence of such purchases.

The representatives may also impose a penalty bid on underwriters and selling group members. This means that if the representatives purchase shares in the open market to reduce the underwriters’ short position or to stabilize the price of those shares, they may reclaim the amount of the selling concession from the underwriters and selling group members who sold those shares. The imposition of a penalty bid may also affect the price of the shares in that it discourages resales of those shares.

Neither we nor any of the underwriters makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the common stock. In addition, neither we nor any of the underwriters makes any representation that the representatives will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

Merrill Lynch will be facilitating Internet distribution for this offering to certain of its Internet subscription customers. Merrill Lynch intends to allocate a limited number of shares for sale to its online brokerage customers. An electronic prospectus is available on the Internet Web site maintained by Merrill Lynch and web sites maintained by some of the other underwriters. Other than the prospectus in electronic format, the information on the Merrill Lynch Web site is not part of this prospectus.

In connection with this offering, certain of the underwriters or securities dealers may distribute this prospectus electronically.

Under the Conduct Rules of the NASD, Inc., underwriters or their affiliates receiving amounts equal to or greater than 10% of the net proceeds of an offering may be deemed to have a “conflict of interest” under Rule 2710(c)(8). When a NASD member with a conflict of interest participates as an underwriter in a public offering, that rule requires that the initial public offering price may be no higher than that recommended by a “qualified independent underwriter,” as defined by the NASD. Although this rule does not apply where a “bona fide independent market” exists for a security, as is the case of our common stock, we have nevertheless retained to act as a qualified independent underwriter. In such role, has performed a due diligence investigation of us and participated in the preparation of this prospectus and the registration statement. The public offering price of the shares of common stock will be no higher than the price recommended by . We have agreed to indemnify

Some of the underwriters and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us. They have received customary fees and commissions for these transactions. Merrill Lynch, which is serving as sole book-running and lead managing underwriter for this offering, and its affiliates will receive benefits from this offering in addition to the underwriting discounts for the sale of common stock offered hereby. Merrill Lynch is the owner of 781,836 shares of our common stock, including warrants to purchase 12,864 shares of our common stock, and 473,867 shares of Preferred Stock. Approximately million of the net proceeds from this offering will be used to redeem all of the outstanding shares of Preferred Stock, including those held by Merrill Lynch and/or its affiliates. In addition, in November 2002, in connection with our emergence from Chapter 11 bankruptcy, we received exit financing of $309.0 million, of which $224.0 million of senior debt and $78.7 million of mezzanine debt was provided by Merrill Lynch Mortgage, an affiliate of Merrill Lynch. This financing is currently secured by 54 of our hotels and as of December 31, 2003 had an outstanding balance of $299.3 million. In March 2003, pursuant to the terms of the debt agreements, the senior and mezzanine debt amounts were resized to $218.1 million and $84.1 million, respectively.

The validity of the shares of the common stock will be passed upon for us by Morris, Manning & Martin, LLP, Atlanta, Georgia. Sidley Austin Brown & Wood LLP, New York, New York, will act as counsel to the underwriters.

The consolidated balance sheets as of December 31, 2003 and 2002, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the year ended December 31, 2003 and the period from November 23, 2002 to December 31, 2002 (successor company operations), and the period from January 1, 2002 to November 22, 2002 and the year ended December 31, 2001 (predecessor company operations), included in this prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein in the registration statement of which this prospectus is a part (which expresses an unqualified opinion and includes an explanatory paragraph relating to the successor company’s change in its method of accounting for discontinued operations to conform with Statement of Financial Accounting Standards No. 144 and to the successor company’s adoption of the provisions of Statement of Financial Accounting Standards No. 150), and have been so included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.

We have filed with the Securities and Exchange Commission a registration statement on Form S-1 under the Securities Act of 1933, and the rules and regulations promulgated thereunder, with respect to the shares of common stock offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement and the exhibits thereto. Statements contained in this prospectus as to the contents of any contract or other document that is filed as an exhibit to the registration statement are not necessarily complete and each such statement is qualified in all respects by reference to the full text of such contract or document.

You may read and copy all or any portion of the registration statement and the exhibits at the Securities and Exchange Commission’s public reference room at 450 Fifth Street N.W., Washington, D.C. 20549, and at the regional offices of the Securities and Exchange Commission located at 233 Broadway,

We are subject to the information and periodic reporting requirements of the Securities Exchange Act of 1934 and, in accordance therewith, file periodic reports, proxy and information statements and other information with the Securities and Exchange Commission. These periodic reports, proxy, and information statements and other information are not incorporated herein by reference but are available on the company’s web site, www.lodgian.com, and are available for inspection and copying at the public reference facilities, regional offices and Securities and Exchange Commission’s website referred to above.

All schedules are inapplicable, or have been disclosed in the Notes to Consolidated Financial Statements and, therefore, have been omitted.

We have audited the accompanying consolidated balance sheets of Lodgian, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2003 and December 31, 2002, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the year ended December 31, 2003 and the periods from November 23, 2002 to December 31, 2002 (Successor Company operations), and from January 1, 2002 to November 22, 2002 and the year ended December 31, 2001 (Predecessor Company operations). 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 of America. 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.

As discussed in Note 2 to the consolidated financial statements, on November 5, 2002, the Bankruptcy Court entered an order confirming the plan of reorganization which became effective after the close of business on November 25, 2002. Accordingly, the accompanying financial statements have been prepared in conformity with AICPA Statement of Position 90-7, “Financial Reporting by Entities in Reorganization Under the Bankruptcy Code,” for the Successor Company as a new entity with assets, liabilities, and a capital structure having carrying values not comparable with prior periods as described in Note 4.

In our opinion, such Successor Company consolidated financial statements present fairly, in all material respects, the financial position of Lodgian, Inc. and subsidiaries as of December 31, 2003 and December 31, 2002, and the results of their operations and their cash flows for the year ended December 31, 2003, and the period from November 23, 2002 to December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. Further, in our opinion, the Predecessor Company financial statements referred to above, present fairly, in all material respects, the Predecessor Company’s results of operations and cash flows for the period January 1, 2002 to November 22, 2002, and for the year ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 3 to the consolidated financial statements, in 2002, the Company changed its method of accounting for discontinued operations to conform to Statement of Financial Accounting Standards No. 144. As discussed in Note 12 to the consolidated financial statements, effective July 1, 2003, the Company adopted the provisions of Statement of Financial Accounting Standards, No. 150.

Upon emergence from Chapter 11, the Company adopted fresh start reporting. As a result, all assets and liabilities were restated to reflect their fair values. The consolidated financial statements of the new reporting entity (the “Successor”) are not comparable to the reporting entity prior to the Company’s emergence from Chapter 11 (the “Predecessor”).

*Represent dividends accrued for the period January 1, 2003 to June 30, 2003. Pursuant to Statement of Financial Accounting Standard No. 150, dividends accrued for the period July 1, 2003 to December 31, 2003 are reflected in interest expense.

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. On December 20, 2001, the Company and substantially all of its subsidiaries that owned hotel properties filed for voluntary reorganization under Chapter 11 of the Bankruptcy Code. At the time of the Chapter 11 filing, the Company’s portfolio of hotels consisted of 106 hotel properties. The Company emerged from Chapter 11 with 97 hotels since eight of the hotels were conveyed to the lender in satisfaction of outstanding debt obligations and one hotel was returned to the lessor of a capital lease. Of the portfolio of 97 hotels, 78 hotels emerged from Chapter 11 on November 25, 2002, 18 hotels emerged from Chapter 11 on May 22, 2003 and one hotel never filed under Chapter 11.

In 2003, the Company developed a strategy of owning and operating a portfolio of profitable, well-maintained and appealing hotels at superior locations in strong markets. We are implementing this strategy by:


	•	renovating and repositioning certain of its existing hotels to improve performance;

	•	divesting hotels that do not fit this strategy or that are unlikely to do so without significant effort or expense; and

	•	acquiring selected hotels that better fit this strategy.

In accordance with this strategy and our efforts to reduce debt and interest, in 2003 we identified 19 hotels, our only office building and three land parcels for sale. One of the 19 hotels was sold in November 2003, bringing the hotel portfolio to 96 at December 31, 2003. The office building was sold in December 2003.

Effective November 22, 2002, the Company adopted fresh start reporting. As a result, all assets and liabilities were restated to reflect their fair values. The Consolidated Financial Statements after emergence are those of a new reporting entity (the “Successor”) and are not comparable to the financial statements prior to November 22, 2002 (the “Predecessor”). See Note 4.

The financial statements consolidate the accounts of Lodgian, its wholly-owned subsidiaries and four joint ventures in which Lodgian has a controlling financial interest and 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. The four joint ventures in which the Company exercises control are as follows:

Melbourne Hospitality Associates, Limited Partnership (which owns the Holiday Inn Melbourne, Florida) — This joint venture is in the form of a limited partnership, in which a Lodgian subsidiary serves as the general partner and has a 50% voting interest.

New Orleans Airport Motel Associates, Ltd. (which owns the New Orleans Airport Plaza Hotel and Conference Center, Louisiana) — This joint venture is in the form of a limited partnership, in which a Lodgian subsidiary serves as the general partner and has an 82% voting interest.

Servico Centre Associates, Ltd. (which owns the Crowne Plaza West Palm Beach, Florida) — This joint venture is in the form of a limited partnership, in which a Lodgian subsidiary serves as the general partner and has a 50% voting interest.

Macon Hotel Associates, L.L.C. (which owns the Crowne Plaza Macon, Georgia) — This joint venture is in the form of a limited liability company, in which a Lodgian subsidiary serves as the managing member and has a 60% voting interest.

An unconsolidated entity owning one hotel, Columbus Hospitality Associates LP, in which the Company has a 30% non-controlling equity interest, is accounted for under the equity method. When the Company accounts for an entity under the equity method, its share of the investment is recorded on the Consolidated Balance Sheet and its share of the net income or loss is recorded in the Consolidated Statement of Operations. The Company’s share of this investment is included in other assets on the Consolidated Balance Sheet. Its share of the net income or loss is shown in “interest income and other” in the Consolidated Statements of Operations. The Company’s investment in this entity at December 31, 2003 was $0.2 million and its share of the loss was $20,000.

All significant intercompany accounts and transactions have been eliminated in consolidation.

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-preferred redeemable securities, represents Convertible Redeemable Equity Structure Trust Securities (“CRESTS”). In connection with the Company’s emergence from Chapter 11, the CRESTS were exchanged for common stock (868,000 shares), Class A warrants (1,258,815) and Class B warrants (251,062). Previously, the CRESTS bore interest at the rate of 7% per annum and were convertible into shares of the Company’s common stock.

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.

Property and equipment is stated at depreciated cost, less adjustments for impairment, where applicable. Capital improvements are capitalized when they extend the useful life 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. Effective November 22, 2002, the Company restated the recorded values of all property and equipment to reflect their fair values.

The Company capitalizes interest costs incurred during the renovation and construction of capital assets. Interest costs capitalized, for the periods listed below, were as follows:

Management periodically evaluates the Company’s property and equipment to determine whether events or changes in circumstances indicate that a possible impairment in the carrying value of the assets has occurred. The carrying value of long-lived assets is considered impaired when the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. If it is determined that an impairment has occurred, the excess of the assets’ carrying value over its estimated fair value is charged to operating expenses. 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 8 for further discussion of the Company’s charges for asset impairment.

Deferred franchise costs and deferred financing costs at December 31, 2003 and 2002, are included in other assets, net of accumulated amortization. Deferred franchise costs are amortized using the straight-line method over the terms of the related franchise agreements while deferred financing costs are amortized using the effective interest method over the related term of the debt. These deferrals are presented below for and as of the year ended December 31, 2003 along with the comparative period.

Based on the balances at December 31, 2003, the five year amortization schedule for deferred financing and deferred loan costs is as follows:

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Restricted cash as of December 31, 2003 consisted of amounts reserved for letter of credit collateral, a deposit required by the Company’s bankers and cash reserved pursuant to loan agreements.

The fair value of financial instruments is estimated using market trading information. Where published market values are not available, management estimates fair values based upon quotations received from broker/ dealers or interest rate information for similar instruments. Changes in fair value are recognized in earnings.

The fair values of current assets and current liabilities are assumed equal to their reported carrying amounts. The fair values of the Company’s fixed rate 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.

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, 2003 and 2002, allowances were $797,000 ($689,000 relating to assets held for use) and $1,594,000, respectively.

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 15 for the components of the Company’s deferred taxes. As a result of the Company’s history of losses, 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.

Basic earnings per share is calculated based on the weighted average number of common shares outstanding during the periods and include common stock (if any) contributed by the Company to its employee 401(k) Plan. Dilutive earnings per common share include the Company’s outstanding stock options, restricted stock, warrants to acquire common stock (“A” and “B” class), if dilutive. See Note 17 for computation of basic and diluted earnings per share.

As more fully discussed in Note 4, upon the Company’s emergence from reorganization proceedings, the Company’s previous equity securities were cancelled and new equity securities were issued. Because the Company is assumed to be a new entity for financial reporting purposes subsequent to the application of fresh start reporting, prior periods have not been restated.

The Company accounts for stock option grants in accordance with Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees” and related interpretations. Under APB No. 25, if 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 No. 123, “Accounting for Stock-Based Compensation,” compensation cost is measured at the grant date based on the estimated value of the award and is recognized over the service (or vesting) period.

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.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure.” SFAS No. 148 amends SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for an entity that voluntarily changes to the fair-value-based method of accounting for stock-based employee compensation. It also amends the disclosure provisions of SFAS No. 123 to require prominent disclosure about the effects on reported net income and earnings per share and the entity’s accounting policy decisions with respect to stock-based employee compensation. The Company continues to account for stock issued to employees, using the intrinsic value method in accordance with the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees.” The disclosures required by SFAS No. 148 are reflected in Note 2.

Revenues are recognized when the services are rendered. Revenues are comprised of room, 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 and meeting rentals. Other revenues include charges for guests’ long-distance telephone service, laundry service and parking services, in-room movie services, vending machine commissions, leasing of hotel space and other miscellaneous revenues.

The cost of advertising is expensed as incurred. Advertising costs incurred, for the periods listed below, were as follows:

The financial statements of foreign subsidiaries have been translated into U.S. dollars in accordance with SFAS No. 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 resulting from the changes in exchange rates from year to year are reported in other comprehensive income. The effects on the statements of operations of transaction gains and losses are insignificant for all years presented.

The Company’s only operating segment is the ownership and management of hotels.

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.

The Company is self-insured up to certain limits with respect to employee medical, employee dental, property insurance, general liability insurance, personal injury claims, workers’ compensation and auto liability. Liabilities for these self-insured obligations are established annually, based on actuarial valuations and the Company’s history of claims. As of December 31, 2003 and December 31, 2002, the Company had approximately $10.0 million and $9.1 million, respectively, accrued for such liabilities.

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”), to address perceived weaknesses in accounting for entities commonly known as special-purpose or off-balance-sheet. In addition to numerous FASB Staff Positions written to clarify and improve the application of FIN 46, the FASB recently announced a deferral for certain entities, and an amendment to FIN 46 entitled FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities (“FIN 46R”). FIN 46 establishes consolidation criteria for entities for which “control” is not easily discernible under Accounting Research Bulletin 51, Consolidated Financial Statements, which is based on the premise that holders of the equity of an entity, control the entity by virtue of voting rights. FIN 46 provides guidance for identifying the party with a controlling financial interest resulting from arrangements or financial interests rather than from voting interests. FIN 46 defines the term “variable interest entity” (“VIE”) and is based on the premise that if a business enterprise absorbs a majority of the VIE’s expected losses and/or receives a majority of its expected residual returns (measure of risk and reward), that enterprise (the primary beneficiary) has a controlling financial interest in the VIE. The assets, liabilities, and results of the activities of the VIE should be included in the consolidated financial statements of the primary beneficiary. The Company was required to adopt the provisions of FIN 46R relating to any interests in special-purpose entities (SPEs) as of December 31, 2003. In addition, during the first quarter of 2004, the Company is required to apply the provisions of FIN 46R to any other entities falling within its scope. Adoption of FIN 46 and the counterpart revision (FIN 46R) has not had and is not expected to have a material impact on the Company’s financial position and results of operations.

On April 30, 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” which amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts and hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS No. 149 requires that contracts with comparable characteristics be accounted for similarly. In particular, SFAS No. 149 clarifies the circumstances under which a contract with an initial net investment meets the characteristics of a derivative as discussed in SFAS No. 133. In addition, SFAS No. 149 clarifies when a derivative contains a financing component that warrants special reporting in the statement of cash flows. SFAS No. 149 amends certain other existing pronouncements, resulting in more consistent reporting of contracts that are derivatives in their entirety or that contain embedded derivatives that warrant separate accounting. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The Company adopted SFAS No. 149 on July 1, 2003. The adoption did not have a material impact on its financial position and results of operations.

On May 15, 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” which aims to eliminate diversity in practice by requiring

that certain types of freestanding instruments be reported as liabilities by their issuers including mandatorily redeemable instruments issued in the form of shares which unconditionally obligate the issuer to redeem the shares for cash or by transferring other assets. These instruments were previously presented in various ways, as part of liabilities, as part of equity, or between the liabilities and equity sections (sometimes referred to as “mezzanine” reporting). The provisions of SFAS No. 150, which also include a number of new disclosure requirements, were effective for instruments entered into or modified after May 31, 2003. For pre-existing instruments, SFAS No. 150 was effective as of the beginning of the first interim period which commenced after June 15, 2003 (July 1, 2003 for the Company). The Company adopted SFAS No. 150 on July 1, 2003. The adoption impacted the treatment of its Mandatorily Redeemable 12.25% Cumulative Preferred Stock (“Preferred Stock”), previously presented between total liabilities and stockholders’ equity. As a result of the adoption of SFAS No. 150, the Preferred Stock has been included as part of long-term debt in the accompanying Consolidated Financial Statements and the Preferred Stock dividends for the period July 1, 2003 to December 31, 2003 has been included in interest expense. The preferred stock dividends for the period January 1, 2003 to June 30, 2003 ($7.6 million) continues to be shown as a deduction from retained earnings. On October 29, 2003, the FASB decided to defer the effective date of SFAS No. 150 related to non-controlling interests. As a result, until the FASB establishes further guidance, the Company will not have to measure the mandatorily redeemable minority interests at fair value.

If the Company were to be required to comply with the provisions of paragraphs 9 and 10 of SFAS No. 150 as currently drafted, the Company would be required to reclassify certain amounts currently included in minority interest to the liability section of the accompanying consolidated balance sheet. In addition, the minority partners’ interests would be recorded at the estimated current liquidation amounts. If this treatment of the minority interests was effected in the current fiscal period, the Company’s earnings would have been impacted. Under the proposed standard, the liability would require quarterly review and changes to the current liquidation amounts would be recorded as interest expense.

In November 2002, the FASB issued Interpretation No. 45 “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). FIN 45 requires that a liability be recognized at fair value at the inception of certain guarantees for the obligations undertaken by the guarantor. FIN 45 also requires additional disclosures for certain guarantee contracts. The disclosure provisions of FIN 45 were effective for financial statements ending after December 15, 2002, while the recognition and initial measurement provisions were applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The adoption of FIN 45 was not material to our financial position and results of operations.

On December 23, 2003, the FASB issued SFAS No. 132 (Revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits.” This revised standard increases existing disclosures by requiring more details about plan assets, benefit obligations, cash flows, benefit costs and related information. The revised standard also requires companies to disclose various elements of pension and postretirement benefit costs in interim period financial statements for the quarters beginning after December 15, 2003. The adoption of this revised statement is not expected to materially impact the Company’s current disclosures.

Prior to the Company’s Chapter 11 filing, the Company had adopted the Lodgian, Inc. Stock Option Plan, as amended, (the “Option Plan”) whereby, options to acquire up to 3,250,000 shares of common stock were granted to employees, directors, independent contractors and agents as determined by a committee appointed by the Board of Directors. Options could not be granted at an exercise price which was less than the fair market value on the date of grant. These options vested 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 the date of grant. Such options became exercisable upon the date of grant and were granted under the Company’s Non-Employee Directors’ Stock Plan. However, in connection with the Company’s emergence from Chapter 11, the previous common shares were cancelled along with the options to acquire these shares.

On November 25, 2002, the Company adopted a new Stock Incentive Plan (the “Stock Incentive Plan”) which replaced the Option Plan previously in place. In accordance with the Stock Incentive Plan, awards to acquire up to 1,060,000 shares of common stock could be granted to officers or other key employees or consultants of the Company as determined by a committee appointed by the Board of Directors. Awards may consist of stock options, stock appreciation rights, stock awards, performance share awards, section 162(m) awards or other awards determined by the committee. Stock options granted pursuant to the Stock Incentive Plan cannot be granted at an exercise price which is less than 100% of the fair market value per share on the date of the grant. Vesting, exercisability, payment and other restrictions pertaining to any awards made pursuant to the Stock Incentive Plan are determined by the committee. The income tax benefit, if any, associated with the exercise of stock options is credited to additional paid-in capital.

Pursuant to the Stock Incentive Plan, the committee made the following awards during the year ended December 31, 2003:


(1)	July 15, 2003 — W. Thomas Parrington, the Company’s Chief Executive Officer, was awarded 200,000 shares of restricted stock. These vest equally over three years commencing on July 15, 2004. Mr. Parrington was also granted incentive stock options to acquire 100,000 shares of the Company’s common stock at an exercise price of $3.00 per share. The options also vest equally over three years commencing on July 15, 2004. In addition, pursuant to our employment agreement with Mr. Parrington, our chief executive officer, we have committed to grant him options to purchase 150,000 additional shares of common stock. After taking into account the outstanding options and shares of restricted stock granted under the Stock Incentive Plan, as well as our contractual commitment to Mr. Parrington, we have 236,500 shares of common stock available for grant under the Stock Incentive Plan.

(2)	September 5, 2003 — Other awards were made to certain of the Company’s employees and to members of the Audit Committee of the Board of Directors. The employees received incentive stock options to acquire 337,000 shares of the Company’s common stock while each of the three members of the Audit Committee received non-qualified options to acquire 5,000 shares of the Company’s common stock. The exercise price of the awards granted on September 5, 2003 was $5.07. One-third of the options granted on September 5, 2003 vested at the date of grant, one-third will vest on September 5, 2004 and the remaining one-third will vest on September 5, 2005.

(3)	October 13, 2003 — Manuel Artime, the Company’s Chief Financial Officer, was granted incentive stock options to acquire 21,500 shares of the Company’s common stock at an exercise price of $5.22.


	One-third of the options granted on October 13, 2003 vested at the date of grant, one-third will vest on October 13, 2004 and the remaining one-third will vest on October 13, 2005.

Presented below is a summary of the stock option plan and restricted stock activity for the years shown:


(1)	At December 31, 2001, there were also 112,500 Stock Appreciation Rights exercisable at $6.13 per right.

(2)	At December 31, 2003, none of the restricted stock had vested.

The following table summarizes information for options outstanding and exercisable at December 31, 2003:

Options exercisable and the weighted average exercise price of the options at December 31, 2001 were 1,341,200 and $5.21, respectively.

Had the compensation cost of the Stock Option Plan been recognized under SFAS No. 123, based on the fair market value at the grant dates, the compensation cost recognized would have been $0.6 million for the year ended December 31, 2003 and nil for the periods November 22, 2002 to December 31, 2002, January 1, 2002 to November 22, 2002 and the year ended December 31, 2001.

Also, had the compensation cost of the Stock Option Plan been recognized under SFAS No. 123, based on the fair market value at the grant dates, the Company’s pro forma net income (loss) and net earnings (loss) per share would have been as follows:

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:


(1)	The Company filed for Chapter 11 on December 20, 2001. The fair value of the options was estimated to be nil while the Company was in Chapter 11. On its emergence from Chapter 11 on November 25, 2002 (November 22, 2002 for accounting) all stock options were cancelled. No options were granted between January 1, 2002 and December 31, 2002.

Pursuant to the terms of the plan of reorganization approved by the Bankruptcy Court, the Company conveyed eight wholly-owned hotels to the lender in January 2003 in satisfaction of outstanding debt obligations and one wholly-owned hotel was returned to the lessor of a capital lease. The results of operations of these nine hotels are reported in Discontinued Operations in the Consolidated Statement of Operations. Due primarily to the application of fresh start reporting in November 2002, in which these and other assets were adjusted to their respective fair values, there was no gain or loss on these transactions.

The following combined condensed table summarizes the assets and liabilities of the nine hotels as of December 31, 2002:

There were no material changes to the Combined Balance sheet of the nine hotels between December 31, 2002 and the date they were conveyed to the lender, in the case of the eight hotels, and the lessor, in the case of the leased property.

The Company’s strategy is to own and operate a portfolio of profitable, well-maintained and appealing hotels at superior locations in strong markets. In 2003, the Company developed a portfolio improvement strategy to accomplish this by:


•	renovating and repositioning certain of its existing hotels to improve performance;

•	divesting hotels that do not fit this strategy or that are unlikely to do so without significant effort or expense; and

•	acquiring selected hotels that better fit this strategy.

In accordance with this strategy and the Company’s efforts to reduce debt and interest costs, in 2003 the Company identified 19 hotels, the Company’s only office building property and three land parcels for sale.

At December 31, 2003, 18 hotels and three land parcels were held for sale. One hotel and an office building were sold during 2003 while four hotels were sold between January 1, 2004 and March 1, 2004. The net proceeds of sale of the hotel and office building sold in 2003 was approximately $12.3 million. In accordance with SFAS No. 144, all assets sold during 2003 and held for sale at December 31, 2003

(including any related impairment charges) are included in Discontinued Operations in the Consolidated Statement of Operations. The assets held for sale at December 31, 2003 and the liabilities related to these assets are separately disclosed in the Consolidated Balance Sheet. In connection with this strategy, where the carrying values of the assets exceeded the estimated fair values, net of selling costs, the carrying values were reduced and impairment charges were recorded. Fair value is determined using quoted market prices, when available, or other accepted valuation techniques. The impairment charges recorded on assets held for sale, during the year ended December 31, 2003 were $5.4 million. Where the estimated selling prices, net of selling costs, exceeded the carrying values, no adjustments were recorded. In addition to the other criteria specified by SFAS No. 144, management classifies an asset as held for sale if it expects to dispose of it within one year. In accordance with SFAS No. 144, the results of operations of all assets identified as held for sale (including the related impairment charges) are reported in Discontinued Operations. The assets held for sale and the liabilities related to these assets are separately disclosed on the face of the Consolidated Balance Sheet as of December 31, 2003. See Note 20.

The following combined condensed table summarizes the assets and liabilities relating to the properties identified as held for sale as of December 31, 2003:

The condensed combined results of operations included in Discontinued Operations for the Successor year ended December 31, 2003, the Successor period November 23, 2002 to December 31, 2002, the

Predecessor period January 1, 2002 to November 22, 2002 and the Predecessor year ended December 31, 2001 were as follows:

On December 20, 2001, the Company and substantially all of its subsidiaries which owned hotel properties filed for voluntary reorganization under Chapter 11 of the Bankruptcy Code in the Southern District of New York.

At a Confirmation Hearing held on November 5, 2002, the Bankruptcy Court confirmed the Company’s First Amended Joint Plan of Reorganization (the “Joint Plan of Reorganization”) and, on November 25, 2002, the Company and entities owning 78 hotels officially emerged from Chapter 11. Pursuant to the terms of the Joint Plan of Reorganization, eight other wholly-owned hotels were conveyed to a lender in

January 2003 in satisfaction of outstanding debt obligations and one hotel was returned to the lessor of a capital lease.

Of the Company’s 97 hotel portfolio, 18 hotels, previously owned by two subsidiaries (Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C.), were not part of the Joint Plan of Reorganization. On April 24, 2003, the Bankruptcy Court confirmed the plan of reorganization relating to these eighteen hotels (the “Impac Plan of Reorganization”). These eighteen hotels remained in Chapter 11 until May 22, 2003, the date on which the Company, through eighteen newly-formed subsidiaries (one for each hotel), finalized an $80.0 million financing with Lehman Brothers Holdings, Inc. (the “Lehman Financing”). The Lehman Financing was primarily used to settle the remaining amount due to the secured lender of these hotels (See Note 11 of the accompanying financial statements). The Impac Plan of Reorganization also provided for a pool of funds of approximately $0.3 million to be paid to the general unsecured creditors of the eighteen hotels.

Pursuant to the Joint Plan of Reorganization, the following significant events took effect in November 2002:


•	5,000,000 shares of Preferred Stock, par value $0.01, initial liquidation value $25 per share, were issued or reserved for issuance in satisfaction of outstanding debt and other obligations;

•	7,000,000 shares of common stock, par value $0.01 per share, were issued or reserved for issuance in satisfaction of outstanding debt and other obligations;

•	Class A warrants to purchase an aggregate of 1,510,638 shares of common stock at $18.29 per share were made available for issuance in satisfaction of outstanding debt and other obligations;

•	Class B warrants to purchase an aggregate of 1,029,366 shares of common stock at $25.44 per share were made available for issuance in satisfaction of outstanding debt and other obligations;

•	Previous equity, consisting of an aggregate of 28,479,837 shares, was cancelled, and in exchange the stockholders received their pro rata share of 207,900 shares of common stock, plus class A warrants to purchase an aggregate of 251,823 shares of common stock and class B warrants to purchase an aggregate of 778,304 shares of common stock;

•	The CRESTS were cancelled and the holders received their pro rata share of 868,000 shares of the common stock, plus class A warrants to purchase 1,258,815 shares of common stock and class B warrants to purchase 251,062 shares of common stock;

•	The 12.25% Senior Subordinated Notes were cancelled and the holders of the notes received their pro rata share of 4,690,600 shares of Preferred Stock and 5,557,511 shares of common stock;

•	The holders of allowed general unsecured claims became entitled to 309,400 shares of Preferred Stock and 366,589 shares of common stock, referred to as the “disputed claims reserve.” Until distributed, these shares form part of the disputed claims reserve for the pre-bankruptcy petition general unsecured creditors. These shares are periodically distributed as the disputed claims are resolved;

•	The Company closed on $302.7 million of exit financing arrangements with Merrill Lynch Mortgage Lending, Inc. (“Merrill Lynch Mortgage”) which was used to repay previous debt obligations, fund payments of certain allowed claims and fund portions of certain required cash escrows. This financing was secured by 56 of its hotels;

•	The Company closed on a $6.3 million exit financing arrangement with Computershare Trust Company of Canada, secured by one of its hotels;


•	Loans from lenders approximating $86.0 million, secured by 21 of our hotels, were reinstated on their previous terms, except for the extension of certain maturities; and in the case of certain loans, a new interest rate; and

In accordance with AICPA, Statement of Position (“SOP”) 90-7, “Financial Reporting by Entities in Reorganization Under the Bankruptcy Code,” the Company implemented fresh start reporting effective November 22, 2002 (the date on which the exit financing agreement was signed). As a result, assets and liabilities were recorded based on fair values. The Consolidated Financial Statements subsequent to the Company’s emergence from Chapter 11 are those of a new reporting entity (the “Successor”) and are not comparable with the financial statements of the Company prior to the effective date of the Joint Plan of Reorganization (the “Predecessor”).

As discussed above, in November 2002, the general unsecured creditors became entitled to receive 309,400 shares of Preferred Stock and 366,589 shares of common stock. These shares are being distributed as claims are resolved.

The status of the distribution to these creditors as of December 31, 2003 was as follows:

The entire entitlement of shares is considered issued and outstanding for accounting purposes. As claims of creditors are resolved, the Company will continue to make periodic distributions of Preferred Stock and common stock to these creditors.

The effects of the reorganization plan were recorded in accordance with the American Institute of Certified Public Accountant’s Statement of Position (“SOP”) 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Code.” Fresh start reporting was applicable because the previous stockholders received less than 50% of the new voting shares and the reorganization value of the Predecessor Company was less than the sum of the pre-petition liabilities allowed and post-petition liabilities.

Fresh start reporting principles require that the reorganization value be allocated to the entity’s assets and that liabilities be stated at the fair value of amounts to be paid.

The reorganization value in respect of the entities included in the Joint Plan of Reorganization was determined by the Company, the Official Committee of Unsecured Creditors and their respective financial advisers. The reorganization value reflects the midpoint of a range of values arrived at by applying various valuation techniques including, among others:


	a) A comparable company analysis, involving the analysis of enterprise values of public companies deemed generally comparable to the operating business of the Company and applying the earnings before interest, taxes, depreciation and amortization (“EBITDA”) provided by this analysis to the applicable Lodgian entities;

	b) A discounted cash flow analysis utilizing a weighted average cost of capital to compute the present value of free cash flows and terminal value of the applicable Lodgian entities; and


	c) A comparable transaction analysis involving the analysis of the financial terms of certain acquisitions of companies and sales of assets which were deemed to be comparable to the operating businesses of the Company and then applying these EBITDA multiples to the applicable Lodgian entities.

The projections utilized in the determination of reorganization value were based on a variety of estimates and assumptions. These estimates and assumptions are subject to uncertainties and contingencies and may not be realized. The projections should, therefore, not be seen as guarantees of actual results.

In accordance with SOP 90-7, the effects or adjustments on reported amounts of individual assets and liabilities resulting from the adoption of fresh start reporting and the effects of the forgiveness of debt are reflected in the Predecessor’s Statement of Operations. All fresh start reporting adjustments are included in reorganization items.

The application of fresh start reporting on the Predecessor’s balance sheet is as follows (amounts in thousands):


(b)	Issuance of new shares to the Senior Subordinated Note Holders, the CREST holders and the general unsecured creditors.

(c)	Gain on cancellation of debt, calculated as follows:


(d)	Represents the recording of the exit financing of $309 million (used to repay previous obligations, fund certain allowed claims and portions of certain required cash escrows) and fair value adjustments (primarily net write-down of fixed assets of $222.1 million).

(e)	Elimination of old equity

The approximate allocation of the Company’s reorganization value as of November 22, 2002 is shown below:

Liabilities subject to compromise at December 31, 2002 refer 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 consisted primarily of amounts outstanding under long-term debt and also included accounts payable, accrued interest, and other accrued expenses.

The principal categories of claims classified as liabilities subject to compromise in the Chapter 11 Cases as of December 31, 2002 are identified below:

The Company recorded all transactions incurred as a result of the Chapter 11 filing and the implementation of fresh start reporting as reorganization items and classified these separately in its Statement of Operations. Though the Company continues to incur expenses related to its reorganization proceedings only those incurred while the entities were in reorganization are classified as reorganization items. Reorganization items relating to the period subsequent to Chapter 11 are included in general, administrative and other expenses.


(1)	Reorganization expenses, shown in the table above, represent only those expenses relating to the Chapter 11 proceedings while the related hotels were in Chapter 11.

(2)	Reorganization expenses were allocated between Continuing Operations and Discontinued Operations, based on the values assigned to the respective entities subsequent to the consummation of the plans of reorganization.

Of the $1,467 charged to expense during 2002, $1,195 related to the Predecessor period (January 1, 2002 to November 22, 2002) and $272 related to the Successor period (November 23, 2002 to December 31, 2002).

At December 31, 2003 and 2002, property and equipment consisted of the following:

As discussed in Note 3, the Company conveyed eight wholly-owned hotels to the lender in January 2003 in satisfaction of outstanding debt obligations and one wholly-owned hotel was returned to the lessor of a capital lease. In addition, at December 31, 2003, 18 hotels and three land parcels were held for sale. One hotel and an office building were sold during 2003 while four hotels were sold between January 1, 2004 and March 1, 2004, as noted in Note 3 and Note 20 of the accompanying consolidated financial statements. During 2003, impairment charges of $5.4 million were recorded on assets held for sale while

$12.7 million of impairment charges were recorded on assets held for use. No depreciation is computed on assets held for sale.

In connection with the Company’s emergence from Chapter 11 on November 25, 2002, the Company implemented fresh start reporting effective November 22, 2002. As a result, the Company’s assets and liabilities were based on their respective fair values. In this regard, the Company recorded a net write-down of its fixed assets of $222.1 million at November 22, 2002. This net write-down is reflected in reorganization items.

In addition, the Company had evaluated the recoverability of its long-lived assets in accordance with SFAS No. 121 as of December 31, 2001 and had 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.

Impairment of long-lived assets was $67.3 million in 2001 ($20.5 million relating to Continuing Operations and $46.8 million relating to Discontinued Operations). 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 of 2001. In connection with its bankruptcy petition on December 20, 2001, the Company determined that 29 of its hotels were significantly overleveraged. 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 SFAS No. 121, the Company determined that an impairment charge of $69.0 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.

At December 31, 2003 and 2002, other accrued liabilities consisted of the following:

Set forth below, by debt pool, is a summary of the Company’s long-term debt (including the current portion) along with the applicable interest rates and the related carrying values of the property, plant and equipment which collateralize the long-term debt (amounts in thousands).


(1)	Long-term obligations and property, plant and equipment of the hotel in which the Company has a non-controlling equity interest and does not consolidate are excluded from the table above.
(2)	Represents the annual weighted average cost at December 31, 2003.

The fair value of the fixed rate mortgage debt (book value $86.8 million) at December 31, 2003 is estimated at $86.7 million.

All of the Company’s property and equipment related to its hotels are pledged as collateral for long-term obligations. Certain of the mortgage notes are subject to a prepayment penalty if repaid prior to their maturity.

The maturities of these debt obligations as of December 31, 2003 are as follows:

The Merrill Lynch Mortgage loan initially matures on November 24, 2004 and has three one-year extensions that may be exercised at the Company’s option. The first extension (to November 24, 2005) is available as long as no events of defaults occur in respect of the payment of principal, interest and other required payments. The second and third extension terms are available only if no event of default exists and are subject to a minimum debt service coverage ratio requirement and a minimum debt yield requirement. The Lehman loan initially matures in May 2005, and has a one-year extension that may be exercised at the Company’s option. At maturity, the Company plans to either exercise these extension options or refinance these loans with the existing lenders or with new lenders. The Company also plans to continue to reduce these loans through property sales and normal principal payments.

On emergence from Chapter 11 on November 25, 2002, the Company received exit financing of $309.0 million comprised of three separate components as follows:


•	Senior debt of $224.0 million from Merrill Lynch Mortgage, accruing interest at the rate of LIBOR plus 2.24%, secured by, among other things, first mortgage liens on the fee simple or leasehold interests in 55 of the Company’s hotels;

•	Mezzanine debt of $78.7 million from Merrill Lynch Mortgage, accruing interest at the rate of LIBOR plus 9.00%, secured by the equity interest in the subsidiaries of 56 hotels (the 55 which secure the senior debt and one additional hotel); and


•	Debt provided through Computershare Trust Company of Canada, a Canadian lender, of $10.0 million Canadian dollars (equated to approximately $6.3 million U.S. dollars at inception) maturing in December 2007, accruing interest at the rate of 7.88% secured by a mortgage on the property located in Windsor, Canada.

In March 2003, as permitted by the terms of the senior and mezzanine debt agreements, Merrill Lynch Mortgage exercised the right to “resize” (as defined) the senior and mezzanine debt amounts, prior to the securitization of the mortgage loan. As a result, the principal amount of the senior debt was decreased from $223.7 million (initially $224.0 less $0.3 million of principal payments) to $218.1 million, and the principal amount of the mezzanine debt was increased from $78.6 (initially $78.7 million less $0.1 million of principal payments) to $84.1 million. Though the blended interest rate on the Merrill Lynch Mortgage debt remained at LIBOR plus 4.00% at the date of the resizing, the interest rate on the senior debt was modified to LIBOR plus 2.36% and the interest rate on the mezzanine debt was modified to LIBOR plus 8.25%. The interest rate on the mezzanine debt increased to 8.79% as of December 1, 2003. Therefore, the new blended rate on the Merrill Lynch Mortgage debt is LIBOR plus 4.15%. Furthermore, as a result of the securitization of the mortgage loan, Merrill Lynch Mortgage no longer has the right to amend or waive provisions thereunder.

The senior and mezzanine debt matures on November 24, 2004. There are, however, three one-year options to renew which could extend the maturity for an additional three years. The first option to extend the maturity date of the senior and mezzanine debt by up to one year (i.e. to November 2005) is available as long as no events of default occur in respect of the payment of principal, interest and other required amounts. Because the Company intends to extend the maturity date and believes it will be eligible for that extension, the Company has reported the senior and mezzanine debt as maturing in 2005. The second and third extension terms are available only if no events of default of any kind exist and are subject to a minimum debt service coverage ratio of 1.20x and a debt yield requirement of 13.25% which the Company did not satisfy as of December 31, 2003. Payments of principal and interest on all three portions of the facility are due monthly. At maturity the Company plans to either exercise the extension options or seek to refinance the loans with a new lender.

The senior and mezzanine debt agreements provide that when either (i) the debt yield for the trailing 12-month period is below 13.25% during the year ending November 2004 (and if the loan is extended, 13.50%, 13.75% and 14.00% during each of the next three years of the loan, respectively) or (ii) the debt service coverage ratio is below 1.20x, excess cash flows of the mortgaged hotels (after payment of operating expenses, management fees, required reserves, service fees, principal and interest) must be deposited in a restricted cash account. These funds can be used for the prepayment of aggregate outstanding borrowings, capital expenditures reasonably approved by the lender, and up to an aggregate of $3.0 million of scheduled principal and interest payments due under these agreements. Funds will no longer be deposited into the restricted cash account when the debt yield and the debt service coverage ratio are sustained above the minimum requirements for three consecutive months. On March 31, 2003, the debt yield, for the hotels securing this debt fell below the then applicable 12.75% minimum threshold and, therefore, the excess cash flow produced by the hotels securing the Merrill Lynch Mortgage debt was retained in the restricted cash account starting on May 1, 2003. The restricted cash balance in this account as of December 31, 2003 was $0.9 million. During 2003, $7.5 million was released from the restricted cash account for capital expenditures and scheduled interest and principal payments. As of March 1, 2004, no cash was being retained in the restricted cash account. At December 31, 2003, the debt yield and debt service coverage ratio remained below the minimum requirements. Further, the mezzanine debt agreement with Merrill Lynch Mortgage requires the Company to maintain a minimum net worth of at least $10.0 million.

On May 22, 2003, the Company completed an $80.0 million financing underwritten by Lehman Brothers Holdings, Inc. (“Lehman”) which was primarily utilized to settle debts secured by the 18 hotels previously owned by Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C. (both Lodgian subsidiaries). The Lehman Financing, provided to eighteen newly-formed subsidiaries (one for each hotel), is a two-year term loan with an optional one-year extension and bears interest at the higher of 7.25% or LIBOR plus 5.25%. The one-year extension is only available if, at the time of electing to extend and at the initial maturity date, there are no events of default. If the Company opts for the one-year extension, an extension fee of $3.0 million is payable. Pursuant to the terms of the agreement, additional interest of $4.4 million is also payable upon the maturity date (May 22, 2005 or the new maturity date, if the Company opts for the extension). Payments of principal and interest on the Lehman Facility are due monthly. If an event of default occurs, the rate increases by 325 basis points or 3.25% for the period of the default. At maturity, the Company plans to exercise the extension option or seek to refinance the loan with a new lender.

The documents governing the terms of both the Merrill Lynch Mortgage debt and the Lehman Financing contain covenants that place restrictions on the Company and certain of its subsidiaries’ activities, including acquisitions, mergers and consolidations, the sale of assets, and the incurrence of liens. Failure to comply with the covenants under our loan agreements would constitute an event of default that would permit acceleration by the lender.

On November 25, 2002, the effective date of the Joint Plan of Reorganization, loans approximating $83.5 million, secured by 20 hotels, were substantially reinstated on their original terms, except for the extension of certain maturities. The terms of one other loan, in the amount of $2.5 million and secured by one hotel, were amended to provide for a new interest rate and a new maturity date.

The Company through its wholly-owned subsidiaries owes approximately $10.6 million under Industrial Revenue Bonds issued on the Holiday Inn Lawrence and Holiday Inn Manhattan, both Kansas properties. The Industrial Revenue Bonds require a minimum debt service coverage ratio, calculated as of the end of each calendar year. For the year ended December 31, 2003, the cash flows of both hotels were insufficient to meet the minimum debt service coverage ratio requirements. The trustee of the Industrial Revenue Bonds may give notice of default, at which time the Company could remedy the default by depositing with the trustee an amount currently estimated at approximately $0.4 million. In the event a default is declared and not cured, the properties would be subject to foreclosure and the Company would be obligated pursuant to a partial guaranty of approximately $1.4 million. In addition, the Company could be obligated to pay our franchisor liquidated damages in the amount of $1.3 million. Total revenues for these two hotels for the years ended December 31, 2003 and the comparative periods were as follows:

On September 30, 2003, first mortgage debt of approximately $7.0 million of Macon Hotel Associates, L.L.C. (“MHA”) became due. MHA was not included in the entities that filed for reorganization under Chapter 11. The Company owns 60% of MHA, and MHA’s sole asset is the Crowne Plaza Hotel in Macon, Georgia. The lender agreed to extend the term of the debt to December 31, 2003 and then to June 30, 2004, while the Company explores alternative financing opportunities. The Company has escrowed foreclosure documents that will allow the lender to foreclose on the property on June 30, 2004 if

the mortgage debt is not repaid at that time. If the Company is not able to refinance the debt and the lender does not grant further extensions, the property would be subject to foreclosure. A foreclosure on the property would constitute a default of the franchise agreement; therefore the Company could be liable for $0.9 million in liquidation damages under the franchise agreement. Total revenues for the Crowne Plaza Hotel in Macon, Georgia for the year ended December 31, 2003 and the comparative periods were as follows:

The debt of approximately $7.0 million is included in the current portion of long-term debt in the accompanying consolidated balance sheet.

On May 20, 2001, promissory notes of approximately $3.9 million secured by the pledge of 100% of the equity interests of MHA were due. MHA did not make this payment on May 20, 2001. On April 19, 2002, MHA and the lenders entered into a Satisfaction and Release Agreement whereby the lenders agreed to fully discharge the indebtedness under the promissory note of $3.9 million plus related accrued interest approximating $0.7 million in exchange for payment by MHA of $0.2 million. The resulting gain on extinguishment of this indebtedness of $4.4 million was recorded in the financial statements for the year ended December 31, 2001, within interest income and other on the consolidated statement of operations.

On September 18, 2003, the Company drew down the full availability of $2.0 million under a revolving loan agreement with OCM Real Estate Opportunities Fund II, L.P. (“OCM Fund II”). Borrowings under the facility bear interest at the fixed rate of 10% per annum and were repaid in full in December 2003 out of the proceeds received from the sale of an office building. During 2003, the Company paid interest to OCM Fund II of approximately $42,000. The facility is secured by two land parcels located in California and New Jersey and matures on May 1, 2004.

Oaktree Capital Management, LLC (“Oaktree”) may be deemed to be the beneficial owner of 1,664,752 shares of the Company’s common stock, including 1,578,611 shares owned by OCM Fund II. Oaktree is the general partner of the OCM Fund II; accordingly, Oaktree may be deemed to beneficially own the shares owned by OCM Fund II. Oaktree disclaims any such beneficial ownership.

Russel S. Bernard, a Principal of Oaktree, and Sean F. Armstrong, a Managing Director of Oaktree, are also directors of Lodgian.

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 non-compliance with such agreements. In the past, management has cured most cases of non-compliance within the applicable cure periods and the events of non-compliance did not result in events of default under the respective loan agreements. However, in selected situations and 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 (see Note 18).

On November 25, 2002, we issued 5,000,000 shares of Preferred Stock (“Preferred Stock”) with a par value of $0.01 at $25.00 per share. Each share of Preferred Stock has a liquidation preference over our common stock. The dividend is cumulative, compounded annually and is payable at the rate of 12.25% per annum on November 21 of each year. As provided by the terms of the Preferred Stock, the first dividend was paid on November 21, 2003 by means of the issuance of additional shares of Preferred Stock, with fractional shares paid in cash. We thus issued 594,299 shares of Preferred Stock as dividends and paid cash dividends of approximately $18,500 for fractional shares. Preferred shares outstanding as of December 31, 2003 were 5,611,760. Changes in fair value of Lodgian’s common stock do not affect the settlement costs of the Preferred Stock. We expect to issue an additional 17,461 shares of Preferred Stock as dividends to those general unsecured creditors who have not yet received their shares of Preferred Stock. If any Preferred Stock is then outstanding, the board of directors will determine whether the dividends due November 21, 2004 and 2005 will be paid in cash or in kind via the issuance of additional shares of Preferred Stock. The Preferred Stock is subject to redemption at any time, at our option and to mandatory redemption on November 21, 2012. If we redeem the Preferred Stock prior to November 21, 2004, the redemption price will be 104% of the liquidation value per share of the Preferred Stock. The liquidation value will be $25.00 per share plus accrued dividends. The redemption price is reduced by 1% for each succeeding twelve-month period through November 20, 2007, after which the Preferred Stock is redeemable for the liquidation value. See Note 4.

On July 1, 2003, in accordance with SFAS No. 150, the Company reclassified the Preferred Stock to the liability section of its consolidated balance sheet and began presenting the related dividends in interest expense which totaled $8.1 million for the period July 1, 2003 to December 31, 2003. Prior to the adoption of SFAS No. 150, the Company presented the Preferred Stock between liabilities and equity in its consolidated balance sheet (called the “mezzanine” section) and reported the Preferred Stock dividend as a deduction from retained earnings with no effect on its results of operations. In accordance with SFAS No. 150, the Preferred Stock and the dividends for the period prior to July 1, 2003, have not been reclassified.

Pursuant to the Joint Plan of Reorganization, in addition to the Preferred Stock, the following securities became available for issuance in November 2002:


•	Common stock, 7,000,000 shares, par value $0.01.

•	Class A and B warrants

The common stock is subject to dilution by the Class A & Class B warrants, any incentive shares and any future shares (See Note 4).

The Class A warrants initially provide for the purchase of an aggregate of 1,510,638 shares of the common stock at an exercise price of $18.29 per share and expire on November 25, 2007.

The Class B warrants initially provide for the purchase of an aggregate of 1,029,366 shares of the common stock at an exercise price of $25.44 per share and expire on November 25, 2009. See Note 2 for stock based compensation awards made during the year ended December 31, 2003.

In order to manage its exposure to fluctuations in interest rates on its variable rate debt, the Company entered into three interest rate cap agreements as follows:


•	Two related to the exit financing obtained from Merrill Lynch Mortgage ($299.3 million and $302.7 million at December 31, 2003 and December 31, 2002, respectively), and

•	One related to the financing obtained from Lehman ($76.4 million at December 31, 2003).

The two interest rate cap agreements related to the Merrill Lynch Mortgage financing allowed the Company to obtain exit financing at floating rates and effectively cap those rates at LIBOR of 6.44% plus 2.36%, in the case of the senior debt, and LIBOR plus 8.25%, in the case of the mezzanine debt. When LIBOR exceeds 6.44%, the contracts require settlement of net interest receivable at specified intervals, which generally coincide with the dates on which interest is payable on the underlying debt. When LIBOR is below 6.44%, there is no settlement from the interest rate caps. The Company is exposed to interest rate risks on the exit financing debt for increases in LIBOR up to 6.44%. The one-month LIBOR as of December 31, 2003 was 1.13%. The notional principal amount of the interest rate caps outstanding was $302.2 million and $302.8 million at December 31, 2003 and December 31, 2002, respectively.

The interest rate cap agreement related to the Lehman financing allowed the Company to obtain financing at a partial floating rate and effectively caps the interest rate at LIBOR of 5.00% plus 5.25%. When LIBOR exceeds 5%, the contracts require settlement of net interest receivable at specified intervals, which generally coincide with the dates on which interest is payable on the underlying debt. When LIBOR is below 5.00%, there is no settlement from the interest rate cap. The Company is exposed to interest rate risks on the Lehman Financing for LIBOR of between 2% and 5%. The notional principal amount of the interest rate cap outstanding was $80 million at December 31, 2003.

These derivative financial instruments are viewed as risk management tools and are entered into for hedging purposes only. The Company does not use derivative financial instruments for trading or speculative purposes. However, the Company has not elected to follow the hedging requirements of SFAS No. 133.

The aggregate fair value of the three interest rate caps as of December 31, 2003 and the two interest rate caps at December 31, 2002 were approximately $15,000 and $100,000, respectively. The fair values of the interest rate caps are recognized in the accompanying balance sheet in other assets. Adjustments to the carrying values of the interest rate caps are reflected in interest expense.

The notional amounts of the two interest rate caps and their termination dates match the principal amounts and maturities of the outstanding amounts on these loans.

The components of the cumulative effect of temporary differences in the deferred income tax (liability) and asset balances at December 31, 2003 and 2002 are as follows:

The difference between income taxes using the effective income tax rate and the federal income tax statutory rate of 34% is as follows:

At December 31, 2003, the Company had established a valuation allowance of $140.0 million to fully offset its net deferred tax asset. As a result of the Company’s history of losses, the Company believed that it was more likely than not that its net deferred tax asset would not be realized and, therefore, provided a valuation allowance to fully reserve against these amounts. Of this $140.0 million, $12.4 million and $54.6 million was generated in 2003 and 2002, respectively.

At December 31, 2003, the Company had available net operating loss carry forwards of approximately $270 million for federal income tax purposes, which will expire in 2004 through 2023. Under the Joint Plan of Reorganization and the Impac Plan of Reorganization, substantial amounts of net operating loss carryforwards were utilized to offset income from debt cancellations in 2002. Also, the Company’s reorganization under Chapter 11, resulted in an ownership change, as defined in Section 382 of the Internal Revenue Code. Consequently, the Company’s ability to use the net operating loss carryforwards to offset future income is subject to certain limitations. Due to these and other limitations, a portion or all of these net operating loss carryforwards could expire unused.

Richard Cartoon, the Company’s Executive Vice President and Chief Financial Officer between October 4, 2001 and October 13, 2003, is a principal in a business that the Company retained in October 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 as Executive Vice President and Chief Financial Officer, the Company was billed as follows, for other support and services provided by associates of Richard Cartoon, LLC:

Richard Cartoon, LLC continues to provide restructuring and other support to the Company.

See Note 11 regarding the $2.0 million revolving loan from OCM Fund II to the Company.

The following table sets forth the computation of basic and diluted earnings per common share:

The computation of diluted loss per share for the Successor year ended December 31, 2003, as calculated above, did not include the shares associated with the assumed conversion of the restricted stock (200,000 shares), stock options (options to acquire 472,726 shares of common stock), and Class A and Class B warrants (rights to acquire 1,510,638 and 1,029,366 shares of common stock, respectively) because their inclusion would have been antidilutive.

The computation of diluted loss per share for the Successor period November 23, 2002 to December 31, 2002, as calculated above, did not include the shares associated with the assumed conversion of the Class A and Class B warrants (rights to acquire 1,510,638 and 1,029,366 shares of common stock, respectively) because their inclusion would have been antidilutive.

The computation of diluted loss per share for the Predecessor periods January 1, 2002 to November 22, 2002, and year ended December 31, 2001, 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 also have been antidilutive.

Fourteen of the Company’s hotels are subject to long-term ground leases, parking and other leases expiring from 2004 through 2075 which provide for minimum payments as well as incentive rent payments. In addition, most of the Company’s hotels have non-cancellable operating leases, mainly for operating equipment. Lease expense for the non-cancellable ground, parking and other leases were as follows:

At December 31, 2003, the future minimum commitments for non-cancellable ground and parking leases were as follows (amounts in thousands):

The Company has entered into franchise agreements with various hotel chains which require annual payments for license fees, reservation services and advertising fees. The license agreements generally have original terms of between 10 and 20 years. The franchisors may require the Company to upgrade its facilities at any time to comply with its then current standards. Upon the expiration of the term of a franchise, the Company may apply for a franchise renewal. In connection with the renewal of a franchise, the franchisor 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 for the year ended December 31, 2003 and the comparative periods were:

As of March 1, 2004, the Company had been notified that it was not in compliance with some of the terms of ten of its franchise agreements and had received default and termination notices from franchisors with respect to an additional five hotels.

In addition, as part of its bankruptcy reorganization proceedings, the Company entered into stipulations with each of its major franchisors setting forth a timeline for completion of capital expenditures for some of its hotels. The Company has not completed the required capital expenditures for 35 hotels in accordance with the stipulations and estimates that completing those improvements will cost $26.1 million. Under the stipulations, the applicable franchisors could therefore seek to declare certain franchise agreements in default and, in certain circumstances, seek to terminate the franchise agreement.

With the exception of one hotel held for sale, the Company believes that it will cure the noncompliance and defaults on these hotels before the applicable termination dates. If a franchise agreement is terminated, The Company generally will either select an alternative franchisor or operate the hotel independently of any franchisor. However, terminating or changing the franchise affiliation of a hotel could require the Company to incur significant expenses, including liquidated damages, and capital expenditures.

The franchise agreements are subject to termination 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 franchise for any individual hotel would not have a material adverse effect on its financial condition and results of operations.

The Company has maintenance agreements, primarily on a one to three year basis, which resulted in the following expenses:

As of December 31, 2003, the Company had issued two irrevocable letters of credit totaling $3.6 million as guarantees to Zurich American Insurance Company and Donlen Fleet Management Services. These letters of credit will expire in November 2004 but may require renewal beyond that date. All letters of credit are backed by the Company’s cash (classified as restricted cash in the accompanying Consolidated Balance Sheet).

The Company is self-insured up to certain limits with respect to employee medical, employee dental, property insurance, general liability insurance, personal injury claims, workers’ compensation and auto liability. The Company establishes liabilities for these self-insured obligations annually, based on actuarial valuations and its history of claims. If these claims escalate beyond the Company’s expectations, this could

cause a negative impact on its future financial condition and results of operations. As of December 31, 2003 and December 31, 2002, the Company had accrued approximately $10.0 million and $9.1 million for these liabilities.

The Company is party to legal proceedings arising in the ordinary course of business. The outcome of these matters is uncertain. However, management believes that these matters will be resolved without a material adverse effect on the Company’s financial position or results of operations. Certain of these claims are limited to the amounts available under the Company’s disputed claims reserve.

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 pension contributions (for unionized and one group of non-union employees) were:

The Company adopted a 401(k) plan for the benefit of its non-union and one group of union employees under which participating employees may elect to contribute up to 10% (increased to 15% as of January 1, 2003) of their compensation. The Company matches an employee’s elective contributions to the 401(k) plan, subject to certain conditions. These employer contributions vest immediately. Contributions to the 401(K) plan made by the Company were:

Of the 18 hotels which were held for sale at December 31, 2003, four were sold between January 1, 2004 and March 1, 2004. Summarized below is certain financial data related to these four hotels:

The following table summarizes unaudited quarterly financial data (amounts have been restated, as appropriate, to give effect to discontinued operations):

Through and including [ , 2004] (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

As permitted by Section 102 of the Delaware General Corporation Law, the restated certificate of incorporation of Lodgian, eliminates its directors’ personal liability to Lodgian or its stockholders for monetary damages for a breach of fiduciary duty as a director of Lodgian, except:


	•	For any breach of the director’s duty of loyalty to Lodgian or its stockholders;

	•	For acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

	•	For payment of dividends or stock purchases or redemptions by the corporation in violation of Section 174 of the Delaware General Corporation Law; or

	•	For any transaction from which the director derived an improper personal benefit.

As a result of this provision, Lodgian and its stockholders may be unable to obtain monetary damages from a director for certain breaches of his or her fiduciary duty to Lodgian. This provision does not, however, eliminate the directors’ fiduciary responsibilities and, in appropriate circumstances, equitable remedies such as injunctive or other forms of non-monetary relief will remain available under Delaware law. The provision also does not affect a director’s responsibilities under any other laws, such as the federal securities laws or state or federal environmental laws.

The restated certificate further provides that Lodgian must indemnify its directors, officers, employees and agents to the fullest extent permitted by the Delaware General Corporation Law. Under Section 145 of the Delaware General Corporation Law, a Delaware corporation has the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that the person is or was a director, officer, employee or agent of the corporation. The corporation may indemnify such a person against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with the action, suit or proceeding if the person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful, except that, in the case of an action by or in the right of the corporation, judicial approval is required for indemnification in respect of any claim, issue or matter as to which the person was adjudged to be liable to the corporation. To the extent that a present or former director or officer of a corporation is successful on the merits or otherwise in the defense of any such action, suit or proceeding, the corporation must indemnify him or her against the expenses

The form of Underwriting Agreement (to be filed as Exhibit 1.1 to this registration statement) provides for indemnification by the underwriters of Lodgian and its officers and directors for certain liabilities arising under the Securities Act of 1933, as amended, or otherwise.

The indemnification provision in Lodgian’s certificate of incorporation and the Underwriting Agreement may be sufficiently broad to permit indemnification of Lodgian’s directors and executive officers for liabilities arising under the Securities Act of 1933, as amended.

Lodgian may purchase and maintain an insurance policy insuring its directors, officers, employees and agents against liability for certain acts and omissions while acting in their official capacity.

During the past three years, we have issued the securities set forth below that were not registered under Section 5 of the Securities Act of 1933, as amended:

Pursuant to the Joint Plan of Reorganization, upon our emergence from reorganization proceedings on November 25, 2002:


	•	5,000,000 shares of Preferred Stock, par value $0.01, with an initial liquidation value $25 per share, were issued or reserved for issuance in satisfaction of outstanding debt and other obligations;

	•	7,000,000 shares of common stock, par value $0.01 per share, were issued or reserved for issuance in satisfaction of outstanding debt and other obligations;

	•	Class A warrants to purchase an aggregate of 1,510,638 shares of common stock at $18.29 per share were made available for issuance in satisfaction of outstanding debt and other obligations;

	•	Class B warrants to purchase an aggregate of 1,029,366 shares of common stock at $25.44 per share were made available for issuance in satisfaction of outstanding debt and other obligations;

	•	Our previous equity, consisting of an aggregate of 28,479,837 shares, was cancelled, and in exchange our stockholders received their pro rata share of 207,900 shares of common stock, plus class A warrants to purchase an aggregate of 251,823 shares of common stock and class B warrants to purchase an aggregate of 778,304 shares of common stock;

	•	Our CRESTS were cancelled and the holders received their pro rata share of 868,000 shares of the common stock, plus class A warrants to purchase 1,258,815 shares of common stock and class B warrants to purchase 251,062 shares of common stock;

	•	Our 12.25% Senior Subordinated Notes were cancelled and the holders of the notes received their pro rata share of 4,690,600 shares of Preferred Stock and 5,557,511 shares of common stock;

	•	The holders of allowed general unsecured claims became entitled to 309,400 shares of Preferred Stock and 366,589 shares of common stock, referred to as the “disputed claims reserve.” Until distributed, these shares are part of the disputed claims reserve for the pre-


		bankruptcy petition general unsecured creditors. These shares are periodically distributed as the disputed claims are resolved;

On November 21, 2003, our first dividend payment date, we issued 594,299 shares of Preferred Stock as dividends, fractional shares which were paid in cash of approximately $18,500, and we expect to issue an estimated 17,461 shares of Preferred Stock as dividends to those general unsecured creditors whom have not yet received their shares of Preferred Stock.

As set forth in Section 7.11 of the Joint Plan of Reorganization, all issuances of our common stock, Preferred Stock, Class A warrants and Class B warrants pursuant to the Joint Plan of Reorganization were exempt from any securities laws registration requirements to the fullest extent permitted by section 1145 of the Bankruptcy Code.

(a) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.


	(i) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of the Registration Statement as of the time it was declared effective.

	(ii) For purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized on the 8th day of March, 2004.


	By:	/s/ W. THOMAS PARRINGTON



	W. Thomas Parrington
	President and Chief Executive Officer

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints W. Thomas Parrington and Daniel E. Ellis, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and any subsequent registration statements pursuant to Rule 462 of the Securities Act of 1933 and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorney-in-fact or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act, the following persons in the capacities and on the dates indicated have signed this Registration Statement.


*	To be filed by Amendment.

EX-3.1 3 g87458exv3w1.txt EX-3.1 RESTATED CERTIFICATE OF INCORPORATION EXHIBIT 3.1 RESTATED CERTIFICATE OF INCORPORATION OF LODGIAN, INC. --------------------- ARTICLE I Name SECTION 1.1 Name. The name of the Corporation is Lodgian, Inc. ARTICLE II Registered Office And Registered Agent SECTION 2.1 Office And Agent. The address of the registered office of the Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of the registered agent of the Corporation at such address is The Corporation Trust Company. ARTICLE III Corporate Purpose SECTION 3.1 Purpose. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law ("DGCL"). ARTICLE IV Capitalization SECTION 4.1 Authorized Capital; Shares. The total number of shares of all classes of stock that the Corporation shall have authority to issue is One Hundred Million (100,000,000), of which Seventy Five Million (75,000,000) shares shall be shares of Common Stock, par value $0.01 per share ("Common Stock"), and Twenty Five Million (25,000,000) shares shall be shares of Preferred Stock, par value $0.01 per share ("Preferred Stock"). SECTION 4.2 Preferred Stock. Shares of Preferred Stock of the Corporation may be issued from time to time in one or more classes or series, each of which class or series shall have such distinctive designation or title as shall be fixed by the affirmative vote of a majority of the whole Board of Directors of the Corporation (the "Board Of Directors") prior to the issuance of any shares thereof (the number of directors of the Corporation, as so determined from time to time, being referred to herein as the "Whole Board"). Each such class or series of Preferred Stock shall have such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions, including the dividend rate, redemption price and liquidation preference, and may be convertible into, or exchangeable for, at the option of either the holder or the Corporation or upon the happening of a specified event, shares of any other class or classes or any other series of the same or any other class or classes of capital stock, or any debt securities, of the Corporation at such price or prices or at such rate or rates of exchange and with such adjustments as shall be stated and expressed in this Restated Certificate of Incorporation or in any amendment hereto or in such resolution or resolutions providing for the issuance of such class or series of Preferred Stock as may be adopted from time to time by the affirmative vote of the number of directors constituting the majority of the Whole Board prior to the issuance of any shares thereof pursuant to the authority hereby expressly vested in it, all in accordance with the DGCL. The authority of the Board of Directors with respect to each series shall also include, but not be limited to, the determination of restrictions, if any, on the issue or reissue of any additional shares of Preferred Stock. SECTION 4.3 No Preemptive Rights. The holders of shares of Common Stock shall have no preemptive or preferential rights of subscription to any shares of any class of capital stock of the Corporation or any securities convertible into or exchangeable for shares of any class of capital stock of the Corporation. ARTICLE V Compromise Or Arrangement SECTION 5.1 Compromise Or Arrangement. Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the Corporation under the provisions of Section 291 of the DGCL or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of Section 279 of the DGCL, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such a manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization, if sanctioned by the court to which the said application has been made, shall be binding on all the creditors or the members of the class of creditors, and/or on all the stockholders or the members of the class of stockholders, of the Corporation, as the case may be, and also on the Corporation. ARTICLE VI Indemnification SECTION 6.1 Indemnification. (a) General. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, to the full extent authorized or permitted by law, as now or hereafter in effect, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person seeking indemnification did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (b) Derivative Actions. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, to the full extent authorized or permitted by law, as now or hereafter in effect, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation; provided, however, -2- that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. (c) Successful Defense. To the extent that a present or former director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) above, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (d) Proceedings Initiated By Any Person. Notwithstanding anything to the contrary contained in subsections (a) or (b) above, except for proceedings to enforce rights to indemnification, the Corporation shall not be obligated to indemnify any person in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized in advance, or unanimously consented to, by the Board of Directors. (e) Procedure. Any indemnification under subsections (a) and (b) above (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the present or former director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in subsections (a) and (b) above. Such determination shall be made with respect to a person who is a director or officer at the time of such determination, (i) by a majority vote of a quorum of the directors who are not parties to such action, suit or proceeding, (ii) by a committee of such nonparty directors designated by a majority vote of such directors, even though less than a quorum, (iii) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (iv) by the stockholders of the Corporation. (f) Advancement Of Expenses. Expenses (including attorneys' fees) incurred by a director or an officer in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking in form and substance satisfactory to the Corporation by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation pursuant to this Article VI. Such expenses (including attorneys' fees) incurred by former directors or officers or other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate. (g) Rights Not Exclusive. The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any law, bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. (h) Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of the DGCL. (i) Definition Of "Corporation". For purposes of this Article VI, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article VI with respect to the -3- resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. (j) Certain Other Definitions. For purposes of this Article VI, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves service by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation," as referred to in this Article VI. (k) Continuation Of Rights. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VI shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (l) Repeal Or Modification. Any repeal or modification of this Article VI by the stockholders of the Corporation shall not adversely affect any rights to indemnification and to advancement of expenses that any person may have at the time of such repeal or modification with respect to any acts or omissions occurring prior to such repeal or modification. (m) Action Against Corporation. Notwithstanding any provisions of this Article VI to the contrary, no person shall be entitled to indemnification or advancement of expenses under this Article VI with respect to any action, suit or proceeding, or any claim therein, brought or made by him against the Corporation. ARTICLE VII Directors SECTION 7.1 Director Liability. (a) A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL or (iv) for any transaction from which the director derived any improper personal benefit. (b) If the DGCL is amended hereafter to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent authorized by the DGCL, as so amended, without further action by either the Board of Directors or the stockholders of the Corporation. (c) Any repeal or modification of this Article VII shall not adversely affect any right or protection of a director of the Corporation existing hereunder with respect to any act or omission occurring prior to or at the time of such repeal or modification. SECTION 7.2 Removal. Any or all of the directors may be removed only for due cause by vote of the record holders of a majority of the outstanding shares of the Corporation entitled to vote thereon at a meeting of the stockholders; PROVIDED, HOWEVER, that no such removal can be made at such meeting unless the notice thereof specifies such removal and the reasons therefor as one of the matters that shall be considered at such meeting. ARTICLE VIII Management Of The Affairs Of The Corporation SECTION 8.1 Management Of The Affairs Of The Corporation. (a) The business and affairs of the Corporation shall be managed by the Board of Directors, which may exercise all the powers of the Corporation and -4- do all such lawful acts and things that are not conferred upon or reserved to the stockholders by law, by this Restated Certificate of Incorporation or by the bylaws of the Corporation (the "Bylaws"). (b) Election of directors of the Corporation need not be by written ballot, unless required by the Bylaws. (c) The following provisions are inserted for the limitation and regulation of the powers of the Corporation and of its directors and stockholders: (i) The Bylaws, or any of them, may be altered, amended or repealed, or new bylaws may be made, but only to the extent any such alteration, amendment, repeal or new bylaw is not inconsistent with any provision of this Restated Certificate of Incorporation as it may be amended from time to time, either by the number of directors constituting the majority of the Whole Board or by the stockholders of the Corporation upon the affirmative vote of the holders of at least 80% of the outstanding capital stock entitled to vote thereon. (ii) The Board of Directors shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. The term of the initial Class I directors shall terminate on the date of the 1999 annual meeting of stockholders; the term of the initial Class II directors shall terminate on the date of the 2000 annual meeting of stockholders; and the term of the initial Class III directors shall terminate on the date of the 2001 annual meeting of stockholders. At each annual meeting of stockholders, beginning with the 1999 annual meeting of stockholders, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, but in no case will a decrease in the number of directors shorten the term of any incumbent director. A director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. The term of a director elected by stockholders to fill a newly created directorship or other vacancy shall expire at the same time as the terms of the other directors of the class for which the new directorship is created or in which the vacancy occurred. Any director elected by the Board of Directors to fill a vacancy shall hold office for a term that shall coincide with the term of the class to which such director shall have been elected. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of Preferred Stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of this Restated Certificate of Incorporation or the resolution or resolutions adopted by the Board of Directors pursuant to Section 4.2 of Article IV hereof applicable thereto, and such directors so elected shall not be divided into classes pursuant to this Section 8.1(c) unless expressly provided by such terms. (iii) Subject to the rights, if any, of the holders of shares of Preferred Stock then outstanding and the notice provisions set forth in Section 7.2 of Article VII, any or all of the directors of the Corporation may be removed from office at any time only for cause by the affirmative vote of holders of a majority of the outstanding shares of the Corporation entitled to vote generally in the election of directors, considered for purposes of this paragraph as one class. (iv) Special meetings of the stockholders of the Corporation for any purpose or purposes may be called at any time by a majority of the members of the Board of Directors or Chief Executive Officer of the Corporation. A special meeting of the stockholders of the Corporation may not be called by any other person or persons. ARTICLE IX Private Property SECTION 9.1 Private Property. The private property of the stockholders of the Corporation shall not be subject to the payment of corporate debts to any extent whatsoever. -5- ARTICLE X Shareholder Consent SECTION 10.1 No Stockholders' Consent In Lieu Of Meeting. Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual meeting or special meeting of such stockholders and may not be effected by any consent in writing by any such stockholders. ARTICLE XI Amendment SECTION 11.1 Amendments. Notwithstanding anything contained in this Restated Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 80% of the outstanding shares of capital stock of the Corporation entitled to vote thereon shall be required to amend, repeal, or adopt any provision inconsistent with, Section 7.2 of Article VII, Section 8.1(c) of Article VIII or this Article XI of this Restated Certificate of Incorporation. ARTICLE XII Effective Date SECTION 12.1 Effective Date. This Restated Certificate of Incorporation shall become effective upon filing with the Secretary of State of the State of Delaware. -6- EX-3.2 4 g87458exv3w2.txt EX-3.2 AMENDMENT TO RESTATED CERTIFICATE EXHIBIT 3.2 CERTIFICATE OF AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION PURSUANT TO REORGANIZATION OF LODGIAN, INC. Pursuant to Section 303 of the General Corporation Law of the State of Delaware, LODGIAN, INC., a corporation duly organized and validly existing under the General Corporation Law of the State of Delaware, does hereby certify as follows: I. The name of the Corporation is LODGIAN, INC. II. Section 4.1 of Article IV of the certificate of incorporation is amended to read as follows: Authorized Capital; Shares. The total number of shares of all classes of stock that the Corporation shall have authority to issue is Forty Million (40,000,000), of which Thirty Million (30,000,000) shares shall be shares of Common Stock, par value $0.01 per share ("COMMON STOCK"), and Ten Million (10,000,000) shares shall be shares of Preferred Stock, par value $0.01 per share ("PREFERRED STOCK"). III. Section 4.4 of Article IV is added to the certificate of incorporation and shall read as follows: Prohibition of Non-Voting Equity Securities. Notwithstanding anything herein to the contrary, the Corporation shall not be authorized to issue non-voting equity securities of any class series or other designation to the extent prohibited by Section 1123(a)(6) of Title 11 of the United States Code (the "Bankruptcy Code"); provided, however, that the foregoing restriction shall (i) have no further force and effect beyond that required under Section 1123(a)(6) of the Bankruptcy Code, (ii) only have such force and effect for so long as such Section 1123(a)(6) is in effect and applies to the Corporation and (iii) be deemed void or eliminated if required by applicable law. IV. Section 8.1(c)(ii) of Article VIII of the certificate of incorporation is amended in its entirety to read as follows: The Board of Directors shall be elected each year at the annual meeting of stockholders. Each director shall hold office until the annual meeting of stockholders for the year following the year of his or her election until his or her successor is elected and has qualified or until his or her earlier resignation, retirement, disqualification or removal from office. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of Preferred Stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of this Restated Certificate of Incorporation or the resolution or resolutions adopted by the Board of Directors pursuant to Section 4.2 of Article IV hereof applicable thereto. V. Pursuant to Section 303 of the General Corporation Law of the State of Delaware, a plan of reorganization of the Corporation entitled Joint Plan of Reorganization of Lodgian, Inc., et al. Together With the Official Committee of Unsecured Creditors (Other than the CCA Debtors) Under Chapter 11 of the Bankruptcy Code (the "Plan") having been filed pursuant to Chapter 11 of Title 11 of the United States Code in a proceeding under the United States Bankruptcy Code entitled In re: Lodgian, Inc., et al., Case No. 01-16345 (the "Proceeding") and confirmed by an order dated November 5, 2002 by the United States Bankruptcy Court for the Southern District of New York, a court having jurisdiction over the Proceeding (the "Order"), and such Order providing for the making and filing of this certificate of amendment, this certificate of amendment amends the provisions of the certificate of incorporation of the Corporation. [SIGNATURES ON FOLLOWING PAGE] -2- IN WITNESS WHEREOF, the Corporation has caused this certificate of amendment to be executed as of the 21st day of November, 2002. LODGIAN, INC. By: /s/ Daniel E. Ellis ---------------------------------- Daniel E. Ellis Vice President and Secretary -3- EX-3.3 5 g87458exv3w3.txt EX-3.3 CERTIFICATE OF DESIGNATION EXHIBIT 3.3 CERTIFICATE OF DESIGNATION FOR SERIES A PREFERRED STOCK OF LODGIAN, INC PURSUANT TO SECTION 303 OF THE DELAWARE GENERAL CORPORATION LAW Lodgian, Inc., a Delaware corporation (the "Corporation"), HEREBY CERTIFIES that pursuant to the provisions of Section 303 of the Delaware General Corporation Law (the "DGCL"), the Corporation, pursuant to the Order dated November 5, 2002 of the United States Bankruptcy Court for the Southern District of New York (the "Order") adopted the following resolution effective as of November 21, 2002 (the "Effective Time"), which resolution remains in full force and effect as of the date hereof: WHEREAS, the Corporation is authorized, pursuant to Section 303 of the DGCL, without further action by its directors or stockholders to put into effect and carry out the Order including making any change in its capital or capital stock; WHEREAS, it is the desire of the Corporation, pursuant to such authority, to authorize and fix the terms of the series of Preferred Stock designated as Series A Preferred Stock; and WHEREAS, capitalized terms used herein and not otherwise defined shall have the meanings set forth in Section 10 hereof; NOW THEREFORE, be it resolved, that the terms and provisions of such series and all other rights or preferences granted to or imposed upon such series or the holders thereof are as herein set forth: SECTION 1. DESIGNATION; RANK. This series of preferred stock shall be designated "Series A Preferred Stock", par value $0.01 per share (the "Series A Preferred Stock"). The initial liquidation preference of each share (a "Share") of Series A Preferred Stock, including shares of Series A Preferred Stock issued as Payment-In-Kind, shall be $25 (the "Initial Liquidation Value"). The Series A Preferred Stock shall rank, with respect to dividend rights and rights on liquidation, dissolution and winding-up, senior to all Junior Securities. SECTION 2. AUTHORIZED NUMBER. The number of authorized Shares constituting the Series A Preferred Stock shall be 7,100,000. The initial number of Shares issued shall be 5,000,000 with an aggregate Initial Liquidation Value of $125,000,000. The additional authorized Shares allow for the payment of the Pay-In-Kind dividends pursuant to Section 3 hereof. SECTION 3. DIVIDENDS. (a) General Obligation. To the extent permitted under applicable law, dividends on each Share shall accrue annually in arrears at a rate of 12.25% per annum of the Liquidation Value thereof (the "Dividend Rate"), from November 21, 2002 (the "Date of Issuance") to the date on which the Liquidation Value of each such Share has been paid in full. Such dividends shall accrue whether or not they have been earned or declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends. (b) Dividend Payment Date. The accrued dividends shall be payable, in accordance with the terms of subsection (c), on November 21 of each year, starting with November 21, 2003 (each a "Dividend Payment Date") to the holders of record of Series A Preferred Stock, as they appear on the stock records of the Corporation at the close of business on such record date as shall be fixed by the Board of Directors not more than 60 or less than 10 days preceding such Dividend Payment Date. (c) Payment Method. The Corporation shall make dividend payments on each Dividend Payment Date in accordance with the following provisions: (i) On the first Dividend Payment Date following the Date of Issuance the Corporation shall Pay-In-Kind all dividends; (ii) On each of the two consecutive Dividend Payment Dates following the first Dividend Payment Date, the Corporation, at the sole discretion of its Board of Directors, shall pay all accrued and unpaid dividends either as Payment-In-Kind or, to the extent permitted under applicable law, out of funds legally available therefor, in cash. The Corporation shall give written notice to the record holders of Series A Preferred Stock of its intention to Pay-In-Kind, pursuant to this clause (ii), at least 5 business days prior to the applicable Dividend Payment Date. (iii) On each Dividend Payment Date following the third Dividend Payment Date, the Corporation shall pay, to the extent permitted under applicable law, out of funds legally available therefor, all accrued and unpaid dividends in cash, and to the extent not paid in cash, such dividends shall accrue and accumulate on each such Dividend Payment Date and shall remain accumulated and unpaid dividends until paid. (d) Distribution of Partial Dividend Payments. With regards to cash dividends, to the extent the Corporation, in accordance with the foregoing provisions of this Section 3, is limited to paying less than the total amount of dividends then accrued and unpaid with respect to the Series A Preferred Stock, such payment will be distributed among the holders of the Series A Preferred Stock pro rata based upon the aggregate accrued but unpaid dividends on the Share(s) held by each such holder, and any amounts of such dividends remaining thereafter shall be accumulated and shall remain accumulated and unpaid dividends with respect to such Share(s) until paid. (e) Dividend Preference. No dividend, distribution, repurchase, redemption, or payment of cash or property (other than solely in shares of common stock or a partial cash dividend on Parity Securities that is paid pro rata on the Series A Preferred Stock) shall be declared, paid, set aside for payment or made on or with respect to any Junior Securities or Parity Securities, either directly or indirectly, unless and until (i) all accrued and unpaid dividends (including all accumulated and unpaid dividends) on each Share that the holder of such Share is entitled to receive pursuant to this Section 3, including pro rata dividends for the period from last Dividend Payment Date to the date of such dividend, distribution, repurchase, redemption or payment, have been paid in full and (ii) the conditions to such dividend, distribution, repurchase, redemption or payment set forth in Section 6 hereof have been satisfied. SECTION 4. LIQUIDATION. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, holders of the Series A Preferred Stock shall be entitled to be paid, before any distribution or payment is made upon any of the Junior Securities, an amount in cash equal to the aggregate Liquidation Value of all such Series A Preferred Stock outstanding on the date of such liquidation, dissolution or winding up, and the holders of Series A Preferred Stock shall not be entitled to any further payment. If upon any such liquidation, dissolution or winding up of the Corporation, the Corporation's assets (or proceeds thereof) to be distributed among the holders of the Series A Preferred Stock and any Parity Securities are insufficient to permit payment in full to such holders of the aggregate amount which they are entitled to be paid, then the entire assets to be distributed shall be distributed ratably among such holders based upon, in the case of holders of the Series A Preferred Stock, the aggregate Liquidation Value of the Series A Preferred Stock held by each such holder on the date of such liquidation, dissolution or winding up and, in the case of holders of any Parity Securities, the liquidation preference and accumulated and unpaid dividends which they are entitled to pursuant to such Parity Securities. The Corporation shall mail written notice of such liquidation, dissolution or winding up, not less than 10 days prior to the payment date statement therein, to each record holder of Series A Preferred Stock. Neither the consolidation or merger of the Corporation into or with any other Person or Persons, nor the reduction of the capital stock of the Corporation, shall be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this Section 4. -2- SECTION 5. REDEMPTION. (a) Optional Redemption. Prior to November 21, 2012, the Series A Preferred Stock shall be redeemable at the option of the Corporation for cash, in whole or in part out of funds legally available therefor, at any time and from time to time, at the redemption prices per share (expressed as a percentage of the Liquidation Value thereof as of the date of such redemption) set forth below (the "Redemption Price"), if redeemed during the twelve-month period beginning November 21 of each of the calendar years indicated below:

(b) Mandatory Redemption. On November 21, 2012 (the "Scheduled Redemption Date") the Corporation shall redeem all remaining outstanding Shares out of funds legally available therefor, at a price per Share equal to the Liquidation Value thereof as of the date of such redemption. (c) Payment of Redemption Price. For each Share which is to be redeemed, the Corporation shall be obligated on the Redemption Date to pay to the holder thereof (upon surrender by such holder at the Corporation's principal office of the certificate representing such Share) the Redemption Price in immediately available funds. If the Corporation's funds which are legally available for redemption of Shares on any date of such redemption are insufficient to redeem the total number of Shares to be redeemed on such date, those funds which are legally available shall be used to redeem the maximum possible number of Shares ratably among the holders of the Shares to be redeemed based upon the aggregate Liquidation Value of such Shares held by each such holder on the date of such redemption. At each Dividend Payment Date thereafter, all funds of the Corporation that are legally available for the redemption of Shares shall immediately be used to redeem the balance of the Shares which the Corporation did not redeem on the date of such redemption. Without limiting any rights of the holders of Series A Preferred Stock which are set forth in the Certificate of Incorporation of the Corporation or are otherwise available under law, the balance of the Shares which the Corporation has become obligated to redeem on the date of any such redemption but which it has not redeemed shall continue to have all of the powers, designations, preferences and relative participating, optional, and other special rights (including without limitation, rights to accrue dividends) which such Shares had prior to such date, until the Redemption Price has been paid in full with respect to such Shares. (d) Notice of Redemption. Except as otherwise provided herein, the Corporation shall mail written notice of each redemption of Series A Preferred Stock to each record holder not more than 60 nor less than 30 days prior to the date on which such redemption is to be made. In case fewer than the total number of Shares represented by any certificate are redeemed, a new certificate representing the number of unredeemed Shares shall be issued to the holder thereof without cost to such holder within 3 business days after surrender by such holder of the certificate representing the redeemed Shares. (e) Dividends After Redemption Date; Rights of Stockholder. No Share is entitled to any dividends accruing after the Redemption Date of such Share. On such Redemption Date all rights of the holder of such Share as a holder shall cease, and such Share shall not be deemed to be outstanding. (f) Redeemed or Otherwise Acquired Shares. Any Shares which are redeemed or otherwise acquired by the Corporation shall be canceled and shall not be reissued, sold or transferred thereafter. SECTION 6. PRIORITY OF SERIES A PREFERRED STOCK ON DIVIDENDS AND REDEMPTIONS. So long as any Shares remain outstanding, without the prior written consent of the holders of a majority of the outstanding Shares, the Corporation shall not, nor shall it permit any Subsidiary to, redeem, retire, purchase or otherwise acquire for value directly or indirectly any Junior Securities or Parity Securities (other than upon -3- conversion of convertible preferred stock into common stock), nor shall any moneys or property be paid into or set apart, or made available for the purchase, redemption or other retirement of any Junior Securities or Parity Securities, nor shall the Corporation directly or indirectly pay or declare any dividend or make any distribution (either in cash or property) with respect to any Junior Securities or Parity Securities (other than dividends payable in compliance with Section 3(e)). SECTION 7. VOTING RIGHTS. (a) General. The holders of Series A Preferred Stock shall have no voting rights other than those voting rights prescribed by law or set forth in this Certificate of Designation. (b) Corporate Action Requiring Affirmative Vote of Holders of Shares of Series A Preferred Stock. So long as any Shares are outstanding, the Corporation shall not: (i) Without first obtaining the consent, given in person or by proxy, either in writing or at any meeting called for that purpose, of the record holders of at least a majority of the Shares then outstanding, (1) increase the authorized number of Shares; (2) amend, alter, change, or repeal (by merger or otherwise) any provision of the Certificate of Incorporation or Bylaws of the Corporation or any terms or provisions of this Certificate of Designation so as to affect the relative rights, preferences, qualifications, limitations or restrictions of the Series A Preferred Stock; or (3) enter into a share exchange, reorganization, recapitalization or other similar transaction that affects the Series A Preferred Stock, or consolidate, merge with or into, or enter into a business combination with, or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets to, another Person, unless (A) the entity formed by such consolidation, merger or business combination (if other than the Corporation) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made (in any such case, the "resulting entity") is a corporation organized and existing under the laws of the United States, any State thereof or the District of Columbia, and (B) if the Corporation is not the resulting entity, the Shares are converted into or exchanged for and become shares of such resulting entity, having in respect of such resulting entity the same (or more favorable) powers, preferences and relative rights, qualifications, limitations and restrictions that Shares of the Series A Preferred Stock had immediately prior to such transaction (it being understood that the resulting entity shall thereafter be deemed to be the "Corporation" for all purposes of this Certificate and the predecessor shall be relieved of all obligations with respect to the Series A Preferred Stock). (ii) For the purpose of this Section 7, except as otherwise specifically provided, the holders of Series A Preferred Stock shall vote as one class, and each holder of Series A Preferred Stock shall be entitled to one vote for each Share held. The consent or votes under this Section 7 shall be in addition to any approval of stockholders of the Corporation that may be required by law or pursuant to any provision of the Corporation's Certificate of Incorporation or Bylaws. SECTION 8. REGISTRATION OF TRANSFER. The Corporation shall keep at its principal office a register for the registration of Series A Preferred Stock. Upon the surrender of any certificate representing Series A Preferred Stock at such place, the Corporation shall, at the request of the record holder of such certificate, execute and deliver (at the Corporation's expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of Shares represented by the surrendered certificate. Each such new certificate shall be registered in such name and shall represent such number of Shares as is requested by the holder of the surrendered certificate and shall be substantially identical in form to the surrendered certificate. SECTION 9. REPLACEMENT. Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder shall be satisfactory) of the ownership and the loss, theft, extraction or mutilation of any certificate evidencing any Shares, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation, or, in the case of any such mutilation upon surrender of such -4- certificate, the Corporation shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of Shares represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate. SECTION 10. DEFINITIONS. Unless defined elsewhere herein, each capitalized term shall have the meaning assigned to such term below: "Date of Issuance" shall have the meaning set forth in Section 3. "Dividend Rate" shall have the meaning set forth in Section 3. "Dividend Payment Date" shall have the meaning set forth in Section 3. "Initial Liquidation Value" shall have the meaning set forth in Section 1. "Junior Securities" means any of the Corporation's securities (except for the Series A Preferred Stock), whether presently issued and outstanding or hereafter authorized and issued, the terms of which do not expressly provide that such securities rank senior to or on a parity with the Series A Preferred Stock as to dividend distributions and distributions upon the Corporation's liquidation, dissolution and winding-up. "Liquidation Value" as to any Share as of any date of determination, means an amount equal to the sum of (x) the Initial Liquidation Value of such Share, (y) all accumulated and unpaid dividends with respect to such Share as of the date of determination and (z) in the case of liquidation pursuant to Section 4 or redemption pursuant to Section 5, all accrued and unpaid dividends with respect to such Share as of the date of such determination, including pro rata dividends for the period from the last Dividend Payment Date to the date of determination, whether or not declared to the date of such determination. "Order" shall have the meaning set forth in the preamble. "Parity Securities" means any class or series of the Corporation's securities, whether presently issued and outstanding or hereafter authorized and issued, the terms of which expressly provide that such class or series will rank on a parity with the Series A Preferred Stock as to dividend distributions and distributions upon the Corporation's liquidation, dissolution and winding-up. "Pay-In-Kind" or "Payment-In-Kind" with respect to any Dividend Payment Date, means the issuance by the Corporation to each holder of record of one or more outstanding Shares a number of additional Shares (or fractional portion thereof) that have an aggregate Liquidation Value equal to the amount of accrued dividends on such outstanding Share(s) as of such Dividend Payment Date. "Person" means any individual, sole proprietorship, partnership (including a limited partnership), joint venture, trust, unincorporated organization, association, corporation, institution, public benefit corporation, limited liability company, joint stock company, entity or government (whether federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof) or any other business entity. "Redemption Date" as to any Share means the Scheduled Redemption Date or the applicable date specified herein in the case of any other redemption; provided, that no such date shall be a Redemption Date unless the applicable Redemption Price is actually paid in full in cash, and if not so paid, the Redemption Date shall be the date on which such Redemption Price is fully paid in cash. "Redemption Price" shall have the meaning set forth in Section 5. "Scheduled Redemption Date" shall have the meaning set forth in Section 5. "Series A Preferred Stock" shall have the meaning set forth in Section 1. -5- "Share" shall have the meaning set forth in Section 1. "Stock" means all shares, options, warrants, general or limited partnership interests, participation or other equivalents (regardless of how designated) of or in a Person, whether voting or nonvoting, including, without limitation, common stock, preferred stock, or any other "equity security" (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended), including without limitation, any securities with profit participation features, and any rights, warrants, options or other securities convertible into or exercisable or exchangeable for any such shares, equity or profits interests, participations or other equivalents, or such other securities, directly or indirectly (or any equivalent ownership interests, in the case of a Person which is not a corporation). "Subsidiary" shall mean, with respect to any Person, (i) any corporation of which an aggregate of 50% or more of the outstanding Stock having ordinary voting power to elect a majority of the board of directors, managers or trustees of such corporation (irrespective of whether, at the time, Stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned legally or beneficially or controlled, directly or indirectly, by such Person and/or one or more Subsidiaries of such Person, or any combination thereof, or with respect to which any such Person has the right to vote or designate the vote of 50% or more of such Stock whether by proxy, agreement, operation of law or otherwise, (ii) any partnership, limited liability company, association or other business entity, in which such Person and/or one or more Subsidiaries of such Person shall have 50% or more of the partnership or other similar ownership interests thereof (whether in the form of voting or participation in profits or capital contribution), and (iii) all other Persons from time to time included in the consolidated financial statements of such Person. For purposes hereof, a Person or Persons shall be deemed to have 50% or more ownership interest in a limited liability company, partnership, association or other business entity if such Person or Persons shall be allocated 50% or more of limited liability company, partnership, association or other business entity gains or losses or shall be or control any managing director or general partner of such limited liability company, partnership, association or other business entity. SECTION 11. AMENDMENT AND WAIVER. No amendment, modification or waiver shall be binding or effective with respect to any of the provisions stating the number, designation, relative rights, preferences, qualifications, limitations or restrictions of the Series A Preferred Stock, without the prior written consent of the holders of at least a majority of Shares then outstanding. SECTION 12. NOTICES. Except as otherwise expressly provided herein, all notices referred to herein shall be in writing and shall be delivered by registered or certified mail, return receipt requested, postage prepaid and shall be deemed to have been given four business days after being deposited in the mail (i) to the Corporation, at its principal executive offices and (ii) to any stockholder, at such holder's address as it appears in the stock records of the Corporation (unless otherwise indicated by any such holder). -6- IN WITNESS WHEREOF, Lodgian, Inc. has caused this Certificate of Designation to be signed by the undersigned this 21st day of November 2002. LODGIAN, INC. By: /s/ Daniel E. Ellis ---------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary -7- EX-3.4 6 g87458exv3w4.txt EX-3.4 AMENDED RESTATED BYLAWS OF LODGIAN, INC. EXHIBIT 3.4 AMENDED RESTATED BYLAWS OF LODGIAN, INC. Effective as of March 4, 2004 TABLE OF CONTENTS ARTICLE I OFFICES

-i- ARTICLE V OFFICERS Section 1. Officers......................................................................................7 Section 2. Authority and Duties..........................................................................7 Section 3. Term of Office, Resignation and Removal.......................................................7 Section 4. Vacancies.....................................................................................7 Section 5. The Chairman..................................................................................7 Section 6. The Chief Executive Officer...................................................................7 Section 7. The President ................................................................................7 Section 8. Vice Presidents ..............................................................................8 Section 9. The Secretary ................................................................................8 Section 10. Assistant Secretaries ........................................................................8 Section 11. Chief Financial Officer ......................................................................8 Section 12. The Treasurer.................................................................................8 Section 13. Assistant Treasurers .........................................................................8 Section 14. Additional Officers ..........................................................................8 ARTICLE VI DIVIDENDS, CHECKS, DRAFTS, NOTES AND PROXIES Section 1. Dividends ....................................................................................9 Section 2. Checks, Drafts and Notes......................................................................9 Section 3. Execution of Proxies .........................................................................9 ARTICLE VII SHARES AND TRANSFER OF SHARES Section 1. Certificates of Stock.........................................................................9 Section 2. Record........................................................................................9 Section 3. Transfer of Stock ............................................................................9 Section 4. Addresses of Stockholders.....................................................................9 Section 5. Lost, Destroyed or Mutilated Certificates....................................................10 Section 6. Facsimile Signatures ........................................................................10 Section 7. Regulations .................................................................................10 Section 8. Record Date .................................................................................10 Section 9. Registered Stockholders......................................................................10

-ii- ARTICLE VIII BOOKS AND RECORDS Section 1. Books and Records............................................................................10 ARTICLE IX SEAL Section 1. Seal.........................................................................................11 ARTICLE X FISCAL YEAR Section 1. Fiscal Year..................................................................................11 ARTICLE XI INDEMNIFICATION Section 1. Indemnification..............................................................................11 ARTICLE XII AMENDMENTS Section 1. Amendments...................................................................................13
-iii- RESTATED BYLAWS OF LODGIAN, INC. ARTICLE I OFFICES Section. 1. Registered Office in Delaware. The address of the registered office of Lodgian, Inc. (hereinafter called the "Corporation") in the State of Delaware shall be The Corporation Trust Company, 1209 Orange Street, in the City of Wilmington, County of New Castle, Delaware 19801, and the registered agent in charge thereof shall be The Corporation Trust Company. Section 2. Other Offices. The Corporation may also have an office or offices at any other place or places within or without the State of Delaware as the Board of Directors of the Corporation (the "Board") may from time to time determine or the business of the Corporation may from time to time require. Notwithstanding the foregoing, the corporate headquarters of the Corporation shall be initially located in Atlanta, Georgia. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. Annual Meeting. The annual meeting of stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held at such place within or without the State of Delaware, and at such date and hour, as shall be designated by the Board and set forth in the notice or in a duly executed waiver of notice thereof. Section 2. Special Meetings. A special meeting of the stockholders for any purpose or purposes may be called at any time by: (i) stockholders who hold, in the aggregate, not less than twenty five percent (25%) of the issued and outstanding shares of the common stock of the Corporation; or (ii) a majority of the members of the Board or by the Chief Executive Officer of the Corporation (the "CEO"). A special meeting of stockholders of the Corporation may not be called by any other person or persons. Any such meeting shall be held at such place within or without the State of Delaware, and at such date and hour, as shall be designated in the notice or in a duly executed waiver of notice of such meeting. Only such business as is stated in the written notice of a special meeting may be acted upon thereat. Section 3. Notice of Meetings. Except as otherwise provided by law, written notice of each annual or special meeting of stockholders stating the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is held, shall be given personally or by first class mail to each stockholder entitled to vote at such meeting, not less than 10 nor more than 60 calendar days before the date of the meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the Corporation. If, prior to the time of mailing, the Secretary shall have received from any stockholder entitled to vote a written request that notices intended for such stockholder are to be mailed to an address other than the address that appears on the records of the Corporation, notices intended for such stockholder shall be mailed to the address designated in such request. Notice of a special meeting may be given by the person or persons calling the meeting, or, upon the written request of such person or persons, by the Secretary of the Corporation on behalf of such person or persons. If the person or persons calling a special meeting of stockholders gives notice thereof, such person or persons shall forward a copy thereof to the Secretary. Every request to the Secretary for the giving of notice of a special meeting of stockholders shall state the purpose or purposes of such meeting. -1- Section 4. Waiver of Notice. Notice of any annual or special meeting of stockholders need not be given to any stockholder entitled to vote at such meeting who files a written waiver of notice with the Secretary, duly executed by the person entitled to notice, whether before or after the meeting. Neither the business to be transacted at, nor the purpose of, any meeting of stockholders need be specified in any written waiver of notice. Attendance of a stockholder at a meeting, in person or by proxy, shall constitute a waiver of notice of such meeting, except as provided by law. Section 5. Adjournments. When a meeting is adjourned to another date, hour or place, notice need not be given of the adjourned meeting if the date, hour and place thereof are announced at the meeting at which the adjournment is taken. If the adjournment is for more than 30 calendar days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting. At the adjourned meeting any business may be transacted which might have been transacted at the original meeting. When any meeting is convened, the presiding officer, if directed by the Board, may adjourn the meeting if (a) no quorum is present for the transaction of business, or (b) the Board determines that adjournment is necessary or appropriate to enable the stockholders (i) to consider fully information which the Board determines has not been made sufficiently or timely available to stockholders or (ii) otherwise to exercise effectively their voting rights. Section 6. Quorum. Except as otherwise provided by law or the Restated Certificate of Incorporation of the Corporation (the "Restated Certificate of Incorporation"), whenever a class of stock of the Corporation is entitled to vote as a separate class, or whenever classes of stock of the Corporation are entitled to vote together as a single class, on any matter brought before any meeting of the stockholders, whether annual or special, holders of shares entitled to cast a majority of the votes entitled to be cast by all the holders of the shares of stock of such class voting as a separate class, or classes voting together as a single class, as the case may be, outstanding and entitled to vote thereon, present in person or by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter at any such meeting of the stockholders. If, however, such quorum shall not be present or represented, the stockholders entitled to vote thereon may adjourn the meeting with respect to that matter from time to time in accordance with Section 5 of this Article II until a quorum shall be present or represented. Section 7. Voting. Unless otherwise provided in the Restated Certificate of Incorporation, each stockholder represented at a meeting of stockholders shall be entitled to cast one vote for each share of capital stock entitled to vote thereat held by such stockholder. Except as otherwise provided by law or the Restated Certificate of Incorporation or these Bylaws, when a quorum is present with respect to any matter brought before any meeting of the stockholders, the vote of the holders of stock casting a majority of the votes present in person or represented by proxy and entitled to be cast on the matter shall decide any such matter. Votes need not be by written ballot, unless the Board, in its discretion, requires any vote or votes cast at such meeting to be cast by written ballot. Section 8. Proxies. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy. Such proxy shall be filed with the Secretary before such meeting of stockholders at such time as the Board may require. No proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. Section 9. Organization. Meetings of stockholders of the Corporation shall be presided over by the CEO in accordance with Article V, Section 6, or in the absence of the CEO, by the President, or in the absence of the President by a director chosen by a majority of the directors present at such meeting. The Secretary of the Corporation (the "SECRETARY"), or in the absence of the Secretary -2- an Assistant Secretary, shall act as secretary of the meeting, but in the absence of the Secretary and any Assistant Secretary the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 10. Advance Notice of Business to be Transacted At Annual Meetings. (a) To be properly brought before the annual meeting of stockholders, business must be either (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board (or any duly authorized committee thereof), (ii) otherwise properly brought before the meeting by or at the direction of the Board (or any duly authorized committee thereof) or (iii) otherwise properly brought before the meeting by any stockholder of the Corporation (A) who is a stockholder of record on the date of the giving of the notice provided for in this Section 10 and on the record date for the determination of stockholders entitled to vote at such meeting and (B) who complies with the notice procedures set forth in this Section 10. In addition to any other applicable requirements, including but not limited to the requirements of Rule 14a-8 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), for business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of this Section 10(a), such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. (b) To be timely, a stockholder's notice to the Secretary pursuant to clause (iii) of Section 10(a) must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than 60 days nor more than 90 days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within 30 days before or after such anniversary date, notice by the stockholder in order to be timely must be so received no later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting is mailed or such public disclosure of the date of the annual meeting is made, whichever first occurs. (c) To be in proper written form, a stockholder's notice to the Secretary pursuant to clause (iii) of Section 10(a) must set forth as to each matter such stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (ii) the name and record address of such stockholder, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder, together with evidence reasonably satisfactory to the Secretary of such beneficial ownership, (iv) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder in such business and (v) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. (d) Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at the annual meeting of stockholders except business brought before such meeting in accordance with the procedures set forth in this Section 10; provided, however, that, once business has been properly brought before such meeting in accordance with such procedures, nothing in this Section 10 shall be deemed to preclude discussion by any stockholder of any such business. If the chairman of such meeting determines that business was not properly brought before the meeting in accordance with the foregoing procedures, the chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted. -3- ARTICLE III BOARD OF DIRECTORS Section 1. General Powers. The property, business and affairs of the Corporation shall be managed by the Board, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law or by the Restated Certificate of Incorporation directed or required to be exercised or done by the stockholders. Section 2. Number and Term of Holding Office. The Board of the Corporation shall consist of not less than six members, the exact number to be determined from time to time by resolution adopted by the affirmative vote of a majority of all directors of the Corporation then holding office at any special or regular meeting. Any such resolution increasing or decreasing the number of directors shall have the effect of creating or eliminating a vacancy or vacancies, as the case may be, provided that no such resolution shall reduce the number of directors below the number then holding office. Except as provided in Section 5 of this Article III, directors shall be elected by a plurality of the votes cast at annual meetings of stockholders, and each director so elected shall hold office as provided by Article VIII of the Restated Certificate of Incorporation. None of the directors need be stockholders of the Corporation. Section 3. Nomination of Directors and Advance Notice Thereof. (a) Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided in the Restated Certificate of Incorporation with respect to the right of holders of preferred stock of the Corporation to nominate and elect a specified number of directors in certain circumstances. Nominations of persons for election to the Board may be made at any annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing directors, (i) by or at the direction of the Board (or any duly authorized committee thereof) or (ii) by any stockholder of the Corporation (A) who is a stockholder of record on the date of the giving of the notice provided for in this Section 3 and on the record date for the determination of stockholders entitled to vote at such meeting and (B) who complies with the notice procedures set forth in this Section 3. In addition to any other applicable requirements, for a nomination to be made by a stockholder pursuant to clause (ii) of this Section 3(a), such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. (b) To be timely, a stockholder's notice to the Secretary pursuant to clause (ii) of Section 3(a) must be delivered to or mailed and received at the principal executive offices of the Corporation (i) in the case of an annual meeting, not less than 60 days nor more than 90 days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within 30 days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting is mailed or such public disclosure of the date of the annual meeting is made, whichever first occurs, or (ii) in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the tenth day following the day on which notice of the date of the special meeting is mailed or public disclosure of the date of the special meeting is made, whichever first occurs. (c) To be in proper written form, a stockholder's notice to the Secretary pursuant to clause (ii) of Section 3(a) must set forth (i) as to each person whom the stockholder proposes to nominate for election as a director, (A) the name, age, business address and residence address of the person, (B) the principal occupation or employment of the person, (C) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the person and (D) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors -4- pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder; and (ii) as to the stockholder giving the notice, (A) the name and record address of such stockholder, (B) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder, together with evidence reasonably satisfactory to the Secretary of such beneficial ownership, (C) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (D) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (E) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected. (d) No person shall be eligible for election as, a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 3. If the chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the chairman of the meeting shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded. Section 4. Resignation. Any director may resign at any time by giving written notice to the Board, the CEO, the President or the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, then it shall take effect when accepted by action of the Board. Except as aforesaid, acceptance of such resignation shall not be necessary to make it effective. Section 5. Vacancies. Any vacancy occurring in the Board, including a vacancy created by an increase in the number of directors, may be filled by the stockholders or by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board. Any director elected by the Board to fill a vacancy shall hold office for a term that shall coincide with the term of the class to which such director shall have been elected. Section 6. Meetings. (a) Annual Meetings. As soon as practicable after each annual election of directors, the Board shall meet for the purpose of organization and the transaction of other business, unless it shall have transacted all such business by written consent pursuant to Section 7 of this Article III. (b) Other Meetings. Other meetings of the Board shall be held at such times as the Board shall from time to time determine or upon call by the Chairman, the CEO, the President or any two directors. (c) Notice of Meetings. Regular meetings of the Board may be held without notice. The Secretary of the Corporation shall give notice to each director of each special meeting, including the time and place of such special meeting. Notice of each such meeting shall be given to each director either by mail, at least two days before the day on which such meeting is to be held, or by telephone, telegram, facsimile, telex or cable not later than the day before the day on which such meeting is to be held or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances. Notice of any meeting shall not be required to be given to any director who shall attend such meeting. A waiver of notice by the person entitled thereto, whether before or after the time of any such meeting, shall be deemed equivalent to adequate notice. (d) Place of Meetings. The Board may hold its meetings at such place or places within or without the State of Delaware as the Board may from time to time by resolution determine or as shall be designated in the respective notices or waivers of notice thereof. -5- (e) Quorum and Manner of Acting. Except as otherwise provided by law, the Restated Certificate of Incorporation or these Bylaws, a majority of the total number of directors then in office shall be necessary at any meeting of the Board in order to constitute a quorum for the transaction of business at such meeting, and the affirmative vote of a majority of those directors present at any such meeting at which a quorum is present shall be necessary for the passage of any resolution or act of the Board. In the absence of a quorum for any such meeting, a majority of the directors present thereat may adjourn such meeting from time to time until a quorum shall be present thereat. Notice of any adjourned meeting need not be given. (f) Minutes of Meetings. The Secretary or, in the case of his absence, any person (who shall be an Assistant Secretary, if an Assistant Secretary is present) whom the chairman of the meeting shall appoint shall act as secretary of such meeting and keep the minutes thereof. Section 7. Action by Consent. Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if a written consent or consents thereto is signed by all members of the Board or such committee, as the case may be, and, such written consent or consents are filed with the minutes of the proceedings of the Board or such committee. Section 8. Meetings by Conference Telephone, Etc. Any one or more members of the Board, or of any committee thereof, may participate in a meeting of the Board, or of such committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting. Section 9. Compensation. Each director, in consideration of his serving as such, shall be entitled to receive from the Corporation such amount per annum, if any, or such fees, if any, for attendance at meetings of the Board or of any committee thereof, or both, as the Board shall from time to time determine. The Board may likewise provide that the Corporation shall reimburse each director or member of a committee for any expenses incurred by him on account of his attendance at any such meeting. Nothing contained in this Section 9 shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. ARTICLE IV COMMITTEES Section 1. Committees. The Board, by resolution passed by a majority of the number of directors constituting the whole Board, may designate members of the Board to constitute one or more committees which shall in each case consist of such number of directors, not fewer than two, and, to the extent permitted by law and provided in the resolution establishing such committee, shall have and exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified members at any meeting of any such committee. In the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any absent or disqualified member. A majority of all the members of any such committee may fix its rules of procedure, determine its action and fix the time and place, whether within or without the State of Delaware, of its meetings and specify what notice thereof, if any, shall be given, unless the Board shall otherwise by resolution provide. The Board, upon approval of a majority of the number of directors constituting the whole Board, shall have power to change the members of any such committee at any -6- time, to fill vacancies therein and to discharge any such committee, either with or without cause, at any time. Each committee shall keep regular minutes and report to the Board when required. ARTICLE V OFFICERS Section 1. Officers. The officers of the Corporation shall be the CEO, the President, the Secretary and a Treasurer and may include one or more Vice Presidents and one or more Assistant Secretaries and one or more Assistant Treasurers. The Board of Directors from time to time may elect a Chairman or Co-Chairmen of the Board. Any two or more offices may be held by the same person. Section 2. Authority and Duties. All officers shall have such authority and perform such duties in the management of the Corporation as may be provided in these Bylaws or, to the extent not so provided, by resolution of the Board. Section 3. Term of Office, Resignation and Removal. (a) Each officer shall be appointed by the Board and shall hold office for such term as may be determined by the Board. Each officer shall hold office until his successor has been appointed and qualified or his earlier death or resignation or removal in the manner hereinafter provided. The Board may require any officer to give security for the faithful performance of his duties. (b) Any officer may resign at any time by giving written notice to the Board, the CEO, the President or the Secretary. Such resignation shall take effect at the time specified in such notice or, if the time be not specified, upon receipt thereof by the Board, the CEO, the President or the Secretary, as the case may be. Unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective. (c) All officers and agents appointed by the Board shall be subject to removal, with or without cause, at any time by the Board or by the action of the recordholders of a majority of the Shares entitled to vote thereon. Section 4. Vacancies. Any vacancy occurring in any office of the Corporation, for any reason, shall be filled by action of the Board. Unless earlier removed pursuant to Section 3 hereof, any officer appointed by the Board to fill any such vacancy shall serve only until such time as the unexpired term of his predecessor expires unless reappointed by the Board. Section 5. The Chairman. The Chairman of the Board of Directors shall preside at all meetings of the Board of Directors and he shall have and perform such other duties as from time to time may be assigned to him by the Board of Directors. The Board of Directors may appoint more than one person to serve as Co-Chairmen of the Board of Directors. If the Chairman or any Co-Chairman is not available to preside over a meeting of the Board, a director chosen by a majority of the directors present shall preside over the meeting. Section 6. The Chief Executive Officer. The CEO shall be the senior officer of the Corporation and, subject to the control of the Board of Directors, shall have general and active management and control of the business and affairs of the Corporation and over its several officers, and shall see that all orders and resolutions of the Board are carried into effect. The CEO shall have the power to call special meetings of stockholders and call special meetings of the Board, shall preside over meetings of the stockholders of the Corporation. The CEO shall have such additional duties specified in any Employment Agreement between the Corporation and such officer in effect from time to time. Section 7. The President. The President shall have the power to call special meetings of the Board. If the CEO is not present at a meeting of the stockholders, the President shall preside, and if the President is not present at such meeting, a director or officer chosen by a majority of -7- the directors present shall preside over the meeting. The President shall exercise supervision over the business of the Corporation and over its several officers, subject to the oversight of the CEO. The President shall have such additional duties specified in any Employment Agreement between the Corporation and such officer in effect from time to time. Section 8. Vice Presidents. Vice Presidents, if any, in such order as may be determined by the Board, shall generally assist the CEO and the President and perform such other duties as the Board, the CEO, or the President shall prescribe. The Board shall have the right to appoint a Vice President of Finance who shall assist the President with respect to financing and capital raising activities. Section 9. The Secretary. The Secretary shall, to the extent practicable, attend all meetings of the Board and all meetings of stockholders and shall record all votes and the minutes of all proceedings in a book to be kept for that purpose, and shall perform the same duties for any committee of the Board when so requested by such committee. He shall give or cause to be given notice of all meetings of stockholders and of the Board, shall perform such other duties as may be prescribed by the Board or the CEO and shall act under the supervision of the CEO. He shall keep in safe custody the seal of the Corporation and affix the same to any instrument that requires that the seal be affixed to it and which shall have been duly authorized for signature in the name of the Corporation and, when so affixed, the seal shall be attested by his signature or by the signature of the Treasurer of the Corporation (the "Treasurer") or an Assistant Secretary or Assistant Treasurer of the Corporation. He shall keep in safe custody the certificate books and stockholder records and such other books and records of the Corporation as the Board or the CEO may direct and shall perform all other duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Board or the CEO. Section 10. Assistant Secretaries. Assistant Secretaries of the Corporation ("Assistant Secretaries"), if any, in order of their seniority or in any other order determined by the Board, shall generally assist the Secretary and perform such other duties as the Board of the Secretary shall prescribe, and, in the absence or disability of the Secretary, shall perform the duties and exercise the powers of the Secretary. Section 11. Chief Financial Officer. The Chief Financial Officer shall exercise supervision over all of the financial affairs of the Corporation, shall perform such other duties as may be prescribed by the Board or the CEO and shall act under the supervision of the CEO. Section 12. The Treasurer. The Treasurer shall have the care and custody of all the funds of the Corporation and shall deposit such funds in such banks or other depositories as the Board, or any officer or officers, or any officer and agent jointly, duly authorized by the Board, shall, from time to time, direct or approve. He shall disburse the funds of the Corporation under the direction of the Board and the CEO. He shall keep a full and accurate account of all moneys received and paid on account of the Corporation and shall render a statement of his accounts whenever the Board or the CEO shall so request. He shall perform all other necessary actions and duties in connection with the administration of the financial affairs of the Corporation and shall generally perform all the duties usually appertaining to the office of treasurer of a corporation. When required by the Board, he shall give bonds for the faithful discharge of his duties in such sums and with such sureties as the Board shall approve. Section 13. Assistant Treasurers. Assistant Treasurers of the Corporation ("Assistant Treasurers"), if any, in order of their seniority or in any other order determined by the Board, shall generally assist the Treasurer and perform such other duties as the Board or the Treasurer shall prescribe, and, in the absence or disability of the Treasurer, shall perform the duties and exercise the powers of the Treasurer. Section 14. Additional Officers. The Board or the CEO may appoint such other officers and assistant officers and agents as it or he shall deem necessary, who shall hold their offices for -8- such terms and shall have authority and exercise such powers and perform such duties as shall be determined from time to time by the Board, by resolution not inconsistent with these Bylaws, or by the CEO. ARTICLE VI DIVIDENDS, CHECKS, DRAFTS, NOTES AND PROXIES Section 1. Dividends. Dividends shall be declared only out of any assets or funds of the Corporation legally available for the payment of dividends at such times as the Board shall direct. Dividends shall be paid to holders of the stock of the Corporation in U.S. dollars. Section 2. Checks, Drafts and Notes. All checks, drafts and other orders for payment of money, notes and other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, agent or agents of the Corporation and in such manner as shall be determined, from time to time, by resolution of the Board. Section 3. Execution of Proxies. The CEO or, in the absence or disability of the CEO, the President or any Vice President, may authorize, from time to time, the execution and issuance of proxies to vote shares of stock or other securities of other corporations held of record by the Corporation and the execution of consents to action taken or to be taken by any such corporation. All such proxies and consents, unless otherwise authorized by the Board, shall be signed in the name of the Corporation by the CEO, the President or any Vice President. ARTICLE VII SHARES AND TRANSFER OF SHARES Section 1. Certificates of Stock. Every owner of shares of stock of the Corporation shall be entitled to have a certificate evidencing the number of shares of stock of the Corporation owned by him or it and designating the class of stock to which such shares belong, which shall otherwise be in such form as the Board shall prescribe. Each such certificate shall bear the signature (or a facsimile thereof) of the CEO, the President or any Vice President and of the Treasurer or any Assistant Treasurer or the Secretary or any Assistant Secretary of the Corporation. Section 2. Record. A record shall be kept of the name of the person, firm or corporation owning the stock represented by each certificate evidencing stock of the Corporation issued, the number of shares represented by each such certificate and the date thereof, and, in the case of cancellation, the date of cancellation. Except as otherwise expressly required by law, the person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. Section 3. Transfer of Stock. (a) The transfer of shares of stock and the certificates evidencing such shares of stock of the Corporation shall be governed by Article 8 of Subtitle I of Title 6 of the Delaware Code (the Uniform Commercial Code), as amended from time to time. (b) Registration of transfers of shares of stock of the Corporation shall be made only on the books of the Corporation upon request of the registered holder thereof, or of his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation, and upon the surrender of the certificate or certificates evidencing such shares properly endorsed or accompanied by a stock power duly executed. Section 4. Addresses of Stockholders. Each stockholder shall designate to the Secretary of the Corporation an address at which notices of meetings and all other corporate notices may be served or mailed to him, and, if any stockholder shall fail to so designate such an address, corporate notices may be served upon him by mail directed to him at his post office address, if any, as the same appears on the share record books of the Corporation or at his last known post office address. -9- Section 5. Lost, Destroyed or Mutilated Certificates. A holder of any shares stock of the Corporation shall promptly notify the Corporation of any loss, destruction or mutilation of any certificate or certificates evidencing all or any such shares of stock. The Board may, its discretion, cause the Corporation to issue a new certificate in place of any certificate theretofore issued by it and alleged to have been mutilated, lost, stolen or destroyed, upon the surrender of the mutilated certificate or, in the case of loss, theft or destruction of the certificate, upon satisfactory proof of such loss, theft or destruction, and the Board may, in its discretion, require the owner of the lost, stolen or destroyed certificate or his legal representative to give the Corporation a bond sufficient to indemnify the Corporation against any claim made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new Certificate. Section 6. Facsimile Signatures. Any or all of the signatures on a certificate evidencing shares of stock of the Corporation may be facsimiles. Section 7. Regulations. The Board may make such rules and regulations as it may deem expedient, not inconsistent with the Restated Certificate of Incorporation or these Bylaws, concerning the issue, transfer and registration of certificates evidencing stock of then. It may appoint, or authorize any principal officer or officers to appoint, one or more transfer agents and one or more registrars, and may require all certificates of stock to bear the signature or signatures (or a facsimile or facsimiles thereof) of any of them. The Board may at any time terminate the employment of any transfer agent or any registrar of transfers. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall cease to be such officer, transfer agent or registrar, whether because of death, removal or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed or whose facsimile signature has been placed upon such certificate or certificates had not ceased to be such officer, transfer agent or registrar. Section 8. Record Date. In order that the Corporation may determine the stockholders entitled to notice of, or to vote at, any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock for the purpose of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other such action. A determination of stockholders entitled to notice of, or vote at, any meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting. Section 9. Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its records as the owner of shares of stock to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments a person registered on its records as the owner of shares of stock, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares of stock on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware. ARTICLE VIII BOOKS AND RECORDS Section 1. Books and Records. The books and records of the Corporation may be kept at such place or places within or without the State of Delaware as the Board may from time to time determine. -10- ARTICLE IX SEAL Section 1. Seal. The Board shall provide a corporate seal which shall bear the full name of the Corporation. ARTICLE X FISCAL YEAR Section 1. Fiscal Year. The fiscal year of the Corporation shall be fixed, and shall be subject to change from time to time, by the Board. ARTICLE XI INDEMNIFICATION Section 1. Indemnification. (a) General. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, to the full extent authorized or permitted by law, as now or after in effect, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person seeking indemnification did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (b) Derivative Actions. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, to the full extent authorized or permitted by law, as now or hereafter in effect, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation; provided, however, that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. (c) Successful Defense. To the extent that a present or former director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) above, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. -11- (d) Proceedings Initiated by any Person. Notwithstanding anything to the contrary contained in subsections (a) or (b) above, except for proceedings to enforce rights to indemnification, the Corporation shall not be obligated to indemnify any person in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized in advance, or unanimously consented to, by the Board. (e) Procedure. Any indemnification under subsections (a) and (b) above unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the present or former director, officer, !employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in subsections (a) and (b) above. Such determination shall be made, with respect to a person who is a director or officer at the time of such determination (i) by a majority vote of a quorum of the directors who are not parties to such action, suit or proceeding, (ii) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, (iii) if there are no such directors, or if such directors so direct by independent legal counsel in a written opinion, or (iv) by the stockholders of the Corporation. (f) Advancement of Expenses. Expenses (including attorneys' fees) incurred by a director or an officer in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking in form and substance satisfactory to the Corporation by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation pursuant to this Article XI. Such expenses (including attorneys' fees) incurred by former directors and officers or other employees and agents may be so paid upon such terms and conditions, if any, as the Board deems appropriate. (g) Rights Not Exclusive. The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this Article XI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any law, by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. (h) Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of the General Corporation Law of the State of Delaware. (i) Definition of "Corporation". For purposes of this Article XI, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article XI with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. (j) Certain Other Definitions. For purposes of this Article XI, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent' of the Corporation which imposes duties on, or involves service by, such director, officer, employee or agent with respect to -12- an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation," as referred to in this Article XI. (k) Continuation of Rights. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article XI shall, unless otherwise provided, when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (l) Repeal or Modification. Any repeal or modification of this Article XI by the stockholders of the Corporation shall not adversely affect any rights to indemnification and to advancement of expenses that any person may have at the time of such repeal or modification with respect to any acts or omissions occurring prior to such repeal or modification. (m) Action Against Corporation. Notwithstanding any provisions of this Article XI to the contrary, no person shall be entitled to indemnification or advancement of expenses under this Article XI with respect to any action, suit or proceeding, or any claim therein, brought or made by him against the Corporation. ARTICLE XII AMENDMENTS Section 1. Amendments. These Bylaws, or any of them, may be altered, amended or repealed, or new bylaws may be made, but only to the extent any such alteration, amendment, repeal or new bylaw is not inconsistent with any provision of the Certificate of Incorporation, either by a majority of the number of directors constituting the whole Board or by the stockholders of the Corporation upon the affirmative vote of the holders of 80% of the outstanding shares of capital stock of the Corporation entitled to vote thereon. -13- EX-5.1 7 g87458exv5w1.txt EX-5.1 FORM OF LEGAL OPINION OF MORRIS, MANNING EXHIBIT 5.1 [MORRIS, MANNING & MARTIN LETTERHEAD] A LIMITED LIABILITY PARTNERSHIP ATTORNEYS AT LAW 1600 ATLANTA FINANCIAL CENTER 3343 PEACHTREE ROAD, N.E. ATLANTA, GEORGIA 30326 TELEPHONE (404) 233-7000 [FORM OF LEGAL OPINION] Lodgian, Inc. 3445 Peachtree Road, NE Suite 700 Atlanta, GA 30326 Re: Registration Statement on Form S-1 Gentlemen: We have acted as counsel for Lodgian, Inc., a Delaware corporation (the "Company"), in connection with the registration under the Securities Act of 1933, as amended, pursuant to a Registration Statement on Form S-1 (the "Registration Statement"), of a proposed offering of an aggregate of _______ shares of the Company's common stock, $0.01 par value per share (the "Common Stock"). In addition, the Company has granted to the underwriters an option to purchase ______ shares of Common Stock to cover over-allotments, if any (the "Over-Allotment Shares"). We have examined such documents, corporate records, and other instruments as we have considered necessary and advisable for purposes of rendering this opinion. In making the foregoing examinations, we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals, and the conformity to original documents of all documents submitted to us as certified or photostatic copies. As to various questions of fact material to this opinion, we have relied, to the extent we deem reasonably appropriate, upon representations or certificates of officers or directors of the Company and documents, records and instruments furnished to us by the Company, without independent check or verification of their accuracy. Based upon and subject to the foregoing, we are of the opinion that the Common Stock and any Over-Allotment Shares being sold, when issued, sold and delivered as contemplated in the Registration Statement, will be duly authorized, validly issued, fully paid and nonassessable. The opinions set forth herein are limited to the laws of the State of Delaware and applicable federal laws. We hereby consent to the filing of this Opinion as an exhibit to the Registration Statement and to the reference to our firm under the caption "Legal Matters" in the Prospectus contained in the Registration Statement. Very truly yours, MORRIS, MANNING & MARTIN a Limited Liability Partnership By: ------------------------------------- Jeffrey L. Schulte, Partner EX-10.1.1 8 g87458exv10w1w1.txt EX-10.1.1 LOAN AGREEMENT Exhibit 10.1.1 LOAN AGREEMENT Dated as of January 31, 1995 By and Among SERVICO FORT WAYNE, INC., a Florida corporation, WASHINGTON MOTEL ENTERPRISES, INC., a Pennsylvania corporation, SERVICO HOTELS I, INC., a Florida corporation, SERVICO HOTELS II, INC., a Florida corporation, SERVICO HOTELS III, INC., a Florida corporation, SERVICO HOTELS IV, INC., a Florida corporation, NEW ORLEANS AIRPORT MOTEL ASSOCIATES, LTD. a Florida limited partnership, WILPEN, INC., a Pennsylvania corporation, HILTON HEAD MOTEL ENTERPRISES, INC., a South Carolina corporation, and MOON AIRPORT MOTEL, INC., a Pennsylvania corporation, as Borrower AND COLUMN FINANCIAL, INC., a Delaware corporation, as Lender TABLE OF CONTENTS Page ---- I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION ......................... 1 Section 1.1 Definitions ................................... 1-18 Section 1.2 Principles of Construction .................... 18-19 II. GENERAL TERMS ................................................... 19 Section 2.1 Loan Commitment; Disbursement to Borrowers .... 19 2.1.1 The Loan ...................................... 19 2.1.2 Disbursement to Borrowers ..................... 19 2.1.3 The Note ...................................... 19 Section 2.2 Use of Proceeds ............................... 19 Section 2.3 Loan Repayment and Prepayments; Refinancing Debt Service Coverage Ratio; Extensions ..... 20 2.3.1 Repayment; Refinancings ....................... 20 2.3.2 Prepayments ................................... 20 2.3.3 Pro Forma Debt Service Coverage Ratio ......... 20 2.3.4 Extensions .................................... 20 Section 2.4 Release of Individual Properties .............. 21 2.4.1 Release of Individual Properties .............. 21 2.4.2 Recalculation of Amortization Payments ........ 22 2.4.3 Release Documentation ......................... 22 Section 2.5 Interest ...................................... 23 2.5.1 Generally ..................................... 23 2.5.2 Default Rate; Post-Maturity Interest .......... 23 -i- Page ---- Section 2.6 Payments; Computations ........................ 23 2.6.1 Making of Payments ............................ 23 2.6.2 Computations .................................. 23 2.6.3 Late Payment Charge ........................... 23 2.6.4 Application of Payments ....................... 24 Section 2.7 Central Account; Deposits and Distributions ... 24 2.7.1 Deposits in Central Account ................... 24 2.7.2 Establishment of Central Account and Sub-Accounts ................................ 25 2.7.3 Funding of Basic Sub-Accounts ................. 25 2.7.4 Deposits During Operative Period and DSCR Restricted Period ........................... 27 2.7.5 Eligible Investments .......................... 27 2.7.6 Interest on Accounts .......................... 28 2.7.7 Payment of Debt Service; Disbursement of Funds in Basic Sub-Accounts; Excess Property Income ...................................... 28 2.7.8 Payment of Loss Proceeds; Borrowers' Right to Release ..................................... 37 III. CONDITIONS PRECEDENT ............................................ 39 Section 3.1 Conditions Precedent to Closing ............... 39 IV. REPRESENTATIONS AND WARRANTIES .................................. 42 Section 4.1 Borrowers' Representations .................... 42 Section 4.2 Survival of Representations ................... 53 V. AFFIRMATIVE COVENANTS ........................................... 54 Section 5.1 Borrowers' Covenants .......................... 54 VI. NEGATIVE COVENANTS .............................................. 63 Section 6.1 Borrowers' Negative Covenants ................. 63 -ii- VII. SPECIAL PROVISIONS .............................................. 66 Section 7.1 Cooperation ................................... 66 7.1.1 Cooperation ................................... 66 7.1.2 Additional Financial Reporting Requirements ... 66 Section 7.2 Insurance; Casualty and Condemnation .......... 67 7.2.1 Insurance ..................................... 67 7.2.2 Casualty and Restoration ...................... 70 7.2.3 Condemnation .................................. 72 Section 7.3 Required Repairs .............................. 74 Section 7.4 FF&E Replacements ............................. 75 7.4.1 Performance of FF&E Replacements .............. 75 7.4.2 Additional Replacements ....................... deleted 7.4.3 Indemnification ............................... 77 Section 7.5 Inspections ................................... 77 VIII. DEFAULTS ........................................................ 77 Section 8.1 Event of Default .............................. 77 Section 8.2 Remedies ...................................... 80 Section 8.3 Remedies Cumulative ........................... 80 IX. MISCELLANEOUS ................................................... 81 Section 9.1 Survival ...................................... 81 Section 9.2 Lender's Discretion ........................... 81 Section 9.3 Governing Law ................................. 81 Section 9.4 Modification, Waiver in Writing ............... 82 Section 9.5 Delay Not a Waiver ............................ 83 Section 9.6 Notices ....................................... 83 Section 9.7 Trial by Jury ................................. 84 -iii- Section 9.8 Headings ...................................... 84 Section 9.9 Successors and Assigns; Assignment ............ 84 Section 9.10 Severability .................................. 84 Section 9.11 Preferences ................................... 84 Section 9.12 Waiver of Notice .............................. 85 Section 9.13 Borrower to Act as Registrar .................. deleted Section 9.14 Expenses; Indemnity ........................... 85 Section 9.15 Exhibits Incorporated ......................... 86 Section 9.16 Offsets, Counterclaims and Defenses ........... 86 Section 9.17 No Joint Venture or Partnership ............... 86 Section 9.18 Publicity ..................................... 86 Section 9.19 Waiver of Marshalling of Assets ............... 86 Section 9.20 Waiver of Counterclaim ........................ 87 Section 9.21 Conflict; Construction of Documents ........... 87 Section 9.22 Brokers and Financial Advisors ................ 87 Section 9.23 Prior Agreements .............................. 87 Section 9.24 Joint and Several ............................. 88 Section 9.25 Appointment of Servicer ....................... 88 Section 9.26 Exculpation ................................... 88 Section 9.27 Arizona Interest .............................. 89 -iv- SCHEDULES Schedule A - Borrowers Schedule B - Allocable Principal Balances Schedule C - Franchisors and Franchise Agreements Schedule D - Properties Schedule E - Required Repairs Schedule F - FF&E Replacements Schedule G - Permits Schedule H - Equipment Leases Schedule I - Leases Schedule J - Form of Operating Statement Schedule K - Operations and Maintenance Programs Schedule L - Litigation Schedule M - Fair Market Value -v- LOAN AGREEMENT THIS LOAN AGREEMENT, dated as of January 31, 1995, by and among COLUMN FINANCIAL, INC., having an address at 3414 Peachtree Road, Suite 1140, Atlanta, Georgia 30326-1113, Attention: Robert A. Barnes, Esq., together with its successors and assigns, including, without limitation, the Loan Purchaser, as lender ("Lender"), and those twelve entities set forth on Schedule A annexed hereto, having an address at Servico Centre South, 1601 Belvedere Road, West Palm Beach, Florida 33406, Attention: Chief Executive Officer, as borrower. All capitalized terms used herein shall have the respective meanings set forth in Section 1 hereof. W I T N E S S E T H : WHEREAS, Borrowers desire to obtain the Loan from Lender; WHEREAS, Lender is willing to make the Loan to Borrowers, subject to and in accordance with the terms of this Agreement and the other Loan Documents; WHEREAS, Lender's interest in the Loan may be purchased by the Loan Purchaser on or after the Closing Date; and WHEREAS, Borrowers consent to the transfer described in the preceding Recital. NOW, THEREFORE, in consideration of the covenants, agreements, representations and warranties set forth in this Agreement, and other good and valuable consideration, the parties hereto hereby covenant, agree, represent and warrant as follows: I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION Section 1.1 Definitions. For all purposes of this Agreement, except as otherwise expressly required or unless the context clearly indicates a contrary intent: "Accountant's Certificate" shall have the meaning set forth in Section 2.7.7(d) (ii). "Accountant's Certificate Default" shall have the meaning set forth in Section 2.7.7(e) (ii). "Additional Sums" shall have the meaning set forth in Section 9.27. "Adjusted Debt Service" shall mean, in connection with the proposed release of one or more Individual Properties pursuant to Section 2.4, the Debt Service, as determined by Lender, that would be due during the twelve (12) month period commencing on the first Due Date after the proposed date of such release, after giving effect to the application of the Release Amount required to be paid under Section 2.4.1 with respect to the proposed release to the outstanding principal balance of the Loan and the recalculation, pursuant to Section 2.4.2, of payments necessary to amortize the remaining principal balance of the Loan by February 1, 2015 and pay interest on the amount of such principal balance outstanding from time to time at the Interest Rate. "Adjusted Debt Service Coverage Ratio" shall mean, with respect to any date, the ratio of Adjusted Cash Flow Available for Debt Service to Adjusted Debt Service for the applicable Properties. "Adjusted Cash Flow Available for Debt Service" shall mean, in connection with the proposed Release of one or more Individual Properties pursuant to Section 2.4, the aggregate Cash Flow Available for Debt Service for the Properties for the twelve (12) calendar month period ending with the last month for which monthly statements of Revenue and Operating Expenses shall have been due pursuant to Section 5.1(k) (iv) prior to the date of Lender's receipt of notice of such proposed release (excluding any Cash Flow Available for Debt Service relating to the Individual Properties proposed to be released). "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 or is a director or officer of such Person or of an Affiliate of such Person. "Agreement" shall mean this Loan Agreement, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Allocable Principal Balance" shall mean, with respect to any Individual Property as of any date, the portion of the aggregate original principal amount of the Loan allocable to such Individual Property as reduced by such Individual Property's pro rata share of any principal amortization payments or prepayments theretofore received. The initial Allocable Principal Balance for each Individual Property is set forth on Schedule B annexed hereto. "ALTA" shall mean American Land Title Association, or any successor thereto. "Annual Operating Budget" shall mean, with respect to each Individual Property, an annual operating budget, showing all -2- projected items of Revenue and Operating Expenses, prepared on an accrual basis in accordance with GAAP and certified by Borrowers. "Assignment of Leases" shall mean, collectively, that certain first priority Assignment of Leases, Rents and Revenues, dated as of the date hereof, from the applicable Borrower, as assignor, to Lender, as assignee, with respect to each Individual Property, assigning to Lender all of Borrowers' interest in and to the Leases, the Rents and the Revenue of such Individual Property as security for the Loan, as such Assignment of Leases may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Assignment of Consulting Agreement" shall mean, collectively, (a) that certain first priority Assignment of Management Agreement, dated as of January 31, 1995 from Westin William Penn Borrower and Westin William Penn Manager with respect to the William Penn Property, (b) that certain Assignment and Subordination of Management Agreement dated as of the date hereof from the applicable Borrower and Related Consultant with respect to the Individual Property identified on Schedule D as the Radisson Inn New Orleans located in Kennar, Louisiana and (b) those certain first priority Assignments and Subordinations of Consulting Agreement, dated as of the date hereof, from the applicable Borrower and Related Consultant to Lender, with respect to each other Individual Property, assigning to Lender all of each such Borrower's interest in and to the applicable Consulting Agreement with respect to such Individual Property as security for the Loan and subordinating, pursuant to its terms, such Consulting Agreement and any Lien or rights created thereunder to the Lien and to the terms, covenants and provisions of the Loan Documents, as such Assignment of Consulting Agreement may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Bank" shall mean First National Bank of Chicago and any other financial institution subsequently selected by Lender. "Bankruptcy Order" shall mean that certain Order Confirming Debtors' Plan of Reorganization filed on May 7, 1992 in that certain bankruptcy proceeding captioned In re Servico, Inc., et al. in the United States Bankruptcy Court, Southern District of Florida, Miami Division, Case No. 90-36655-BKC-AJC-X. "Basic Carrying Costs" shall mean (a) with respect to an Individual Property, the sum of the following costs for the relevant Fiscal Year or payment period: (i) Impositions with respect to such Individual Property and (ii) insurance premiums for the Policies with respect to such Individual Property or (b) the aggregate amount of Basic Carrying Costs for all the Properties. "Basic Carrying Costs Monthly Installment" shall mean an amount equal to (i) one-twelfth (1/12) of an amount estimated -3- by Lender to be necessary to pay the Impositions for all the Properties payable during the next ensuing twelve (12) months, giving effect to any amount deposited in the Basic Carrying Costs Sub-Account on the Closing Date and (ii) during any Operative Period, DSCR Restricted Period and Franchise Restricted Period, one-twelfth (1/12) of an amount estimated by Lender to be necessary to pay the premiums on the Policies for all the Properties due during the next ensuing twelve (12) months for the renewal of the coverage afforded by the Policies upon the expiration thereof. In the event any of the Policies is a blanket policy insuring risks other than those associated with the Properties, the amount set forth in (ii) above shall be the premium that would be payable to continue such policy in effect for just the Properties, as set forth in the Insuror's Letter. "Basic Carrying Costs Sub-Account" shall mean the sub-account of the Central Account established and maintained pursuant to Section 2.7.2 to provide for payment of Basic Carrying Costs for the Properties. "Basic Sub-Accounts" shall have the meaning specified in Section 2.7.2. "Borrower" shall mean, respectively, each of those ten (10) entities set forth on Schedule A annexed hereto and "Borrowers" shall mean, collectively, all such entities, but excluding, in either case, any such entity or entities that own(s) an Individual Property released from the lien of the Mortgage pursuant to Section 2.4. "Borrower Material Adverse Effect" shall have the meaning specified in Section 4.1(a). "Borrowers' Accountant" shall mean Ernst & Young or any other Independent firm of certified public accountants approved by Lender, which approval shall not be unreasonably withheld or delayed. "Building Evaluation Reports" shall mean those certain Building Evaluation Reports prepared by the Engineer and delivered to Lender in connection with the Loan. "Business Day" shall mean any day other than a Saturday, Sunday or any other day on which national banks in New York are not open for business. "Capital Expenditures Budget" shall mean, with respect to each Individual Property, an annual budget, prepared on an accrual basis in accordance with GAAP and certified by Borrowers, showing all proposed capital expenditures. "Capital Expenditure Sub-Account" shall mean a sub-account of the Central Account established pursuant to Section 2.7.2 hereof for the purpose of holding certain Excess Property -4- Income during any DSCR Restricted Period or any Franchise Restricted Period. "Cash Flow Available for Debt Service" shall mean, with respect to each Individual Property with respect to any period, the excess of (a) the Revenue for such period, determined on an accrual basis, less (b) the Operating Expenses for the same period, including, for the purposes of calculating Cash Flow Available for Debt Service, all FF&E Installments calculated with respect to the Revenues for such period or, with respect to any period prior to the Closing Date, FF&E Installments that would have been calculated with respect to such period if this Agreement had been in effect. "Cash Management Agreement" shall mean that certain Cash Management Agreement dated as of January 31, 1995 among Borrowers (except New Orleans Motel Associates) certain Affiliates of Borrowers, Related Consultant and Servico, Inc. "Casualty" shall have the meaning specified in Section 7.2.2(a). "Central Account" shall mean such Eligible Account maintained by Lender at the Bank, in the name of Lender or its successors or assigns (as secured party), as shall be designated by Lender. "Certificate" shall mean any certificate representing an interest in the Loan issued pursuant to the Trust and Servicing Agreement. "Certificateholder" shall mean the holder of a Certificate. "Closing Date" shall mean the date of the closing of the Loan. "Code" shall mean the Internal Revenue Code of 1986, as amended, and as it may be further amended from time to time, any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued pursuant thereto in temporary or final form. "Collateral Security Documents" shall mean any right, document or instrument given as security for the Note, including, without limitation, the Mortgage, the Assignment of Leases and the Assignment of Consulting Agreements, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Commitment" shall have the meaning specified in Section 2.3.1 hereof. -5- "Condemnation" shall mean any temporary or permanent taking of all or any part of any Individual Property, or interest therein or right or use thereof, as a result of, any proceeding in condemnation or eminent domain. "Condemnation Proceeds" shall have the meaning specified in Section 2.7.8(b) hereof. "Consultant" shall mean the Related Consultant and/or the Westin William Penn Manager, as applicable. "Consultant Control Change" shall have the meaning specified in Section 5.1(j). "Consultant Control Notice" shall have the meaning specified in Section 5.1(j). "Consultant's Certifications" shall mean those certifications required to be delivered by Consultant under Section 5.1(k) (iv). "Consultant's Notice" shall have the meaning specified in Section 2.7.1. "Consulting Agreement" shall mean the Related Consulting Agreement and/or the Westin William Penn Management Agreement, as applicable. "Contribution Agreement" shall mean that certain Contribution Agreement dated of even date herewith, by and among the Borrowers, relating to contribution arrangements and reimbursement procedures in the event any Borrower suffers losses or incurs expenses in excess of the Allocable Principal Balance of such Borrower's Individual Property, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Curtailment Reserve Fund Sub-Account" shall mean the sub-account of the Central Account established and maintained pursuant to Section 2.7.2 hereof during the Operative Period for the purpose of holding certain Excess Property Income. "Debt Service" shall mean, with respect to any particular period of time, scheduled principal and interest payments under the Note, as adjusted as a result of any reamortization of the Loan pursuant to Section 2.4.2 hereof. "Debt Service Payment Sub-Account" shall mean the sub-account of the Central Account established and maintained pursuant to Section 2.7.2 hereof for the purposes of making Debt Service payments. "Default Rate" shall have the meaning specified in the Note. -6- "Depositor" shall mean the entity described as such in the Trust and Servicing Agreement, and its successors and assigns. "DSCR Determination Date" shall mean each January 1, April 1, July 1 and October 1 commencing on April 1, 1995. "DSCR Restricted Period" shall have the meaning specified in Section 2.3.3 hereof. "Due Date" shall mean the first Business Day of each calendar month. "Eligible Account" shall mean a segregated account held by and at the Bank or an account that is either: (a) maintained with a depository institution or trust company the long-term unsecured debt obligations of which (or, in the case of a depository institution or trust company that is the principal subsidiary of a holding company, the long-term unsecured debt obligations of such holding company) have been rated by the Rating Agency in one of its two highest rating categories or the short-term commercial paper of which is rated by the Rating Agency in its highest rating category at the time of any deposit therein; or (b) a trust account or accounts maintained with a federal or state chartered depository institution or trust company with trust powers acting in its fiduciary capacity, provided that any such state chartered institution or trust company shall be subject to regulations or has established internal guidelines regarding fiduciary funds on deposit substantially similar to federal regulation 12 C.F.R. 910 (b). The title of each Eligible Account shall indicate that funds held therein are held in trust for the uses and purposes set forth herein. Any funds deposited in the Eligible Account shall only be invested in Eligible Investments. "Eligible Investments" shall mean any one or more of the following acquired at a purchase price of not greater than par: (a) direct obligations of, or obligations fully guaranteed as to payment of principal and interest by, the United States or any agency or instrumentality thereof, provided such obligations are backed by the full faith and credit of the United States of America; (b) fully FDIC-insured demand and time deposits; and (c) interests in money market or common trust funds which as of the date of acquisition of the interest in such fund has been approved for investment by trust funds securing obligations rated AAAm or AAAm- -7- G by Standards & Poor's Ratings Group, Inc. and P-1 by Moody's Corporation. "Engineer" shall mean RKTL Associates, Inc., which is acknowledged by Lender and Borrowers to be an Independent Person, or any other Independent engineer or engineering firm reasonably approved by Lender. "Engineering Escrow Sub-Account" shall mean a sub-account of the Central Account established pursuant to Section 2.7.2 hereof, for the purpose of holding funds to pay for the Required Repairs. "Environmental Consultant" shall mean Environmental Management Group, Inc. or any other Independent environmental consulting firm reasonably approved by Lender. "Environmental Indemnity" shall mean the certain Environmental Indemnity Agreement of even date herewith, by Borrower in favor of Lender with respect to environmental conditions on the Properties, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Equipment" shall have the meaning specified in the Mortgage with respect to each Individual Property. "Equipment Lease" shall mean a lease or other financing arrangement with respect to any furniture, fixtures and equipment (including, without limitation, any motor vehicle) used in the operation of the Properties. "Event of Default" shall have the meaning specified in Section 8.1. "Excess Property Income" shall mean the amounts available in the Central Account during any Operative Period, any DSCR Restricted Period or any Franchise Restricted Period after the allocations under clauses (a) through (e), inclusive, of Section 2.7.3 have been made. "FF&E Monthly Installment" shall mean a payment on each Due Date in an amount equal to the sum of the product for each of the Properties of (a) the Revenue of such Individual Property for the calendar month prior to the calendar month immediately preceding the Due Date in question and (b) (i) five and one-half percent (5.5%) for the Westin William Penn Property or (ii) four percent (4.0%) for the other Properties. "FF&E Replacements" shall have the meaning specified in Section 2.7.7(e). -8- "FF&E Sub-Account" shall mean a sub-account of the Central Account established pursuant to Section 2.7.2 hereof for the purpose of holding reserves to fund FF&E Replacements. "Fiscal Year" shall mean that period beginning on the first Friday after the last Thursday in December of each year and ending on the last Thursday in December, which Fiscal Year shall be composed of four (4) quarters composed of thirteen (13) weeks each. "Franchise Agreement" shall mean, with respect to each Individual Property, that certain franchise agreement more specifically identified on Schedule C annexed hereto, and any other Franchise Agreement entered into by a Borrower with respect to an Individual Property with the consent of Lender in accordance with the terms hereof. "Franchise Agreement Letters" shall mean each of those certain Letter Agreements by the applicable Borrower and the applicable Franchisor in favor of Lender, with respect to each Individual Property, establishing Lender's rights with respect to the applicable Franchise Agreement, as such Franchise Agreement Letters may be amended, restated, replaced, supplemented or otherwise modified from time to time or, collectively, all such Franchise Agreement Letters. "Franchise Restricted Period" shall have the meaning specified in Section 6.1(a). "Franchisor" shall mean, with respect to each Individual Property, which is subject to a Franchise Agreement, the franchisor with respect thereto, as same are identified on Schedule C annexed hereto or any replacement franchisor approved by Lender pursuant to the Assignment of Franchise Agreement. "GAAP" shall mean generally accepted accounting principles in the United States of America as of the date of the applicable financial report. "Governmental Authority" shall mean any court, board, agency, commission, office or authority of any nature whatsoever for any governmental unit (federal, state, county, district, municipal, city or otherwise) whether now or hereafter in existence. "Impositions" shall mean all real estate and personal property taxes and all other taxes, levies, assessments and other similar charges, general and special, ordinary and extraordinary, foreseen and unforeseen, of every kind and nature whatsoever, which at any time prior to, at or after the execution hereof may be assessed, levied or imposed by, in each case, a Governmental Authority upon an Individual Property or the Revenue or the ownership, use, occupancy or enjoyment thereof, and any interest, costs or penalties with respect to any of the foregoing, provided -9- that water, sewer and utility charges not be deemed to be an Imposition. "Improvements" shall have the meaning specified in the Mortgage with respect to each Individual Property. "Indebtedness" shall mean the indebtedness in the original principal amount set forth in, and evidenced by, the Note, together with all other obligations and liabilities of Borrowers due or to become due to Lender pursuant to the Note, this Agreement or any other Loan Document, including, without limitation, all interest thereon and all Yield Maintenance Premiums due in connection therewith. "Independent" means, when used with respect to any Person, a Person who (i) is in fact independent, (ii) does not have any direct financial interest or any material indirect financial interest in any Borrower, or in any Affiliate of any Borrower or any constituent partner, shareholder, member or beneficiary of any Borrower, and (iii) is not connected with any Borrower or any Affiliate of any Borrower or any constituent partner, shareholder, member or beneficiary of any Borrower as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions. In each instance where the opinion or certificate of an Independent Person is required in order to comply with any of the provisions hereof, the opinion or certificate so supplied shall include a statement that the individual executing the same has read this definition and that the Person supplying such opinion or certificate is Independent within the meaning hereof. "Independent Director" shall have the meaning specified in Section 4.1(dd) (xv). "Individual Property" shall mean each parcel of real property and the Improvements thereon owned by a Borrower and encumbered by the Mortgage, together with all rights and property pertaining to such real property and Improvements, as more particularly described in the Granting Clauses of the Mortgage and referred to therein as the "Mortgaged Property". "Insurance Proceeds" shall have the meaning specified in Section 2.7.8(a). "Insurance Requirements" shall mean, with respect to each Individual Property, all material terms of any insurance policy required pursuant to this Agreement or the related Loan Documents, all material requirements of the issuer of any such policy, and all material regulations and then current standards applicable to or affecting such Individual Property or any part thereof or any use or condition thereof, which may, at any time, be recommended by the state insurance commissioner or other state regulatory body, if any, having jurisdiction over such Individual Property, or such other body exercising similar functions. -10- "Insuror's Letter" shall mean a letter provided by the issuer of the Policies setting forth, with respect to any such Policy that is a blanket policy covering risks other than those associated with the Properties, the annual premium that would be required to keep such Policies in effect for just the Properties and making the statement required pursuant to clause (B) of the final sentence of Section 7.2.1(c), as such letter shall be updated from time to time as the amounts of the premiums for the Policies shall change. "Interest Rate" shall have the meaning specified in the Note. "Late Payment Charge" shall have the meaning specified in the Note. "Lease" shall mean any lease, or, to the extent of the interest therein of any Borrower, any sublease or subsublease, letting, license, concession or other agreement (whether written or oral and whether now or hereafter in effect) pursuant to which any person is granted a possessory interest in, or right to use or occupy all or any portion of any space in any Individual Property, and every modification, amendment or other agreement relating thereto and every guarantee of the performance and observance of the covenants, conditions and agreements to be performed and observed thereunder, excluding, however, any occupancy of hotel rooms by guests in the ordinary course of business. "Legal Requirements" shall mean, with respect to each Individual Property, all federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities to which such Individual Property or any part thereof or the construction, use, alteration or operation thereof, or any part thereof, is subject, including, without limitations, all zoning, land use, building, and environmental statutes, laws, codes, resolutions and ordinances, whether now or hereafter enacted and in force, and all permits, licenses, variances and authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instruments, either of record or known to Borrowers, at any time in force affecting such Individual Property or any part thereof, including, without limitation, any which may (i) require repairs, modifications or alterations in or to such Individual Property or any part thereof or (ii) in any way limit the use and enjoyment thereof. "Lender" shall have the meaning specified in the first Paragraph hereof. "Lien" shall mean any mortgage, deed of trust, lien, pledge, hypothecation, assignment, security interest, or any other encumbrance, charge or transfer of, on or affecting any -11- Individual Property or any portion thereof or any Borrower, or any interest therein, including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, any financing statement, and mechanic's, materialmen's and other similar liens and encumbrances. "Loan" shall mean the loan, evidenced by the Note, and secured by the Mortgage and the other Collateral Security Documents, to be made by Lender to Borrowers pursuant hereto. "Loan Documents" shall mean, collectively, this Agreement, the Note, the Mortgage, the Environmental Indemnity and the other Collateral Security Documents and any other document executed or delivered by or on behalf of Borrowers in connection with the Loan. "Loan Purchaser" shall mean any purchaser of the Loan from the Lender, such purchaser's designee, the respective successors and/or assigns of such purchaser or designee and any subsequent holder of the Note. "Loan Year" shall mean each one (1) year period commencing on the Closing Date and on each anniversary of the Closing Date. "Lock-Out Date" shall have the meaning specified in the Note. "Long-Term Required Repairs" shall mean those Required Repairs designated as "long-term" on Schedule E annexed hereto. "Long-Term Required Repairs Installment" shall mean a payment in the amount of $373,875 to be made by Borrowers to Lender on each of the Closing Date and the first Due Date occurring after each of the first two anniversaries of the Closing Date, to be deposited in the Engineering Escrow Account, provided that if the Borrowers shall expend funds (other than funds disbursed by Lender hereunder) in payment of the costs of any Long-Term Required Repair (other than a Long-Term Required Repair designated as sprinklers on Schedule E annexed hereto) and shall deliver to Lender reasonably satisfactory evidence of such payment, together with the contractor's certification required to be delivered as a condition of disbursement pursuant to Section 2.7.7(d) (ii) with respect to such Long-Term Required Repair, Borrowers shall, upon reasonable approval of the foregoing by Lender, receive a credit in the amount of such payment against the amount of the Long-Term Required Repairs Installment next due, if any, provided that the amount of such credit together with any disbursements made from the Engineering Escrow Sub-Account, expressed as a percentage of the costs allocated for such item on Schedule E, shall not exceed the percentage of the work on such item then completed. -12- "Loss Proceeds" shall have the meaning specified in Section 2.7.8(c) hereof. "Major Required Repair" shall have the meaning specified in Section 2.7.7 (d). "Maturity Date" shall mean March 1, 2010, subject to extension as provided in Section 2.3.4. "Minor Required Repair" shall have the meaning specified in Section 2.7.7(d) (i). "Mortgage" shall mean, with respect to each Individual Property, that certain first priority (a) Mortgage, Security Agreement and Assignment of Leases and Rents, (b) Leasehold Mortgage, Security Agreement and Assignment of Leases and Liens or (c) Deed of Trust, Security Agreement and Assignment of Leases and Rents, as applicable, executed and delivered by the Borrower that owns such Individual Property as security for the Loan and encumbering such Individual Property, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time or, collectively, all such Mortgages, Leasehold Mortgages and Deeds of Trust, as the context may require. "Non-Consolidation Opinion" shall have the meaning specified in Section 3.1(f). "Note" shall mean that certain Promissory Note of even date herewith, made by Borrowers in favor of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Officer's Certificate" shall mean a certificate delivered to Lender by a Borrower which is signed by an officer of such Borrower who also serves as Chief Executive Officer, Chief Financial Officer, Treasurer, Controller or Vice President of Servico, Inc. "Operating Expenses" shall mean, for each Individual Property, all ordinary and customary expenses payable in the ordinary course of operating such Individual Property as a hotel project (such expenses being determined on an accrual basis for the relevant calculation period, unless otherwise expressly provided herein) but excluding distributions to stockholders or partners in the applicable Borrower, Debt Service payable by Borrowers, income taxes, non-cash items such as depreciation and any fees payable to the Related Consultant in excess of four percent (4%) of Revenue. "Operations and Maintenance Expense Monthly Installment" shall mean with respect to each month in a particular year, an amount, as determined by Lender, equal to the aggregate of one-twelfth (1/12th) of the product for each Individual Property -13- of (a) 1.05 and (b) the Operating Expenses for such Individual Property in the immediately preceding Fiscal Year. "Operations and Maintenance Expense Sub-Account" shall mean a sub-account of the Central Account established and maintained during any Operative Period, any DSCR Restricted Period and any Franchise Restricted Period pursuant to Section 2.7.2 hereof relating to the payment of Operating Expenses. "Operative Period" shall mean (a) any period during which a monetary Event of Default shall have occurred and be continuing, (b) if Borrowers fail to provide Lender with a Commitment or Commitments on or prior to the Refinance Notification Date, the period commencing on the Refinance Notification Date and ending on the date the Indebtedness has been paid in full, and (c) if Borrowers provide Lender with a Commitment or Commitments on or prior to the Refinance Notification Date and the Void Commitment Date occurs, the period commencing on the Void Commitment Date and ending on the date the Indebtedness has been paid in full. "Other Charges" shall have the meaning specified in Section 5.1(b) "Permits" shall have the meaning specified in Section 4.1(w). "Permitted Encumbrances" shall mean, with respect to each Individual Property, (a) the Liens created by the Loan Documents, (b) all Liens, encumbrances and other matters disclosed in the Title Insurance Policies relating to such Individual Property or any part thereof or in UCC-11 searches delivered to Lender, (c) Liens for Impositions not yet due and payable or being contested in good faith and by appropriate proceedings in accordance with the applicable provisions of the Loan Documents, (d) Equipment Leases and any conditional sale agreement with respect to the purchase of any Equipment, provided the same have been or shall be entered into by the applicable Borrower in the ordinary course of business, (e) Liens given by a Borrower to finance capital improvements to an Individual Property as permitted under the Mortgage, subject to the prior written approval of Lender, in its sole discretion, which approval shall not be granted if such Lien would result in any withdrawal, downgrade or other adverse effect on any rating of the Certificates issued by the Rating Agency, (f) other Liens expressly permitted by the terms of the Loan Documents and (g) such other title and survey exceptions as Lender has approved or may approve in writing in Lender's sole discretion. "Person" shall mean any individual, corporation partnership, joint venture, estate, trust, unincorporated association, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing. -14- "Policies" shall have the meaning specified in Section 7.2.1(c). "Premises" shall, with respect to each Individual Property, have the meaning specified in the Granting Clause of the Mortgage encumbering such Individual Property. "Pro Forma Debt Service Coverage Ratio" shall mean, with respect to any DSCR Determination Date, the ratio of (a) the aggregate Cash Flow Available for Debt Service for all the Properties determined on an accrual basis for the twelve (12) month period ending with the calendar month prior to the calendar month immediately preceding such DSCR Determination Date to (b) the aggregate amount of Debt Service scheduled to be due during the twelve (12) month period immediately following such DSCR Determination Date, assuming, for the purpose of this calculation, that no payments of principal other than scheduled amortization payments will be made during such period. "Properties" shall mean, collectively, all of the Individual Properties, which Individual Properties are identified on Schedule D annexed hereto, but excluding any such Individual Properties released from the lien of the Mortgage pursuant to Section 2.4. "Qualified Institutional Lender" shall mean a financial institution or other lender with a long term credit rating which is not less than investment grade. "Rating Agency" shall mean Fitch Investors Service, Inc. "Recourse Distributions" shall have the meaning specified in Section 9.26. "Refinance Notification Date" shall have the meaning specified in Section 2.3.1 hereof. "Related Consulting Agreement" shall mean, collectively, those certain agreements entered into by and between Borrowers (other than the Westin William Penn Borrower) and Related Consultant, pursuant to which Related Consultant is to provide management consulting, or, in the case of the Individual Property identified on Schedule D as the Radisson Inn New Orleans located in Kennar, Louisiana, management and other services with respect to each Individual Property other than the Westin William Penn Property. "Related Consultant" shall mean Servico Management Corp., a Florida corporation. "Release Amount" shall have the meaning specified in Section 2.4.1(a). -15- "Rents" shall mean, with respect to each Individual Property, all rents, income, issues, revenues and profits arising from the Leases and renewals thereof. "Required Repairs" shall mean those repairs, if any, with respect to any Individual Property specified in Schedule E annexed hereto. "Required Repairs Installment" shall mean the Long-Term Required Repairs Installment and the Sprinkler Installment. "Restoration" shall have the meaning specified in Section 7.2.2(a). "Revenue" shall mean, with respect to each Individual Property, all Rents and all other revenue of any kind derived from such Individual Property, all determined on an accrual basis (unless otherwise indicated) in accordance with GAAP consistently applied, after deducting all allowances for rebates and adjustments, whether cash or credit, derived directly or indirectly from any source including, without limitation: rental of rooms; food and beverage; sales from gift or other shops managed directly by the applicable Borrower or any agent of such Borrower; telephone; net vending income (gross vending revenue reduced by the amount payable to equipment vendors for the use thereof); commissions; net rentals of cars, bicycles and other items; meeting room rentals; all net revenue received from any third party concessionaires operating any concession under any agreement with such Borrower or its agents, and other persons occupying space at such Individual Property and/or rendering services to guests staying at such Individual Property; and any form of incentive payments or awards received by Borrower from any source whatsoever which are attributable to the operation of such Individual Property. "Royce Property" shall mean the Individual Property identified on Schedule D as the Royce Hotel-Pittsburgh Airport located in Pittsburgh, Pennsylvania. "Securitization Transaction" shall mean the transactions contemplated by the Trust and Servicing Agreement, including, without limitation, (a) the assignment and transfer of the Loan and the Loan Documents to the Depositor, (b) the issuance, sale and rating of the Certificates, and (c) the assignment and transfer of the Loan and the Loan Documents to the Trustee for the benefit of the Certificateholders. "Servicer" shall mean (a) the entity described as such in the Trust and Servicing Agreement or its successor in interest, or if any successor servicer is appointed pursuant to the Trust and Servicing Agreement, such successor servicer or (b) any other entity appointed to service the Loan pursuant to Section 9.25. -16- "Short-Term Required Repairs" shall mean any Required Repairs not designated "long-term" on Schedule E annexed hereto. "Short-Term Required Repair Deposit" shall mean an amount equal to the aggregate of one hundred twenty-five percent (125%) of the estimated costs of Short-Term Required Repairs for each Individual Property as set forth on Schedule E annexed hereto. "Sprinkler Installment" shall mean a payment in the amount of $1,312,500 to be made by Borrower to Lender on the Closing Date and the first Due Date occurring after each of the first four anniversaries of the Closing Date, to be deposited in the Engineering Escrow Account, provided that if Borrowers shall expend any funds (other than amounts disbursed by Lender hereunder) in payment of any Long-Term Required Repair designated as sprinklers on Schedule E annexed hereto and shall deliver to Lender reasonably satisfactory evidence of such payment, together with the contractor's certification required to be delivered as a condition of disbursement pursuant to Section 2.7.7(d) (ii) with respect to such Long-Term Required Repair, Borrowers shall, upon reasonable approval of the foregoing by Lender, receive a credit in the amount of such payment against the amount of the Sprinkler Installment next due, if any, provided that the amount of such credit together with any disbursements made from the Engineering Escrow Sub-Account, expressed as a percentage of the costs allocated for such item on Schedule E, shall not exceed the percentage of the work on such item then completed. "State" shall mean, with respect to an Individual Property, the State or Commonwealth in which such Individual Property or any part thereof is located. "Survey" shall mean a survey of the Individual Property in question prepared by a surveyor, licensed in the State, in accordance with ALTA standards and satisfactory to Lender and the company or companies issuing the Title Insurance Policies, and containing a certification of such surveyor satisfactory to Lender. "Survey Requirements" shall have the meaning specified in Section 3.1 (c) (iii). "Term Sheet" shall have the meaning specified in Section 9.23. "Title Insurance Policy" shall mean, with respect to each Individual Property, the ALTA extended coverage mortgagee title insurance policy (1970 form B or other loan policy acceptable to Lender) issued with respect to such Individual Property and insuring the lien of the Mortgage encumbering such Individual Property and containing such endorsements and affirmative assurances as Lender shall reasonably require (to the extent authorized in each State). -17- "Trust and Servicing Agreement" shall mean any trust and servicing agreement or pooling and servicing agreement pursuant to which the Loan is assigned to a Trustee in trust and one or more classes of Certificates are issued representing beneficial ownership interests in the Loan and the other assets of such trust. "Trustee" shall mean the entity described as such in the Trust and Servicing Agreement or its successor in interest, or if any successor trustee is appointed pursuant to the Trust and Servicing Agreement, such successor trustee. "UCC" or "Uniform Commercial Code" shall mean the Uniform Commercial Code as in effect in the State in which an Individual Property is located. "Void Commitment Date" shall have the meaning specified in Section 2.3.1 hereof. "Westin William Penn Borrower" shall mean Wilpen, Inc., a Pennsylvania corporation. "Westin William Penn Management Agreement" shall mean that certain Management Agreement dated March 5, 1984 between Westin William Penn Borrower and Westin William Penn Manager, as amended by that certain Amendment to Management Agreement dated as of August 13, 1984 between Westin William Penn Borrower and Westin William Penn Manager and as amended and assumed under that certain Agreement for Assumption of Contract dated as of July 7, 1991, by and between Westin William Penn Borrower and Westin William Penn Manager and further amended by that certain Second Amendment of Management Agreement dated January 28, 1995. "Westin William Penn Manager" shall mean Westin Hotel Company, a Delaware corporation, together with its permitted successors and assigns under the Westin William Penn Management Agreement. "Westin William Penn Property" shall mean the Individual Property identified on Schedule D as the Westin William Penn Hotel located in Pittsburgh, Pennsylvania. "Yield Maintenance Premium" shall have the meaning specified in the Note. Section 1.2 Principles of Construction. All references to sections, schedules and exhibits are to sections, schedules and exhibits in or to this Agreement unless otherwise specified. Unless otherwise specified, the words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise specified, all meanings attributed to defined -18- terms herein shall be equally applicable to both the singular and plural forms of the terms so defined. All accounting terms not specifically defined herein shall be construed in accordance with GAAP, as modified herein. II. GENERAL TERMS Section 2.1 Loan Commitment; Disbursement to Borrowers. 2.1.1 The Loan. Subject to and upon the terms and conditions set forth herein, Lender hereby agrees to make the Loan to Borrowers on the Closing Date, in the original principal amount set forth in the Note, which Loan shall mature on the Maturity Date. Borrowers hereby agree to accept the Loan on the Closing Date, subject to and upon the terms and conditions set forth herein. 2.1.2 Disbursement to Borrowers. Borrowers may request and receive only one borrowing hereunder in respect of the Loan and any amount borrowed and repaid hereunder in respect of the Loan may not be reborrowed. Borrowers shall, on the Closing Date, receive the Loan, subject to the direction given by Borrowers as to the application of Loan proceeds to pay certain closing costs and to fund (i) the Basic Carrying Cost Sub-Account in an amount equal to (a) the amount necessary to enable Lender to make each payment of Impositions coming due during the twelve (12) months following the Closing Date on the date each such payment is due, taking into account the Basic Carrying Costs Monthly Installments that will be due and payable before each such payment of Impositions is due plus (b) twice the amount indicated in the Insuror's Letter as the premium necessary to keep the Policies in effect for one month and (ii) the Engineering Escrow Sub-Account in an amount equal to (a) the Short-Term Required Repair Deposit plus (b) the first Long-Term Required Repair Installment plus (c) the first Sprinkler Installment, in accordance with the provisions of this Agreement. 2.1.3 The Note. The Loan shall be evidenced by the Note, in the original principal amount of the Loan. The Note shall bear interest as provided in such Note, shall be subject to repayment and prepayment as provided in Section 2.3. The Note shall be entitled to the benefits of this Agreement and shall be secured by the Mortgage, the Assignment of Leases and the other Collateral Security Documents. Section 2.2 Use of Proceeds. Borrowers shall use the proceeds of the Loan disbursed to it pursuant to Section 2.1 to (i) repay and discharge any existing loans relating to the Properties, except the Permitted Encumbrances, (ii) pay all past-due Basic Carrying Costs, if any, -19- in respect of the Properties, (iii) fund the Basic Carrying Costs Sub-Account, as provided in Section 2.1.2, and the Engineering Escrow Sub-Account and (iv) pay costs and expenses incurred in connection with the Closing of the Loan, as mutually approved by Lender and Borrowers. Any remaining proceeds of the Loan shall be used for commercial purposes only. Section 2.3 Loan Repayment and Prepayments; Refinancing; Extensions. 2.3.1 Repayment; Refinancings. Borrowers shall repay the Loan in accordance with the provisions of the Note. Borrowers shall deliver to Lender written commitment(s) or engagement letter(s) (either, a "Commitment" or "Commitments"), which Commitment or Commitments shall set forth specific terms and conditions for the refinancing of the entire outstanding amount of the Loan from a Qualified Institutional Lender or Lenders or a nationally recognized investment banking firm or firms on or before that date which is six (6) months prior to the Maturity Date (the "Refinance Notification Date"). If Borrowers fail to deliver such Commitment or Commitments prior to the Refinancing Notification Date or if such Commitment or Commitments are delivered on or before the Refinance Notification Date, but lapse, terminate or are otherwise withdrawn prior to the funding of such Commitment or Commitments and the use of the proceeds thereof to pay the entire outstanding amount of the Loan (the date upon which such Commitment or Commitments lapse, terminate or are otherwise withdrawn is hereinafter referred to as the "Void Commitment Date"), unless the Indebtedness shall have been paid in full prior to the Refinance Notification Date or the Void Commitment Date, as the case may be, an Operative Period shall be in effect and all Excess Property Income shall be applied by Lender pursuant to Section 2.7.3(f). 2.3.2 Prepayments. The Loan may be prepaid only as provided in the Note. 2.3.3 Pro Forma Debt Service Coverage Ratio. If on any DSCR Determination Date, the Pro Forma Debt Service Coverage Ratio, is less than or equal to 1.2/1.0, then for the period (the "DSCR Restricted Period") commencing on such DSCR Determination Date and ending on the next DSCR Determination Date on which the Pro Forma Debt Service Coverage Ratio exceeds 1.2/1.0 all Excess Property Income for all the Properties shall be deposited in the Central Account and allocated as provided in Section 2.7.3(g), provided that if a DSCR Restricted Period and an Operative Period shall both be in effect with respect to any period of time, such period will be deemed an Operative Period for the purposes of this Agreement. 2.3.4 Extensions. At the request of Borrower, which request must be made at least one hundred eighty (180) days prior to the Maturity Date, Lender shall have the option, in its sole discretion, to extend the maturity of the Loan to the next -20- anniversary of the Maturity Date, provided, however, in no event shall Lender extend the maturity of the Loan beyond March 1, 2015. Section 2.4 Release of Individual Properties. Except as set forth in this Section 2.4, no repayment or prepayment of all or any portion of the principal of the Loan shall cause, give rise to a right to require, or otherwise result in, the release of any Lien of any Mortgage on any Individual Property. 2.4.1 Release of Individual Properties. From and after the Lock-Out Date or in connection with any application by Lender of Loss Proceeds to the Loan pursuant to Section 2.7.8 and Section 7.2, Borrowers may obtain (i) the release (in whole but not in part) of an Individual Property from the Lien of the Mortgage thereon and (ii) the release of such Borrower's obligations under the Loan Documents (other than those expressly stated to survive satisfaction of the Indebtedness), upon satisfaction of each of the following conditions: (a) Lender shall have received payment of an amount equal to the sum of (i) the then current Allocable Principal Balance for the Individual Property to be released, (ii) twenty-five percent (25%) of (A) if such release shall occur on or before the seventh (7th) anniversary of the Closing Date, the initial Allocable Principal Balance for such Individual Property or (B) if such release shall occur after such seventh (7th) anniversary of the Closing Date, the then current Allocable Principal Balance for such Individual Property and (iii) the amount of any additional reduction in the outstanding principal balance of the Loan necessary to cause the Adjusted Debt Service Coverage Ratio to equal at least (A) if such release shall occur on or before the seventh (7th) anniversary of the Closing Date, the greater of (I) 1.53/1.0 or (II) the ratio of (x) the Cash Flow Available for Debt Service for all of the Properties for the twelve (12) month period ending with the last month for which Lender shall have received financial reports for all of the Properties pursuant to Section 5.1(k) (iv) to (y) twelve (12) times the amount of the payment of Debt Service payable on the Due Date occurring immediately prior to the date of such release or (B) if such release shall occur after such seventh (7th) anniversary, the greater of (I) 1.53/1.0 or (II) the ratio of (x) the Cash Flow Available for Debt Service for all of the Properties for the twelve (12) month period ending with the last month for which Lender shall have received financial reports for all of the Properties pursuant to Section 5.1(k) (iv) to (y) twelve (12) times the amount of the payment of Debt Service payable on the Due Date occurring immediately prior to the date of such release (collectively, the "Release Amount"), together with the Yield Maintenance Premium, if any, payable in connection with payment of the Release Amount; -21- (b) Lender shall have received all other payments of principal, interest, Yield Maintenance Premiums and other amounts then due and payable under the Note, this Agreement and the other Loan Documents; (c) The Borrower in question shall have delivered an Officer's Certificate to Lender at least thirty (30) days prior to the date the applicable Individual Property is to be released from the Lien of the applicable Mortgage, and again on the date of such release, certifying in each case that the conditions in this Section have been satisfied (or will be satisfied on the date of such release), with detailed calculations indicating the derivation of the Adjusted Debt Service Coverage Ratio and of the amounts of the Release Amount, the Yield Maintenance Premiums and other amounts payable pursuant to subparagraphs (a) and (b) above, which amounts shall be subject to confirmation by Lender; (d) After giving effect to the proposed release, no Default or Event of Default shall have occurred and be continuing; and (e) Borrowers shall have submitted to Lender, not less than fifteen (15) days prior to the date of such release, all documentation Lender reasonably requires to be delivered by Borrowers in connection with such release, together with an Officer's Certificate of the Borrower in question certifying that such documentation (i) is in compliance with all Legal Requirements, (ii) will effect such release in accordance with the terms of this Agreement, and (iii) will not impair or otherwise adversely affect the Liens and other rights of Lender under the Loan Documents and with respect to Properties not being released. 2.4.2 Recalculation of Amortization Payments. Commencing on the first Due Date after the receipt of any Release Amount, the amount of the Debt Service payment due on each Due Date shall be adjusted to equal the amount, as determined by Lender and Borrowers, of the fixed monthly payment necessary to fully amortize the remaining principal balance of the Loan by February 1, 2015 while paying interest at the Interest Rate on the principal balance of the Loan outstanding from time to time. 2.4.3 Release Documentation. Lender shall, upon the written request and at the expense of Borrowers, upon payment in full of all principal, interest, Yield Maintenance Premiums and all other amounts then due and payable under the Loan Documents, execute and deliver documents, prepared by Borrower or Borrower's counsel and in form and substance reasonably satisfactory to Lender, to release the Lien of the Mortgage from the applicable Individual Property. -22- Section 2.5 Interest. 2.5.1 Generally. Borrowers shall pay interest at the Interest Rate on the outstanding principal balance of the Loan on each Due Date. 2.5.2 Default Rate; Post-Maturity Interest. If Borrowers shall fail to make any payment of principal, interest, Yield Maintenance Premiums or any other amount payable by Borrowers under the Note, this Agreement or any other Loan Documents within the grace period provided with respect to such payment under Section 8.1 or, if no grace period is provided, on the date on which such payment is due, whether by acceleration or otherwise, Borrowers shall pay interest at the Default Rate with respect to such amounts and/or with respect to the entire unpaid principal balance of the Loan as provided in the Note. The preceding sentence shall not be construed as an agreement or privilege to extend the date for payment of any such amounts nor as a waiver of any other right or remedy accruing to Lender by reason of the occurrence of an Event of Default. Section 2.6 Payments; Computations. 2.6.1 Making of Payments. Each payment by Borrowers hereunder or under the Note shall be made directly into the Central Account by wire transfer of immediately available funds to: The First National Bank of Chicago Chicago, Illinois ABA #071000013 Credit Clearing A/C No. BNF=7521-7623/DES Ref: 19203932/LSU or to such other designated bank or place, or in such other manner, as Payee may from time to time specify in writing. Whenever any payment hereunder or under the Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day. 2.6.2 Computations. Interest payable hereunder or under the Note by Borrowers shall be computed on the basis of a 360-day year consisting of twelve (12) months of thirty (30) days each except that interest due and payable for a period less than a full month shall be calculated by multiplying the actual number of days elapsed in such period by a daily rate based on said 360-day year. 2.6.3 Late Payment Charge. If any principal, interest, Yield Maintenance Premiums or any other sums due under the Loan Documents is not paid in full within three (3) Business Days of the date on which it is due, Borrowers shall pay to Lender a Late Payment Charge pursuant to the Note. -23- 2.6.4 Application of Payments. Unless otherwise expressly provided herein, all payments received on account of the Indebtedness shall be applied, first, to accrued and unpaid interest, second, to the outstanding principal balance of the Loan, third, to any Yield Maintenance Premium then due and payable and thereafter to other amounts payable under the Loan Documents. Section 2.7 Central Account; Deposits and Distributions. 2.7.1 Deposits in Central Account. (a) On each Due Date, Borrower shall pay, or cause to be paid, to Lender, by wire transfer directly to the Central Account as provided in Section 2.6.1 or as otherwise directed by Lender, (i) the payment of Debt Service then due and payable, together with all Yield Maintenance Premiums and other amounts payable under the Note, this Agreement and the other Loan Documents, (ii) the Basic Carrying Costs Monthly Installment, (iii) the FF&E Monthly Installment, (iv) during any Operative Period, DSCR Restricted Period or Franchise Restricted Period, (A) the Operations and Maintenance Expense Monthly Installment and (B) all Excess Property Income and (v) if such Due Date is the first Due Date occurring after each of the first four anniversaries of the Closing Date, the Required Repairs Installment, all for application as provided herein. (b) On each Due Date, Lender shall allocate all funds deposited into the Central Account to the Debt Service Payment Sub-Account, the Basic Carrying Costs Sub-Account, the Engineering Escrow Sub-Account (if such Due Date is the first Due Date occurring after each of the first four anniversaries of the Closing Date) and the FF&E Sub-Account, in that order, provided that during any Operative Period, any DSCR Restricted Period or any Franchise Restricted Period, Lender shall allocate such funds pursuant to Section 2.7.3. (c) Upon commencement of any Operative Period, any DSCR Restricted Period or any Franchise Restricted Period, Lender may deliver a Consultant's Notice to Consultant. Borrowers shall cause Consultant, upon receipt by Consultant of a notice from Lender so directing Consultant (a "Consultant's Notice") until directed otherwise by Lender, to collect all Revenue (determined for the purposes of this provision on a cash basis) relating to each Individual Property and pay over all such Revenue or, in the case of the Westin William Penn Manager, all amounts that would otherwise be payable to Westin William Penn Borrower under the Westin William Penn Management Agreement, to Lender by wire transfer directly to the Central Account as provided in Section 2.6.1 or as may be otherwise designated from time to time by Lender. From and after the day immediately following the date on which a Consultant's Notice is received, Consultant shall collect all of the Revenue of each of the Individual Properties and shall deposit such funds directly into the Central Account within One -24- (1) Business Day after receipt thereof or, in the case of the Westin William Penn Manager, when required to be paid to the Westin William Penn Borrower pursuant to the Westin William Penn Management Agreement. Upon termination of the applicable Operative Period, DSCR Restricted Period or Franchise Restricted Period, provided no other such Period shall then be in effect, Lender shall deliver a notice to Consultant directing Consultant that from and after the date of such notice Consultant shall not be required to collect and pay over Revenue pursuant to the applicable Consultant's Notice. (d) Borrowers pledge, assign and grant a security interest to Lender in all amounts deposited into the Central Account, as security for payment of all sums due under the Loan and the performance of all other terms and covenants of the Loan Documents and this Agreement on Borrowers' part to be paid and performed. 2.7.2 Establishment of Central Account and Sub-Accounts. Lender shall establish and maintain the Central Account with the Bank, in the name of Lender, as secured party. The Central Account shall be an Eligible Account and shall include (a) the Debt Service Payment Sub-Account, (b) the Basic Carrying Costs Sub-Account, (c) the FF&E Sub-Account, (d) the Engineering Escrow Sub-Account, (e) the Operations and Maintenance Expense Sub-Account, (f) the Curtailment Reserve Fund Sub-Account and (g) the Capital Expenditure Sub-Account (collectively, the "Basic Sub-Accounts"), to which certain funds shall be allocated and from which disbursements shall be made pursuant to the terms of this Agreement. The Central Account and the Basic Sub-Accounts shall be under the sole dominion and control of Lender. Borrowers hereby irrevocably direct and authorize Lender to deposit funds into and withdraw funds from the Central Account and the Basic Sub-Accounts in accordance with the terms and conditions of this Agreement. Borrowers shall have no direct right of withdrawal in respect of the Central Account or the Basic Sub-Accounts, but shall have the right to receive disbursements as provided herein. Each transfer of funds to be made hereunder shall be made only to the extent that funds are on deposit in the Central Account or the affected Basic Sub-Account and Lender shall have no responsibility to make additional funds available in the event that funds on deposit are insufficient. 2.7.3 Funding of Basic Sub-Accounts During Operative Period, DSCR Restricted Period and Franchise Restricted Period. During any Operative Period, DSCR Restrictive Period and any Franchise Restricted Period, Lender shall allocate all funds deposited into the Central Account each day among the Basic Sub-Accounts in the following priority: (a) first, to the Basic Carrying Costs Sub-Account, until an amount equal to the sum of (i) an amount equal to the Basic Carrying Costs Monthly Installment for any prior month(s), to the extent not previously paid, plus (ii) an -25- amount equal to the Basic Carrying Cost Monthly Installment due on the current Due Date, has been allocated to the Basic Carrying Costs Sub-Account; (b) second, to the Operations and Maintenance Expense Sub-Account, until an amount equal to the sum of (i) an amount equal to the Operations and Maintenance Expense Monthly Installment for any prior month(s), to the extent not previously paid, plus (ii) an amount equal to the Operations and Maintenance Expense Monthly Installment due on the current Due Date, has been allocated to the Operations and Maintenance Expense Sub-Account; (c) third, to the Debt Service Payment Sub-Account, until an amount equal to the sum of (i) the amount, if any, deducted therefrom during any preceding month to pay any amounts due to any other Basic Sub-Account in accordance with the provisions of this Section 2.7 to the extent not previously reimbursed by such other Basic Sub-Account to the Debt Service Payment Sub-Account, plus (ii) an amount equal to the payment of Debt Service for any prior month(s), to the extent not previously paid, plus (iii) an amount equal to the payment of Debt Service for the current Due Date (and any other amounts required to be paid under the Note on such Due Date), has been allocated to the Debt Service Payment Sub-Account; (d) fourth, but only if all of the Required Repair Installments have not yet been paid, to the Engineering Escrow Sub-Account, until an amount equal to the sum of (i) the amount, if any, deducted therefrom during any preceding month to pay any amounts due to any other Basic Sub-Account in accordance with the provisions of this Section 2.7 to the extent not previously reimbursed by such other Basic Sub-Account to the Engineering Escrow Sub-Account, plus (ii) an amount equal to the payment of any portion of any Required Repairs Installment previously payable, to the extent not previously paid, plus (iii) an amount equal to the aggregate of the Required Repairs Installment, if any, payable hereunder on the first Due Date occurring after the next anniversary of the Closing Date divided by the number of Due Dates to occur between the date such funds are received and the first Due Date occurring after the next anniversary of the Closing Date, inclusive; (e) fifth, to the FF&E Sub-Account, until an amount equal to the sum of (i) the amount, if any, deducted therefrom during any preceding month to pay any amounts due to any other Basic Sub-Account in accordance with the provisions of this Section 2.7 to the extent not previously reimbursed by such other Basic Sub-Account to the FF&E Sub-Account, plus (ii) an amount equal to the FF&E Monthly Installment for any prior month(s), to the extent not previously paid, plus (iii) an amount equal to the FF&E Monthly Installment due on the current Due Date, has been allocated to the FF&E Sub-Account; -26- (f) sixth, but only during any Operative Period, to the Curtailment Reserve Fund Sub-Account to be applied pursuant to Section 2.7.7(g), unless Lender shall elect, in its sole discretion, to disburse all or any portion of such funds in payment of any Operating Expenses or any other charges affecting all or a portion of the Properties, upon such terms and conditions as Lender shall elect; and (g) seventh, but only during any DSCR Restricted Period or any Franchise Restricted Period, to the Capital Expenditure Sub-Account, to be disbursed as provided in Section 2.7.7(f). 2.7.4 Deposits During Operative Period, DSCR Restricted Period and Franchise Restricted Period. If on any Due Date during any Operative Period, DSCR Restricted Period or any Franchise Restricted Period, the funds then on deposit in the Central Account shall be less than the amount of funds which are required to be deposited therein pursuant to Section 2.7.3(a) through (d) for such Due Date, Borrowers shall be obligated to deposit immediately available funds (in addition to Revenue) by wire transfer directly into the Central Account as provided in Section 2.6.1, on such Due Date (subject to the grace period provided in Section 8.1 (a) (i)), in the amount of such deficiency, and failure to make such deposit shall be an Event of Default hereunder. Lender may (but shall not be obligated to) withdraw funds from the Debt Service Payment Sub-Account the Engineering Escrow Sub-Account, the FF&E Sub-Account, the Curtailment Reserve Sub-Account or the Capital Expenditure Sub-Account (in each case to the extent funds are available in each such Basic Sub-Account) and pay any deficiency in any other Basic Sub-Account, in such order of priority as Lender determines in Lender's sole discretion. Lender shall not withdraw or disburse funds from the Basic Carrying Costs Sub-Account or the Operation and Maintenance Sub-Account except as expressly provided in Section 2.7.7(b) and (c). 2.7.5 Eligible Investments. Lender shall direct the Bank to invest and reinvest any balance in the Central Account from time to time in Eligible Investments, provided that (a) the maturities of the Eligible Investments on deposit in the Central Account, if fixed, shall, to the extent such dates are ascertainable, be selected and coordinated to become due not later than the day before any disbursements from the Central Account and the Basic Sub-Accounts must be made, (b) all such Eligible Investments shall be held in the name of Lender (as secured party) and be under the sole dominion and control of Lender, and (c) no Eligible Investment shall be made unless Lender shall retain a perfected first priority Lien in such Eligible Investment securing the Indebtedness and all filings and other actions necessary to ensure the validity, perfection, and priority of such Lien have been taken and Lender shall have been provided with an opinion of counsel satisfactory to Lender confirming the perfection of such Lien in such Eligible -27- Investment. All funds in the Central Account that are invested in a Eligible Investment shall be deemed to be held in the Central Account for all purposes of this Agreement and the other Loan Documents. Neither Lender nor the Bank shall have any liability for any loss in investments of funds in the Central Account that are invested in Eligible Investments and no such loss shall affect Borrowers' obligation to fund, or liability for funding, the Central Account, as the case may be. Borrowers agree that Borrowers shall include all such earnings on the Central Account as income of the Borrowers for federal and applicable state tax purposes. 2.7.6 Interest on Accounts. All interest paid or other earnings on the Eligible Investments made hereunder shall be deposited into the Central Account and shall be allocated to the Basic Sub-Account which contained the funds with respect to which such interest was paid or other earnings earned. All such interest and earnings shall be treated as Revenue. Except during a DSCR Restricted Period, a Franchise Restricted Period, an Operative Period or any period when an Event of Default has occurred and is continuing, all such interest paid or other earnings earned with respect to funds in the Basic Carrying Costs Sub-Account and the Debt Service Payment Sub-Account shall, after each anniversary of the Closing Date, at Lender's option, either be paid over to Borrowers or, on notice to Borrowers, credited against the amounts payable by Borrowers on the next Due Date. Except for amounts to be paid or credited to Borrowers pursuant to the preceding sentence, all interest paid or earnings earned with respect to funds on deposit in any Basic Sub-Account shall be retained in such Basic Sub-Account and disbursed pursuant to Section 2.7.7. 2.7.7 Payment of Debt Service; Disbursement of Funds in Basic Sub-Accounts; Excess Property Income. Transfers and payments from the Central Account and the Basic Sub-Accounts shall be made in accordance with the following provisions: (a) Payment of Debt Service. On each Due Date during the term of the Loan, Lender shall withdraw from the Debt Service Payment Sub-Account and apply to the Indebtedness an amount equal to the sum of all payments of Debt Service and any other amounts payable to Lender under the Note, this Agreement or the other Loan Documents, provided that if any such payment of Debt Service or other amounts is past due, Lender shall make such withdrawal immediately upon allocation of funds to the Debt Service Payment Sub-Account. (b) Payment of Basic Carrying Costs. Borrower shall use its best efforts to cause all notices of the amount and due date of payments of Basic Carrying Costs to be sent to Lender at least ten (10) Business Days prior to such due date. Provided that (i) Lender has received notice of the amount and due date of any payment of Basic Carrying -28- Costs and (ii) there are sufficient funds available in the Basic Carrying Costs Sub-Account, Lender shall make such payment of Basic Carrying Costs directly to the Governmental Authority or insuror entitled thereto. If the amount in the Basic Carrying Costs Sub-Account is not sufficient to pay the Basic Carrying Costs, Borrowers shall pay to Lender, within five (5) Business Days of written notice, an amount which Lender shall estimate as sufficient to make up the deficiency. Notwithstanding anything contained herein to the contrary, Borrowers may only request disbursements from the Basic Carrying Costs Sub-Account to pay premiums on the Policies to the extent of amounts deposited in the Basic Carrying Costs Sub-Account pursuant to clause (ii) of the definition of "Basic Carrying Costs Monthly Installment". Nevertheless, Lender shall also have the right, without Borrowers' request, but not the obligation, to disburse amounts in the Basic Carrying Costs Sub-Account in payment of premiums for the Policies if Borrowers shall fail to pay the same when due. (c) Payment of Operating Expenses. (i) Borrowers hereby agree to pay, or cause to be paid, when due all Operating Expenses with respect to the Properties (whether or not any amounts on deposit in the Operations and Maintenance Expense Sub-Account shall be sufficient for such purpose); provided that any Borrower may contest any Operating Expenses which it in good faith disputes, provided that (A) no Lien shall attach to the applicable Individual Property (except for the Lien of any Impositions being contested by Borrowers as permitted under the Loan Documents), (B) such Borrower shall have demonstrated to Lender's reasonable satisfaction that it has established adequate reserves to provide for payment of such Operating Expense, if ultimately required, and (C) failure to pay such Operating Expense shall not have a material adverse effect on the operation of such Individual Property. Borrowers may, not more frequently than twice in any calendar month, give Lender written notice, at least five (5) Business Days prior to the due date with respect to any Operating Expenses, requesting that Lender pay such Operating Expenses on behalf of such Borrower on or prior to the due date thereof, which notice shall be accompanied by (I) an Officer's Certificate for each Borrower making such request, specifying the Operating Expenses for which payment is requested and certifying that all requested amounts are properly payable hereunder and (II) evidence reasonably satisfactory to Lender that all Operating Expenses for which disbursements have previously been requested have been paid. Provided that (A) Lender has received the Consultant's Certifications for the most recent period for which the same are due, and (B) there are sufficient funds available in the Operations and Maintenance Expense Sub-Account, Lender shall, as Lender in its sole discretion shall determine, either make such payments out of such Basic Sub-Account or -29- disburse funds from such Basic Sub-Account to the applicable Borrower or to the Consultant on behalf of such Borrower for the purpose of making payment of such Operating Expenses within five (5) Business Days of receipt of the documentation required hereby; provided that if an Event of Default with respect to any amounts payable under the Loan Documents shall have occurred and be continuing or the Indebtedness shall have been accelerated, Lender shall disburse payments of Operating Expenses only to third parties entitled to payment thereof. (ii) Notwithstanding anything to the contrary contained herein, Lender shall not be obligated to make any disbursement from the Operations and Maintenance Sub-Account to pay Basic Carrying Costs, Debt Service, the costs of any FF&E Replacements, the costs of Required Repairs or legal fees in connection with any dispute arising under any Loan Document or any management or consulting fees in excess of four percent (4%) of Revenues with respect to the applicable Individual Property, except as may be required under the Westin William Penn Management Agreement. (d) Payment of Costs of Required Repairs. (i) Borrowers shall pay all costs in connection with the performance of the Required Repairs (without regard to the amount of money then available in the Engineering Escrow Sub-Account). With respect to any Required Repair for which the cost set forth on Exhibit E annexed hereto is less than the greater of (A) $75,000 or (B) one and one-half percent (1.5%) of the initial Allocable Principal Balance for the Individual Property in question (a "Minor Required Repair"), the applicable Borrower may submit one request for a disbursement from the Engineering Escrow Sub-Account of the actual cost of such Required Repair, provided that all requests by Borrowers for disbursement for Minor Required Repairs in any calendar month shall be submitted simultaneously and each such request shall be accompanied by an Officer's Certificate specifying the costs to be paid from such disbursement and certifying that all requested amounts are properly payable hereunder and that (I) all costs of Required Repairs for which disbursements have previously been made hereunder have been paid to the extent due and payable and (II) any amounts disbursed by Lender for the costs of Required Repairs that are not yet due and payable have been reserved by the applicable Borrower for payment of such costs. Borrowers shall cause Borrowers' Accountant to deliver to Lender, on or before the first day of each February, May, August and November of each Fiscal Year, commencing on May 1, 1995, a certificate of Borrowers' Accountant (an "Accountant's Certificate") stating that (A) Borrowers' Accountant has reviewed (I) all Officer's Certificates delivered by Borrowers pursuant to the preceding sentence during the quarter of Borrowers' Fiscal Year last ended, (II) the invoice from the appropriate -30- contractor or supplier for each expenditure for which an advance from the Engineering Escrow Sub-Account was requested pursuant to such Officer's Certificates, (III) the cancelled check written by the applicable Borrower in payment of each such invoice, (IV) all receipts and other evidence of payment received by Borrower with respect to such payments and (V) such evidence as Borrowers' Accountant, in its professional judgment, deems necessary to establish that all amounts requested by Borrowers to be disbursed from the Engineering Escrow Sub-Account during such quarter of the Fiscal Year have in fact been expended for purposes permitted under this Agreement and (B) all amounts disbursed by Lender during such quarter of Borrowers' Fiscal Year (I) (x) were in fact expended in payment of amounts payable out of funds on deposit in the Engineering Escrow Sub-Account under the terms of this Agreement or (y) have been reserved by the applicable Borrower for payment of such amounts or (II), if any such disbursements were not used to pay amounts properly payable hereunder or reserved for future payment of such amounts, specifying the amounts so misapplied, provided that upon completion of any Minor Required Repair and payment in full of costs payable in connection therewith, Borrowers shall not be required to account for any excess funds disbursed from the Engineering Sub-Account in connection with such Minor Required Repair. If any such Accountant's Certificate shall indicate that amounts disbursed from the Engineering Escrow Sub-Account were misapplied, Borrowers shall immediately deposit in the Central Account, for allocation to the Engineering Escrow Sub-Account, funds equal to the amount so misapplied. (ii) With respect to any Required Repair for which the cost set forth on Exhibit E annexed hereto is not less than the greater of (A) $75,000 or (B) one and one-half percent (1.5%) of the initial Allocable Principal Balance for the Individual Property in question (a "Major Required Repair") the applicable Borrower may from time to time, but not more frequently than once in any calendar month, request a disbursement from the Engineering Escrow Account of amounts to pay for the costs of such Major Required Repair, accompanied by an Officer's Certificate specifying the costs to be paid from such disbursement and certifying that all such costs are properly payable hereunder, provided that (I) prior to commencement of such Major Required Repair, Borrower shall have submitted to Lender a budget for such Major Required Repair and a plan detailing the time frames for each stage of such work, the percentage of the total Major Required Repair represented by each stage and the percentage of the budget allocated to each such stage; (II) such request shall be accompanied by (x) a certification of the Independent contractor setting forth the percentage of the Major Required Repair then completed and (y) evidence reasonably satisfactory to Lender that all costs of such -31- Major Required Repair for which disbursements have previously been made hereunder have been paid; and (III) Lender shall not be required to advance any funds from the Engineering Escrow Sub-Account with respect to any Major Required Repair to the extent that the aggregate funds advanced for such item, expressed as a percentage of the costs allocated for such item on Schedule E, would exceed the percentage of the work on such item then completed. (iii) Provided that (A) no Event of Default has occurred and is continuing, (B) Lender has received the Consultant's Certifications and the Accountant's Certificates for the most recent period for which the same are due and the conditions set forth in subparagraphs (i) and (ii) above have been met, Lender shall disburse to the applicable Borrower the funds in the Engineering Escrow Sub-Account with respect to such Individual Property to pay the costs of the Required Repairs, up to the amount set forth on Schedule E annexed hereto for each such Required Repair, subject to Borrowers' right to request disbursement of excess funds pursuant to clause (v) below; provided that Lender may condition the disbursement of the final twenty-five percent (25%) of the funds in the Engineering Escrow Sub-Account with respect to any Major Required Repair upon an inspection by Lender or its agent, at Borrowers' expense, to confirm that such item has been completed. (iv) After completion of all Short-Term Required Repairs at any Individual Property and after completion of all Long-Term Required Repairs at any Individual Property, Borrowers shall submit to Lender (A) (i) a certificate from the Engineer with respect to any of the Short-Term Required Repairs or Long-Term Required Repairs at such Individual Property that were Major Required Repairs or (ii) an Officer's Certificate with respect to all of the Short-Term Required Repairs or Long-Term Required Repairs at such Individual Property that were not Major Required Repairs stating that all such Short-Term Required Repairs or Long-Term Required Repairs, as applicable, at the applicable Individual Property have been completed in good and workmanlike manner and in accordance with all Legal Requirements, that all Permits necessary for the use or occupancy of the applicable Individual Property upon completion of such Required Repairs have been obtained (with copies of all such Permits attached), (B) at Lender's option, a title search for such Individual Property indicating that such Individual Property is free from all liens, claims and other encumbrances not previously approved by Lender, and (C) such other evidence as Lender shall reasonably request that the Short-Term Required Repairs or Long-Term Required Repairs, as applicable, Required Repairs at such Individual Property have been completed and paid for, including, without limitation, copies of lien waivers. -32- (v) If, after completion of all Short-Term Required Repairs with respect to any Individual Property, a portion of the funds deposited in the Engineering Escrow Sub-Account with respect to Short-Term Required Repairs at such Individual Property remains on deposit the applicable Borrower may submit an Officer's Certificate stating that all Short-Term Required Repairs with respect to such Individual Property have been completed in compliance herewith, that all amounts payable in connection with such Short-Term Required Repairs have been paid and that the applicable Borrower is entitled to receive a disbursement of the remaining funds on deposit in the Engineering Escrow Sub-Account with respect to the Short-Term Required Repairs at such Individual Property. Lender shall, at Lender's option, pay such funds remaining in the Engineering Escrow Sub-Account applicable to Short-Term Required Repairs at such Individual Property to such Borrower or, upon notice to Borrowers, apply such amount to the amounts payable hereunder on the next Due Date. (vi) If, after completion of all Required Repairs with respect to any Individual Property, a portion of the funds deposited in the Engineering Escrow Sub-Account with respect to such Individual Property remains on deposit and/or any Required Repairs Installments are not yet due and payable with respect to such Individual Property, the applicable Borrower may submit an Officer's Certificate stating that all Required Repairs with respect to such Individual Property have been completed in compliance herewith, that all amounts payable in connection with such Required Repairs have been paid and that the applicable Borrower is entitled to receive a disbursement of the remaining funds on deposit in the Engineering Escrow Sub-Account with respect to such Individual Property and/or that any Required Repairs Installments with respect to such Individual Property not yet due and payable should be waived. Lender shall, at Lender's option, pay such funds remaining in the Engineering Escrow Sub-Account applicable to such Individual Property to such Borrower or, upon notice to Borrowers, apply such amount to the amounts payable hereunder on the next Due Date, and any Required Repairs Installments with respect to such Individual Property not yet due and payable shall be waived. (vii) Upon the occurrence of an Event of Default with respect to any amounts payable under the Loan Documents or the acceleration of the Indebtedness, Lender may apply the funds on deposit in the Engineering Escrow Sub-Account, as Lender in its sole discretion may determine, either (A) in payment of any costs of Required Repairs or any other charges affecting all or any portion of the Properties or (B) in payment, in such order as Lender may elect, of the Indebtedness then due and payable, whether by acceleration or otherwise; provided, however, that no such application -33- shall be made by operation of law or otherwise until actually made by Lender as herein provided. (e) Disbursement from FF&E Sub-Account. (i) Borrowers shall pay the costs of those items listed on Schedule F annexed hereto (the "FF&E Replacements") (without regard to any amounts on deposit in the FF&E Sub-Account). Borrowers may, not more frequently than once in any calendar month and not with respect to any requested disbursement of less than $1,000, give Lender written notice requesting that Lender pay for the costs of any FF&E Replacements performed or to be performed in accordance with Section 7.4 hereof, which notice shall be accompanied by an Officer's Certificate from each Borrower performing FF&E Replacements that are subject to such request stating (A) the specific FF&E Replacements for which the disbursement is requested, (B) the quantity and price of each item purchased, if the FF&E Replacement includes the purchase or replacement of specific items, (C) the price of all materials (grouped by type or category) used or to be used in any FF&E Replacement other than the purchase or replacement of specific items, (D) the cost of all contracted labor or other services applicable to each FF&E Replacement for which such request for disbursement is made, (E) that all FF&E Replacements have been or will be made in accordance with all Legal Requirements and (F) that all costs incurred in connection with the FF&E Replacements subject to such disbursement are costs payable from the FF&E Sub-Account pursuant to the terms of this Agreement. (ii) Borrowers shall cause Borrowers' Accountant to deliver to Lender, on or before the first day of each February, May, August and November of each Fiscal Year, commencing on May 1, 1995, an Accountant's Certificate stating that (A) Borrowers' Accountant has reviewed (I) all Officer's Certificates delivered by Borrowers pursuant to subparagraph (i) above during the quarter of Borrowers' Fiscal Year last ended, (II) the invoice from the appropriate contractor or supplier for each expenditure for which an advance from the FF&E Sub-Account was requested pursuant to such Officer's Certificates, (III) the cancelled check written by the applicable Borrower in payment of each such invoice, (IV) all receipts and other evidence of payment received by Borrower with respect to such payments and (V) such evidence as Borrowers' Accountant, in its professional judgment, deems necessary to establish that all amounts requested by Borrowers to be disbursed from the FF&E Sub-Account during such quarter of the Fiscal Year have in fact been expended for purposes permitted under this Agreement and (B) all amounts disbursed by Lender during such quarter of Borrowers' Fiscal Year were in fact expended in payment of amounts payable out of funds on deposit in the FF&E Sub-Account under the terms of this Agreement. If Borrowers' Accountant is unable to deliver the Accountant's -34- Certificate containing the certifications required under the preceding sentence when due, or if any Accountant's Certificate contains any incorrect Statement (either occurrence is herein referred to as an "Accountant's Certificate Default"), thereafter the Officer's Certificate delivered in connection with any request for a disbursement from the FF&E Sub-Account shall, in addition to all the other matters described in clause (i) above, (Y) state that all costs for which such disbursement is requested have been paid in full by Borrowers and (Z) be accompanied by copies of invoices for all items or materials purchased and all contracted labor or services provided and each request shall include copies of lien waivers or other evidence satisfactory to Lender of payment of all such amounts. (iii) If (A) the cost of an FF&E Replacement exceeds $10,000 and (B) the contractor performing such FF&E Replacement requires periodic payments pursuant to terms of a written contract, a copy of which has been delivered to Lender, a request for disbursement from the FF&E Sub-Account may be made from time to time to make such periodic payments when payable under such contract, provided (I) all other conditions in this Agreement for disbursement have been satisfied, (II) funds remaining in the FF&E Sub-Account are, in Lender's judgment, sufficient to complete such FF&E Replacement and other FF&E Replacements when required, and (III) each contractor or subcontractor receiving payments under such contract shall have provided a waiver of lien with respect to amounts which have been paid to that contractor or subcontractor and, if requested by Lender, the applicable Borrower shall have delivered copies of such lien waivers to Lender. (iv) Except for requests for disbursement described in clause (iii) above, each request for disbursement from the FF&E Sub-Account shall be made only after completion of the FF&E Replacement for which disbursement is requested and Borrowers, collectively, shall make only one simultaneous submission of such requests in any calendar month. Borrowers shall provide Lender evidence of completion of the FF&E Replacements subject to such requests satisfactory to Lender in its reasonable judgment and the Officer's Certificates submitted in connection with such requests shall state that all costs of the FF&E Replacements subject thereto have been paid in full. (v) Provided that (A) no Event of Default has occurred and is continuing, (B) Lender has received the Consultant's Certifications and the Accountant's Certificate for the most recent period for which the same are due, (C) the requirements set forth in this clause (e) and Section 7.4 of this Agreement are satisfied and (D) there are sufficient funds available in the FF&E Sub-Account, Lender shall disburse to the applicable Borrowers amounts from the -35- FF&E Sub-Account necessary to pay the actual costs of the FF&E Replacements, provided that after the occurrence of an Accountant's Certificate of Default, such disbursements shall be made only to reimburse Borrowers for actual costs of FF&E Replacements that Borrowers have demonstrated pursuant to subparagraph (ii) above have already been paid and that are properly payable from the FF&E Sub-Account under this Agreement. Lender shall not be obligated to make disbursements from the FF&E Sub-Account to pay, or to reimburse Borrowers for, the costs of routine maintenance to an Individual Property or for costs which are to be disbursed from the Required Repair Fund. (vi) Upon the occurrence of an Event of Default with respect to any amounts payable under the Loan Documents or acceleration of the Indebtedness, Lender may apply the funds on deposit in the FF&E Sub-Account, as Lender in its sole discretion may determine, either (A) in payment of the costs of any FF&E Replacements or other charges affecting all or any portion of the Properties or (B) in payment, in such order as Lender may elect, of the Indebtedness then due and payable, whether by acceleration or otherwise, any Yield Maintenance Premium payable with respect to any portion applied in reduction of the principal balance of the Loan; provided, however, that no such application shall be deemed to have been made by operation of law or otherwise until actually made by Lender as herein provided. (f) Disbursement of Funds in Capital Expenditure Sub-Account. (i) Notwithstanding anything to the contrary contained in the Note, this Agreement or the other Loan Documents, Lender may elect to (a) retain the funds on deposit in the Capital Expenditure Sub-Account as additional collateral to secure repayment of the Indebtedness and performance of the other obligations of Borrowers hereunder or (b) disburse such funds in payment of the costs and expenses of any improvement, repair or replacement approved by Lender, in its sole discretion, to any Individual Property, the cost of which Borrower would be required to capitalize for federal income tax purposes, provided, however, that notwithstanding the foregoing, if the Pro Forma Debt Service Coverage Ratio has been (I) less than or equal to 1.2/1.0 on two (2) consecutive DSCR Determination Dates, exclusive, with respect to any DSCR Restricted Period, of the initial DSCR Determination Date on which the Pro Forma Debt Service Coverage Ratio fell below 1.2/1.0, Lender may elect to apply any funds on deposit in the Capital Expenditure Sub-Account as a prepayment of the principal balance of the Loan or other amounts payable in connection therewith, on the next occurring Due Date, with no Yield Maintenance Payable in connection with such application, or (II) at least equal to 1.3/1.0 for four (4) consecutive DSCR Determination Dates, Lender shall, at Lender's option, either pay over any funds on deposit in the -36- Capital Expenditure Sub-Account to Borrowers or credit such funds, on notice to Borrowers, against the amounts payable by Borrowers on the next Due Date, provided that nothing contained in this clause (II) shall limit Lenders rights elsewhere in this paragraph (f)(i). If any Franchise Restricted Period shall terminate prior to the occurrence of an Event of Default hereunder and no DSCR Restricted Period is then in effect, Lender shall, at Lender's option, either pay over any funds on deposit in the Capital Expenditure Sub-Account to Borrowers or credit such funds, on notice to Borrowers, against the amounts payable by Borrowers on the next Due Date. (ii) Each Borrower may, not more frequently than once in each calendar month, give Lender written notice requesting that Lender pay the costs of, or reimburse such Borrower for payment of the costs of any such capital improvement, repair or replacement, together with an Officer's Certificate from such Borrower stating the amounts of charges for which disbursement is requested and that such charges are properly payable hereunder, and, if required, satisfactory evidence of the progress and/or completion of such capital improvement and the cost thereof, satisfactory evidence that any and all completed capital improvement, repair or replacement work complies with Legal Requirements and lien waivers, copies of bills, invoices and other evidence as may be required by Lender to establish that the costs of any such capital improvement, repair or replacement for which reimbursement is requested, or for which disbursement has been previously made, have been paid by such Borrower. (g) Disbursement of Funds in Curtailment Reserve Fund Sub-Account. Lender shall apply the funds on deposit in the Curtailment Reserve Fund Sub-Account as a prepayment of the principal balance of the Loan, together with any Yield Maintenance Premium and other amounts payable in connection therewith on the next occurring Due Date. 2.7.8 Payment of Loss Proceeds; Borrowers' Right to Release. (a) In the event of a Casualty with respect to an Individual Property, Lender and Borrowers shall cause all proceeds under any insurance policy required to be maintained by Borrowers ("Insurance Proceeds") to be paid by the respective insurers directly into the Central Account, except for Insurance Proceeds relating to Equipment subject to Equipment Leases that require such Insurance proceeds be paid to the lessor thereunder. Unless Lender shall elect or be required to make such Insurance Proceeds available to Borrowers for Restoration pursuant to Section 7.2.2 (a), Lender shall (after deducting out Lender's cost of recovering such Insurance Proceeds, including, without limitation, reasonable attorneys' fees) apply such Insurance Proceeds on the next occurring Due Date as a prepayment of the principal balance of the Loan in accordance with the terms of the -37- Note. If such Insurance Proceeds are to be made available for Restoration of such Individual Property, Lender shall hold such funds in a segregated bank account at the Bank, which, to the extent feasible in the context of the administration of construction disbursement draw requests, shall be interest bearing, and shall disburse such funds in accordance with Section 7.2.2(b). (b) In the event of a Condemnation to an Individual Property, Lender and Borrowers shall cause all of the proceeds in respect of any Condemnation ("Condemnation Proceeds") to be paid directly into the Central Account. Unless Lender shall elect or be required to make such Condemnation Proceeds available to Borrowers pursuant to Section 7.2.3 (a), Lender shall (after deducting out Lender's cost of recovering such Condemnation Proceeds, including, without limitation, reasonable attorneys' fees) apply such Condemnation Proceeds on the next occurring Due Date as a prepayment of the principal balance of the Loan in accordance with the terms of the Note. If such Condemnation Proceeds are to be made available to Borrowers, Lender shall hold any such funds not immediately disbursed to Borrowers in a segregated bank account at the Bank, which, to the extent feasible in the context of the purposes for which Lender shall disburse such funds, shall be interest-bearing, and shall disburse such funds in accordance with Section 7.2.3(a). (c) If any Insurance Proceeds or Condemnation Proceeds (collectively, "Loss Proceeds") are received by Borrowers, such Loss Proceeds shall be received in trust for Lender, shall be segregated from other funds of Borrowers, and shall be forthwith paid into the Central Account, to be applied or disbursed in accordance with the foregoing. (d) If Lender shall apply any Loss Proceeds as a prepayment of the principal balance of the Loan as provided above, the applicable Borrower may elect to have the Individual Property in question released from the Lien of the Mortgage, notwithstanding anything to the contrary contained herein, without payment of any Yield Maintenance Premium and whether or not the Lock-Out Date shall have occurred, provided that (i) (A) the Loss Proceeds applied by Lender toward payment of the Loan shall be at least equal to the then current Allocable Principal Balance for such Individual Property or (B) Borrowers shall pay to Lender any amount by which the then current Allocable Principal Balance of such Individual Property exceeds the amount of Loss Proceeds so applied toward payment of the Loan and (ii) the conditions set forth in Section 2.4.1(d) and (e) shall have been satisfied. -38- III. CONDITIONS PRECEDENT Section 3.1 Conditions Precedent to Closing. The obligation of Lender to make the Loan hereunder is subject to the fulfillment by Borrowers, or waiver by Lender, of the following conditions precedent no later than the Closing Date: (a) Representations and Warranties; Compliance with Conditions. The representations and warranties of Borrowers contained in this Agreement and the other Loan Documents shall be true and correct in all material respects on and as of the Closing Date, and no event shall have occurred and be continuing that would constitute, by reason of the execution, delivery and performance of this Agreement or the other Loan Documents, the grant of the Liens on the Properties contemplated hereby, the making of the Loan, or the consummation of the other transactions contemplated by this Agreement or the other Loan Documents, a Default or an Event of Default; and Borrowers shall be in compliance in all material respects with all terms and conditions set forth in this Agreement and in each other Loan Document on its part to be observed or performed. (b) Loan Agreement, Note, Environmental Agreement and Contribution Agreement. Lender shall have received an original of this Agreement, the Note, the Environmental Indemnity and the Contribution Agreement in each case duly executed and delivered on behalf of each of the Borrowers. (c) Delivery of Mortgages; Assignment of Leases; Franchise Agreement Letters and Assignment of Consulting Agreement; Title Insurance; Reports; Leases. (i) Mortgage, Assignment of Leases, Franchise Agreement Letters and Assignment of Consulting Agreement. Lender shall have received from each Borrower fully executed and acknowledged counterparts of the Mortgage, the Assignment of Leases, the Franchise Agreement Letters (except with respect to the Westin William Penn Property and the Royce Property) and the Assignment of Consulting Agreement relating to each of the Individual Properties and evidence that counterparts of the Mortgage and Assignment of Leases for each Individual Property have been delivered to the title company for recording so as to effectively create upon such recording, in the reasonable judgment of Lender, valid and enforceable Liens upon such Properties, of the requisite priority, in favor of Lender (or such other trustee as may be required or desired under local law), subject only to the Permitted Encumbrances and such other Liens as are permitted pursuant to the Loan Documents. -39- (ii) Title Insurance. Lender shall have received the Title Insurance Policy for each Mortgage, or a marked, re-dated and recertified title commitment establishing the form of the Title Insurance Policy and providing title insurance effective as of the Closing Date, issued by First American Title Insurance Company and dated as of the Closing Date, with endorsements, reinsurance and direct access agreements acceptable to Lender. Such policies shall (A) provide coverage in amounts satisfactory to Lender, (B) insure Lender that the relevant Mortgage creates a valid first priority Lien on the Individual Property, free and clear of all exceptions from coverage other than Permitted Encumbrances and standard exceptions and exclusions from coverage (as modified by the terms of any endorsements), (C) contain such endorsements and affirmative coverages as Lender may request, and (D) name Lender. The Title Insurance Policies shall be assignable without charge. Lender also shall have received evidence that all premiums in respect of such title policies have been paid. (iii) Survey. Lender shall have received a current survey of each Individual Property in form and content satisfactory to Lender, prepared by a professional and properly licensed land surveyor satisfactory to Lender in accordance with the 1992 Minimum Standard Detail Requirements for ALTA/ACSM Land Title Survey (the "Survey Requirements") and certified to the issuer of the Title Insurance Policy, Lender and its successors and assigns by a certification in the form set forth in paragraph 8 of the Survey Requirements. Such survey shall reflect the same legal description contained in the Title Insurance Policy relating to such Individual Property referred to in clause (ii) above and shall meet the requirements of an "Urban Survey as set forth in the Survey Requirements and shall include items 1, 2, 3, 4, 6, 7, 8, 9, 10, 11 and 13 set forth on Table A of the Survey Requirements. (iv) Insurance. Lender shall have received certified copies of the Policies required hereby, together with original certificates issued by the insuror evidencing such Policies, naming Lender as an additional insured or loss payee, together with evidence satisfactory to Lender that such policies are in full force and effect, that all premiums then payable for the existing policy period have been paid and that such policies may not lapse or be terminated without at least thirty (30) days notice to Lender. (v) Environmental Reports. Lender shall have received a Phase I environmental report and, if indicated, a Phase II environmental report in respect of each Individual Property, in each case satisfactory to Lender. -40- (vi) Zoning. With respect to each Individual Property, Lender shall have received, at Lender's option, (i) letters or other evidence with respect to such Individual Property from the appropriate municipal authorities (or other Persons acceptable to Lender) concerning applicable zoning laws, or (ii) a zoning opinion letter from Borrowers' local counsel, in form and substance satisfactory to Lender. (vii) Encumbrances. Borrowers shall have taken or caused to be taken such actions to provide Lender, as of the Closing Date, with a valid, perfected, first priority Lien with respect to the Mortgage in each Individual Property, subject only to applicable Permitted Encumbrances, and Lender shall have received satisfactory evidence thereof. (d) Related Documents. Each additional Loan Document not specifically referenced herein, but relating to the transactions contemplated herein, shall have been duly authorized, executed and delivered by all parties thereto and Lender shall have received and approved certified copies thereof. (e) Delivery of Organizational Documents. On or before the Closing Date, Borrowers shall deliver or cause to be delivered to Lender copies certified by each of the respective Borrowers of all organizational documentation related to such Borrower and/or its formation, structure, existence, good standing and/or qualification to do business, as Lender may request in its sole discretion, including, without limitation, good standing certificates, qualifications to do business in the appropriate jurisdictions, resolutions authorizing the entering into of the Loan and incumbency certificates. (f) Opinions of Borrowers' Counsel. Lender shall have received (i) the opinion of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A., special counsel for Borrowers, with respect to non-consolidation issues (the "Non-Consolidation Opinion"), (ii) opinions of counsel for Borrowers with respect to due formation of Borrowers, due authorization, execution and delivery of the Note, this Agreement and the other Loan Documents and enforceability of the Note, this Agreement and the other Loan Documents and (iii) opinions of counsel for Borrowers (who shall be satisfactory to Lender), in the States in which the Individual Properties are located with respect to (A) enforceability of the Mortgage, the Assignment of Leases and the other Loan Documents with respect to the Individual Properties located in such State, (B) perfection of Lender's security interest in the Revenue of such Individual Properties, (C) perfection of Lender's security interest in all liquor licenses, restaurant licenses and hotel operating licenses with respect to each such Individual Property, if permitted under the laws of such State and (D) adequacy of Permits listed on an affidavit of an officer of each Borrower with respect to each such Individual Property, to the knowledge -41- of such counsel, each in form and substance satisfactory to Lender, dated as of the Closing Date and addressing such matters as Lender may reasonably request. (g) Budgets. Borrower shall have delivered the Capital Expenditures Budget and the Annual Operating Budget for each Individual Property for the prior Fiscal Year and the current Fiscal Year (on a forecast basis). (h) Basic Carrying Costs. Borrower shall have paid all Basic Carrying Costs relating to each of its Properties which are due and payable through the Closing Date, including, without limitation, all Impositions relating to each of the Borrowers or the Individual Properties, which amounts may be funded with proceeds of the Loan. (i) Completion of Proceedings. All corporate and other proceedings taken or to be taken in connection with the transactions contemplated by this Agreement and other Loan Documents shall be reasonably satisfactory in form and substance to Lender, and Lender shall have received all such counterpart originals or certified copies of such documents as Lender may reasonably request. (j) Evidence of Insurance Premiums. Borrowers shall have delivered, or caused to be delivered, the Insuror's Letter. (k) Cash Management Agreement. Borrowers shall have delivered to Lender a certified copy of the Cash Management Agreement. IV. REPRESENTATIONS AND WARRANTIES Section 4.1 Borrowers' Representations. Borrowers represent and warrant that: (a) Organization. Each Borrower has been duly organized and is validly existing and in good standing under the laws of the jurisdiction of its formation. Each Borrower and any general partner of any Borrower has requisite corporate or partnership power and authority to (i) own its properties, (ii) transact the businesses in which it is now engaged, (iii) execute and deliver this Agreement, the Note, the Mortgage and the other Loan Documents and (iv) consummate the transactions contemplated hereby and thereby. Each Borrower is duly qualified to do business and is in good standing in the jurisdiction where its respective Individual Property is located and in each other jurisdiction where it is required to be so qualified in connection with the ownership, maintenance, management and operation of its Individual Property, except where the failure to be so qualified or in good standing would not have a material -42- adverse effect on the financial condition or the business of such Borrower or the ownership, condition or operation of its Individual Property (a "Borrower Material Adverse Effect"). Each Borrower possesses all rights, licenses, permits and authorizations, governmental or otherwise, necessary to entitle it to own its properties and to transact the businesses in which it is now engaged. The sole business of each Borrower is the ownership, management and operation of Individual Property. (b) Authorization; Enforceability. The execution, delivery and performance of Borrowers' obligations under this Agreement, the Note, the Mortgage and the other Loan Documents has been duly authorized by all requisite corporate or partnership action of each Borrower, including, where required, the consent of its partners or shareholders and directors. This Agreement, the Note, the Mortgage and such other Loan Documents have been duly executed and delivered by or on behalf of Borrowers and constitute legal, valid and binding obligations of Borrowers enforceable against Borrowers in accordance with their respective terms, subject to applicable bankruptcy, insolvency and similar laws affecting rights of creditors generally and to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). (c) No Conflicts. The execution, delivery and performance of this Agreement, the Note, the Mortgage and the other Loan Documents by Borrowers will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any Lien (other than pursuant to the Loan Documents) upon any of the property or assets of any Borrower pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement, partnership agreement or other agreement or instrument to which any Borrower is a party or to which any of Borrowers' property or assets is subject, which conflict, breach, default or imposition of Lien would have a Borrower Material Adverse Effect, nor will such action result in any violation of the provisions of any statute or any order, rule or regulation of any Governmental Authority having jurisdiction over any Borrower or any of Borrowers' Properties or assets, and any consent, approval, authorization, order, registration or qualification of or with any Governmental Authority required for the execution, delivery and performance by Borrowers of this Agreement, the Note, the Mortgage or any other Loan Documents has been obtained and is in full force and effect. (d) Litigation. Except as set forth on Schedule L, there are no actions, suits or proceedings at law or in equity by or before any Governmental Authority for which service has been made on any Borrower or any Affiliate or, to the knowledge of any Borrower, threatened against or affecting any Borrower or any of the Properties, which actions, suits or proceedings are not covered by insurance and, if determined against such Borrower or any of the Properties, would materially adversely affect the -43- condition (financial or otherwise) or business of such Borrower or the condition or ownership of any of the Properties. (e) Agreements. No Borrower is a party to any agreement or instrument or subject to any restriction which would materially adversely affect such Borrower or any of the Properties, or Borrower's business, properties or assets, operations or condition, financial or otherwise. No Borrower is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which it is a party or by which such Borrower or any of the Properties are bound, except for any defaults that would not have a Borrower Material Adverse Effect. (f) Title. Each Borrower has good, marketable and indefeasible title in fee to the real property comprising part of its respective Individual Properties and good title to the balance of such Properties, free and clear of all Liens, restrictions, covenants, easements and other matters affecting title whatsoever, except the Permitted Encumbrances. The Mortgage, when properly recorded in the real property records of the county or parish where each Individual Property is located, and the other Collateral Security Documents, together with any Uniform Commercial Code financing statements required to be filed in connection therewith, will create (i) a valid, perfected first priority Lien on the applicable Individual Property, subject only to Permitted Encumbrances and (ii) perfected security interests in and to, and perfected collateral assignments of, all personalty (including the Leases) and other collateral described therein, all in accordance with the terms thereof, in each case subject only to any applicable Permitted Encumbrances. There are no outstanding options or rights of first refusal affecting any of the Properties. There are no claims for payment for work, labor or materials affecting any of the Properties which are or may become a lien prior to, or of equal priority with, the Liens created by the Loan Documents. All of the Permitted Encumbrances reflected in the Title Insurance Policies are customary exceptions for commercial mortgage lending transactions involving properties similar to the Properties. (g) No Bankruptcy Filing. No Borrower is contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws or the liquidation of all or a major portion of such Borrower's assets or property, and no Borrower has knowledge of any Person contemplating the filing of any such petition against it. Except for the Bankruptcy Order, no Borrower is currently the subject of any bankruptcy or similar proceeding under any state or federal law and none of the Properties is currently under the jurisdiction of any bankruptcy court or other court having similar jurisdiction. (h) Full and Accurate Disclosure. No statement of fact made by any Borrower in this Agreement or in any of the other Loan Documents contains any untrue statement of a material -44- fact or omits to state any material fact necessary to make statements contained herein or therein not misleading. There is no material fact presently known to any Borrower which has not been disclosed to Lender which adversely affects, or might reasonably be expected to adversely affect, any of the Properties or the business, operations or condition (financial or otherwise) of any Borrower. (i) No Plan Assets. No Borrower is an "employee benefit plan," as defined in Section 3(3) of ERISA, subject to Title I of ERISA, and none of the assets of any Borrower constitutes or will constitute "plan assets" of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101. (j) Compliance. Each Borrower and each of the Properties and the use thereof comply in all material respects with all applicable Legal Requirements, including, without limitation, parking requirements. No Borrower is in default or violation of any order, writ, injunction, decree or demand of any Governmental Authority, the violation of which would materially adversely affect the condition (financial or otherwise) or business of such Borrower. (k) Contracts. There are no material contracts, excluding Leases, Equipment Leases, Franchise Agreements and cable television contracts affecting any Individual Property that would be binding upon Lender or its designee after foreclosure or transfer in lieu of foreclosure of such Individual Property that are not terminable on one month's notice or less without cause and without penalty or premium. (l) Financial Information. All financial data of the Borrowers, including, without limitation, the statements of cash flow and income and operating expense, that have been delivered to Lender (i) are true, complete and correct in all material respects, (ii) fairly represent the financial condition of the Properties and Borrowers as of the date of such reports, and (iii) have been prepared in accordance with GAAP, consistently applied throughout the periods covered, except as disclosed therein. As of the date of this Agreement, no Borrower has any material contingent liability, liability for taxes (other than taxes not yet due and payable) or other unusual or forward commitment. Since June 30, 1994, there has been no material adverse change in the results of operations of any of the Properties or the assets, liabilities or financial condition of any Borrower. Except as disclosed in such financial statements, no Borrower has incurred any obligation or liability, contingent or otherwise, which would materially adversely affect its business operations or any of the Properties. (m) Condemnation. No Borrower or Affiliate of any Borrower has received notice of any proceeding with respect to Condemnation, nor, to Borrower's best knowledge, is any -45- Condemnation contemplated, with respect to all or any portion of any of the Properties. (n) Federal Reserve Regulations. No part of the proceeds of the Loan will be used for the purpose of purchasing or acquiring any "margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System or for any other purpose which would be inconsistent with such Regulation U or any other Regulations of such Board of Governors, or for any purposes prohibited by Legal Requirements or by the terms and conditions of this Agreement or the other Loan Documents. (o) Utilities and Public Access. Each Individual Property has rights of access to public ways and is served by water, gas, electric, telephone, sanitary sewer and storm drain facilities adequate to service such Properties for their respective intended uses. To the knowledge of Borrowers, except as disclosed in the surveys, all public utilities necessary or convenient to the full use and enjoyment of each Individual Property are located in the public right-of-way abutting such Individual Property, and all such utilities are connected so as to serve such Individual Property without passing over other property. All roads necessary for access to each Individual Property for its current purposes have been completed and dedicated to public use and accepted by all Governmental Authorities. No road providing access to any of the Properties is currently (i) closed or severely restricted in use or (ii) to the best of any Borrower's knowledge, contemplated to be relocated, closed or severely restricted in use. (p) Not a Foreign Person. No Borrower is a "foreign person" within the meaning of 1445(f) (3) of the I.R.C. (q) Separate Lots. Each Individual Property is comprised of one (1) or more parcels, which constitutes a separate tax lot and does not constitute a portion of any other tax lot not a part of such Individual Property. No Individual Property is assessed jointly with any other real property constituting a separate tax lot or with any personal property not constituting part of such Individual Property such that the lien of any taxes which may be levied against such personal property shall be assessed or levied or charged as a lien on such Individual Property. (r) Assessments. There are no pending or, to the best of Borrowers' knowledge, proposed special or other assessments for public improvements or otherwise affecting any of the Properties, except for Permitted Encumbrances, nor, to the best of Borrowers' knowledge, are there any contemplated improvements to any of the Properties that may result in such special or other assessments. -46- (s) No Defenses. As of the Closing Date, this Agreement, the Note and the other Loan Documents are not subject to any right of rescission, set-off, counterclaim or defense by Borrowers, including the defense of usury, and no Borrower has asserted any right of rescission, set-off, counterclaim or defense with respect thereto. (t) No Prior Assignment. Lender is the assignee of all Borrowers' interests under the Leases and there are no prior assignments of any of the Leases or any portion of the Revenue which are presently outstanding. (u) Insurance. Borrower has obtained and has delivered to Lender the Policies, or certified copies thereof, together with original certificates evidencing such Policies, reflecting the insurance coverages, amounts and other requirements set forth herein, which Policies are in full force and effect and may not lapse or be terminated without at least thirty (30) days notice to Lender or ten (10) days for nonpayment of premium. (v) Use of Properties. Each Individual Property is used exclusively for hotel purposes and other appurtenant and related uses, except for those portions of the Westin William Penn Property which are, as of the Closing Date, leased or offered for lease for commercial uses not related to the use of such Property as a hotel. (w) Certificate of Occupancy; Permits and Licenses. Borrowers have obtained all permits, licenses, approvals and franchises, including, without limitation, certificates of occupancy, hotel licenses and liquor licenses (the "Permits"), required by Legal Requirements in order to use and operate each of the Properties for hotel use as currently operated, except for Permits the failure of which to so obtain would not have a Borrower Material Adverse Effect. All such Permits are (i) listed on Schedule G annexed hereto, (ii) have been validly issued and are in full force and effect and (iii) are issued in or have been transferred into the name of the related Borrower or the related Individual Property, except as indicated on Schedule G. Where permitted by Legal Requirements, each Borrower has granted Lender a valid, perfected first priority security interest in all such Permits. All fees due and payable with respect to each Permit have been paid. There are no proceedings pending or threatened which may result in the revocation, suspension or, to the best of Borrowers' knowledge, termination of any Permit. Each Individual Property is operated in compliance, in all material respects, with the related Permits. (x) Flood Zone. None of the Improvements on any Individual Property are located in a flood hazard area as defined by the Federal Emergency Management Agency, except for the Individual Properties identified on Schedule D as the Radisson -47- Inn New Orleans located in Kennar, Louisiana and the Holiday Inn Hilton Head on Hilton Head Island, South Carolina. (y) Physical Condition. To the best of Borrowers' knowledge, except as disclosed in the Building Evaluation Reports, each Individual Property, including, without limitation, all buildings, parking facilities, sidewalks, storm drainage systems, roofs, plumbing systems, HVAC systems, fire protection systems, electrical systems, equipment, elevators, exterior sidings and doors, landscaping, irrigation systems and all other Improvements thereon are in operating condition, order and repair in all material respects. To the best of Borrowers' knowledge, except as disclosed in the Building Evaluation Reports, there exists no structural or other material defect in any of the Properties, whether latent or otherwise. Neither any Borrower nor any Affiliate of any Borrower has received written notice from any insurance company or bonding company of any defects or inadequacies in any of the Properties, or any part thereof, which would adversely affect the insurability of the same or cause the imposition of extraordinary premiums or charges thereon or of any termination or threatened termination of any policy of insurance or bond. (z) Solvency. The fair saleable value of each Borrower's assets (taking into account the rights and obligations of each Borrower against each of the other Borrowers pursuant to the Contribution Agreement) exceeds and will, immediately following the making of the Loan, exceed such Borrower's total liabilities, including, without limitation, subordinated, unliquidated, disputed and contingent liabilities. The fair saleable value of each Borrower's assets (taking into account the rights and obligations of each Borrower against each of the other Borrowers pursuant to the Contribution Agreement) is and will, immediately following the making of the Loan, be greater than such Borrower's probable liabilities, including its contingent liabilities, on its debts as such debts become absolute and matured. In the good faith judgment of each Borrower, such Borrower's assets constitute, and immediately following the making of the Loan will constitute, reasonably sufficient capital to carry out its business as conducted or as proposed to be conducted. No Borrower intends to, or believes that it will, incur debts and liabilities (including, without limitation, contingent liabilities and other commitments) beyond its ability to pay such debts as they mature. (aa) Casualty. No Individual Property has sustained any material loss or interference with its operations from fire, explosion, flood or other calamity, or from any labor dispute or any action, order or decree by any Governmental Authority. (bb) Components of Value. The portions of the Properties constituting real property interests have a fair market value as of the date hereof at least equal to seventy percent (70%) of the original principal balance of the Loan. The -48- portion of each Individual Property constituting interests in real property have a fair market value as of the date hereof at least equal to seventy percent (70%) of the Allocable Principal Balance for such Individual Property. (cc) Filing and Recording Taxes. All transfer taxes, deed stamps, intangible taxes or other amounts in the nature of transfer taxes required to be paid by any Person under applicable Legal Requirements in connection with the transfer of the Properties to Borrower have been paid. All mortgage, mortgage recording, stamp, intangible or other similar tax required to be paid by any Person under applicable Legal Requirements in connection with the execution, delivery, recordation, filing, registration, perfection or enforcement of any of the Loan Documents, including, without limitation, the Mortgage encumbering each Individual Property have been paid, and, under current Legal Requirements, the Mortgage is enforceable in accordance with its terms by Lender (or any subsequent holder thereof) against each Individual Property. (dd) Single-Purpose. Borrowers hereby represent and warrant to, and covenant with, Lender that, as of the date hereof and until such time as the Indebtedness shall be paid in full, except as otherwise provided herein, in the other Loan Documents or in the Related Consulting Agreement or the Cash Management Agreement, each Borrower, and if any such Borrower is a limited partnership, the general partner of such Borrower: (i) does not own and shall not own any asset other than the related Individual Property or, in the case of a general partner, its interest in such Borrower; (ii) is not engaged and shall not engage in any business other than those necessary for the ownership, use, management or operation of the such Individual Property and any transactions entered into in connection with such business with any Affiliate of such Borrower or such general partner, other than any such transactions embodied in the Loan Documents and the Related Consulting Agreement, shall be entered into upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties other than an Affiliate of such Borrower or such general partner; (iii) has not incurred, created or assumed any currently outstanding debt, and shall not incur, create or assume any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than the Indebtedness, trade indebtedness incurred in the ordinary course of such Borrower's or such general partner's business (including the financing of insurance premiums) and the Permitted Encumbrances, except as may be otherwise expressly permitted hereunder; -49- (iv) has not made any currently outstanding, and shall not make any, loans or advances to any third party (including any Affiliate of such Borrower or such general partner), provided that (A) the execution and delivery of the Loan Documents, the payment by any Borrower of any amounts payable to Lender thereunder and the disbursement by Lender of any amounts hereunder shall not be deemed a violation of this provision, regardless of to which Individual Property any such amounts relate, provided that Borrowers shall account for all amounts advanced by each Borrower on behalf of any other Borrower pursuant to the Cash Management Agreement and (B) participation by such Borrower under the Cash Management Agreement shall not be deemed a violation of this provision; (v) is and shall be solvent and paying its liabilities (including, as applicable, reasonable allocations of personnel and overhead expenses) from its assets as the same shall become due; (vi) has done or caused to be done and shall do or cause to be done all things necessary to preserve its existence, and shall not, nor shall any general partner thereof, as applicable, amend, modify or otherwise change its articles of incorporation or by-laws or partnership agreement, as applicable without the prior written consent of Lender, in its sole discretion; (vii) shall observe all corporate or partnership formalities, as applicable, and conduct and operate its business as presently conducted and operated and in accordance with the assumptions set forth in the Non-Consolidation Opinion; (viii) shall maintain books and records and bank accounts separate from those of its Affiliates or any other Person; (ix) shall maintain a separate business office at its Individual Property; (x) shall be, and at all times shall hold itself out to the public as, a legal entity separate and distinct from any other entity, including any Affiliate thereof, provided that each Borrower may identify its Individual Property as associated with the applicable Franchisor; (xi) shall file its own tax returns, if required by the Code; (xii) shall maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations, which capital may include amounts deposited by such Borrower under the Cash Management Agreement; -50- (xiii) shall not seek or consent to the liquidation, dissolution or winding up, in whole or in part, of such Borrower or such general partner, nor enter into any consolidation, merger, joint venture, syndication or other combination; (xiv) shall not commingle its funds and other assets with those of any Affiliate or any other Person, except as may be provided herein, in the other Loan Documents or in the Cash Management Agreement; (xv) has caused, and at all times shall cause, there to be at least one duly appointed member of the board of directors (an "Independent Director") of such Borrower or such general partner who has not been at the time of such individual's appointment, and may not have been at any time during the preceding two years (A) a stockholder of, or an officer, director (other than with respect to such Independent Director's service as director of such Borrower, such general partner or any other Borrower hereunder) or employee of, such Borrower or any of its Affiliates, or such general partner or any of its Affiliates, (B) a customer or supplier to such Borrower or any of its Affiliates, or to such general partner or any of its Affiliates, (C) a person or other entity controlling any such stockholder, supplier or customer, or (D) a member of the immediate family of any such stockholder, officer, employee, supplier or customer or any other director of such Borrower or such general partner. As used in this subsection (dd), the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise; (xvi) has not caused, and shall not cause, the board of directors of such Borrower or such general partner to take any action which, under the terms of any certificate of incorporation, by-laws or any voting trust agreement with respect to such Borrower's common stock, requires the unanimous affirmative vote of one hundred percent (100%) of the members of the board of directors, unless at the time of such action there shall be at least one member who is an Independent Director; (xvii) shall comply with the provisions of its articles of incorporation or by-laws or partnership agreement, as applicable; and (xviii) shall use separate and distinct invoices and stationery and checks that indicate, by printed or typed identification, that such Borrower is the entity for which payment is made. (ee) Enforceability of Franchise and Consulting Agreement. Each of the Franchise Agreements, the Related Consulting Agreement and the Westin William Penn Management Agreement has been duly authorized, executed and delivered or -51- duly assumed by the applicable Borrower or Borrowers and constitutes a valid and legally binding instrument enforceable against such Borrower or Borrowers in accordance with its terms, subject to the effects of bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and general equitable principles (whether considered in a proceeding in equity or at law). (ff) Compliance with Franchise Agreements. A true and complete copy of each Franchise Agreement (including all amendments, agreements, side letters and other documents relating thereto) has been delivered to Lender and there are no other documents or agreements between any Borrower or any Franchisor with respect to any of its Properties. All amounts due and payable under the Franchise Agreements through the Closing Date have been paid, and to Borrowers' knowledge, there is no default by either party under any Franchise Agreement and no event has occurred and is continuing which, with the passage of time and/or the giving of notice, would constitute a default or event of default by either party under any Franchise Agreement, except in any case for defaults that would not have a Borrower Material Adverse Effect. Any work on any Individual Property required by the Franchisor under any Franchise Agreement to have been completed prior to the date hereof has been completed and either (i) has been approved by such Franchisor or (ii) Borrowers know of no reason why such work should not be approved. All necessary consents, if any, of any Franchisor to the transactions contemplated by this Agreement and the other Loan Documents have been obtained. (gg) Compliance with Consulting Agreements. A true and complete copy of the Related Consulting Agreement and the Westin William Penn Management Agreement (including, in each case, all amendments, agreements, side letters and other documents relating thereto) has been delivered to Lender and there are no other agreements or documents providing for the management or the supervision of any Individual Property. All amounts due and payable under the Related Consulting Agreement and the Westin William Penn Management Agreement as of the Closing Date have been paid and, to the best of Borrowers' knowledge, there is no default in any material respect by any party under the Related Consulting Agreement or the Westin William Penn Management Agreement, and no event has occurred and is continuing which, with the passage of time and/or the giving of notice, would constitute a default or event of default in any material respect by any party under either the Related Consulting Agreement or the Westin William Penn Management Agreement. (hh) Equipment Leases. True and complete copies of all Equipment Leases (including all amendments, agreements, side letters and documents relating thereto) have been delivered to Lender. All Equipment Leases are listed on Schedule H annexed hereto and, except as set forth on Schedule H, all of such Equipment Leases are unmodified. All of the Equipment Leases are -52- in full force and effect and there is no default in any material respect by any Borrower thereunder, nor, to the best knowledge of Borrowers, by the lessor or other party thereunder and, to the best knowledge of Borrowers, no event has occurred and is continuing which, with the passage of time and/or the giving of notice, would constitute a default or event of default in any material respect under any such Equipment Leases. Except for items subject to the Equipment Leases, all furniture, fixtures, equipment and personal property used in connection with the ownership, operation, management and maintenance of the Properties is owned by the Borrowers. (ii) No Encroachments. To the best knowledge of the Borrowers, except as disclosed in the Surveys or Title Insurance Policies, all improvements comprising a portion of each Individual Property lie wholly within the boundary and building restriction lines of such Individual Property and no improvements on adjoining properties encroach upon any Individual Property in any respect. (jj) Leases. Schedule I, annexed hereto, sets forth all Leases affecting any part of the Properties. All such Leases are in full force and effect and have not been amended or modified except as set forth on Schedule I. To the best of Borrowers' knowledge, no material default has occurred and is continuing thereunder. (kk) Royce Hotel. There is no Franchise Agreement in effect with respect to the Royce Property and Borrower has the right to use the name "Royce" in connection with the operation thereof without a license by or agreement with any other party. Upon taking title to the Royce Property, by foreclosure, deed in lieu of foreclosure or otherwise, Lender will have full right to use the "Royce" name. (ll) Cash Management Agreement. The Cash Management Agreement is in full force and effect and has not been modified, amended or terminated and there are no other agreements, other than the Consulting Agreements, among Borrowers and any Affiliates regarding the transfer of funds between Borrowers and any Affiliates. (mm) Bankruptcy Order. No Borrower nor any Affiliate of Borrowers is in default in any material respect under its obligations under the Bankruptcy Order. Section 4.2 Survival of Representations. Borrowers agree that all of the representations and warranties of Borrowers set forth in Section 4.1 and elsewhere in this Agreement and in the other Loan Documents shall survive for so long as any amount remains owing to Lender under this Agreement or any of the other Loan Documents. All -53- representations, warranties, covenants and agreements made in this Agreement or in the other Loan Documents by Borrowers shall be deemed to have been relied upon by Lender notwithstanding any investigation heretofore or hereafter made by Lender or on its behalf. V. AFFIRMATIVE COVENANTS Section 5.1 Borrowers' Covenants. From the date hereof and until payment and performance in full of all obligations of Borrowers under the Loan Documents or the earlier release of the Lien of the Mortgage (and all related obligations) from all the Properties in accordance with the terms of this Agreement and the other Loan Documents, Borrowers hereby covenant and agree with Lender that: (a) Existence; Compliance with Legal Requirements and Insurance Requirements. Each Borrower shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence, rights, licenses, permits and corporate franchises and comply with all Legal Requirements applicable to it and its Individual Property. Each Borrower shall at all times use its best efforts to maintain, preserve and protect all its corporate franchises and trade names and preserve all the remainder of its property used or useful in the conduct of its business and shall keep all of its Individual Property, including, without limitation, all Equipment, in satisfactory working order and repair and in compliance with all Legal Requirements and Insurance Requirements, and from time to time make, or cause to be made, all reasonably necessary repairs, renewals, replacements, betterments and improvements thereto in order to maintain such Individual Property in compliance with the prevailing standards for a hotel property of similar age, size, construction and the then applicable franchise affiliation in the metropolitan area in which such Individual Property is located, all as more fully provided in the Mortgage. (b) Impositions and Other Charges. Each Borrower shall pay all Impositions, now or hereafter levied or assessed or imposed against its Individual Property or any part thereof, subject to Lender's obligation to disburse funds from the Basic Carrying Costs Sub-Account pursuant to Section 2.7.7(b) and shall pay all water, sewer, maintenance and other charges now or hereafter levied or assessed or imposed against such Individual Property or any part thereof (the "Other Charges") as same become due and payable. No Borrower shall suffer, and each Borrower shall promptly cause to be paid and discharged, any Lien whatsoever which may be or become a lien or charge against Individual Property other than Permitted Encumbrances, and shall promptly pay for all utility services provided to its Individual Property. Each Borrower shall furnish to Lender or its designee -54- upon request, receipts for the payment, or other evidence reasonably satisfactory to Lender of payment, of such Impositions, Other Charges and said utility services prior to the date the same shall become delinquent, except with respect to amounts that Lender is obligated to disburse pursuant to Section 2.7.7(b). After prior written notice to Lender, a Borrower, at its own expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount or validity or application in whole or in part of any Impositions or Other Charges, provided that (i) no Event of Default has occurred and is continuing, (ii) such proceeding shall suspend the collection of the Impositions or Other Charges from the applicable Individual Property, (iii) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which such Borrower or the related Individual Property is subject and shall not constitute a default thereunder, and (iv) such Borrower shall have furnished such security as may be required in the proceeding, or as may be reasonably requested by Lender, to insure the payment of any such Impositions or Other Charges, together with all interest and penalties thereon. (c) Litigation. Each Borrower shall give prompt written notice to Lender of any litigation or governmental proceedings pending or threatened against such Borrower which might materially adversely affect such Borrower's condition (financial or otherwise) or its business or its Individual Property. (d) Access to Premises. Borrowers shall permit agents, representatives and employees of Lender to inspect any of the Properties or any part thereof at reasonable hours upon reasonable advance notice. (e) Notice of Default. Each Borrower shall promptly advise Lender of any material adverse change in such Borrower's condition, financial or otherwise, or of the occurrence of any default or Event of Default of which such Borrower has knowledge. (f) Cooperate in Legal Proceedings. Borrowers shall cooperate fully with Lender with respect to any proceedings before any Governmental Authority with respect to Borrowers or the Properties which may in any way affect the rights of Lender hereunder or any rights obtained by Lender under any of the other Loan Documents and, in connection therewith, permit Lender, at its election and at Borrowers' expense, to participate in any such proceedings. (g) Perform Loan Documents. Each Borrower shall observe, perform and satisfy all the terms, provisions, covenants and conditions of, and shall pay when due all costs, fees and expenses to the extent required under the Loan Documents executed and delivered by, or applicable to, such Borrower. -55- (h) Insurance Benefits. Each Borrower shall cooperate with Lender in obtaining for Lender the benefits of any proceeds of any insurance lawfully or equitably payable in connection with its Individual Property, and Lender shall be reimbursed for any expenses incurred in connection therewith (including reasonable attorneys' fees and disbursements, and the payment by such Borrower of the expense of an appraisal on behalf of Lender if reasonably requested by Lender in case of a fire or other casualty affecting its Individual Property or any part thereof) out of such insurance proceeds. (i) Further Assurances; Supplemental Mortgage Affidavits. (i) Borrowers shall, at Borrowers' sole cost and expense: (A) furnish to Lender all instruments, documents, boundary surveys, footing or foundation surveys, certificates, plans and specifications, appraisals, title and other insurance reports and agreements, and each and every other document, certificate, agreement and instrument required to be furnished by Borrowers pursuant to the terms of the Loan Documents or reasonably requested by Lender in connection therewith; (B) execute and deliver to Lender such documents, instruments, certificates, assignments and other writings, and do such other acts necessary or desirable to evidence, preserve and/or protect, and to maintain Lender's perfected lien upon, and security interest in, the collateral (including, without limitation, the Central Account and all funds on deposit therein) at any time securing or intended to secure the obligations of Borrowers under the Loan Documents, as Lender may reasonably require; and (C) do and execute all and such further lawful and reasonable acts, conveyances and assurances for the better and more effective carrying out of the intents and purposes of this Agreement and the other Loan Documents, as Lender shall reasonably require from time to time. (ii) The Lien created by the Mortgage is intended to encumber each Individual Property on a joint and several basis to the full extent of the Indebtedness. As of the date hereof, Borrowers represent that they have paid all state, county and municipal recording and all other taxes imposed upon the execution and recordation of the Mortgage against each of the Properties based upon the foregoing and such security is not limited by the Allocable Principal Balance for any Individual Property. If at any time Lender determines, based on applicable law, that Lender is not being afforded the maximum amount of security available from any one or more of the Properties as a direct or indirect result of applicable taxes not having been paid with respect to any such Properties, Borrowers will execute, acknowledge and deliver to Lender, immediately upon Lender's request, supplemental affidavits increasing the amount of the -56- Indebtedness for which all applicable taxes have been paid to an amount determined by Lender to be equal to the lesser of (a) the greater of the fair market value of the applicable Individual Property (i) as of the Closing Date and (ii) as of the date such supplemental affidavits are to be delivered to Lender, and (b) the amount of the Indebtedness, and Borrower shall, on demand, pay any additional taxes required in connection therewith. (j) Management of Mortgaged Property. Each Borrower covenants and agrees with Lender that (i) its Individual Property will be managed at all times (A) by the Westin William Penn Manager pursuant to the Westin William Penn Management Agreement with respect to the Westin William Penn Property or by the Related Consultant with respect to the Individual Property identified on Schedule D as the Radisson Inn New Orleans located in Kennar, Louisiana pursuant to the applicable Related Consulting Agreement or (B) in consultation with the Related Consultant pursuant to the Related Consulting Agreement with respect to each other Individual Property, (ii) immediately upon the occurrence of a fifty percent (50%) or more change in control of the Related Consultant (a "Consultant Control Change"), Borrower will promptly give Lender notice thereof (a "Consultant Control Notice") and (iii) any Related Consulting Agreement may be terminated by Lender (A) For Cause (as defined below) at any time, (B) at any time after the occurrence and during the continuance of an Event of Default with respect to any amounts payable hereunder or under the Note, the Mortgage or the other Loan Documents, (C) upon commencement of any foreclosure proceeding with respect to the applicable Individual Property and (D) after any Consultant Control Change with respect to the applicable Consultant if the Rating Agency has failed to confirm, after written request, in writing that as a result of such Consultant Control Change the then current rating of the Certificates will not be downgraded, withdrawn or otherwise adversely affected. Upon such termination, a substitute managing agent shall be appointed by the applicable Borrower, subject to Lender's approval, in Lender's sole discretion, for such Individual Property. As used in this subsection (j), the term "control", means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of Consultant, whether through ownership of voting securities, by contract or otherwise, and the term "For Cause" means on account of Consultant's gross negligence, willful misconduct or fraud or Consultant's default beyond the expiration of any applicable notice or grace period in the performance of its obligations under the applicable Consulting Agreement. The Consulting Agreements shall be subject and subordinate in all respects to the Lien and to the terms, covenants and provisions of the Mortgage and the other Loan Documents in accordance with those certain Assignments of Consulting Agreements, dated as of the date hereof. Provided no Event of Default has occurred and is then continuing hereunder, Consultant shall be entitled to collect fees under the Consulting Agreement, provided that any such fees in excess of four percent (4%) of Revenues shall not be -57- paid or collected unless all amounts then payable under the Loan Documents shall have been paid in full and Operating Expenses are being paid consistent with Borrowers' practices in effect as of the Closing Date and Borrowers shall not reasonably expect future Revenue to be insufficient to pay Operating Expenses accrued or thereafter accruing. Borrowers further covenant and agree that Borrowers shall require the Consultant to maintain at all times during the term of the Loan worker's compensation insurance as required by Governmental Authorities. Each Borrower shall perform its obligations under the Consulting Agreements. (k) Financial Reporting. (i) Borrowers will keep and maintain or will cause to be kept and maintained on a Fiscal Year basis, in accordance with GAAP, proper and accurate books, records and accounts reflecting all of the financial affairs of Borrowers and all items of income and expense in connection with the operation on an individual basis of each Individual Property and in connection with any services or Equipment provided in connection with the operation thereof, whether such income or expense be realized by any Borrower or by any other Person whatsoever, excepting lessees unrelated to and unaffiliated with any Borrower who have leased from a Borrower portions of any Individual Property for the purpose of occupying the same. Lender shall have the right from time to time at all times during normal business hours upon reasonable notice to examine such books, records and accounts at the office of any Borrower or other Person maintaining such books, records and accounts and to make such copies or extracts thereof as Lender shall desire. After the occurrence of an Event of Default, Borrowers shall pay any reasonable costs and expenses incurred by Lender in connection with such examination. (ii) Borrowers will furnish to Lender annually (with a copy to the Rating Agency), within one hundred twenty (120) days following the end of each Fiscal Year of Borrowers, a certified complete copy of the financial statement of Borrowers, prepared on a combined basis, audited by Borrowers' Accountant in accordance with GAAP covering on a combined basis the operation of the Properties for such Fiscal Year and containing a statement of Revenues and Operating Expenses, a statement of assets and liabilities and a statement of Borrowers' equity. Together with Borrowers' annual combined financial statement, each Borrower shall furnish to Lender an unaudited operating statement for such Individual Property, accompanied by an Officer's Certificate representing as of the date thereof (A) that the annual operating statement accurately represents the operation of the related Individual Property, in accordance with GAAP consistently applied and (B) whether there exists an event or circumstance which constitutes a default or Event of Default under the Loan Documents executed and delivered by, or applicable to, such Borrower, and if such default or Event of Default exists, the nature thereof, the period of time it has existed and the action then being taken to remedy the same. -58- (iii) Borrowers shall timely file any and all required reports with the Securities and Exchange Commission, required to be filed pursuant to the Securities Exchange Act of 1934, as amended. (iv) Borrowers will furnish, or cause to be furnished, to Lender monthly (with a copy to the Rating Agency), within twenty (20) days following the end of each month, both (A) a true, complete and correct cash flow statement with respect to each Individual Property on an individual basis in form reasonably acceptable to Lender showing (I) all cash receipts of any kind whatsoever and all cash payments and disbursements for such month, and (II) year-to-date summaries of such cash receipts, payments and disbursements, (III) all Revenue and Operating Expenses for such month and (IV) all Revenue and Operating Expenses for the preceding twelve (12) full calendar months and (B) an operations statement with respect to each Individual Property prepared on an accrual basis, in the form of Schedule J annexed hereto, showing the operations of such Individual Property for the preceding twelve (12) full calendar months and (C) a balance sheet for each Borrower, together with a certification of the Related Consultant (a "Consultant's Certification") stating that, in all material respects, (a) each such cash flow statement and operating statement is true, complete and correct and (b) all Operating Expenses with respect to such Individual Property which have accrued as of the last day of the month preceding the delivery of such cash flow statement have been fully paid or otherwise provided for by or on behalf of the related Borrower. (v) Borrowers shall furnish to Lender (with a copy to the Rating Agency), within fourteen (14) days after request, such further detailed information with respect to the operation of any of the Properties and the financial affairs of Borrowers as may be reasonably requested by Lender. (vi) Lender shall have the right to audit, at Lender's expense, each Borrower's books and records to determine Revenue and Operating Expenses for each Individual Property; provided, however, that if such audit reveals a misstatement of Revenue or Operating Expenses in any financial statement submitted by or on behalf of any Borrower by more than five percent (5%) of such amount for the period which is the subject of such audit, Borrowers shall reimburse Lender on demand for the cost of such audit. (l) Business and Operations. Each Borrower will continue to engage in the businesses presently conducted by it as and to the extent the same are necessary for the ownership, maintenance, management and operation of its Individual Property. Each Borrower will qualify to do business and will remain in good standing under the laws of each jurisdiction as and to the extent the same are required for the ownership, maintenance, management and operation of its Individual Property. -59- (m) Title to the Properties. Borrowers will warrant and defend (i) the title to each of the Properties and every part thereof, subject only to the Permitted Encumbrances, and (ii) the validity and priority of the Liens of the Mortgage and the Assignment of Leases on each Individual Property, subject only to the Permitted Encumbrances, in each case against the claims of all Persons whomsoever. Borrowers shall reimburse Lender for any losses, costs, damages or expenses (including reasonable attorneys' fees and court costs) incurred by Lender if an interest in any of the Properties, other than as permitted hereunder, is claimed by another Person. (n) Costs of Enforcement. In the event (i) that the Mortgage is foreclosed in whole or in part or is put into the hands of an attorney for collection, suit, action or foreclosure, (ii) of the foreclosure of any other mortgage encumbering any of the Properties in which proceeding Lender is made a party, or (iii) of the bankruptcy, insolvency, rehabilitation or other similar proceeding in respect of any Borrower or an assignment by any Borrower for the benefit of its creditors, Borrowers, their successors or assigns, shall be chargeable with and agree to pay all costs of collection and defense, including attorneys' fees in connection therewith and in connection with any appellate proceeding or post-judgment action involved therein, which shall be due and payable hereunder together with all required service or use taxes. (o) Estoppel Statement. Borrowers, within ten (10) days after request from Lender, shall from time to time furnish to Lender a statement, duly acknowledged and certified by Borrowers, setting forth (i) the amount then owing by Borrowers in respect of the Indebtedness, (ii) the date through which interest on the Loan has been paid, and (iii) any offsets, counterclaims, credits or defenses to the payment of Borrowers' obligations under the Loan Documents and acknowledging that this Agreement and the other Loan Documents executed and delivered by, or applicable to, Borrowers are legal, valid and binding obligations of Borrowers and have not been modified or, if modified, giving the particulars of such modification. Lender, within ten (10) days after a request by Borrowers, shall from time to time, but not more frequently than four (4) times in any calendar year, furnish to Borrowers a statement, duly acknowledged and certified by Lender, setting forth (A) the amount then owing by Borrowers with respect to the Indebtedness, (B) the date through which Interest on the Loan has been paid and (C) that, to the best of Lender's knowledge, no default has occurred hereunder, and acknowledging that this Agreement and the other Loan Documents have not been modified, or if modified, giving the particulars of such modification. (p) Loan Proceeds. The proceeds of the Loan shall be used only for the purposes set forth in Section 2.2. -60- (q) Permits. Each Borrower shall comply, and cause its Individual Property to be operated in compliance, in all material respects, with all Permits and shall extend or renew any Permit that may expire. (r) Annual Operating Budget and Capital Expenditure Budget. Borrowers shall prepare and deliver to Lender, not less than fifteen (15) Business Days prior to the commencement of each Fiscal Year of Borrowers, (i) an Annual Operating Budget with respect to each Individual Property for such ensuing Fiscal Year, and (ii) a Capital Expenditures Budget with respect to each Individual Property for such ensuing Fiscal Year. (s) Confirmation of Representations. In addition to and not in limitation of the covenants and agreements of Borrower contained in Section 7.1, each Borrower shall deliver, in connection with any Securitization Transaction, one or more Officer's Certificates certifying as to the accuracy of all representations made by Borrowers in the Loan Documents as of the date of the closing of such Securitization Transaction or specifying any changes in the accuracy of such representations. (t) No Joint Assessment. No Borrower shall suffer, permit or initiate the joint assessment of any Individual Property (i) with any other real property constituting a tax lot separate from such Individual Property, and (ii) with any other personal property, whereby the lien of any taxes which may be levied against such other personal property shall be assessed or levied or charged to such Individual Property. (u) Leasing Matters. Any Lease with respect to any Individual Property that covers more than one thousand (1,000) rentable square feet shall be written on a form of lease which has been approved by Lender, which approval shall not be unreasonably withheld. Upon request, Borrowers shall furnish Lender with executed copies of all Leases. All proposed Leases or renewals of existing leases entered into after the Closing Date shall be on commercially reasonable terms and shall not contain any terms which would materially affect Lender's rights under the Loan Documents. All Leases executed after the date hereof shall be subordinate to the Mortgage encumbering the applicable Individual Property. Notwithstanding anything to the contrary contained herein, with respect to those portions of the Westin William Penn Property which are, as of the Closing Date, leased or offered for lease for commercial uses not related to the use of the Property as a hotel, the Westin William Penn Borrower may enter, extend, modify or terminate, or take any other actions with respect to, any Lease, in a commercially reasonable manner provided that the uses permitted under such Leases shall be commercially suitable to the operation of the Westin William Penn Property as a first-class hotel. Borrowers (i) shall observe and perform the obligations imposed upon the lessor under the Leases in a commercially reasonable manner; (ii) shall enforce, and may amend or terminate, the terms, covenants -61- and conditions contained in the Leases upon the part of the lessee thereunder to be observed or performed in a commercially reasonable manner; (iii) shall not collect any of the rents more than one (1) month in advance (other than security deposits); (iv) shall not execute any other assignment of lessor's interest in the Leases or the Revenue (except as contemplated by the Loan Documents); (v) shall not alter, modify or change the terms of the Leases in a manner inconsistent within the provisions of the Loan Documents; and (vi) shall execute and deliver at the request of Lender all such further assurances, confirmations and assignments in connection with the Leases as Lender shall from time to time require. (v) Financing Statements. Borrowers shall, promptly upon Lender's request, at Borrowers' sole cost and expense, timely file or refile, or cause to be filed or refiled, all continuations and any assignments of any of the Uniform Commercial Code Financing Statements filed in connection with the Loan, as appropriate, in the appropriate recording or filing offices, such that Lender will continue to have a valid and perfected first priority lien on the collateral subject to such financing statements. (w) Equipment Leases. Each Borrower shall observe and perform or cause to be observed or performed all of its obligations under all Equipment Leases and replace any expired Equipment Leases with similar agreements as necessary to maintain the operating standards of its Individual Property. (x) Franchise Inspection Reports. Each Borrower shall deliver to Lender, or cause the Consultant to deliver to Lender, a copy of each inspection report of any Franchisor with respect to any Individual Property within five (5) Business Days after such Borrowers' or Consultant's receipt thereof. (y) Compliance with Franchise Agreements. Each Borrower shall operate its Individual Property as a hotel open for business under the Franchise Agreement, and shall perform all of its obligations under the Franchise Agreement. (z) Operations and Maintenance Programs. The Borrowers that own the Individual Properties referred to on Schedule K annexed hereto shall cause such Individual Properties to be operated and maintained in all material respects in accordance with those certain operations and maintenance programs, approved by the Environmental Consultant, listed on Schedule K and shall deliver an Officer's Certificate to Lender within thirty (30) days of the Closing Date stating that such Borrowers have instructed the relevant employees at such Individual Property in compliance with such operations and maintenance program. -62- (aa) Insuror's Letter. Borrowers shall deliver an updated Insuror's Letter within ten (10) Business Days of any change in the premiums payable with respect to the Policies. (bb) Cash Management Agreement. Each Borrower shall comply with its obligations under the Cash Management Agreement, including, without limitation, that during any Operative Period, DSCR Restricted Period or Franchise Restricted Period or if a receiver, liquidator or trustee shall be appointed for Servico, Inc., Consultant or a Non-Borrower Participant (as defined in the Cash Management Agreement) or if any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by or against Servico, Inc., Consultant or any Non-Borrower Participant, Borrowers will cease to participate in the Cash Management Agreement and shall reconcile in cash any underpayments or overpayments existing at that time and that from the date of any such appointment or filing, Lender may, by delivery of a Consultant's Notice, cause the Consultant to collect the Revenue of each Individual Property and pay such Revenue over to Lender pursuant to Section 2.7.1(c), to be allocated by Lender pursuant to Section 2.7.3 as if a DSCR Restricted Period were then in effect, until such time aa Lender shall be reasonably satisfied that Borrowers are no longer participating in the Cash Management Agreement. VI. NEGATIVE COVENANTS Section 6.1 Borrowers' Negative Covenants. From the date hereof until payment and performance in full of all obligations of Borrowers under the Loan Documents or the earlier release of the Liens of the Mortgage (and all related obligations) from all the Properties in accordance with the terms of this Agreement and the other Loan Documents, Borrowers covenant and agree with Lender that none of them will do, directly or indirectly, any of the following: (a) Operation of Properties. No Borrower shall, without the prior consent of Lender, which consent shall not be unreasonably withheld or delayed, amend, modify, terminate or extend, or consent to an assignment of Franchisor's or Consultant's rights under, any Franchise Agreement or Consulting Agreement relating to any Individual Property or otherwise replace any Franchisor or Consultant of any Individual Property or enter into any other management or franchise agreements with respect to any of the Properties. Notwithstanding the foregoing, if any Franchise Agreement or the Westin William Penn Management Agreement shall expire or be terminated, other than any termination by a Borrower or on account of a Borrower's default thereunder, the applicable Borrower shall enter into a new Franchise Agreement, in form and substance reasonably -63- satisfactory to Lender. During any Franchise Restricted Period, all Excess Property Income for all the properties shall be deposited in the Central Account and allocated as provided in Section 2.7.3(g), provided that if a Franchise Restricted Period and a DSCR Restricted Period shall both be in effect with respect to any period of time, such period will be deemed a DSCR Restricted Period for the purposes of this Agreement and if a Franchise Restricted Period and an Operative Period shall both be in effect with respect to any period of time, such period of time shall be deemed an Operative Period for the purposes of this Agreement. A "Franchise Restricted Period" shall mean any period of time (i) commencing on the ninetieth (90th) day after the expiration or termination, other than a termination by a Borrower or on account of a Borrower's default thereunder, of any Franchise Agreement or of the Westin William Penn Management Agreement and continuing until such Franchise Agreement or the Westin William Penn Management Agreement shall have been replaced by a new Franchise Agreement pursuant to the second preceding sentence or (ii) any period of time during which three (3) or more of the Franchise Agreements and the Westin William Penn Management Agreement shall have been expired or been terminated, other than a termination by a Borrower or on account of a Borrower's default thereunder, and shall not have been replaced by a new Franchise Agreement pursuant to the third preceding sentence. It shall be an Event of Default hereunder if any Franchise Restricted Period shall continue for more than ninety (90) days. (b) Liens. No Borrower shall, without the prior written consent of Lender, create, incur, assume or suffer to exist any Lien on any portion of any of the Properties or permit any such action to be taken, except: (i) Permitted Encumbrances; or (ii) Liens for Impositions or Other Charges not yet due or which are being contested in compliance with Section 5.1(b) (c) Dissolution. No Borrower shall dissolve, terminate, liquidate, merge with or consolidate into another Person. (d) Chance In Business. No Borrower shall enter into any line of business other than the ownership and operation of its Individual Property, or make any material change in the scope or nature of its business objectives, purposes or operations, or undertake or participate in activities other than the continuance of its present business. (e) Debt Cancellation. No Borrower shall cancel or otherwise forgive or release any claim or debt (other than termination of Leases in accordance herewith) owed to Borrower by -64- any Person, except for adequate consideration and in the ordinary course of Borrower's business. (f) Affiliate Transactions. No Borrower shall enter into, or be a party to, any transaction with an Affiliate of any Borrower or of any partner of any Borrower except (a) under the Cash Management Agreement, (b) the Related Consulting Agreement, (c) in the ordinary course of business and on terms which are fully disclosed to Lender in advance and are no less favorable to such Borrower or such Affiliate than would be obtained in a comparable arm's-length transaction with an unrelated third party or (d) as may be otherwise expressly provided for hereunder. (g) Zoning. No Borrower shall initiate or consent to any zoning reclassification of all or any portion of its Individual Property or seek any variance under any existing zoning ordinance or use or permit the use of any portion of any such Individual Property in any manner that could result in such use becoming a non-conforming use under any zoning ordinance or any other applicable land use law, rule or regulation, without the prior consent of Lender. (h) Assets. No Borrower shall purchase or own any properties other than its Individual Property. (i) Debt. No Borrower shall create, incur or assume any debt other than the Indebtedness and other than unsecured, short-term trade indebtedness incurred in the ordinary course of operating its Individual Property (including financing of insurance premiums) and permitted Encumbrances. (j) Misapplication of Funds. No Borrower shall, or permit any Consultant to, (i) distribute any Revenue to any Borrower or any partners or shareholders thereof either (A) in violation of the provisions of Section 2.7 hereof or (B) unless true and correct Consultant's Certifications as referred to in Section 5.1(k) (iv) shall have been delivered for the most recent period for which the same are due, or (ii) misappropriate any security deposit made under any Lease or portion thereof. (k) Cash Management Agreement. No Borrower shall amend, modify, rescind or terminate the Cash Management Agreement, nor waive any rights of such Borrower thereunder, provided that the addition or release of Affiliates as parties thereto shall not be deemed an amendment thereof provided that any Affiliate so withdrawing shall have repaid all advances made to it under such Cash Management Agreement. -65- VII. SPECIAL PROVISIONS Section 7.1 Cooperation. 7.1.1 Cooperation. (a) Lender intends to make the Loan pursuant to and in accordance with the Loan Documents and the Loan Purchaser intends to purchase the Loan, in each case, prior to effecting any Securitization Transaction. Borrowers and their Affiliates shall, at Lender's cost and expense, including, without limitation, reasonable legal fees, cooperate in good faith with the Lender, the Loan Purchaser, any Servicer and the Securities and Exchange Commission in effecting such Securitization Transaction, including obtaining Franchise Agreement Letters for the benefit of the Loan Purchaser, and shall cooperate in good faith to implement all requirements imposed by the Rating Agency or any rating agencies including, without limitation, changes to the Loan and the Loan Documents occasioned by the Securitization Transaction and all additional conditions imposed by such rating agencies in connection with any rating of the Certificates, including, without limitation, delivery of opinions of counsel acceptable to such Rating Agencies and addressing such matters as such Rating Agencies may reasonably require; provided, however, that Borrowers shall not act as a Depositor or issuer in connection with a Securitization Transaction or be required to acquiesce in respect of material modifications to the Loan or the Loan Documents, including, without limitation, any modifications (whether material or not) relating to (i) the interest rate payable in respect of the Loan, (ii) the Maturity Date, (iii) the amortization of the Loan, (iv) the calculation of Yield Maintenance Premiums or the instances in which such Yield Maintenance Premiums are applicable, (v) the limitations on recourse set forth in the Loan Documents, (vi) the conditions for release of an Individual Property set forth in Section 2.4 or (vii) the Cash Management Agreement. (b) The Loan Purchaser, at its election, may determine to resell the Loan or retain title to the Loan instead of implementing the Securitization Transaction. In such event, Borrower shall cooperate in good faith with the Loan Purchaser in connection with effecting any such resale or retention of the Loan. 7.1.2 Additional Financial Reporting Requirements. Borrowers hereby agree that Borrowers and their Affiliates shall, at Borrowers' cost and expense, execute and deliver all documentation and statistical information as may be reasonably requested by Lender and take all action deemed reasonably necessary or desirable by Lender, in both cases for the implementation of the Securitization Transaction(s) including, without limitation, delivery of (i) audited financial statements fulfilling Securities and Exchange Commission -66- requirements as to form, content and period covered, (ii) consents of experts fulfilling Securities and Exchange Commission requirements, (iii) other matters as may be customary for offerings of securities similar to the Certificates, (iv) the satisfaction of all reasonable Rating Agency requirements with respect to documentation and statistical information and (v) all ongoing periodic reporting requirements under the Securities Exchange Act of 1934, as amended, arising out of the registration of the Certificates. Section 7.2 Insurance; Casualty and Condemnation. 7.2.1 Insurance. (a) Each Borrower, at its sole cost and expense, shall keep its Individual Property insured during the entire term of the Loan for the mutual benefit of such Borrower and Lender on an "All Risk" basis, including without limitation, insurance against loss or damage by fire and against loss or damage by other risks and hazards covered by a standard extended coverage policy, including, but not limited to, riot and civil commotion, vandalism, malicious mischief, burglary and theft. Such insurance shall be in an amount (i) equal to the then full replacement cost of the Improvements (exclusive of footings and foundations) and Equipment, without deduction for physical depreciation, and (ii) such that the insurer would not deem such Borrower a co-insurer under said policies, provided that if such coverage is provided under a blanket policy, such coverage may be provided through a "loss limit" policy in the amount of not less than $100,000,000 per occurrence and not in the aggregate (which amount may be increased, in Lender's reasonable discretion, if the number of properties covered by such blanket policy is increased after the Closing Date). The policies of insurance carried in accordance with this Section shall be paid monthly or quarterly in advance and, unless such policies shall be blanket policies pursuant to the preceding sentence, shall contain the "Replacement Cost Endorsement with a waiver of depreciation. (b) Each Borrower, at its sole cost and expense, for the mutual benefit of such Borrower and Lender, shall also obtain and maintain, or cause to be maintained, during the entire term of the Loan the following policies of insurance with respect to its Individual Property: (i) flood insurance if any part of such Individual Property is located in an area identified by the Federal Emergency Management Agency as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968 (and any amendment or successor act thereto) in an amount at least equal to the lesser of the Allocable Principal Balance attributable to such Individual Property or the maximum limit of coverage available with respect to the Improvements and Equipment under said Act, whichever is less; -67- (ii) comprehensive public liability insurance in the amount of $5,000,000 or such additional amount reasonably requested by Lender, including broad form property damage, blanket contractual and personal injuries (including death resulting therefrom) coverages; (iii) business interruption insurance in an amount not less than the Revenues projected by Lender for such Individual Property for a period of twenty-four (24) months at one hundred percent (100%) occupancy, provided that notwithstanding the foregoing, if the hazard insurance under paragraph (a) above is provided under a "loss limit" blanket policy as permitted thereunder, such business interruption insurance may be included in such policy, provided that such insurance shall provide coverage for each Individual Property for the actual loss of Cash Flow Available for Debt Service for such Individual Property sustained due to the suspension of operations during the period of the restoration of operations and continuing normal Operating Expenses incurred during such period. The term "period of restoration" as used in this subparagraph means the period of time (a) from the date of the applicable Casualty until the date on which the Restoration of the Individual Property, if prosecuted with reasonable diligence, should be completed and (b) from the date on which the Restoration of such Individual Property is technically completed until the earlier of (I) the date on which the business operations and condition of the Individual Property should be restored to their status prior to such Casualty, if pursued with reasonable diligence, and (II) the date which is sixty (60) consecutive days after the actual completion of the Restoration; (iv) insurance against loss or damage from leakage of sprinklers or explosion of steam boilers, air conditioning equipment, high pressure piping, machinery and equipment, pressure vessels or similar apparatus now or hereafter installed on such Individual Property; (v) Worker's compensation insurance with respect to any employees of such Borrower or of Consultant employed at such Individual Property, as required by Governmental Authorities, or Legal Requirements; and (vi) such other or additional insurance as may from time to time be reasonably required by Lender. (c) All policies of insurance (the "Policies") required pursuant to this Section 7.2.1: (i) shall be issued by an insurer rated "A" (or the equivalent) by the Rating Agency and satisfactory to Lender, (ii) shall contain the standard New York mortgagee non-contribution clause (or equivalent) naming Lender as the person to whom all payments made by such insurance company, relating to property losses, shall be paid (except with respect to (A) Equipment subject to an Equipment Lease that requires insurance proceeds to be paid to the lessor thereunder -68- and (B) provided no Event of Default shall have occurred and be continuing, refunds of premiums made as a result of policy audits), (iii) shall be maintained throughout the term of this Agreement without cost to Lender, (iv) shall contain a waiver of subrogation, (v) shall be delivered to Lender (or Lender shall receive original certificates of insurance and certified copies of all Policies), (vi) shall contain such provisions as Lender deems reasonably necessary or desirable to protect its interest including, without limitation, endorsements providing that neither Borrower, Lender nor any other party shall be a co-insurer under said Policies and that Lender shall receive at least thirty (30) days' prior written notice of any modification or cancellation, except that Lender shall receive ten (10) days' prior written notice of any cancellation for non-payment of any premium, and (vii) shall be reasonably satisfactory to Lender and shall be approved by Lender as to amounts, form, risk coverage, deductibles, loss payees, and insureds, which approval shall not be unreasonably withheld or delayed. Borrowers shall pay the premiums for such Policies as the same become due and payable. Not later than ten (10) days prior to the expiration date of each of the Policies, Borrowers will deliver to Lender satisfactory evidence of the renewal of each of the Policies. The Policies may be part of a blanket policy only if (A) such blanket policy covers only Individual Properties subject to the Mortgage (excluding, without limitation, any Individual Property released from the Lien of the Mortgage pursuant to Section 2.4) or (B) the provider of such blanket policy provides Borrowers and Lender with a letter confirming that coverage for any Individual Property will not be cancelled or reduced because of any matter relating to any property other than the Properties. (d) All insurers shall be authorized to issue insurance in the State in which the applicable Individual Property is located. (e) In the event Borrowers fail to provide, maintain, keep in force, or deliver and furnish to Lender the Policies required hereunder, Lender may procure such insurance as Lender shall deem appropriate, and Borrowers will reimburse Lender for all premiums paid by Lender promptly upon demand by Lender, together with interest thereon at the Default Rate from the date of demand. The amounts advanced by Lender to pay for such insurance, together with such interest thereon, shall be a part of the Indebtedness and secured by the Mortgage. (f) Borrowers shall pay, or cause to be paid, all premiums therefor not later than the date due and shall submit to Lender, within three (3) Business Days of the date such premium payment is due, other than with respect to payments disbursed from the Basic Carrying Costs Sub-Account, a copy of each check written in payment of such premiums or other evidence reasonably satisfactory to Lender that such premium has been paid or, if such payment shall be made by wire transfer, evidence of such transfer reasonably satisfactory to Lender. -69- 7.2.2 Casualty and Restoration. (a) Borrowers shall give prompt written notice to Lender of any damage to or destruction of all or any portion of any Individual Property (any such event being herein referred to as a "Casualty"). Provided that Lender shall make Insurance proceeds available pursuant to Section 7.2.2(b), Borrowers shall promptly and diligently restore, replace, rebuild and repair such Individual Property as nearly as possible to the value and condition of such Individual Property immediately prior to such Casualty (such restoration, replacement, rebuilding and repair is herein referred to as the "Restoration"), regardless of whether Insurance Proceeds shall be payable with respect to such Casualty or shall be sufficient to pay for the Restoration. The plans and specifications and Permits for the Restoration shall be submitted to Lender in advance and shall be reasonably satisfactory to Lender in all respects. The Restoration shall be done in compliance with all Legal Requirements, and the applicable Borrower shall carry builder's risk insurance satisfactory to Lender in connection with the Restoration. Lender, its agents and representatives shall have the right to inspect the Individual Property to monitor the Restoration. All reasonable costs and expenses incurred by Lender, its agents or representatives in connection with the Restoration, including, without limitation, counsel fees and engineers fees incurred by Lender in connection with the review of plans, specifications and Permits and the monitoring of the Restoration, shall be paid by Borrowers. Upon completion of the Restoration, the applicable Borrower shall deliver to Lender an Officer's Certificate (or if the cost of such Restoration shall exceed $250,000, a certificate of an Engineer) stating that (A) all materials installed and work and labor performed in connection with the Restoration have been paid for in full, (B) no mechanics' or other Liens on the applicable Individual Property arising out of the Restoration exist which have not been bonded or otherwise discharged of record, (C) the Restoration has been completed in compliance with the plans and specifications submitted to Lender and all Legal Requirements and (D) all Permits required for use of the Individual Property after the Restoration have been obtained, together with such other evidence of the foregoing as Lender may request. (b) Lender may elect to make all or any portion of any Insurance Proceeds received by Lender pursuant to Section 2.7.8(a) (after deducting out Lender's cost of obtaining such Insurance Proceeds, including, without limitation, reasonable attorneys' fees) available to pay the costs of the Restoration, provided that Lender shall make such Insurance Proceeds (after deducting Lender's cost as aforesaid) available to pay the costs of the Restoration if (i) such Insurance Proceeds are paid to Lender prior to February 1, 2007, and (ii) (A) the Insurance Proceeds received with respect to any Casualty (after deducting out such costs) shall not exceed fifty percent (50%) of the fair market value for the Individual Property in question as set forth on Schedule M annexed hereto or (B) such Insurance Proceeds (after deducting out such costs) shall equal or exceed fifty -70- percent (50%) of such fair market value for such Individual Property and the ratio of (x) the Cash Flow Available for Debt Service for such Individual Property for the twelve (12) month period ending with the last day of the last full month prior to such Casualty for which Lender shall have received financial reports for such Individual Property pursuant to Section 5.1(k) (iv) to (y) the aggregate amount of payments of principal and interest that would be payable over the twelve (12) months following the date of such Casualty in order to amortize the current Allocable Principal Balance for such Individual Property, with interest at the Interest Rate, over the period from the date of such Casualty to the Maturity Date shall be at least equal to 1.53/1.0, unless, in such case, Borrowers shall elect not to perform the Restoration (provided that with respect to the Individual Property identified as the Hilton Head Holiday Inn located on Hilton Head Island, South Carolina, Lender may elect to apply such Insurance Proceeds as a prepayment of the principal balance of the Loan in accordance with Section 2.7.8 unless Borrowers shall demonstrate to Lender's reasonable satisfaction that Borrowers have obtained any zoning variations or permits required to reconstruct such Individual Property to substantially its configuration prior to such Casualty), and (iii) no Default or Event of Default shall have occurred and be continuing and (iv) Borrowers shall have deposited with Lender an amount equal to the difference between the cost of the Restoration, as reasonably estimated by Lender, and the amount of Insurance Proceeds to be made available by Lender to pay such costs. If such Insurance Proceeds are less than $100,000, Lender shall pay such Insurance Proceeds over to the Borrower in question upon receipt of an Officer's Certificate stating the costs of such Restoration to which such Insurance Proceeds shall be applied. If the Insurance Proceeds equal or exceed $100,000 and are to be made available to pay the costs of the Restoration, such Insurance Proceeds shall be paid by Lender to, or as directed by, the applicable Borrower, less retainage customary in the area where such Individual Property is located, from time to time during the course of the Restoration (but not more frequently than once per calendar month), upon (x) receipt of a written request for such disbursement by the applicable Borrower accompanied by an Officer's Certificate (or if the cost of such Restoration shall exceed $250,000, a certificate of an Engineer) stating that (l) all materials installed and work and labor performed to date (except to the extent they are to be paid for out of the requested payment) in connection with the Restoration have been paid for in full, and (2) no mechanics' or other Liens on the applicable Individual Property arising out of the Restoration exist which have not been bonded or otherwise discharged or released, together with such other evidence of the foregoing as Lender may request and (y) compliance with such other reasonable conditions as Lender may from time to time impose. (c) Any amount of Insurance Proceeds which Lender does not elect, or is not required, to make available to pay the costs -71- of the Restoration, or which remains after payment of the costs of any restoration or reconstruction, shall be applied as provided in Section 2.7.8(a) 7.2.3 Condemnation. (a) Borrowers shall promptly give Lender notice of the actual or threatened commencement of any Condemnation proceeding relating to any Individual Property and shall deliver to Lender copies of any and all papers served in connection with such proceedings. Following any Condemnation of less than all of an Individual Property, provided that Lender shall make Condemnation Proceeds available pursuant to Section 7.2.3(b), Borrowers shall promptly and diligently perform such restoration and reconstruction of the affected Individual Property as is necessary to retain, as nearly as possible, the economic value of such Individual Property, regardless of whether Condemnation Proceeds payable with respect thereto shall be sufficient to pay for such restoration and reconstruction. The plans and specifications and Permits for such restoration and reconstruction shall be submitted to Lender in advance and shall be reasonably satisfactory to Lender in all respects. Such restoration and reconstruction shall be done in compliance with all Legal Requirements, and the applicable Borrower shall carry builder's risk insurance satisfactory to Lender in connection therewith. Lender, its agents and representatives shall have the right to inspect the Individual Property to monitor such restoration and reconstruction. All reasonable costs and expenses incurred by Lender, its agents or representatives in connection with such restoration and reconstruction, including, without limitation, counsel fees and engineers fees incurred by Lender in connection with the review of plans, specifications and Permits and the monitoring of such restoration and reconstruction, shall be paid by Borrowers. Upon completion of such restoration and reconstruction, the applicable Borrower shall deliver to Lender an Officer's Certificate (or if the cost of such restoration and reconstruction shall exceed $250,000, a certificate of an Engineer) stating that (A) all materials installed and work and labor performed in connection with such restoration and reconstruction have been paid for in full, (B) no mechanics' or other Liens on the applicable Individual Property arising out of such restoration and reconstruction exist which have not been bonded or otherwise discharged of record, (C) such restoration and reconstruction have been completed in compliance with the plans and specifications submitted to Lender and all Legal Requirements and (D) all Permits required for use of the Individual Property after such restoration and reconstruction have been obtained, together with such other evidence of the foregoing as Lender may request. (b) Any Condemnation Proceeds received by Lender (after deducting out Lender's costs of obtaining such Condemnation Proceeds, including, without limitation, reasonable attorneys' fees) may, in Lender's discretion, be either retained and applied by Lender toward payment of the Loan or, at the discretion of Lender be disbursed, either in whole or in part, to -72- the applicable Borrower for such purposes and upon such conditions as Lender shall designate, provided that Lender shall make such Condemnation Proceeds (after deducting Lender's cost as aforesaid) available to pay the costs of such restoration and reconstruction if (i) such Condemnation Proceeds (after deducting out such costs) are paid to Lender prior to February 1, 2007, and (ii) (A) the Condemnation Proceeds received with respect to any Condemnation shall not exceed fifty percent (50%) of the fair market value for the Individual Property in question as set forth on Schedule M, or (B) such Condemnation Proceeds shall equal or exceed fifty percent (50%) of such fair market value for such Individual Property and the ratio of (x) the Cash Flow Available for Debt Service for such Individual Property for the twelve (12) month period ending with the last day of the last full month prior to such Condemnation for which Lender shall have received financial reports for such Individual Property pursuant to Section 5.1(k) (iv) to (y) the aggregate amount of payments for principal and interest that would be payable over the twelve (12) months following the date of such Condemnation in order to amortize the current Allocable Principal Balance for such Individual Property, with interest at the Interest Rate, over the period from the date of such Condemnation to the Maturity Date shall be at least equal to 1.53/1.0, unless in such case Borrowers shall elect not to perform such restoration and construction, and (iii) the remainder of the Individual Property is, in Lender's reasonable judgment, susceptible to being restored or reconstructed to a satisfactory economic value, and (iv) no Default or Event of Default shall have occurred and be continuing and (v) Borrowers shall have deposited with Lender an amount equal to the difference between the cost of such restoration and reconstruction, as reasonably estimated by Lender, and the amount of Insurance Proceeds to be made available by Lender to pay such costs. If such Condemnation Proceeds are less than $100,000, Lender shall pay such Condemnation Proceeds over to the Borrower in question upon receipt of an Officer's Certificate stating the costs of such Restoration to which such Condemnation Proceeds shall be applied. If the Condemnation Proceeds equal or exceed $100,000 and are to be made available to pay the costs of such restoration and reconstruction, such Condemnation Proceeds shall be paid by Lender to, or as directed by, the applicable Borrower, less retainage customary in the area where such Individual Property is located, from time to time during the course of such restoration and reconstruction (but not more frequently than once per calendar month), upon (x) receipt of a written request for such disbursement by the applicable Borrower accompanied by an Officer's Certificate (or if the cost of such restoration and reconstruction shall exceed $250,000, a certificate of an Engineer) stating that (1) all materials installed and work and labor performed to date (except to the extent they are to be paid for out of the requested payment) in connection with such restoration and reconstruction have been paid for in full, and (2) no mechanics' or other Liens on the applicable Individual Property arising out of such restoration and reconstruction exist which have not been bonded or otherwise -73- discharged or released, together with such other evidence of the foregoing as Lender may request and (y) compliance with such other reasonable conditions as Lender may from time to time impose. (c) Any amount of Condemnation Proceeds that Lender does not elect, or is not required, to make available to Borrowers, or that remains after payment of the costs of any restoration or reconstruction, shall be applied as provided in Section 2.7.8(b). (d) Notwithstanding any Condemnation (including but not limited to any transfer made in lieu of or in anticipation of the exercise of such taking), Borrower shall continue to pay the Loan at the time and in the manner provided for its payment in the Note and the Loan shall not be reduced until any Condemnation Proceeds shall have been actually received and applied by Lender, after the deduction of expenses of collection as provided above, to the reduction of the Indebtedness, if permitted hereunder. Lender shall not be limited to the interest paid on the award by the condemning authority but shall be entitled to receive out of the award interest at the rate or rates provided in the Note. If the Individual Property subject to the Condemnation proceeding is sold, through foreclosure or otherwise, prior to the receipt by Lender of such Condemnation Proceeds, Lender shall have the right, notwithstanding the limitations on recourse under the Loan Documents and whether or not a deficiency judgment on the Note shall have been sought, recovered, denied or available hereunder, to receive said Condemnation proceeds, or a portion thereof sufficient to pay the Indebtedness. Section 7.3 Required Repairs. Borrowers shall promptly commence and diligently continue the Required Repairs at each Individual Property, provided that Long-Term Required Repairs shall be commenced as may be reasonably required to permit the completion thereof by the dates required pursuant to the following sentence. It shall be an Event of Default under this Agreement if Borrower does not complete the Short-Term Required Repairs at each Individual Property by the first (1st) anniversary of the Closing Date (except as set forth on Schedule E with respect to certain Short-Term Required Repairs at the Individual Property identified on Schedule D as the Holiday Inn Meadowlands located in Washington, Pennsylvania) or, with respect to any Long-Term Required Repair by the first to occur of (a) the fifth (5th) anniversary of the Closing Date or (b) the date by which such Long-Term Required Repair may be required to be completed pursuant to any applicable Franchise Agreement. -74- Section 7.4 FF&E Replacements. 7.4.1 Performance of FF&E Replacements. (a) Borrowers shall make FF&E Replacements when required by sound hotel management practices in order to keep each Individual Property in condition and repair consistent with requirements under the applicable Franchise Agreements and Borrowers' standards and practices as of the Closing Date, but in any event not below prevailing standards for hotel properties of similar age, size, construction and the then-current franchise affiliation in the metropolitan area in which the respective Individual Property is located, and to keep each Individual Property from deteriorating. Borrowers shall complete all FF&E Replacements in a good and workmanlike manner as soon as practicable following the commencement of making each such FF&E Replacement. (b) Upon Lender's request, Borrowers shall deliver copies of, and assign to Lender any contract or subcontract relating to such FF&E Replacements. (c) Borrowers shall permit Lender and Lender's agents and representatives (including, without limitation, Lender's engineer, architect, or inspector) to enter onto each Individual Property, upon reasonable prior notice, during normal business hours (subject to the rights of tenants under their leases) to inspect the progress of any FF&E Replacements and all material being used in connection therewith and to examine all plans and shop drawings relating to such FF&E Replacements which are or may be kept at each Individual Property. Borrowers shall cause all contractors and subcontractors to cooperate with Lender and such agents and representatives in connection with such inspections. (d) In the event Lender determines, in its reasonable discretion, that any FF&E Replacement is not being performed in a workmanlike or timely manner or that any FF&E Replacement has not been completed in a workmanlike manner and timely manner, Lender may elect to withhold disbursement under Section 2.7.7(e) for such unsatisfactory FF&E Replacement and, if Borrowers have failed to remedy any deficiencies in the performance of such FF&E Replacement within fifteen (15) days after notice thereof by Lender, to proceed under existing contracts or to contract with third parties to complete such FF&E Replacement and to apply any funds in the FF&E Sub-Account toward the costs to complete such FF&E Replacement, upon five (5) Business Days' prior written notice. (e) In order to facilitate Lender's making the FF&E Replacements pursuant to subsection (d) above, Borrowers grant Lender the right to enter onto any Individual Property and perform any and all work and acquire all materials necessary to complete or make the FF&E Replacements and/or employ watchmen to protect such Individual Property from damage. All sums so expended Lender shall be deemed to have been advanced under -75- the Loan to Borrowers and secured by the Mortgage encumbering such Individual Property. For this purpose each Borrower constitutes and appoints Lender its true and lawful attorney-in-fact with full power of substitution to complete or undertake the FF&E Replacements in the name of such Borrower pursuant to subsection (d) above. Such power of attorney shall be deemed to be a power coupled with an interest and cannot be revoked. Each Borrower empowers said attorney-in-fact as follows: (i) to use any funds in the FF&E Sub-Account for the purpose of making or completing the FF&E Replacements; (ii) to make such additions, changes and corrections to the FF&E Replacements as shall be necessary or desirable to complete the FF&E Replacements; (iii) to employ such contractors, subcontractors, agents, architects and inspectors as shall be required for such purposes; (iv) to pay, settle or compromise all existing bills and claims which are or may become Liens against any Individual Property, or as may be necessary or desirable for the completion of the FF&E Replacements; (v) to execute all applications and certificates in the name of such Borrower which may be required by any contract documents relating to such FF&E Replacements; (vi) to prosecute and defend all actions or proceedings relating to the FF&E Replacements in connection with any Individual Property; and (vii) to do any and every act which such Borrower might do in its own behalf to fulfill the terms of this Agreement relating to the FF&E Replacements. (f) In addition to any other insurance required under the Loan Documents, Borrowers shall provide or cause to be provided workmen's compensation insurance, builder's risk, and public liability insurance and other insurance to the extent required by Legal Requirements in connection with a particular FF&E Replacement. All such policies shall be in form and amount reasonably satisfactory to Lender. (g) All FF&E Replacements shall be constructed, installed or completed, as applicable, free and clear of all mechanic's, materialman's or other Liens and in compliance with all Legal Requirements and all Insurance Requirements. (h) Nothing in this Section 7.4.1 nor the exercise by Lender of its rights hereunder shall: (i) require Lender to expend funds in addition to such funds as may be on deposit from time to time in the FF&E Sub-Account to make or complete any FF&E Replacements; (ii) obligate Lender to make or complete any FF&E Replacements; (iii) obligate Lender to demand from Borrowers additional sums to make or complete any FF&E Replacements; or (iv) be construed as constituting Lender a "mortgagee in possession" of any Individual Property. (i) It shall be an Event of Default under this Agreement if Borrowers fail to comply with any provision of this Section 7.4.1. and such failure is not cured within ten (10) days after notice from Lender or, if such failure is not reasonably susceptible to cure within such ten (10) day period, if Borrowers -76- shall fail to commence to cure such failure within such ten (10) day period or to complete such cure within such longer period, not to exceed sixty (60) days or, if such cure shall require construction, one hundred eighty (180) days, except as such 180-day period may be extended to the extent Borrowers' cure of such failure is prevented by fire or other casualty, acts of God, strike or other labor trouble of general application (but not a labor dispute directed particularly at any Borrower or Borrowers) or similar event (excluding financial difficulties of Borrower) beyond the control of Borrowers, as may be required to complete the same with reasonable diligence. 7.4.2 Indemnification. Borrowers shall indemnify Lender and hold Lender harmless from and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations, costs and expenses (including litigation costs and reasonable attorneys fees and expenses) arising from or in any way connected with the performance of the FF&E Replacements, except for any such actions, suits, claims, demands, liabilities, losses, damages, obligations, costs and expenses arising solely out of the willful misconduct or gross negligence of Lender. Borrowers shall assign to Lender all rights and claims Borrowers may have against all persons or entities supplying labor or materials in connection with the FF&E Replacements; provided, however, that Lender may not pursue any such right or claim unless an Event of Default has occurred and remains uncured. Section 7.5 Inspections. Without limiting any other rights provided to Lender under the Loan Documents, Lender shall have the right to inspect each Individual Property, at Borrowers' expense (a) once during any DSCR Restricted Period and (b) after receipt of any report indicating that such Individual Property has failed an inspection by the applicable Franchisor. VIII. DEFAULTS Section 8.1 Event of Default. (a) Each of the following events occurring with respect to Borrowers, any Borrower, the Properties or any Individual Property shall constitute an "Event of Default" hereunder: (i) if Borrowers fail to make any payment required to fund the Debt Service Payment Sub-Account, the Basic Carrying Costs Sub-Account, the FF&E Sub-Account and, during any Operative Period and any DSCR Restricted Period, the Operations and Maintenance Expense Sub-Account, in full on any Due Date and such failure continues for two (2) days, provided that if such grace -77- period shall end on a day other than a Business Day, such grace period shall be extended to the next Business Day; (ii) if Borrowers fail to pay all or any portion of the principal amount of the Loan on the Maturity Date; (iii) if Borrowers fail to pay any amount (other than amounts that may be referred to in clauses (i) and (ii) above) payable by Borrowers pursuant to this Agreement or any other Loan Document when due and such failure continues for five (5) days after Lender delivers written notice thereof to Borrowers, provided that if such grace period shall end on a day other than a Business Day, such grace period shall be extended to the next Business Day; (iv) the continuation of any Franchise Restricted Period for ninety (90) days; (v) if any representation or warranty made by any Borrower herein or in any other Loan Document, or in any report, certificate, financial statement or other instrument, agreement or document furnished by Borrowers in connection with this Agreement or any other Loan Document, shall be misleading in any material respect as of the date representation or warranty was made and such misleading respect shall not have been remedied within fifteen (15) days of the earlier of discovery by Borrowers or written notice by Lender; (vi) if any Borrower or any general partner of any Borrower shall make an assignment for the benefit of creditors; (vii) if a receiver, liquidator or trustee shall be appointed for any Borrower or any general partner of any Borrower or if any Borrower or any general partner of any Borrower shall be adjudicated a bankrupt or insolvent, or if any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by or against, consented to, or acquiesced in by, any Borrower or any general partner of any Borrower, or if any proceeding for the dissolution or liquidation of any Borrower or any general partner of any Borrower shall be instituted; provided, however, if such appointment, adjudication, petition or proceeding was involuntary and not consented to by such Borrower or such general partner, upon the same not being discharged, stayed or dismissed within thirty (30) days, or if any Borrower or any general partner of any Borrower shall generally not be paying its debts as they become due; (viii) if any Borrower attempts to (A) assign its respective rights under this Agreement or any of the other Loan Documents or any interest herein or therein or (B) transfer its Individual Property or any interest therein in contravention of the Loan Documents; -78- (ix) if any Borrower breaches any of its covenants contained in Section 6.1 or any covenant contained in Section 4.l(dd) hereof and such breach is not remedied within five (5) days of written notice by Lender; (x) if an Event of Default as defined or described in the Note, the Mortgage or any of the other Loan Documents occurs, whether as to any Borrower or its Individual Property or as to Borrowers or all or any portion of the Properties; (xi) if Borrowers, or any Borrower shall continue to be in Default under any of the other terms, covenants or conditions of this Agreement or any other Loan Document, for ten (10) days after written notice from Lender, in the case of any default which can be cured by the payment of a sum of money, or for thirty (30) days after notice from Lender in the case of any other default; provided, however, that if such non-monetary default is susceptible of cure but cannot reasonably be cured within such 30-day period and provided further that Borrowers shall have commenced to cure such default within such 30-day period and thereafter diligently and expeditiously proceeds to cure the same, such 30-day period shall be extended for such time as is reasonably necessary for Borrowers in the exercise of due diligence to cure such default, such additional period not to exceed sixty (60) days or, if such cure shall require construction, one hundred eighty (180) days, except as such 180-day period may be extended to the extent Borrowers' cure of such default is prevented by fire or other casualty, acts of God, strike or other labor trouble of general application (but not a labor dispute directed particularly at any Borrower or Borrowers) or similar event (excluding financial difficulties of Borrower) beyond the control of Borrowers, as may be required to complete the same with reasonable diligence; (xii) if the Policies required to be procured and maintained by Borrowers are not so procured and maintained in accordance with the terms hereof; or (xiii) if Borrowers shall fail to complete the Required Repairs as required under Section 7.3 (b) Upon the occurrence of an Event of Default (other than an Event of Default described in clauses (vi), (vii) or (viii) above) and at any time thereafter the Lender may, in addition to any other rights or remedies available to it pursuant to this Agreement and. the other Loan Documents or at law or in equity, take such action, without notice or demand, that Lender deems advisable to protect and enforce its rights against any one or more of the Borrowers and in and to all or any of the Properties, including, without limitation, giving notice to Borrowers that the Indebtedness is immediately due and payable, and Lender may enforce or avail itself of any or all rights or remedies provided in the Loan Documents against any one or more of the Borrowers and any or all of the Properties, including, -79- without limitation, all rights or remedies available at law or in equity. Upon any Event of Default described in clauses (vi), (vii) or (viii) above, the Indebtedness shall immediately and automatically become due and payable, without notice or demand, and Borrowers hereby expressly waive any such notice or demand, anything contained herein or in any other Loan Document to the contrary notwithstanding. Section 8.2 Remedies. (a) Upon the occurrence of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to Lender against Borrowers under this Agreement or any of the other Loan Documents or at law or in equity may be exercised by Lender at any time and from time to time, whether or not all or any of the Indebtedness shall be declared due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to all or any of the Individual Properties. Any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in such order as Lender may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein or in the other Loan Documents. (b) With respect to Borrowers and the Properties, nothing contained herein or in any other Loan Document shall be construed as requiring Lender to resort to any Individual Properties for the satisfaction of any of the Indebtedness in preference or priority to any other such Individual Properties, and Lender may seek satisfaction out of all such Individual Properties or any part thereof, in its absolute discretion, in respect of the Indebtedness. Section 8.3 Remedies Cumulative. The rights, powers and remedies of Lender under this Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender may have against Borrower pursuant to this Agreement or the other Loan Documents, or existing at law or in equity or otherwise. Lender's rights, powers and remedies may be pursued singly, concurrently or otherwise, at such time and in such order as Lender may determine in Lender's sole discretion. No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be -80- deemed expedient. A waiver of one default or Event of Default with respect to any one or more of Borrowers shall not be construed to be a waiver of any such default or Event of Default with respect to any other Borrowers or with respect to any subsequent default or Event of Default by such Borrower or Borrowers or any other Borrowers, or to impair any remedy, right or power consequent thereon. IX. MISCELLANEOUS Section 9.1 Survival. This Agreement and all covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto shall survive the making by Lender of the Loan and the execution and delivery to Lender of the Note, and shall continue in full force and effect so long as all or any of the Indebtedness of Borrowers is outstanding and unpaid. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party. All covenants, promises and agreements contained in this Agreement shall be binding upon, and shall inure to the benefit of, Lender, together with its successors and assigns, and Borrowers, together with their permitted successors and assigns. Section 9.2 Lender's Discretion. Whenever pursuant to this Agreement, Lender exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Lender, the decision of Lender to approve or disapprove or to decide whether arrangements or terms are satisfactory or not satisfactory shall (except as is otherwise specifically herein provided) be in the sole discretion of Lender and shall be final and conclusive. Section 9.3 Governing Law. (a) This Agreement was negotiated in the State of New York, and made by Lender and accepted by Borrowers in the State of New York, and the proceeds of the Note delivered pursuant hereto shall be disbursed from the State of New York, which State the parties agree has a substantial relationship to the parties and to the underlying transaction embodied hereby, and in all respects, including, without limiting the generality of the foregoing, matters of construction, validity and performance, this Agreement and the obligations arising hereunder shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and performed in such State and any applicable law of the United States of -81- America, except that at all times the provisions for the creation, perfection, and enforcement of the liens and security interests created pursuant hereto and pursuant to the other Loan Documents shall be governed by and construed according to the law of the State in which the applicable Individual Property is located, it being understood that, to the fullest extent permitted by the law of such State, the law of the State of New York shall govern the validity and the enforceability of all Loan Documents and all of the Indebtedness or obligations arising hereunder or thereunder. To the fullest extent permitted by law, Borrowers hereby unconditionally and irrevocably waive any claim to assert that the law of any other jurisdiction governs this Agreement and the Note, and this Agreement and the Note shall be governed by and construed in accordance with the laws of the State of New York pursuant to Section 5-1401 of the New York General Obligations Law. (b) Any suit, action or proceeding against Lender or any Borrower or Borrowers arising out of or relating to this Agreement shall be instituted in any federal or state court in New York, New York, pursuant to Section 5-1402 of the New York General Obligations Law, or, at Lender's discretion, in any State where any Individual Property is located, and each Borrower waives any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding, and each Borrower hereby irrevocably submits to the jurisdiction of any such court in any suit, action or proceeding. Borrowers do hereby designate and appoint C.T. Corporation System, 1633 Broadway, New York, New York 10019, as its authorized agent to accept and acknowledge on its behalf service of any and all process which may be served in any such suit, action or proceeding in any federal or state court in New York, New York, and agrees that service of process upon said agent at said address and written notice of said service of Borrowers mailed or delivered to Borrowers in the manner provided herein shall be deemed in every respect effective service of process upon Borrowers, in any such suit, action or proceeding in the State of New York. Borrowers (i) shall give prompt notice to Lender of any changed address of its authorized agent hereunder, (ii) may at any time and from time to time designate a substitute authorized agent with an office in New York, New York (which office shall be designated as the address for service of process), provided that all Borrowers shall have the same authorized agent with the same address, and (iii) shall promptly designate such a substitute if its authorized agent ceases to have an office in New York, New York or is dissolved without leaving a successor. Section 9.4 Modification, Waiver in Writing. No modification, amendment, extension, discharge, termination or waiver of any provision of this Agreement, or of the Note, or of any other Loan Document, nor consent to any -82- departure by Borrowers therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then any such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to, or demand on Borrowers, shall entitle Borrowers to any other or future notice or demand in the same, similar or other circumstances. Section 9.5 Delay Not a Waiver. Neither any failure nor any delay on the part of Lender in insisting upon strict performance of any term, condition, covenant or agreement, or exercising any right, power, remedy or privilege hereunder, under the Note or under any other Loan Document, or any other instrument given as security therefor, shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege. In particular, and not by way of limitation, by accepting payment after the date on which the same is due of any amount payable under this Agreement, the Note or any other Loan Document, Lender shall not be deemed to have waived any right either to require prompt payment when due of all other amounts due under this Agreement, the Note or the other Loan Documents, or to declare a default for failure to effect prompt payment of any such other amount. Section 9.6 Notices. All notices, consents, approvals and requests required or permitted hereunder or under any other Loan Document shall be given in writing and shall be effective for all purposes if hand delivered or sent by (a) certified or registered United States mail, postage prepaid, return receipt requested, or (b) nationally recognized overnight delivery service, either commercial or United States Postal Service, with proof of attempted delivery, addressed if to Lender at its address set forth on the first page hereof, and if to Borrowers to Borrowers' address set forth on the first page hereof, or at such other address and person as shall be designated from time to time by any party hereto, as the case may be, in a written notice to the other parties hereto in the manner provided for in this Section. A copy of all notices, consents, approvals and requests directed to Borrower shall be delivered to Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A., 150 West Flagler Street, Suite 2200, Miami, Florida 33130, Attention: Alison W. Miller, Esq. A notice shall be deemed to have been given: in the case of hand delivery, at the time of delivery; in the case of registered or certified mail, when delivered or upon the first attempted delivery on a Business Day; or in the case of overnight delivery -83- service, when delivered or upon the first attempted delivery on a Business Day. Section 9.7 Trial by Jury. EACH BORROWER, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT BY ANY PARTY HERETO WITH RESPECT TO THIS AGREEMENT, THE NOTE, OR THE OTHER LOAN DOCUMENTS. Section 9.8 Headings. The Article and/or Section headings and the Table of Contents 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 9.9 Successors and Assigns; Assignment. This Agreement shall be binding upon and shall inure to the benefit of each party hereto and their respective permitted successors and assigns. Lender shall have the right, upon notice to Borrowers, to transfer, sell or assign this Agreement and any of the other Loan Documents and the obligations hereunder to any Person who purchases or otherwise acquires an interest in the Loan. Section 9.10 Severability. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. Section 9.11 Preferences. Lender shall have the continuing and exclusive right to apply or reverse and reapply any and all payments by Borrowers to any portion of the obligations of Borrowers hereunder. To the extent Borrowers make a payment or payments to Lender, which payment or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or -84- proceeds received, the obligations hereunder or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or proceeds had not been received by Lender. Section 9.12 Waiver of Notice. Borrowers shall not be entitled to any notices of any nature whatsoever from Lender except with respect to matters for which (a) this Agreement or the other Loan Documents specifically and expressly provide for the giving of notice by Lender to Borrowers and (b) Borrowers are not, pursuant to applicable law, permitted to waive the giving of notice. To the extent permitted by Applicable Law, Borrowers hereby expressly waive the right to receive any notice from Lender with respect to any matter for which this Agreement or the other Loan Documents do not specifically and expressly provide for the giving of notice by Lender to Borrowers. Section 9.13 Intentionally Deleted. Section 9.14 Expenses; Indemnity. Borrowers covenant and agree to reimburse Lender upon receipt of written notice from Lender for all reasonable costs and expenses (including reasonable attorneys' fees and disbursements) incurred by Lender in connection with (i) the negotiation, preparation, execution, delivery and administration of any consents, amendments, waivers or other modifications to this Agreement and the other Loan Documents and any other documents or matters requested by Borrower; (ii) the filing and recording fees and expenses, title insurance and other similar expenses incurred in creating and perfecting the Liens in favor of Lender pursuant to this Agreement and the other Loan Documents; (iii) enforcing or preserving any rights, in response to third party claims or the prosecuting or defending of any action or proceeding or other litigation, in each case against, under or affecting Borrowers, this Agreement, the other Loan Documents, the Properties, or any other security given for the Loan; and (iv) enforcing any obligations of or collecting any payments due from Borrowers under this Agreement, the other Loan Documents or with respect to the Properties or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a "work-out" or of any insolvency or bankruptcy proceedings; provided, however, that Borrowers shall not be liable for the payment of any such costs and expenses to the extent the same arise by reason of the gross negligence, illegal acts, fraud or willful misconduct of Lender. -85- Section 9.15 Exhibits Incorporated. The Exhibits and Schedules annexed hereto are hereby incorporated herein as a part of this Agreement with the same effect as if set forth in the body hereof. Section 9.16 Offsets, Counterclaims and Defenses. Any assignee of Lender's interest in and to this Agreement, the Note and the other Loan Documents shall take the same free and clear of all offsets, counterclaims or defenses which Borrowers may have against any assignor of such documents that are unrelated to the Loan, and no such unrelated counterclaim or defense shall be interposed or asserted by Borrowers in any action or proceeding brought by any such assignee upon such documents and any such right to interpose or assert any such unrelated offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by each Borrower. Section 9.17 No Joint Venture or Partnership. Borrowers and Lender intend that the relationships created hereunder and under the other Loan Documents be solely that of borrower and lender. Nothing herein or therein is intended to create a joint venture, partnership, tenancy-in-common, or joint tenancy relationship between Borrowers and Lender nor to grant Lender any interest in the Properties other than that of mortgagee or lender. Section 9.18 Publicity. All news releases, publicity or advertising by Borrowers or their Affiliates through any media intended to reach the general public which refers to the Loan Documents or the Loan, to the Lender, the Loan Purchaser, the Depositor, the Servicer or the Trustee shall be subject to the prior written approval of Lender, provided that Lender shall have no right to prevent Borrowers from making any news releases, filings or statements required by Legal Requirements. Section 9.19 Waiver of Marshalling of Assets. To the fullest extent Borrowers may legally do so, each Borrower waives all rights to a marshalling of the assets of such Borrower, such Borrower's partners, if any, and others with interests in Borrower, and of such Borrower's Individual Property, and to a marshalling of the assets of any other Borrower, its partners or others with interests therein and of the other Properties, or to a sale in inverse order of alienation in the event of foreclosure of the interests hereby created, and -86- agrees not to assert any right under any laws pertaining to the marshalling of assets, the sale in inverse order of alienation, homestead exemption, the administration of estates of decedents, or any other matters whatsoever to defeat, reduce or affect the right of Lender under the Loan Documents to a sale of the applicable Individual Properties for the collection of the Indebtedness without any prior or different resort for collection, or the right of Lender or any deed of trust trustee to the payment of the Indebtedness out of the net proceeds of the Individual Property in preference to every other claimant whatsoever. Section 9.20 Waiver of Counterclaim. Each Borrower hereby waives the right to assert a counterclaim, other than a compulsory counterclaim, in any action or proceeding brought against it by Lender or its agents, including, without limitation, any Servicer. Section 9.21 Conflict; Construction of Documents. In the event of any conflict between the provisions of this Agreement and any of the other Loan Documents, the provisions of this Agreement shall control. The parties hereto acknowledge that they were represented by counsel in connection with the negotiation and drafting of the Loan Documents and that such Loan Documents shall not be subject to the principle of construing their meaning against the party which drafted same. Section 9.22 Brokers and Financial Advisors. Each Borrower hereby represents that it has dealt with no financial advisors, brokers, underwriters, placement agents, agents or finders in connection with the transactions contemplated by this Agreement other than the Blackstone Group L.P. and Donaldson, Lufkin & Jenrette Securities Corporation, which Borrower will pay pursuant to separate agreements. Each of Borrowers and Lender hereby agree to indemnify and hold the other harmless from and against any and all claims, liabilities, costs and expenses of any kind in any way relating to or arising from a claim by any other Person that such Person acted on behalf of the indemnifying party in connection with the transactions contemplated herein. The provisions of this Section 9.22 shall survive the expiration and termination of this Agreement and the repayment of the Indebtedness. Section 9.23 Prior Agreements. This Agreement and the other Loan Documents contain the entire agreement of the parties hereto and thereto in respect of the transactions contemplated hereby and thereby, and all prior agreements among or between such parties, whether oral or -87- written, including, without limitation, the Commitment Letter dated July 19, 1994 between DLJ Mortgage Capital, Inc. and Servico, Inc., and those certain supplemental letters dated August 19, 1994 and August 29, 1994 by DLJ Mortgage Capital, Inc. to Servico Hotels & Resorts (together with any subsequent term sheets, supplemental letters or amendments, the "Term Sheet") are superseded by the terms of this Agreement and the other Loan Documents, except for the provisions of Schedule I of the Term Sheet, as the same may be amended, which shall survive the execution and delivery of this Agreement and the other Loan Documents. Section 9.24 Joint and Several. The obligations and liabilities of Borrowers, and of each Borrower hereunder, shall be joint and several. Section 9.25 Appointment of Servicer. Lender may appoint a Servicer to administer the Loan, which Servicer shall have the power and authority to exercise all of the rights and remedies of Lender and to act as agent of Lender hereunder and under the Note, the Mortgage and the other Loan Documents. Upon receipt of notice of the appointment of Servicer, Borrowers shall recognize Servicer as the agent of Lender and shall make all payments and deliver all notices as directed by Servicer and accept all notices from Servicer hereunder. Section 9.26 Exculpation. Notwithstanding any provision herein or in any of the Loan Documents (other than the Environmental Indemnity) to the contrary, in any action brought to enforce the obligations of Borrowers under the Note, this Agreement, the Mortgage or the other Loan Documents (other than the Environmental Indemnity), the judgment or decree shall be enforceable against Borrowers only to the extent of their respective interests in the Properties and any other collateral given to Lender to secure Borrowers' obligations hereunder, and any such judgment shall not be subject to execution on, nor be a lien on, other assets of Borrowers other than their respective interests in the Properties and any other Collateral given to Lender to secure the Borrowers' obligations hereunder, except as otherwise expressly provided hereinafter. The provisions of this paragraph shall not, however, limit the liability of Borrowers for loss, costs or damage arising out of the following matters: (i) any failure to apply the Revenue of the Properties to pay the operating expenses of the Properties or to fulfill the then current obligations of Borrowers under this Agreement, the Note, the Mortgage or any other Loan Document; (ii) any misapplication of Loss Proceeds, security deposits or trust funds in violation of applicable law or the provisions of this Agreement, the Mortgage or any other Loan Document; (iii) any collection of Rent for more than one -88- month in advance of the time when the same becomes due; (iv) failure to pay all Impositions prior to the date on which such payments become delinquent (subject to Lender's obligation to make disbursements from the Basic Carrying Costs Sub-Account); (v) any willful misrepresentation by any Borrower (or any constituent partner or shareholder of any Borrower) in connection with Borrowers' application, negotiation or documentation of the Loan; or (vi) a fraudulent conveyance or a fraudulent transfer of the Properties or any part thereof or any other properties or assets of any Borrower; (vii) any material misrepresentation or breach of warranty or covenant made by any Borrower under the Environmental Indemnity. Nothing herein shall be deemed (w) to be a waiver of any right which Lender may have under any bankruptcy law of the United States or of any State in which any part of the Properties are located to file a claim for the full amount of the Loan or to require that all of the Properties and any other collateral securing the Loan shall continue to secure all of the Indebtedness; (x) to impair the validity of the Indebtedness; (y) to impair the right of Lender as mortgagee or secured party to foreclose any Lien or (z) impair the right of Lender to obtain the Recourse Distributions received by Borrowers, including, without limitation, the right to proceed against any constituent partner or shareholder of any Borrower to the extent any such Recourse Distribution has actually theretofore been distributed to such constituent partner or shareholder. The provisions of this Section 9.26 shall be inapplicable to any Borrower if any petition for bankruptcy, reorganization or arrangement pursuant to federal or state law shall be filed by, consented to or acquiesced in by or with respect to such Borrower or if such Borrower shall institute any proceeding for the dissolution or liquidation of such Borrower or if such Borrower shall make an assignment for the benefit of creditors, in which event Lender shall have recourse against all of the assets of such Borrower and the Recourse Distributions received by the constituent partners and shareholders of such Borrower. For purposes of this Section 9.26, the term "Recourse Distributions" shall mean the Revenue arising from the Properties to the extent received by any Borrower (or actually received by any partner or shareholder of any Borrower if not actually received by any Borrower) after the occurrence and written notice (including any Consultant's Notice) of an Event of Default. Section 9.27 Arizona Interest. Borrowers agree that, for the purposes of Arizona law, the effective rate of interest shall be the Interest Rate stated in the Note plus any additional rate of interest resulting from any other charges in the nature of interest paid or to be paid in connection with this Loan Agreement, the Note and the other Loan Documents. All fees, charges, goods and things in action or any other sums or things of value, other than the interest resulting from the Interest Rate and the Default Rate, as applicable, paid or payable by Maker (collectively, the "Additional Sums"), -89- whether pursuant to this Loan Agreement, the Note, the Loan Documents or any other document or instrument in any way pertaining to this lending transaction, or otherwise with respect to this lending transaction, shall, for the purpose of any laws of the State of Arizona that may limit the maximum amount of interest to be charged with respect to the Loan transaction, be payable by the Borrowers as, and shall be deemed to be, additional interest, and for such purposes only, the agreed upon and "contracted for rate of interest" of the Loan shall be deemed to be increased by the rate of interest resulting from the Additional Sums. Borrowers understand and believe that the Loan complies with the usury laws of the State of Arizona; however, for the purposes of Arizona law, if any interest or other charges in connection with this lending transaction are ever determined to exceed the maximum amount permitted by law, then Borrowers agree that (a) the amount of interest or charges payable pursuant to this lending transaction shall be reduced to the maximum amount permitted by law and (b) any excess amount previously collected from Borrower in connection with this lending transaction that exceeded the maximum amount permitted by law, will be credited against the principal balance then outstanding hereunder as provided in the Note. If the outstanding principal balance hereunder has been paid in full, the excess amount paid will be refunded to Borrower. -90- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized representatives, all as of the day and year first above written. LENDER: COLUMN FINANCIAL, INC. By: /s/ Kieran P. Quinn ----------------------------------- Name: KIERAN P. QUINN Title: Vice President & COO BORROWERS: SERVICO FORT WAYNE, INC., a Florida corporation By: /s/ David Buddemeyer ----------------------------------- David Buddemeyer, President WASHINGTON MOTEL ENTERPRISES, INC., a Pennsylvania corporation By: /s/ David Buddemeyer ----------------------------------- David Buddemeyer, President SERVICO HOTELS III, INC., a Florida corporation By: /s/ David Buddemeyer ----------------------------------- David Buddemeyer, President SERVICO HOTELS IV, INC., a Florida corporation By: /s/ David Buddemeyer ----------------------------------- David Buddemeyer, President -91- NEW ORLEANS AIRPORT MOTEL ASSOCIATES, LTD. a Florida limited partnership By New Orleans Airport Motel Enterprises, Inc., a Louisiana corporation By: /s/ David Buddemeyer ------------------------------- David Buddemeyer President WILPEN, INC., a Pennsylvania corporation By: /s/ David Buddemeyer ----------------------------------- Name: David Buddemeyer, President HILTON HEAD MOTEL ENTERPRISES, INC., a South Carolina corporation By: /s/ David Buddemeyer ----------------------------------- Name: David Buddemeyer, President SERVICO HOTELS I, INC., a Florida corporation By: /s/ David Buddemeyer ----------------------------------- Name: David Buddemeyer, President SERVICO HOTELS II, INC., a Florida corporation By: /s/ David Buddemeyer ----------------------------------- Name: David Buddemeyer, President MOON AIRPORT MOTEL, INC., a Pennsylvania corporation By: /s/ David Buddemeyer ----------------------------------- Name: David Buddemeyer, President -92- EX-10.1.2 9 g87458exv10w1w2.txt EX-10.1.2 PROMISSORY NOTE Exhibit 10.1.2 PROMISSORY NOTE U.S. $60,500,000 Executed and Delivered in the City of New York, New York As of January 31, 1995 1. FOR VALUE RECEIVED, the undersigned parties, having an address at Servico Centre South , 1601 Belvedere Road, West Palm Beach, Florida 33406 (each, a "Maker" and collectively, "Makers"), promise to pay to the order of COLUMN FINANCIAL, INC., a Delaware corporation, having an office at 3414 Peachtree Road, N.E., Suite 1140, Atlanta, Georgia 30326-1113, or its successors or assigns (collectively, the "Payee"), the principal sum of SIXTY MILLION FIVE HUNDRED THOUSAND Dollars ($60,500,000), in lawful money of the United States of America with interest thereon from the date of this Note at the Interest Rate (hereinafter defined). 2. The interest rate (the "Interest Rate") shall be Ten and 59/100ths (10.59%) percent per annum. Interest on the principal sum of this Note shall be calculated on the basis of a 360 day year consisting of twelve (12) months of thirty (30) days each. However, interest due and payable for a period of less than a full calendar month shall be calculated by multiplying the actual number of days elapsed in such period by a daily rate based on a 360-day year. 3. Makers shall make (a) a payment of interest only in the amount of Four Hundred Sixty Two Thousand Seven Hundred Twenty Four and 17/100ths Dollars ($462,724.17) on March 1, 1995 and (b) thereafter monthly payments of principal and interest on the unpaid principal balance, payable in arrears, in the amount of Six Hundred Seven Thousand Six Hundred Eighty One and 78/100ths Dollars ($607,681.78) on the first Business Day (as hereinafter defined) of each calendar month (the "Due Date"). The unpaid principal sum and all interest thereon and all other sums and fees then payable under this Note shall be due and payable on the first Business Day of March, 2010 (the "Maturity Date"). All payments under this Note shall be paid directly into the Central Account (as defined in the Loan Agreement (as hereinafter defined)) by wire transfer of immediately available funds to: The First National Bank of Chicago Chicago, Illinois ABA #071000013 Credit Clearing A/C No. BNF=7521-7623/DES Ref: 192023932/LSU or to such other designated bank or place, or in such other manner, as Payee may reasonably specify in writing from time to time. The term "Business Day" shall mean any day other than a Saturday, Sunday or any other day on which national banks in New York, New York are not open for business. 4. The whole of the principal sum of this Note, together with all interest accrued and unpaid thereon, and all other sums and fees payable hereunder and under the Loan Agreement, the Mortgage (as hereinafter defined) and the other Loan Documents (as defined in the Loan Agreement) (such amounts hereinafter collectively referred to as the "Indebtedness") shall become immediately due and payable at the option of Payee on the happening of any Event of Default (as defined in the Loan Agreement), subject to Section 8.1(b) of the Loan Agreement. 5. (a) The outstanding principal balance of this Note may not be prepaid, in whole or in part, on or prior to the fourth anniversary of the date hereof (the "Lock-Out Date"), except in connection with the application by Lender of (i) any Loss Proceeds (as defined in the Loan Agreement) to the principal amount of the Indebtedness pursuant to Section 2.7.8 of the Loan Agreement, including any payments made with respect to a release of any Individual Property (as defined in the Loan Agreement) from the lien of the Mortgage pursuant to Section 2.7.8(d) of the Loan Agreement in connection with such application of Loss Proceeds, (ii) any amounts on deposit in the Capital Expenditure Sub-Account to the Indebtedness during any DSCR Restricted Period or Franchise Restricted Period (as such terms are defined in the Loan Agreement) pursuant to Section 2.7.7(f) of the Loan Agreement, (iii) any amounts on deposit in the Curtailment Reserve Fund Sub-Account to the Indebtedness during any Operative Period (as such terms are defined in the Loan Agreement) pursuant to Section 2.7.7(g) of the Loan Agreement and (iv) any prepayments of the outstanding principal amount of the Indebtedness made pursuant to the Mortgage in connection with a change in control of Servico, Inc. After the Lock-Out Date, and provided that no Event of Default shall have occurred and be continuing under the Loan Documents, Makers may, on any Due Date, upon not less than thirty (30) days prior written notice to Payee, prepay the principal amount of the Indebtedness, in whole or in part, by wire transfer to the Central Account as provided in Paragraph 3 above of (A) the portion of the principal amount of the Indebtedness to be prepaid, (B) interest accrued and unpaid on the outstanding principal balance of the Indebtedness to and including the date of such prepayment, (C) the Yield Maintenance Premium, if any, payable with respect to such -2- prepayment, and (D) any other amounts which have accrued and are owing under the Loan Documents through the date of such prepayment. Each notice of a voluntary prepayment of all or any portion of the principal amount of the Indebtedness shall specify (I) the prepayment date, (II) the amount of such prepayment and the amount of interest thereon and other amounts to be delivered in connection therewith, (III) the amount of the Yield Maintenance Premium believed by Makers to be payable in connection with such prepayment, and (IV) whether Makers intend to obtain a release of the Mortgage encumbering any Individual Property in connection with such prepayment. The amount of the Yield Maintenance Premium, interest and other amounts payable in connection with any prepayment shall be subject to confirmation by Payee. (b) The term "Yield Maintenance Premium" shall mean an amount to be paid to Payee upon the prepayment of the Indebtedness in whole or in part at any time before the first Due Date (the "l0th Anniversary Due Date") following the tenth (l0th) anniversary of the date hereof for any reason, whether said prepayment is made voluntarily or involuntarily or before, upon or after the acceleration of the Indebtedness by Payee following the occurrence of an Event of Default (provided, however, that no Yield Maintenance Premium shall be payable in connection with any prepayment made as a result of Lender's application to the Indebtedness of Loss Proceeds pursuant to Section 2.7.8 of the Loan Agreement or of amounts on deposit in the Capital Expenditure Sub-Account pursuant to Section 2.7.7(f) (ii) of the Loan Agreement), which amount shall be equal to the greater of: (i) (A) with respect to a prepayment made prior to the first Due Date (the "5th Anniversary Due Date") following the fifth (5th) anniversary of the date hereof, two percent (2%) or (B) with respect to a prepayment made on or after the 5th Anniversary Due Date but before the 10th Anniversary Due Date, one percent (1%) of the portion of the principal balance of the Loan being prepaid, or (ii) the product of (A) the excess, if any, of (I) the present value (as determined by discounting at a rate equal to (y) the Treasury Constant Maturity Yield Index published during the second full week preceding the date on which such Yield Maintenance Premium is payable for instruments having maturity coterminous with the remaining term of this Note plus (z) fifty (50) basis points) of the stream of payments of principal and interest that would be made on the Indebtedness if such prepayment of principal were not made, including any payment due on the Maturity Date, over (II) the principal balance of the Indebtedness immediately prior to such prepayment, multiplied by (B) a fraction of which the numerator is the amount of principal so prepaid and the denominator is the principal balance immediately prior to such prepayment. The determination of the Yield Maintenance Premium shall be made by Payee and shall, absent manifest error, be final, conclusive and binding upon all parties. The term "Treasury Constant Maturity Yield Index" shall mean the average yield for "This Week" as reported by the Federal -3- Reserve Board in Federal Reserve Statistical Release H.15(519). If there is no Treasury Constant Maturity Yield Index for instruments having a maturity coterminous with the remaining term of this Note, then the index referred to in clause (ii) (A) (I) above shall be equal to the weighted average yield to maturity of the Treasury Constant Maturity Yield Indices with maturities next longer and shorter than the remaining term of the Note, calculated by averaging (and rounding upward to the nearest whole multiple of 1/100 of 1% per annum, if the average is not such a multiple) the yields of the relevant Treasury Constant Maturity Yield Indices (rounded, if necessary, to the nearest 1/100 of 1%, with any figure of 1/200 of 1% or above rounded upward). 6. Makers agree that (a) if any amount payable under this Note, the Loan Agreement or any other Loan Document is not paid within the grace period provided with respect to such payment under Section 8.1 of the Loan Agreement or, if no grace period is provided thereunder with respect to such payment, on the date on which such payment is due, whether by acceleration or otherwise, Makers shall pay interest at the Default Rate (as hereinafter defined) with respect to such amount, upon demand from time to time, to the extent permitted by applicable law, from the date such amount was due until such amount has been paid by Makers and (b) upon the occurrence of any Event of Default, Payee shall have the option, upon three (3) Business Days' notice given to Makers, of increasing the rate of interest on the entire unpaid principal balance of this Note (provided, however, that such rate of interest shall be increased automatically and without notice for all such amounts as hereinafter provided, upon the occurrence of any of the events set forth in Section 8.1(a) (vi), (vii) and (viii) of the Loan Agreement), effective from the date of Makers' initial default with respect to such Event of Default without allowance for any applicable notice and/or grace period, to the Default Rate. The term "Default Rate" shall mean a rate of interest equal to the greater of (a) fifteen percent (15%) per annum or (b) 500 basis points above the "Prime Rate" published in The Wall Street Journal as of the date notice is sent to Makers, which interest Makers agree to pay and which interest shall be secured by the Mortgage. For purposes of the foregoing, if more than one Prime Rate is published in The Wall Street Journal for the applicable day, the average of the Prime Rates shall be used. The Prime Rate (or the average of Prime Rates) will be rounded up to the nearest one-fourth of one percent. In the event that The Wall Street Journal should cease or temporarily interrupt publication, then the Prime Rate shall mean the daily average prime rate published in another business newspaper, or business section of a newspaper, of national standing chosen by Payee. In the event that a prime rate is no longer generally published or is limited, regulated or administered by a governmental or quasi-governmental body, then Payee shall select a comparable interest rate index which is readily available and verifiable to Makers but is beyond Payee's control. This substitute index will also be rounded up to the -4- nearest one-fourth of one percent. Notwithstanding the foregoing, if the unpaid principal sum or any other amount required to be paid on the Maturity Date or upon acceleration of the Indebtedness is not paid when due, then interest shall thereafter be computed and paid at the Default Rate without notice to Maker. The preceding sentence shall not be construed as an agreement or privilege to extend the date of the payment of the Indebtedness, nor as a waiver of any other right or remedy accruing to Payee by reason of the occurrence of an Event of Default. 7. This Note is given to evidence a loan (the "Loan") by Payee to Makers pursuant to that certain Loan Agreement dated the date hereof (the "Loan Agreement") between Payee and Makers and is secured by, among other things, those certain Mortgages, Security Agreements and Assignments of Leases and Rents, Leasehold Mortgage, Security Agreement and Assignment of Leases and Rents and Deeds of Trust, Security Agreements and Assignments of Leases and Rents, (collectively, the "Mortgage") dated the date hereof given by Makers to Payee covering ten (10) certain premises more particularly described in the Mortgage. 8. Notwithstanding any provision herein, the total liability for payments in the nature of interest hereunder shall not exceed the applicable limits imposed by any applicable State or Federal interest rate laws. If any payments in the nature of interest, additional interest, and other charges made hereunder are held to be in excess of the applicable limits imposed by any applicable State or Federal laws, the amount held to be in excess of such limits shall be considered payment of principal and the Indebtedness shall be reduced by such amount of principal in the inverse order of maturity so that the total liability for payments in the nature of interest, additional interest and other charges shall not exceed the applicable limits imposed by any applicable State or Federal interest rate laws. For the purposes of calculating the actual amount of interest, additional interest and other amounts paid and/or payable hereunder, in respect of laws pertaining to usury or such other laws, all sums paid or agreed to be paid to the holder hereof for the use, forbearance or detention of the Indebtedness outstanding from time to time shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread from the date of disbursement of the proceeds of this Note until payment in full of all of the Indebtedness, so that the actual rate of interest on account of the Indebtedness is uniform through the term hereof. The terms and provisions of this Paragraph 8 shall control and supersede every other provision of all agreements between Makers or any endorser and Payee. 9. If any monthly principal and interest payment or any other amounts payable under this Note, the Mortgage, the Loan Agreement or the other Loan Documents is not paid in full within the grace period provided with respect to such payment under -5- Section 8.1 of the Loan Agreement or, if no grace period is provided thereunder with respect to such payment, on the date on which such payment is due, then a late charge equal to the lesser of five percent (5%) of such unpaid amount, or the maximum amount permitted by applicable law (the "Late Payment Charge") shall be deemed to be immediately assessed and shall be immediately due and payable. Such Late Payment Charge shall automatically become due to Payee without notice and shall be paid to defray the expenses incurred by Payee in handling and processing such delinquent payment, and to compensate Payee for the loss of the use of such delinquent payment, and such amount shall be secured by the Mortgage. Such charges shall be in addition to interest at the Default Rate and all other rights and remedies available to Payee upon the occurrence of an Event of Default or a default under this Note, the Mortgage, the Loan Agreement or the other Loan Documents. 10. Notwithstanding any provision herein or in any of the Loan Documents (other than the Environmental indemnity (as defined in the Loan Agreement)) to the contrary, Payee shall not enforce the obligations contained in this Note, the Loan Agreement, the Mortgage or the other Loan Documents by any action or proceeding wherein a money judgment shall be sought against any Maker except that Payee may bring a foreclosure action, an action for specific performance or any other appropriate action or proceeding to enable Payee to realize upon the Mortgaged Property (as defined in the Mortgage) and any other collateral given to Payee to secure the Indebtedness, including, without limitation, any action to obtain a deficiency judgment against any Maker or Makers, provided that such deficiency judgment shall be enforced only against the Mortgaged Property and such other collateral, except as otherwise expressly provided hereinafter. The provisions of this Paragraph 10 shall not, however, limit the liability of Makers for loss, costs or damage arising out of the following matters: (i) any failure to apply the Revenue (as defined in the Loan Agreement) of the Mortgaged Property to pay the operating expenses of the Mortgaged Property or to fulfill the then current obligations of Makers under this Note, the Loan Agreement, the Mortgage or any other Loan Document; (ii) any misapplication of Loss Proceeds (as defined in the Loan Agreement), security deposits or trust funds in violation of applicable law or the provisions of the Loan Agreement or any other Loan Document; (iii) any collection of rent for more than one month in advance of the time when the same becomes due; (iv) failure to pay all real estate taxes and assessments prior to the date on which such payments become delinquent (subject to Lender's obligation to make disbursements from the Basic Carrying Costs Sub-Account (as defined in the Loan Agreement)); (v) any willful misrepresentation by any Maker (or any constituent partner or shareholder of any Maker) in connection with Makers' application, negotiation or documentation of the Loan; (vi) a fraudulent conveyance or a fraudulent transfer of the Mortgaged Property or any part thereof or any other properties or assets of -6- any Maker; or (vii) any material misrepresentation or breach of warranty or covenant made by any Maker under the Environmental Indemnity. Nothing herein shall be deemed (w) to be a waiver of any right which Payee may have under any bankruptcy law of the United States or of any State in which any part of the Mortgaged Property is located to file a claim for the full amount of the Loan or to require that all of the Mortgaged Property and any other collateral given to secure the Loan shall continue to secure all of the Indebtedness; (x) to impair the validity of the Indebtedness; (y) to impair the right of Payee as mortgagee or secured party to foreclose any lien or security interest or (z) impair the right of Payee to obtain the Recourse Distributions received by Makers, including, without limitation, the right to proceed against any constituent partner or shareholder of any Maker to the extent any such Recourse Distribution has actually theretofore been distributed to such constituent partner or shareholder. The provisions of this Paragraph 10 shall be inapplicable to any Maker if any petition for bankruptcy, reorganization or arrangement pursuant to federal or state law shall be filed by, consented to or acquiesced in by or with respect to such Maker or if such Maker shall institute any proceeding for the dissolution or liquidation of such Maker or if such Maker shall make an assignment for the benefit of creditors, in which event Payee shall have recourse against all of the assets of such Maker and the Recourse Distributions received by the constituent partners and shareholders of such Maker. For purposes of this Paragraph 10, the term "Recourse Distributions" shall mean the Revenues arising from the Mortgaged Property to the extent received by any Maker (or actually received by any partner or shareholder of any Maker if not actually received by any Maker) after the occurrence and written notice (including any Consultant's Notice (as defined in the Loan Agreement)) of an Event of Default. 11. This Note may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Makers or Payee, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. Any such written waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to, or demand on, Makers shall entitle Makers to any other or future notice or demand in the same, similar or other circumstances. 12. The obligations and liabilities of Makers and each Maker hereunder shall be joint and several. 13. Each Maker and all other persons or parties who may become liable for the payment of all or any part of the Indebtedness does hereby expressly and unconditionally waive (a) presentment and demand for payment, notice of dishonor, protest, -7- notice of protest and non-payment and notice of any kind, including, without limitation, any notice of intention to accelerate and notice of acceleration, except as expressly provided herein, and (b) in connection with any suit, action or proceeding brought by Payee on this Note, any and every right it may have to (i) interpose any counterclaim therein (other than a counterclaim which can only be asserted in the suit, action or proceeding brought by Payee on this Note and cannot be maintained in a separate action) and (ii) have the same consolidated with any other or separate suit, action or proceeding. Except as provided in the Loan Agreement, no release of any security for the Indebtedness or extension of time for payment of this Note or any installment hereof, and no alteration, amendment or waiver of any provision of this Note, the Mortgage, the Loan Agreement or any other Loan Document made by agreement between Payee and any such other person or party shall release, discharge, modify, change or affect the liability of Makers, and any other person who may become liable for the payment of all or any part of the Indebtedness, under any other provision of this Note or the Mortgage. EACH MAKER WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND ARISING OUT OF OR RELATING TO THIS NOTE OR THE INTERPRETATION, BREACH OR ENFORCEMENT HEREOF. 14. In the event that it should become necessary to employ counsel to collect the Indebtedness or to protect or foreclose the security hereof, or pursue its rights under the Loan Documents, Maker agrees to pay reasonable attorneys' fees for the services and disbursements of such counsel whether or not suit be brought. 15. All of the terms, covenants and conditions contained in the Loan Agreement, the Mortgage and all other Loan Documents are hereby made part of this Note to the same extent and with the same force as if they were fully set forth herein. 16. (a) This Note was negotiated in New York, and executed and delivered by Makers and accepted by Payee in the State of New York, and the proceeds of the Note delivered pursuant hereto were disbursed from New York, which State the parties agree has a substantial relationship to the parties and to the underlying transaction embodied hereby, and in all respects, including, without limiting the generality of the foregoing, matters of construction, validity and performance, this Note and the obligations arising hereunder shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and performed in such State and any applicable law of the United States of America, except that at all times the provisions for the creation, perfection, and enforcement of the liens and security interests created pursuant to the Loan Agreement, the Mortgage and the other Loan Documents shall be governed by and construed according to the law of the State in which the applicable Individual Property (as defined in the Loan Agreement) is located, it being understood -8- that, to the fullest extent permitted by law of such State, the law of the State of New York shall govern the validity and the enforceability of all Loan Documents, and the Indebtedness or obligations arising hereunder or thereunder. To the fullest extent permitted by law, each Maker hereby unconditionally and irrevocably waives any claim to assert that the law of any other jurisdiction governs this Note and the Loan Agreement and this Note and the Loan Agreement shall be governed by and construed in accordance with the laws of the State of New York pursuant to 5-1401 of the New York General Obligations Law. (b) Any suit, action or proceeding against Makers or Payee arising out of or relating to this Note shall be instituted in any federal or state court in New York, New York, pursuant to 5-1402 of the New York General Obligations Law, or, at Payee's discretion, in any state where the Mortgaged Property is located and each Maker waives any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding, and each Maker hereby irrevocably submits to the jurisdiction of any such court in any suit, action or proceeding. Makers do hereby designate and appoint C.T. Corporation System, 1633 Broadway, New York, New York 10019, as their authorized agent to accept and acknowledge on their behalf service of any and all process which may be served in any such suit, action or proceeding in any federal or state court in New York, New York, and agree that service of process upon said agent at said address and written notice of said service of Makers mailed or delivered to Makers in the manner provided in the Mortgage, shall be deemed in every respect effective service of process upon Makers, in any such suit, action or proceeding in the State of New York. Makers (i) shall give prompt notice to the Payee of any changed address of their authorized agent hereunder, (ii) may at any time and from time to time designate a substitute authorized agent with an office in New York, New York (which office shall be designated as the address for service of process), provided that all Makers shall have the same authorized agent with the same address and (iii) shall promptly designate such a substitute if its authorized agent ceases to have an office in New York, New York or is dissolved without leaving a successor. 17. Wherever possible, each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Note shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Note. -9- IN WITNESS WHEREOF, Maker has duly executed this Note the day and year first above written. BORROWERS: HILTON HEAD MOTEL ENTERPRISES, INC., a South Carolina corporation By: David Buddemeyer ----------------------------------------- David Buddemeyer, President SERVICO HOTELS I, INC., a Florida corporation By: David Buddemeyer ----------------------------------------- David Buddemeyer, President SERVICO HOTELS II, INC., a Florida corporation By: David Buddemeyer ----------------------------------------- David Buddemeyer, President MOON AIRPORT MOTEL, INC., a Pennsylvania corporation By: David Buddemeyer ----------------------------------------- David Buddemeyer, President SERVICO FORT WAYNE, INC., a Florida corporation By: David Buddemeyer ----------------------------------------- David Buddemeyer, President -10- WASHINGTON MOTEL ENTERPRISES, INC., a Pennsylvania corporation By: /s/ David Buddemeyer ----------------------------------------- David Buddemeyer, President SERVICO HOTELS III, INC., a Florida corporation By: /s/ David Buddemeyer ----------------------------------------- David Buddemeyer, President SERVICO HOTELS IV, INC., a Florida corporation By: /s/ David Buddemeyer ----------------------------------------- David Buddemeyer, President NEW ORLEANS AIRPORT MOTEL ASSOCIATES, LTD., a Florida limited partnership By New Orleans Airport Motel Enterprises, Inc., a Louisiana corporation By: /s/ David Buddemeyer ----------------------------------------- David Buddemeyer, President WILPEN, INC., a Pennsylvania corporation By: /s/ David Buddemeyer ----------------------------------------- David Buddemeyer, President -11- EX-10.2.1 10 g87458exv10w2w1.txt EX-10.2.1 LOAN AND SECURITY AGREEMENT EXHIBIT 10.2.1 LOAN AND SECURITY AGREEMENT DATED NOVEMBER 25, 2002 BETWEEN THE BORROWER OR BORROWERS LISTED ON SCHEDULE 1 HERETO AS BORROWERS AND MERRILL LYNCH MORTGAGE LENDING, INC. AS LENDER ----------------------------- ================================================================================ TABLE OF CONTENTS
PAGE ARTICLE I DEFINITIONS .......................................................... 1 Section 1.1 Certain Defined Terms ......................................... 1 Section 1.2 Accounting Terms .............................................. 25 Section 1.3 Other Definitional Provisions ................................. 25 ARTICLE II TERMS OF THE LOAN ................................................... 25 Section 2.1 Loan .......................................................... 25 Section 2.2 Interest ...................................................... 26 Section 2.3 Interest Rate Cap Agreement ................................... 27 Section 2.4 Payments ...................................................... 28 Section 2.5 Maturity ...................................................... 30 Section 2.6 Prepayment .................................................... 32 Section 2.7 Outstanding Balance ........................................... 33 Section 2.8 Taxes ......................................................... 33 Section 2.9 Reasonableness of Charges ..................................... 33 Section 2.10 Funding Losses/Change in Law Etc .............................. 33 Section 2.11 Servicing/Special Servicing ................................... 35 ARTICLE III CONDITIONS TO LOAN ................................................. 35 Section 3.1 Conditions to Funding of the Loan on the Closing Date ......... 35 ARTICLE IV REPRESENTATIONS AND WARRANTIES ...................................... 40 Section 4.1 Organization, Powers, Capitalization, Good Standing, Business . 40 Section 4.2 Authorization of Borrowing, etc. .............................. 41 Section 4.3 Financial Statements .......................................... 41 Section 4.4 Indebtedness and Contingent Obligations ....................... 42 Section 4.5 Title to the Properties ....................................... 42 Section 4.6 Zoning; Compliance with Laws .................................. 42 Section 4.7 Leases; Agreements ............................................ 43 Section 4.8 Condition of the Properties ................................... 44 Section 4.9 Litigation; Adverse Facts ..................................... 44 Section 4.10 Payment of Taxes .............................................. 45 Section 4.11 Adverse Contracts ............................................. 45 Section 4.12 Performance of Agreements ..................................... 45 Section 4.13 Governmental Regulation ....................................... 45 Section 4.14 Employee Benefit Plans ........................................ 45 Section 4.15 Broker's Fees ................................................. 45 Section 4.16 Intentionally Deleted ......................................... 45 Section 4.17 Solvency ...................................................... 45 Section 4.18 Disclosure .................................................... 46
i Section 4.19 Use of Proceeds and Margin Security................................... 46 Section 4.20 Insurance ............................................................ 46 Section 4.21 Separate Tax Lots .................................................... 46 Section 4.22 Investments .......................................................... 46 Section 4.23 Reserved ............................................................. 47 Section 4.24 Defaults ............................................................. 47 Section 4.25 No Plan Assets ....................................................... 47 Section 4.26 Governmental Plan .................................................... 47 Section 4.27 Not Foreign Person ................................................... 47 Section 4.28 No Collective Bargaining Agreements................................... 47 Section 4.29 Mortgaged Condominium Documents....................................... 47 Section 4.30 Ground Leases ........................................................ 47 ARTICLE V COVENANTS OF BORROWER PARTIES.................................................. 48 Section 5.1 Financial Statements and Other Reports................................. 48 Section 5.2 Existence; Qualification .............................................. 53 Section 5.3 Payment of Impositions and Claims...................................... 53 Section 5.4 Maintenance of Insurance............................................... 54 Section 5.5 Operation and Maintenance of the Properties; Casualty.................. 58 Section 5.6 Inspection ............................................................ 61 Section 5.7 O&M Plan .............................................................. 62 Section 5.8 Intentionally Deleted ................................................. 62 Section 5.9 Compliance with Laws and Contractual Obligations....................... 62 Section 5.10 Further Assurances .................................................... 62 Section 5.11 Performance of Agreements and Leases................................... 62 Section 5.12 Leases ................................................................ 62 Section 5.13 Management; Franchise Agreement ....................................... 64 Section 5.14 Material Agreements ................................................... 66 Section 5.15 Deposits; Application of Receipts ..................................... 66 Section 5.16 Estoppel Certificates.................................................. 66 Section 5.17 Indebtedness........................................................... 67 Section 5.18 No Liens............................................................... 67 Section 5.19 Contingent Obligations ................................................ 68 Section 5.20 Restriction on Fundamental Changes..................................... 68 Section 5.21 Transactions with Related Persons ..................................... 68 Section 5.22 Bankruptcy, Receivers, Similar Matters ................................ 68 Section 5.23 ERISA ................................................................. 69 Section 5.24 Press Release ......................................................... 69 Section 5.25 Ground Leases.......................................................... 69 Section 5.26 Mortgaged Condominium Property ........................................ 73 Section 5.27 Lender's Expenses ..................................................... 75 Section 5.28 Distributions ......................................................... 75 Section 5.29 Completion of Required Capital Improvements............................ 75 Section 5.30 Compliance with Plan of Reorganization................................. 75 Section 5.31 Cancellation of Indebtedness; Settlement of Claims .................... 75

ii ARTICLE VI RESERVES....................................................................... 75 Section 6.1 Security Interest in Reserves; Other Matters pertaining to Reserves...... 75 Section 6.2 Funds Deposited with Lender.............................................. 76 Section 6.3 Impositions and Insurance Reserve........................................ 76 Section 6.4 FF&E Reserve............................................................. 77 Section 6.5 Capital Improvement Reserve; Required Capital Improvements .............. 77 Section 6.6 Hazardous Materials Remediation Reserve ................................. 78 Section 6.7 Conditions to Disbursements from Hazardous Materials Remediation Reserve and Capital Improvement Reserve; Performance of Work ............ 78 Section 6.8 Cash Trap Reserve........................................................ 83 ARTICLE VII LOCK BOX; CLEARING ACCOUNT; CENTRAL ACCOUNT; CASH MANAGEMENT.................. 84 Section 7.1 Establishment of Deposit Account and Lock Box Account ................... 84 Section 7.2 Application of Funds in Lock Box Account ................................ 85 Section 7.3 Application of Funds After Event of Default.............................. 85 ARTICLE VIII DEFAULT, RIGHTS AND REMEDIES................................................ 86 Section 8.1 Event of Default......................................................... 86 Section 8.2 Acceleration and Remedies................................................ 88 Section 8.3 Performance by Lender.................................................... 90 Section 8.4 Evidence of Compliance................................................... 90 ARTICLE IX SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS................................................. 91 Section 9.1 Applicable to all Primary Borrower Parties............................... 91 Section 9.2 Applicable to Borrowers, General Partner and Member...................... 93 ARTICLE X RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS............................... 94 Section 10.1 Secondary Market Transactions Generally.................................. 94 Section 10.2 Cooperation; Limitations ................................................ 95 Section 10.3 Information.............................................................. 95 Section 10.4 Additional Provisions.................................................... 97 ARTICLE XI RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES.................................................... 97 Section 11.1 Restrictions on Transfer and Encumbrance................................. 97 Section 11.2 Transfers of Beneficial Interests in Borrowers........................... 97 Section 11.3 Assumability............................................................. 98 Section 11.4 Release of Properties ................................................... 99 Section 11.5 Conversion/Release....................................................... 101 Section 11.6 Sale of Building Equipment............................................... 102

iii Section 11.7 Immaterial Transfers and Easements, etc.................................. 102 ARTICLE XII RECOURSE; LIMITATIONS ON RECOURSE............................................. 103 Section 12.1 Limitations on Recourse.................................................. 103 Section 12.2 Partial Recourse......................................................... 103 Section 12.3 Miscellaneous............................................................ 104 ARTICLE XIII WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES............................... 104 Section 13.1 Waivers.................................................................. 104 ARTICLE XIV MISCELLANEOUS................................................................. 106 Section 14.1 Expenses and Attorneys' Fees............................................. 106 Section 14.2 Indemnity................................................................ 107 Section 14.3 Amendments and Waivers................................................... 107 Section 14.4 Retention of Borrowers' Documents........................................ 107 Section 14.5 Notices.................................................................. 108 Section 14.6 Survival of Warranties and Certain Agreements............................ 109 Section 14.7 Failure or Indulgence Not Waiver, Remedies Cumulative.................... 109 Section 14.8 Marshaling; Payments Set Aside .......................................... 109 Section 14.9 Severability............................................................. 109 Section 14.10 Headings ................................................................ 110 Section 14.11 APPLICABLE LAW........................................................... 110 Section 14.12 Successors and Assigns................................................... 110 Section 14.13 Sophisticated Parties, Reasonable Terms, No Fiduciary Relationship....... 110 Section 14.14 Reasonableness of Determinations ........................................ 111 Section 14.15 Limitation of Liability ................................................. 111 Section 14.16 No Duty.................................................................. 111 Section 14.17 Entire Agreement......................................................... 111 Section 14.18 Construction; Supremacy of Loan Agreement ............................... 111 Section 14.19 Consent to Jurisdiction.................................................. 112 Section 14.20 Waiver of Jury Trial..................................................... 112 Section 14.21 Counterparts; Effectiveness.............................................. 113 Section 14.22 Servicer................................................................. 113 Section 14.23 Obligations of Borrower Parties.......................................... 113 Section 14.24 Additional Inspections; Reports.......................................... 113

iv LIST OF EXHIBITS AND SCHEDULES Exhibit A - Capital Improvement Plan Exhibit B - Environmental Reports Exhibit C - Franchise Agreements Exhibit D - Allocated Loan Amount Exhibit E - Management Agreements Exhibit F - Properties Exhibit G - Property Improvement Plan Exhibit H - Ground Lessor Estoppels Exhibit I - Acceptable Franchisors Exhibit J - [Reserved] Exhibit K - [Reserved] Exhibit L - [Reserved] Exhibit M - Property Condition Reports Schedule 1 - Borrowers Schedule 3.1(A) - List of Loan Documents Schedule 4.1(C) - Organizational Chart for Borrower Parties Schedule 4.2 - Consents Schedule 4.4 - Contingent Obligations Schedule 4.5 - Condemnation Proceedings Schedule 4.6 - Zoning Schedule 4.7(B) - Rent Roll Schedule 4.7(E) - Franchise Defaults Schedule 4.9 - Litigation Schedule 4.14 - ERISA Plans Schedule 4.20 - Insurance Schedule 4.28 - Collective Bargaining Agreements Schedule 4.29 - Mortgaged Condominium Property Documents Schedule 4.30 - Ground Lease Amendments Schedule 5.1(D) - CapEx/FF&E Budget Schedule 5.7 - O&M Plans Schedule 5.14 - Material Agreements Schedule 6.6 - Environmental Work Schedule 6.7 - Reserve Funding Condition

List of Schedules LOAN AND SECURITY AGREEMENT This LOAN AND SECURITY AGREEMENT (this "LOAN AGREEMENT") is dated as of November 25, 2002 and entered into by and between THE BORROWER OR BORROWERS LISTED ON SCHEDULE 1 HERETO (collectively, "BORROWERS", and individually, each a "BORROWER"), and MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (together with its successors and assigns, "LENDER"). NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the Borrowers and Lender agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 CERTAIN DEFINED TERMS. The terms defined below are used in this Loan Agreement as so defined. Terms defined in the preamble and recitals to this Loan Agreement are used in this Loan Agreement as so defined. "ACCEPTABLE FRANCHISOR" and "ACCEPTABLE FRANCHISE NAME" means the franchisors identified on EXHIBIT I. "ACCEPTABLE MANAGER" means Lodgian Management Corp. or any other Affiliate of the Borrowers and, upon receipt of a Rating Confirmation, another reputable hotel management company with at least five (5) years experience managing hotel properties similar to the Properties and which at the time of its engagement is managing at least 5,000 hotel rooms (exclusive of the Properties). "ACCEPTABLE REPLACEMENT CAP" has the meaning set forth in Section 2.3. "ACCOUNT COLLATERAL" means all of the Borrowers' right, title and interest in and to the Accounts, the Reserves, all monies and amounts which may from time to time be on deposit therein, all monies, checks, notes, instruments, documents, deposits, and credits from time to time in the possession of Lender representing or evidencing such Accounts and Reserves and all earnings and investments held therein and proceeds thereof. "ACCOUNTS" means, collectively, the Deposit Account, the FF&E Reserve, any Loss Proceeds Account, the Lock Box Account, the Sub-Accounts thereof and any other accounts pledged to Lender pursuant to this Loan Agreement or any other Loan Document. "AFFILIATE" means in relation to any Person, any other Person: (i) directly or indirectly controlling, controlled by, or under common control with, the first Person; (ii) directly or indirectly owning or holding fifty percent (50%) or more of any equity interest in the first Person; or (iii) fifty percent (50%) or more of whose voting stock or other equity interest is directly or indirectly owned or held by the first Person. In addition, the Affiliates of each Borrower Party include, without limitation, all other Borrower Parties, irrespective of whether they now or hereafter satisfy the foregoing criteria. For purposes of this definition, "CONTROL" (including with correlative meanings, the terms "CONTROLLING", "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the possession directly or indirectly of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Where expressions such as "[name of party] or any Affiliate" are used, the same shall refer to the named party and any Affiliate of the named party. Further, the Affiliates of any Person that is an entity shall include all natural persons who are officers, agents, directors, members, partners, or employees of the entity Person. "AGGREGATE ALLOCATED LOAN AMOUNT" shall mean the aggregate portion of the Mezzanine Loan and the Loan allocated to each Property as set forth on EXHIBIT D. "AGGREGATE OUTSTANDING PRINCIPAL BALANCE" means, at the time of determination, the aggregate outstanding principal balance of the Mezzanine Loan and the Loan. "ALLOCATED LOAN AMOUNT" shall mean the portion of the Loan allocated to each Property as set forth on EXHIBIT D. "AMORTIZATION DEFICIENCY" shall mean, as of the date of determination, (x) the aggregate of all monthly Scheduled Mortgage Principal Payments through the date of determination minus (y) the actual principal payments made to Lender pursuant to Section 2.4(A)(ii) and Section 2.4(A)(iv) of this Loan Agreement through the date immediately preceding the date of determination. "APPLICABLE SPREAD" means 2.2442%. "APPROVED ACCOUNTING FIRM" means Ernst and Young, PricewaterhouseCoopers, Deloitte & Touche or KPMG Peat Marwick or any successor entity. "APPROVED CAPITAL IMPROVEMENT EXPENDITURES" has the meaning set forth in Section 6.7. "APPROVED ENVIRONMENTAL EXPENDITURES" has the meaning set forth in Section 6.7. "APPROVED EXPENDITURES" has the meaning set forth in Section 6.7. "ARCHITECT" has the meaning set forth in Section 5.5. "ASSIGNMENT OF RATE CAP" means that certain Collateral Assignment of Interest Rate Protection Agreement of even date herewith from the Borrowers to Lender, constituting an assignment of the Cap and proceeds therefrom as Collateral for the Loan, as same may be amended or modified from time to time. "ASSIGNMENTS OF LEASES" means, collectively, the Assignments of Leases and Rents of even date herewith from each of the Borrowers to Lender, constituting assignments of each Borrower's right, title and interest in the Leases and proceeds therefrom for each of their respective Properties as Collateral for the Loan, as same may be amended or modified from time to time. "ASSIGNMENTS OF MANAGEMENT AGREEMENTS" means, collectively, those certain Conditional Assignments of Management Hotel Agreements of even date herewith executed by 2 each of the Borrowers and the applicable Manager, constituting an assignment of each Management Agreement as collateral for the Loan, as same may be amended or modified from time to time. "ASSUMPTION" has the meaning set forth in Section 11.3. "BANKRUPTCY CODE" means Title 11 of the United States Code, as amended from time to time, and all rules and regulations promulgated thereunder. "BEVERAGE COMPANY" shall mean any Person (other than any of the Borrowers) holding, or entitled to any proceeds from, any liquor license or other beverage permit for the sale of alcoholic beverages at any Property. "BOARD OF MANAGERS" means the board of managers, or similar governing entity, established for the governance of the condominium association established pursuant to the terms of the Mortgaged Condominium Property Documents. "BORROWER" and "BORROWERS" have the meanings set forth in the preamble; provided that, following a Release, "BORROWERS" shall mean each of the Borrowers remaining as a party to the Loan Documents, and whose Properties remain encumbered by the Deeds of Trust as Collateral for the Loan and "BORROWER" shall mean any of such remaining parties. "BORROWER PARTY" and "BORROWER PARTIES" means, individually or collectively, the Borrowers, General Partner, Member and Guarantor. "BORROWER PARTY SECRETARY" has the meaning set forth in Section 3.1. "BUSINESS DAY" means any day excluding (i) Saturday, (ii) Sunday, (iii) any day which is a legal holiday under the laws of the State of New York, the state or states where the servicing offices of the Servicer, and, if the Loan becomes a "specially serviced mortgage loan" pursuant to the terms of any trust and servicing agreement entered into in connection with any Securitization backed in whole or in part by the Loan, the special servicer, are located or the state in which the corporate trust office of the trustee in connection with any such Securitization is located, and (iv) any day on which banking institutions located in such state are generally not open for the conduct of regular business. "CALCULATION DATE means (x) prior to the occurrence of a Cash Trap Event, the last day of each calendar quarter, and (y) during the continuance of a Cash Trap Event, the last day of each calendar month. "CAP" has the meaning set forth in Section 2.3. "CAPEX/FF&E BUDGET" means the expenditures for Replacements and other expenditures for FF&E and Capital Expenditures set forth in an annual budget approved by Lender in writing (such approval not to be unreasonably withheld or delayed as long as the budget is consistent with the form of the CapEx/FF&E Budget provided to Lender prior to Closing), covering the planned FF&E expenditures and Capital Expenditures for the period covered by such budget, as same may be amended pursuant to Section 5.1 (D) hereof. 3 "CAPITAL EXPENDITURES" means expenditures for Capital Improvements. "CAPITAL IMPROVEMENTS" means capital improvements, repairs or alterations, furnishings, fixtures, equipment and other capital items (whether paid in cash or property or accrued as liabilities) made by the Borrowers that, in conformity with GAAP, would not be included in the Borrowers' annual financial statements as an Operating Expense of the Properties. "CAPITAL IMPROVEMENT PLAN" means each of the Borrower's current plan and budget for certain ongoing multi-phased capital improvements to the respective Properties, as more particularly described on EXHIBIT A. "CAPITAL IMPROVEMENT RESERVE" has the meaning set forth in Section 6.5. "CAP PROVIDER" has the meaning set forth in Section 2.3. "CAP RESERVE" has the meaning set forth in Section 2.3. "CAP THRESHOLD RATE" has the meaning set forth in Section 2.3. "CASH MANAGEMENT AGREEMENT" means the Cash Management Agreement of even date herewith among the Borrowers, Lender, Manager, and Lock Box Account Bank. "CASH TRAP EVENT" has the meaning set forth in Section 6.8. "CASH TRAP RESERVE" has the meaning set forth in Section 6.8. "CATEGORY" means the applicable Tier 1 Hotel, the Tier 2 Hotel or the Tier 3 Hotel category. "CLAIMS" has the meaning set forth in Section 5.3. "CLOSING" means the funding of the Loan and the consummation of the other transactions contemplated by this Loan Agreement. "CLOSING DATE" means the date on which the Closing occurs. "COLLATERAL" means rights, interests, and property of every kind, real and personal, tangible and intangible, which is granted, pledged, liened, or encumbered as security for the Loan or any of the other Obligations under this Loan Agreement, the Deeds of Trust, the Cash Management Agreement or other Loan Documents, including without limitation the Properties and the Account Collateral. "COMPLIANCE CERTIFICATE" has the meaning set forth in Section 5.1. "CONDOMINIUM BORROWER" means Servico Maryland, Inc., together with, following a Condominium Release, the Borrower owning the Hotel Unit. "CONDOMINIUM DEFAULT" has the meaning set forth in Section 4.29. 4 "CONTINGENT OBLIGATION", as applied to any Person, means any direct or indirect liability, contingent or otherwise, of that Person: (A) with respect to any indebtendness, lease, dividend or other obligation of another if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto; (B) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings; (C) under any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement designed to protect against fluctuations in interest rates; or (D) under any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect that Person against fluctuations in currency values. Contingent Obligations shall include (i) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making (other than the Loan), discounting with recourse or sale with recourse by such Person of the obligation of another, (ii) the obligation to make take-or-pay or similar payments if required regardless of nonperformance by any other party or parties to an agreement, and (iii) any liability of such Person for the obligations of another through any agreement to purchase, repurchase or otherwise acquire such obligation or any property constituting security therefor, to provide funds for the payment or discharge of such obligation or to maintain the solvency, financial condition or any balance sheet item or level of income of another. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if not a fixed and determined amount, the maximum amount so guaranteed. "CONTRACTUAL OBLIGATION", as applied to any Person, means any indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject, other than the Loan Documents. "CONVERSION" shall mean the conversion of the West Palm Beach Property to a condominium form of ownership. "CONVERSION DOCUMENTS" has the meaning set forth in Section 11.5. "CREDIT CARD COMPANIES" has the meaning set forth in Section 7.1. "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER" has the meaning set forth in Section 7.1. "D&O INSURANCE" has the meaning set forth in Section 5.4. "DEBT SERVICE COVERAGE RATIO" OR "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 Test Rate) that the Borrowers will be required to pay over the succeeding 12 months on the Loan and the Mezzanine Loan plus, in the case of any determination after the first anniversary of the Closing Date, principal amortization of the Loan and the Mezzanine Loan that would be required in respect of the then outstanding principal 5 amount of the Loan and the Mezzanine Loan over the first 12 months of a 25-year amortization schedule, calculated using the Test Rate. "DEBT SERVICE SUB-ACCOUNT" has the meaning set forth in Section 7.1. "DEBT YIELD" means, at any time of determination, Net Cash Flow for the trailing 12-month period divided by the then outstanding principal balance of the Loan and the Mezzanine Loan. "DEEDS OF TRUST" means, collectively, (i) those certain Fee/Leasehold Deeds of Trust, Assignments of Leases and Security Agreements, (ii) those certain Fee/Leasehold Mortgages, Assignments of Leases and Security Agreements, and (iii) those certain Deeds to Secure Debt, Assignment of Leases and Security Agreements of even date herewith from the Borrowers to Lender (or deed trustee on behalf of Lender, as applicable), constituting Liens on their respective Properties as Collateral for the Loan as same may be modified or amended from time to time. "DEFAULT" means any breach or default under any of the Loan Documents, whether or not the same is an Event of Default, and also any condition or event that, after notice or lapse of time or both, would constitute an Event of Default if that condition or event were not cured or removed within any applicable grace or cure period. "DEFAULT RATE" has the meaning set forth in Section 2.2. "DEPOSIT ACCOUNT" has the meaning set forth in Section 7.1. "DEPOSIT ACCOUNT AGREEMENT" has the meaning set forth in Section 7.1. "DEPOSIT BANK" has the meaning set forth in Section 7.1. "DETERMINATION DATE" means the day which is two (2) Eurodollar Business Days prior to the first day of an Interest Accrual Period; provided that the first Determination Date shall be two (2) Eurodollar Business Days prior to the Closing Date or, if such date is not a Eurodollar Business Day, the immediately preceding Eurodollar Business Day. The LIBO Rate set on each Determination Date shall be in effect for the Interest Accural Period immediately following such Determination Date. "DISCLOSURE DOCUMENTS" has the meaning set forth in Section 10.3. "DOLLAR EQUIVALENTS" means (a) commercial paper rated P-1 or better by Moody's or A-1 or better by S&P or similarly rated by any successor to either of such rating services, (b) obligations of the United States government or any agency thereof which are backed by the full faith and credit of the United States, or (c) deposits, including certificates of deposit, in any commercial bank or trust company (i) which is registered to do business in any state of the United States, (ii) which has capital and surplus in excess of $100,000,000 and (iii) the short-term debt of which is rated A-1 or better by S&P or P-1 or better by Moody's or is similarly rated by any successor thereof, provided that each such item of commercial paper, each such obligation, and each such time deposit has a maturity date not later than thirty days after the date of purchase thereof. 6 "DOLLARS" and the sign "$" mean the lawful money of the United States of America. "DOTHAN HOTEL" has the meaning set forth in Section 5.13. "ELIGIBLE ACCOUNT" shall mean a separate and identifiable account from all other funds held by the holding institution, which account is either (i) an account maintained with an Eligible Bank or (ii) a segregated trust account maintained by a corporate trust department of a federal depository institution or a state chartered depository institution subject to regulations regarding fiduciary funds on deposit similar to Title 12 of the Code of Federal Regulations Section 9.10(b), which, in either case, has corporate trust powers and is acting in its fiduciary capacity or is otherwise acceptable to the Rating Agencies. "ELIGIBLE BANK" shall mean a bank that satisfies the Rating Criteria. "EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the meaning of Section 3(3) of ERISA (including any Multiemployer Plan) (i) which is maintained for employees of any of the Borrowers or any ERISA Affiliate, (ii) which has at any time within the preceding six (6) years been maintained for the employees of any of the Borrowers or any current or former ERISA Affiliate or (iii) for which any of the Borrowers or any ERISA Affiliate has any liability, including contingent liability. "ENVIRONMENTAL INDEMNITY" means the Environmental Indemnity of even date herewith from the Borrowers and Guarantor to Lender, as same may be amended or modified from time to time. "ENVIRONMENTAL LAWS" means all present and future local, state, federal or other governmental authority, statutes, ordinances, codes, orders, decrees, laws, rules or regulations pertaining to or imposing liability or standards of conduct concerning environmental regulation (including, without limitation, regulations concerning health and safety), contamination or clean-up or the handling, generation, release or storage of Hazardous Material affecting the Properties including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, as amended, the Resource Conservation and Recovery Act, as amended, the Emergency Planning and Community Right-to-Know Act of 1986, as amended, the Hazardous Substances Transportation Act, as amended, the Solid Waste Disposal Act, as amended, the Clean Water Act, as amended, the Clean Air Act, as amended, the Toxic Substances Control Act, as amended, the Safe Drinking Water Act, as amended, the Occupational Safety and Health Act, as amended, any state superlien and environmental clean-up statutes and all regulations adopted in respect of the foregoing laws whether now or hereafter in effect. "ENVIRONMENTAL REPORTS" means those certain environmental reports and audits for the Properties as described on EXHIBIT B. "ENVIRONMENTAL WORK" has the meaning set forth in Section 6.6. "ERISA" means the Employee Retirement Income Security Act of 1974, and all rules and regulations promulgated thereunder. 7 "ERISA AFFILIATE" means, in relation to any Person, any other Person under common control with the first Person, within the meaning of Section 4001(a)(14) of ERISA. "EURODOLLAR BUSINESS DAY" means any day on which banks in the City of London, England are generally open for interbank or foreign exchange transactions and which is also a Business Day. "EVENT OF DEFAULT" has the meaning set forth in Section 8.1. "EXCESS CASH FLOW" has the meaning set forth in the Cash Management Agreement. "EXCESS INTEREST" has the meaning set forth in Section 2.2. "EXCLUSIONS FROM COVERAGE" has the meaning set forth in Section 5.4. "EXCULPATED PARTIES" has the meaning set forth in Section 12.2. "EXTENSION CAP THRESHOLD RATE" has the meaning set forth in Section 2.5. "EXTENSION NOTICE" has the meaning set forth in Section 2.5. "EXTENSION TERMS" has the meaning set forth in Section 2.5. "EXTRAORDINARY RECEIPTS SUB-ACCOUNT" has the meaning set forth in the Cash Management Agreement. "FF&E" means all machinery, furniture, furnishings, equipment, fixtures (including, without limitation, all heating, air conditioning, plumbing, lighting, communications and elevator fixtures), inventory and articles of personal property and accessions, renewals and replacements thereof and substitutions therefor (including, without limitation, beds, bureaus, chiffonniers, chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs, carpeting, drapes, draperies, venetian blinds, screens, paintings, hangings, pictures, divans, couches, luggage carts, luggage racks, stools, sofas, chinaware, linens, pillows, blankets, glassware, foodcarts, cookware, dry cleaning facilities, dining room wagons, tools, keys or other entry systems, bars, bar fixtures, liquor and drink dispensers, ice makers, radios, clock radios, television sets, intercom and paging equipment, electric and electronic equipment, dictating equipment, private telephone systems, medical equipment, potted plants, heating, lighting and plumbing fixtures, fire prevention and extinguishing apparatus, cooling and air-conditioning systems, elevators, escalators, fittings, plants, apparatus, stoves, ranges, refrigerators, laundry machines, tools, machinery, engines, dynamos, motors, boilers, incinerators, switchboards, conduits, compressors, vacuum cleaning systems, floor cleaning, waxing and polishing equipment, call systems, brackets, electrical signs, bulbs, bells, fuel, conveyors, cabinets, lockers, shelving, spotlighting equipment, dishwashers, garbage disposals, washer and dryers), other customary hotel equipment and other tangible property of every kind and nature whatsoever owned by the Borrowers, or in which the Borrowers have or shall have an interest, now or hereafter located at the Properties, or appurtenant thereto, and useable in connection with the present or future operation and occupancy of the Properties and all building equipment, material and supplies of any nature whatsoever owned by the Borrowers, or in which the Borrowers have or shall have an interest, 8 now or hereafter located at the Properties, or appurtenant thereto, and useable in connection with the present or future operation, enjoyment and occupancy of the Properties. "FF&E RESERVE" means the reserve established pursuant to Section 6.4. "FINANCIAL STATEMENTS" means statements of operations and retained earnings, statements of cash flow and balance sheets. "FINANCING STATEMENTS" means the Uniform Commercial Code Financing Statements naming the applicable Borrower Parties as debtor, and Lender as secured party, required under applicable state law to perfect the security interests created hereunder or under the other Loan Documents. "FIRST EXTENSION TERM" has the meaning set forth in Section 2.5. "FITCH" means Fitch, Inc. "FORCE MAJEURE" means acts of god, governmental restrictions, stays, judgments, orders, decrees, enemy actions, civil commotion, fire, casualty, strikes or work stoppages which are industry-wide and not aimed at the Borrowers or their Affiliates, or other causes beyond the reasonable control of the Borrowers and/or their Affiliates, but the Borrowers' lack of funds in and of itself shall not be deemed a cause beyond the control of the Borrowers. "FRANCHISE AGREEMENTS" means, collectively, those certain agreements described in EXHIBIT C and any replacement franchise agreement which may hereafter be entered into in accordance with the terms and conditions hereof by any of the Borrowers, as franchisee, pursuant to which the Borrowers have the right to operate the Properties under names and hotel systems controlled by the Franchisor. "FRANCHISOR" means the current hotel franchisor or licensor with respect to each Property or any other successor franchisor or licensor permitted pursuant to Section 5.13. "FRANCHISOR LETTER" shall mean, with respect to each Property, a comfort letter(s), and/or similar instrument(s) from the related Franchisor to Lender acknowledging the Loan and providing certain assurances, reasonably satisfactory to Lender, with respect thereto. "FUNDING LOSSES" has the meaning set forth in Section 2.10. "FUNDING PARTY" means any bank or other entity, if any, which is indirectly or directly funding Lender with respect to the Loan, in whole or in part, including, without limitation, any direct or indirect assignee of, or participant in, the Loan. "GAAP" means generally accepted accounting principles as set forth in Statement on Auditing Standards No. 69 entitled "The Meaning of Presenting Fairly in Conformity with Generally Accepted Accounting Principles in the Independent Auditor's Report" issued by the Auditing Standards Board of the institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board to the extent such principles are applicable to the facts and circumstances as of the date of determination. 9 "GENERAL PARTNER" shall mean, individually or collectively, those parties identified on SCHEDULE 4.1(c) as "General Partners", and any other entity which is now or hereafter becomes a general partner of any of the Borrowers under such Borrower's limited partnership agreement. "GOVERNMENTAL AUTHORITY" means, with respect to any Person, any federal or state government or other political subdivision thereof and any entity, including any regulatory or administrative authority or court, exercising executive, legislative, judicial, regulatory or administrative or quasi-administrative functions of or pertaining to government, and any arbitration board or tribunal in each case having jurisdiction over such applicable Person or such Person's property, and any stock exchange on which shares of capital stock of such Person are listed or admitted for trading. "GROUND LEASE DEFAULT" has the meaning set forth in Section 4.30 "GROUND LEASED PROPERTIES" means the Properties subject to the Ground Leases as described on SCHEDULE 4.30 attached hereto. "GROUND LEASES" means the ground leases described on SCHEDULE 4.30 attached hereto. "GROUND LESSORS" means the lessors under the Ground Leases as described on SCHEDULE 4.30 attached hereto. "GUARANTOR" means Lodgian, Inc., a Delaware corporation. "GUARANTY" means the Guaranty of Recourse Obligations and the Environmental Indemnity, each of even date herewith executed by Guarantor in favor of Lender, as same may be amended or modified from time to time. "HAZARDOUS MATERIAL" means all or any of the following: (A) substances, materials, compounds, wastes, products, emissions and vapors that are defined or listed in, regulated by, or otherwise classified pursuant to, any applicable Environmental Laws, including any so defined, listed, regulated or classified as "hazardous substances", "hazardous materials", "hazardous wastes", "toxic substances", "pollutants", "contaminants", or any other formulation intended to regulate, define, list or classify substances by reason of deleterious, harmful or dangerous properties; (B) waste oil, oil, petroleum or petroleum derived substances, natural gas, natural gas liquids or synthetic gas and drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal resources; (C) any flammable substances or explosives or any radioactive materials; (D) asbestos in any form; (E) electrical or hydraulic equipment which contains any oil or dielectric fluid containing polychlorinated biphenyls; (F) radon; (G) mold; or (H) urea formaldehyde, provided, however, such definition shall not include cleaning materials and other substances commonly used in the ordinary course of the Borrowers' business, which materials exist only in reasonable quantities and are stored, contained, transported, used, released, and disposed of in accordance with all applicable Environmental Laws. "HAZARDOUS MATERIALS REMEDIATION RESERVE" means the Reserve established pursuant to Section 6.6. 10 "HOTEL UNIT" has the definition set forth in Section 11.5. "IMPOSITIONS" means (i) all real estate and personal property taxes, and vault charges and all other taxes, levies, assessments and other similar charges, general and special, ordinary and extraordinary, foreseen and unforeseen, of every kind and nature whatsoever (including any payments in lieu of taxes), which at any time prior to, at or after the execution hereof may be assessed, levied or imposed by, in each case, a governmental authority upon any of the Properties or the rents relating thereto or upon the ownership, use, occupancy or enjoyment thereof, and any interest, cost or penalties imposed by such governmental authority with respect to any of the foregoing and (ii) all rent and other amounts payable by the Borrowers under each of the Ground Leases and under the Mortgaged Condominium Property Documents. Impositions shall not include (x) any sales or use taxes payable by the Borrowers, (y) taxes payable by tenants or guests occupying any portions of the Properties, or (z) taxes or other charges payable by any Manager or Franchisor unless such taxes are being paid on behalf of the Borrowers. "IMPOSITIONS AND INSURANCE RESERVE" means the reserve established pursuant to Section 6.3. "IMPROVEMENTS" means all buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements of every kind and nature now or hereafter located on the Properties. "INDEBTEDNESS" or "INDEBTEDNESS", shall mean, for any Person, without duplication: (i) all indebtedness of such Person for borrowed money, for amounts drawn under a letter of credit, or for the deferred purchase price of property for which such Person or its assets is liable, (ii) all unfunded amounts under a loan agreement, letter of credit (unless secured in full by Dollars), or other credit facility for which such Person would be liable if such amounts were advanced thereunder, (iii) all amounts required to be paid by such Person as a guaranteed payment to partners or a preferred or special dividend, including any mandatory redemption of shares or interests but not any preferred return or special dividend paid solely from, and to the extent of, excess cash flow after the payment of all operating expenses, capital improvements and debt service on all Indebtedness, (iv) all obligations under leases that constitute capital leases for which such Person is liable, and (v) all obligations of such Person under interest rate swaps, caps, floors, collars and other interest hedge agreements, in each case whether such Person is liable contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person otherwise assures a creditor against loss. "INDEMNIFIED LIABILITIES" has the meaning set forth in Section 14.2. "INDEMNITEES" has the meaning set forth in Section 14.2. "INDEPENDENT DIRECTOR" means an individual who shall not have been at the time of such individual's appointment or at any time while serving as a director of General Partner, Member, any of the Borrowers or any of their respective Affiliates, and may not have been at any time during the preceding five years (i) a stockholder, director (other than as an independent director/member), officer, employee, partner, attorney or counsel of General Partner, Member, Guarantor, any of the Borrowers or any Affiliate of any of them (except that such individual may 11 be an independent director of any other Affiliate of the foregoing), (ii) a customer, supplier or other Person who derives any of its purchases or revenues from its activities with General Partner, Member, Guarantor, any of the Borrowers or any Affiliate of any of them (other than a company that provides professional independent directors and which also may provide other ancillary corporate, partnership, company or trust services to the Borrowers, Member, General Partner or their Affiliates in the ordinary course of business (for example, The Corporation Trust Company)), (iii) a Person or other entity controlling or under common control with any such stockholder, partner, customer, supplier or other Person, or (iv) a member of the immediate family of any such stockholder, director, officer, employee, partner, customer, supplier or other Person. As used in this definition, the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management, policies or activities of a Person, whether through ownership of voting securities, by contract or otherwise. "INITIAL TERM" means the period from the Closing Date to the Scheduled Maturity Date. "INSURANCE POLICIES" has the meaning set forth in Section 5.4. "INSURANCE PREMIUMS" means the annual insurance premiums for the insurance policies required to be maintained by the Borrowers with respect to the Properties under Section 5.4. "INTEREST ACCRUAL PERIOD" means a period commencing on the first Business Day of a calendar month and ending on the day immediately prior to the first Business Day of the next calendar month; provided that the first Interest Accrual Period shall mean the period from and including the Closing Date and including the day immediately prior to the first Business Day of the next calendar month. "INTERESTED PARTIES" has the meaning set forth in Section 10.3. "INTEREST RATE" has the meaning set forth in Section 2.2. "INVOLUNTARY BORROWER BANKRUPTCY" has the meaning set forth in Section 5.22. "IRC" means the Internal Revenue Code of 1986, and any rule or regulation promulgated thereunder from time to time, in each case as amended from time to time. "IRS" means the Internal Revenue Service or any successor thereto. "KNOWLEDGE": whenever in this Loan Agreement or any of the Loan Documents, or in any document or certificate executed on behalf of any Borrower Party pursuant to this Loan Agreement or any of the Loan Documents, reference is made to the knowledge of the Borrowers or any other Borrower Party (whether by use of the words "knowledge" or "known", or other words of similar meaning, and whether or not the same are capitalized), such shall be deemed to refer to the knowledge (without independent investigation unless otherwise specified) of (i) the individuals who have significant responsibility for any policy making, major decisions or financial affairs of the applicable entity; (ii) the general manager for the applicable Property; (iii) the regional vice president of operations for Guarantor, the president of each Borrower and Member, with respect to operational issues of any Property or any of the Borrowers; (iv) the 12 chief operating officer of Guarantor, with respect to representations regarding Guarantor; and (v) also to the knowledge of the person signing such document or certificate. "LEASE" means any lease, tenancy, license, assignment and/or other rental or occupancy agreement or other agreement or arrangement (including, without limitation, any and all guaranties of any of the foregoing) heretofore or hereafter entered into affecting the use, enjoyment or occupancy of, or the conduct of any activity upon or in, the Properties or any portion thereof, including any extensions, renewals, modifications or amendments thereof. "LENDER" is defined in the preamble. "LENDERS'S CONSULTANT" has the meaning set forth in Section 6.7 "LETTER OF CREDIT" shall mean an irrevocable, unconditional, transferable, clean sight draft letter of credit (either an evergreen letter of credit or one which does not expire until at least thirty (30) days after the Maturity Date (the "LC EXPIRATION DATE")), in favor of Lender, entitling Lender to draw thereon in New York, New York based solely on a statement executed by an officer or authorized signatory of Lender, in form and substance reasonably acceptable to Lender and issued by an Eligible Bank. If at any time (a) the institution issuing any such Letter of Credit shall cease to be an Eligible Bank, or (b) if the Letter of Credit is due to expire prior to the LC Expiration Date, Lender shall have the right immediately to draw down the same in full and hold the proceeds thereof in accordance with the provisions of this Loan Agreement, unless the Borrowers shall deliver a replacement Letter of Credit from an Eligible Bank within (i) as to (a) above, twenty (20) days after Lender delivers written notice to the Borrowers that the institution issuing the Letter of Credit has ceased to be an Eligible Bank, or (ii) as to (b) above, within twenty (20) days prior to the expiration date of said Letter of Credit. "LIBO RATE" means the applicable London interbank offered rate (rounded upwards, if necessary, to the nearest one sixteenth (1/16th) of one percent (1%)) expressed as a percentage per annum 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 Accrual Period and having a maturity equal to the duration of such Interest Accrual Period, provided that, (1) if Telerate Page 3750 is not available for any reason, LIBO Rate for the relevant Interest Accrual 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 Accrual Period, and having a remaining term to maturity equal to such Interest Accrual Period, and (2) if no such report is available, LIBO Rate 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 Accrual Period, in the approximate amount of its portion of the relevant loan and having a maturity equal to such Interest Accrual Period. LIBO Rate shall be adjusted for Federal Reserve Board reserve requirements. "LIEN" means any lien, mortgage, pledge, security interest, charge or encumbrance of any kind, whether voluntary or involuntary, (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest). 13 "LOAN" has the meaning set forth in Section 2.1. "LOAN AGREEMENT" means this Loan and Security Agreement, as same may be amended, modified or restated from time to time (including all schedules, exhibits, annexes and appendices hereto). "LOAN DOCUMENTS" means this Loan Agreement, the Note, the Deeds of Trust, the Assignments of Leases, the Assignments of Management Agreements, the Guaranty, the Environmental Indemnity, the Assignment of Rate Cap, the Financing Statements, the Cash Management Agreement and any and all other documents and agreements from any of the Borrowers, General Partner, Member, Guarantor or Manager and accepted by Lender for the purposes of evidencing and/or securing the Loan, excluding the Mezzanine Loan Documents. "LOCK BOX ACCOUNT" and "LOCK BOX ACCOUNT BANK" are defined in Section 7.1. "MANAGEMENT AGREEMENTS" means those certain Management Agreements described in EXHIBIT E, between each Borrower and the applicable Manager described therein, the Memphis Interim Agreement, and any management agreement which may hereafter be entered into in accordance with the terms and conditions hereof, pursuant to which any subsequent Manager may hereafter manage one or more of the Properties. "MANAGEMENT FEE" means the fees earned by all Managers pursuant to the terms of the Management Agreements. "MANAGERS" means the managers described in EXHIBIT E or an Acceptable Manager as may hereafter be charged with management of one or more of the Properties in accordance with the terms and conditions hereof. "MATERIAL ADVERSE EFFECT" means, as determined by Lender in its reasonable discretion, (A) a material adverse effect (which may include economic or political events) upon the business, operations, properties, assets or condition (financial or otherwise) of any of the Borrowers or Guarantor, or (B) the impairment of the ability of any of the Borrowers or Guarantor to perform its obligations under any Loan Documents, or (C) the impairment of the ability of Lender to enforce or collect any of the Obligations as such Obligations become due. In determining whether any individual event would result in a Material Adverse Effect, notwithstanding that such event does not of itself have such effect, a Material Adverse Effect shall be deemed to have occurred if the cumulative effect of such event and all other then occurring events and existing conditions would result in a Material Adverse Effect. "MATERIAL AGREEMENT" means any contract or agreement relating to the ownership, management, development, use, operation, leasing, maintenance, repair or improvement of the Properties under which there is an obligation of the Borrowers, in the aggregate, to pay, or under which any of the Borrowers receives in compensation, more than $1,000,000 per annum, other than (i) the Management Agreements, (ii) any Franchise Agreements, and (iii) any agreement under which (x) there is an obligation of the Borrowers, in the aggregate, to pay, or under which any of the Borrowers (or all the Borrowers in the aggregate) receives in compensation, not more than $5,000,000 per annum and (y) which is terminable by the Borrowers on not more than sixty (60) days prior written notice without any fee or penalty. 14 "MATERIAL ALTERATION" means any improvement or alteration to a Property (other than decorative work such as painting, wallpapering and carpeting), the cost of which exceeds the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000, or is not otherwise already approved by Lender as part of the CapEx/FF&E Budget or Capital Improvement Plan then in effect, or which otherwise does not constitute Work. "MATERIAL LEASE" means any Lease of space in a Property (other than Leases for space in the office building located at the West Palm Beach Property) which (i) is with an Affiliate of the Borrowers, (ii)(a) either provides for annual rent or other payments in an amount equal to or greater than $100,000, or has a term (including all extensions and renewals which are unilaterally exercisable by the tenant thereunder) of more than ten (10) years, and (b) may not be cancelled by either party thereto on thirty (30) days' notice without payment of a termination fee, penalty or other cancellation fee, (iii) demises in excess of 2000 square feet of space, (iv) is for any establishment the primary purpose of which is the service of food and/or beverages or for any use not currently in effect at the Properties, or (v) obligates the Borrowers to make any improvements to the Properties either directly or through cash allowances (including, without limitation, free rent, tenant improvement allowances, or landlord's construction work) to the applicable tenant in excess of $25,000. For purposes of this definition only, in determining the square footage demised under any Lease, all space in the applicable Property which may in the future be demised to the tenant under such Lease by reason of such tenant exercising any right or option contained in such Lease shall be included in the calculation of the square footage demised under such Lease. "MATURITY DATE" shall mean the Scheduled Maturity Date, as same may be extended for the first Extension Term, the Second Extension Term, or the Third Extension Term (subject to the terms and conditions of Section 2.5(B)), or such other date on which the final payment of principal of the Note becomes due and payable as herein provided, whether at such stated maturity date, by acceleration, or otherwise. "MAXIMUM RATE" has the meaning set forth in Section 2.2. "MEMPHIS INTERIM AGREEMENT" means that certain Management Agreement dated as of the Closing Date between IMPAC I, L.L.C. and Lodging Memphis Property Owner, LLC, with respect to certain interim management services provided at the Property location a 2144 Madison Avenue, Memphis, Tennessee. "MEMBER" shall mean, individually or collectively, those parties identified on SCHEDULE 4.1(c) as "Members", and any other entity which is now or hereafter becomes the managing member of any of the Borrowers under such Borrower's limited liability company operating agreement (other than the sole member of any single member limited liability company). "MERRILL LYNCH" has the meaning set forth in Section 10.3. "MEZZANINE BORROWER" shall mean, individually or collectively, those parties identified on SCHEDULE 4.1(c) as "Mezzanine Borrower". 15 "MEZZANINE LENDER" shall mean Merrill Lynch Mortgage Lending, Inc., its successors and assigns. "MEZZANINE LENDER'S PERCENTAGE" shall mean, at the time of determination, the ratio, expressed as a percentage, that the outstanding principal balance of the Mezzanine Loan bears to the Aggregate Outstanding Principal Balance. As of the date hereof Mezzanine Lender's Percentage is 25.99%. "MEZZANINE LOAN" means that certain loan in the amount of $78,671,201 from Mezzanine Lender to Mezzanine Borrower. "MINIMUM DEBT YIELD" means (i) prior to the first 1st anniversary of the Closing Date, 12.75%, (ii) from the first 1st anniversary of the Closing Date but prior to the second 2nd anniversary of the Closing Date, 13.25%, (iii) during the First Extension Term, 13.50%, (iv) during the Second Extension Term, 13.75%, and (v) during the Third Extension Term, 14.00%. "MINIMUM DSCR" means 1.20:1.0. "MONTHLY FF&E PAYMENT" has the meaning set forth in Section 6.4. "MOODY'S" means Moody's Investors Service. "MORTGAGED CONDOMINIUM PROPERTY" means, collectively, the Property identified on SCHEDULE 4.29, together with, following the Office Unit Release, the Hotel Unit. "MORTGAGED CONDOMINIUM PROPERTY DOCUMENTS" means those certain documents identified on SCHEDULE 4.29, and, following a Conversion, the documents establishing and governing the condominium regime applicable to the Hotel Unit and the Office Unit. "MORTGAGE LENDER'S PERCENTAGE" shall mean, at the time of determination, the ratio, expressed as a percentage, that the outstanding principal balance of the Loan bears to the Aggregate Outstanding Principal Balance. As of the date hereof Mortgage Lender's Percentage is 74.01%. "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section 3(37) or Section 4001(a)(3) of ERISA to which any of the Borrowers or any Affiliate is making, or is accruing an obligation to make, contributions or has made, or been obligated to make, contributions within the preceding six (6) years, or for which any of the Borrowers or any Affiliate has any liability, including contingent liability. "NET CASH FLOW" means Net Operating Income for any period less (i) a base management fee equal to the greater of (A) the actual base management fee for such period and (B) 4.0% of Operating Revenues for such period, (ii) a reserve for FF&E equal to 4.0% of Operating Revenues for such period, and (iii) fees due to all Franchisors for such period. "NET OPERATING INCOME" OR "NOI" means, for any period, the amount by which Operating Revenues (other than from the office building located at the West Palm Beach Property) exceed Operating Expenses (excluding Management Fees, interest, income taxes, 16 depreciation, amortization, FF&E reserves, fees due to all Franchisors for such period, and expenses related solely to the office building located at the West Palm Beach Property). "NET SALES PROCEEDS" means all consideration, from whatever source, for the purchase of a Property pursuant to the terms of a purchase contract with an entity which is not an Affiliate of the Borrowers or Guarantor and less customary and reasonable costs (as determined by Lender in its reasonable discretion), including broker's fees, closing attorney's fees, and transfer and sales taxes payable by the Borrowers. "NON-FLAGGED PROPERTIES" means the Properties located at 9700 Bluegrass Highway, Louisville, Kentucky and 2144 Madison Avenue, Memphis, Tennessee, prior to such Properties becoming subject to a Franchise Agreement. "NOTE" has the meaning set forth in Section 2.1. "OBLIGATIONS" means the Loan and all obligations, liabilities and indebtedness of every nature to be paid or performed by the Borrowers under the Loan Documents, including the principal amount of the Loan, interest accrued thereon and all fees, costs and expenses, and other sums now or hereafter owing, due or payable and whether before or after the filing of a proceeding under the Bankruptcy Code by or against any of the Borrowers, and the performance of all other terms, conditions and convenants under the Loan Documents. "OFFICE UNIT" has the meaning set forth in Section 11.5. "OFFICE UNIT RELEASE" has the meaning set forth in Section 11.5. "O&M PLANS" has the meaning set forth in Section 5.7. "OPERATING BUDGET" means, for any period, the Borrowers' budget setting forth the Borrowers' best estimate, after due consideration, of all Operating Revenues and Operating Expenses and any other revenues, costs and expenses for each of the Properties for such period, which budget has been approved by Lender in accordance herewith, as same may be amended pursuant to Section 5.1(D) hereof. "OPERATING EXPENSES" means, for any period, without duplication, all costs and expenses of operating, maintaining and managing the Properties determined in accordance with GAAP, including, without limitation, Impositions (due and payable during the applicable period of determination), Insurance Premiums, repair and maintenance costs, Management Fees and costs, fees payable to all Franchisors, utilities, accounting, legal and other professional fees, fees relating to environmental and financial audits, wages, salaries, payroll taxes and benefits, business franchise taxes, tips and gratuities paid to employees and staff and other personnel expenses, costs and expenses related to operating and maintaining all guest rooms, restaurants (including inventory and supplies), retail stores and shops, bars, meeting rooms, banquet rooms, apartments, parking and recreational facilities, and all other "costs and expenses" as defined in the Uniform System; but excluding principal and interest payments on the Loan, fees and expenses of a non-operating nature and fees and expenses due and payable to or for the benefit of Lender under this Loan Agreement or any of the other Loan Documents (including, without limitation, all loan servicing fees and expenses, and expenses related to a Cap), expenses which, 17 in accordance with GAAP, should be capitalized, any expense paid by a tenant that would otherwise be an Operating Expense, capital expenditures, tenant improvement allowances and leasing commissions, if any, asset management fees, any payment or expense for which each Borrower was or is to be reimbursed from proceeds of the Loan or insurance or by any third party, any fees or expenses paid to any partner or member of the Borrowers for services provided to any of the Borrowers and any non-cash charges such as depreciation and amortization. Operating Expenses shall not include federal, state or local income taxes or legal and other professional fees unrelated to the operation of the Properties. "OPERATING REVENUES" means, without duplication, all revenues and receipts of the Borrowers from operation of the Properties or otherwise arising in respect of the Properties which are properly allocable to the Properties for the applicable period in accordance with GAAP, including, without limitation, all hotel receipts, revenues and credit card receipts collected from guest rooms, restaurants and bars (including without limitation, service charges for employees and staff), mini-bars, meeting rooms, banquet rooms, apartments, parking and recreational facilities, health club membership fees, food and beverage wholesale and retail sales, service charges, convention services, special events, audio-visual services, boat cruises, travel agency fees, internet booking fees, telephone charges, laundry services, vending machines and otherwise, all rents, revenues and receipts now existing or hereafter arising or created out of the sale, lease, sublease, license, concession or other grant of the right of the possession, use of occupancy of all or any portion of the Properties or personalty located thereon, or rendering of service by any of the Borrowers or any operator or manager of the hotel or commercial space (including, without limitation, from the rental of any office space, retail space, guest rooms or other space, halls, stores and deposits securing reservations of such space (only to the extent such deposits are not required to be returned or refunded to the depositor)), proceeds from rental or business interruption insurance relating to business interruption or loss of income for the period in question and any other items of revenue which would be included in operating revenues under the Uniform System; but excluding proceeds from the sale of FF&E, abatements, reductions or refunds of real estate or personal property taxes relating to the Properties, dividends on insurance policies relating to the Properties, condemnation proceeds arising from a temporary taking of all or a part of any Properties, security and other deposits until they are forfeited by the depositor, advance rentals until they are earned, proceeds from a sale, financing or other disposition of the Properties or any part thereof or interest therein and other non-recurring revenues as determined by Lender, insurance proceeds (other than proceeds from rental or business interruption insurance), other condemnation proceeds, capital contributions or loans to any of the Borrowers and disbursements to any of the Borrowers from the Reserves. "OSI DEFAULTS" means defaults under the Crowne Plaza Franchise Agreements resulting from the failure to achieve or maintain an Overall Service Index Level (as such term is defined in the applicable standards manual in effect for the Crowne Plaza Franchise Agreements) of 80, or such other default standard as may be set forth in the applicable standards manual after the Closing Date, at the following Properties: (i) the West Palm Beach Property; (ii) 350 1st Avenue N.E., Cedar Rapids, Iowa; (iii) 91 State Street, Albany, New York and (iv) 2801 NW Freeway, Houston, Texas. "OWNERSHIP INTERESTS" has the meaning set forth in Section 9.1. 18 "PAYMENT DATE" means the date that is the last day of each calendar month occurring during the term of the Loan (or if such last day is not a Business Day, the immediately preceding Business Day). "PERMITTED ASSUMPTION" has the meaning set forth in Section 11.3. "PERMITTED ENCUMBRANCES" means, collectively, (i) the Deeds of Trust and the other Liens of the Loan Documents in favor of Lender, (ii) the items shown in Schedule B to the Title Policies as of Closing, (iii) Liens for Impositions not yet due and payable or Liens arising after the date hereof which are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted in accordance with Section 5.3(B) hereof; (iv) in the case of Liens arising after the date hereof, statutory Liens of carriers, warehousemen, mechanics, materialmen and other similar Liens arising by operation of law, which are incurred in the ordinary course of business and discharged by the Borrowers by payment, bonding or otherwise within forty-five (45) days after the filing thereof or which are being contested in good faith in accordance with Section 5.3(B) hereof; (v) Liens arising from reasonable and customary purchase money financing of personal property and equipment leasing to the extent the same are created in the ordinary course of business in accordance with Section 5.17(B) hereof; (vi) all easements, rights-of-way, restrictions and other similar charges or non-monetary encumbrances against real property which do not materially adversely affect (A) the ability of the Borrowers to pay any of their obligations to any Person as and when due, (B) the marketability of title to the Properties, (C) the fair market value of the Properties, or (D) the use or operation of the Properties as of the Closing Date and thereafter; (vii) rights of existing and future tenants, as tenants only, pursuant to the Leases; and (viii) any other Lien to which Lender may expressly consent in writing. "PERMITTED INDEBTEDNESS" has the meaning set forth in Section 5.17. "PERMITTED INVESTMENTS" has the meaning set forth in the Cash Management Agreement. "PERMITTED OWNERSHIP INTEREST TRANSFERS" has the meaning set forth in Section 11.2. "PERMITTED TRANSFEREE" means any Person (provided such Person satisfies the requirements of Article IX hereof) controlled by, and more than 51% of which is owned by, one of the following: (i) a pension fund, pension trust or pension account that (a) has total real estate assets of at least $2.5 Billion and (b) is managed by a Person who controls real estate equity assets (not including the Properties) having a fair market value of at least $1.25 Billion; or (ii) a pension fund advisor who (a) immediately prior to such transfer, controls at least $1 Billion of real estate equity assets and (b) is acting on behalf of one or more pension funds that, in the aggregate, satisfy the requirements of clause (i) of this definition; or (iii) an insurance company which is subject to supervision by the insurance commissioner, or a similar official or agency, of a state or territory of the United States (including the District of Columbia) (a) with a net worth, as of the date immediately prior to the 19 date of the transfer, of at least $1 Billion and (b) who, immediately prior to such transfer, controls real estate equity assets (not including the Properties) having a fair market value of at least $2.5 Billion; or (iv) a corporation organized under the banking laws of the United States or any state or territory of the United States (including the District of Columbia) (a) with a combined capital and surplus of at least $1 Billion and (b) who, immediately prior to such transfer, controls real estate equity assets (not including the Properties) having a fair market value of at least $5 Billion; or (v) any other Person (a) with a long-term unsecured debt rating from the Rating Agencies of at least investment grade and (b) that owns or operates at least 15,000 hotel rooms, (ii) has a net worth, as of the date immediately prior to the date of such transfer, of at least $750 Million and (iii) immediately prior to such transfer, controls real estate equity assets (not including the Properties) having a fair market value of at least $1.5 Billion. "PERSON" means and includes natural persons, corporations, limited liability companies, limited partnerships, general partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof and their respective permitted successors and assigns (or in the case of a governmental Person, the successor functional equivalent of such Person). "PLAN OF REORGANIZATION" means the Joint Plan of Reorganization of Lodgian, Inc., et al., together with the Official Committee of Unsecured Creditors under Chapter 11 of the Bankruptcy Code, as approved pursuant to the terms of the Bankruptcy Code, together with any confirmation and/or amendments thereto entered in accordance with the Bankruptcy Code. "PRE-CLOSING CONDEMNATION" means those certain condemnation proceedings by the Florida Department of Transportation against Servico Pensacola 7200, Inc. related to Item/Segment No. 2224341, Parcel No. 101.1, and Servico Pensacola 7330, Inc. relating to Item/Segment No. 2224341, Parcel No. 102.1 with respect to certain parcels of land which do not constitute any portion of any of the Properties. "PRE-EXISTING CONDITION" has the meaning set forth in Section 5.5. "PREPAYMENT CONSIDERATION" has the meaning set forth in Section 2.6. "PRIMARY BORROWER PARTIES" means, collectively, the Borrowers, General Partner and Member. "PROPERTIES" and "PROPERTY" means, collectively or individually, the properties (including land and Improvements) described in EXHIBIT F, together with all Improvements now or hereafter located thereon and all related facilities, amenities and FF&E owned by the Borrowers and which shall be encumbered by and are more particularly described in the respective Deeds of Trust: provided that, following a Release, "PROPERTIES" shall mean each of the Properties that remain encumbered by the Deeds of Trust as Collateral for the Loan. 20 "PROPERTY CONDITION REPORT" means those certain property condition reports for the Properties as described on EXHIBIT M. "PROPERTY IMPROVEMENT PLAN" means, collectively, those certain property improvement plans for the Properties attached as EXHIBIT G and any future Property Improvement Plans required to be implemented by the applicable Franchisor. "PROPERTY RELEASE" has the meaning set forth in Section 11.4. "RATING AGENCY" shall mean, prior to a securitization, any of S&P, Moody's and Fitch or any other nationally-recognized statistical rating organization designated by Lender in its sole discretion, and, after a Securitization, each Rating Agency which has rated the Securities that are the subject of the Securitization. "RATING CONFIRMATION" with respect to the transaction or matter in question, shall mean: (i) if all or any portion of the Loan, by itself or together with other loans, has been the subject of a Securitization, then each applicable Rating Agency shall have confirmed in writing that such transaction or matter shall not result in a downgrade, qualification, or withdrawal of any rating then in effect for any certificate or other securities issued in connection with such Securitization, and (ii) if all of the Loan has not been the subject of a Securitization, then Lender shall have determined in its reasonable discretion (taking into consideration such factors as Lender may in good faith determine, including the attributes of the loan pool in which the Loan might reasonably be expected to be securitized) that no rating for any certificate or other securities that would be issued in connection with a Securitization of such portion of the Loan will be downgraded, qualified, or withheld by reason of such transaction or matter. "RATING CRITERIA" with respect to any Person, shall mean that (i) the short-term unsecured debt obligations of such Person are rated at least "A-1" by S&P, "P-1" by Moody's and "F-1" by Fitch, if deposits are held by such Person for a period of less than one month, or (ii) the long-term unsecured debt obligations of such Person are rated at least "AA-" by S&P (or "A" if the short-term unsecured debt obligations of such Person are rated at least "A-l"), "Aa2" by Moody's and "A" by Fitch, if deposits are held by such Person for a period of one month or more. "RECEIPTS" shall mean all revenues, receipts and other payments of every kind arising from ownership or operation of the Properties, including without limitation, all warrants, stock options, or equity interests in any tenant, licensee or other Person occupying space at, or providing services related to or for the benefit of, the Properties received by the Borrowers or any Related Person of the Borrowers in lieu of rent or other payment. "RELATED PERSON" means any Person in which any of the Borrowers or the Guarantor holds greater than a ten percent (10%) equity interest. "RELEASE" has the meaning set forth in Section 11.4. "RELEASE DATE" has the meaning set forth in Section 11.4. 21 "RELEASE PRICE" means an amount equal to the greater of (i) one hundred twenty-five percent (125%) of the Aggregate Allocated Loan Amount of the applicable Property, and (ii) seventy-five percent (75%) of the Net Sales Proceeds of a Property to be released. "RELEASE PRICE EXCESS" means the amount by which any Release Price exceeds the Aggregate Allocated Loan Amount of the Property being released; provided, however, Release Price Excess shall exclude any portion of a Release Price paid in connection with (x) a Release necessary to prevent an Uncured Franchise Default, or (y) a Release necessary to enable the Borrowers to comply with the restrictions set forth in Section 5.13(D). "RENT ROLL" has the meaning set forth in Section 3.1. "RENTS" has the meaning set forth in the Granting Clauses of the Deeds of Trust. "REPLACEMENTS" has the meaning set forth in Section 6.4. "REQUIRED CAPITAL IMPROVEMENTS" has the meaning set forth in Section 6.5. "REQUIRED INSURANCE POLICY" and "REQUIRED INSURANCE POLICIES" have the meanings set forth in Section 5.4. "RESERVE PRINCIPAL PAYMENT" has the meaning set forth in the Mezzanine Loan Agreement. "RESERVE SUB-ACCOUNTS" has the meaning set forth in Section 7.1. "RESERVES" means the reserves held by or on behalf of Lender pursuant to this Loan Agreement or the other Loan Document, including without limitation, the reserves established pursuant to Article VI. "RESTORATION" has the meaning set forth in Section 5.5. "RESTORATION THRESHOLD" shall mean the greater of (x) $250,000 or (y) five percent (5%) of the Aggregate Allocated Loan amount of the applicable Property, not to exceed $500,000, per Property per occurrence. "REVPAR" means average room revenues per available room per day. "S&P" shall mean Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. "SCHEDULED MATURITY DATE" shall mean, November 30, 2004. "SCHEDULED MEZZANINE PRINCIPAL PAYMENTS" shall mean (x) $64,975.00 through and including the Payment Date in November 2003, (y) $97,462.50 following the Payment Date in November 2003, through and including the Payment Date in November 2004, and (z) $129,950.00 thereafter through the Maturity Date. 22 "SCHEDULED MORTGAGE PRINCIPAL PAYMENTS" shall mean (x) $185,025.00 through and including the Payment Date in November 2003, (y) $277,537.50 following the Payment Date in November 2003, through and including the Payment Date in November 2004, and (z) $370,050.00 thereafter through the Maturity Date. "SECOND EXTENSION TERM" has the meaning set forth in Section 2.5(B). "SECONDARY MARKET TRANSACTION" has the meaning set forth in Section 10.1. "SECURITIES" (whether or not capitalized) means any stock, shares, voting trust certificates, bonds, debentures, options, warrants, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "SECURITIZATION" shall mean a rated offering of securities representing direct or indirect interests in the Loan or the right to receive income therefrom. "SERVICER" means a servicer selected by Lender from time to time in its sole discretion to service the Loan. "SERVICING FEES" has the meaning set forth in Section 2.11. "SUB-ACCOUNTS" has the meaning set forth in Section 7.1. "SUPPLEMENTAL FINANCIAL INFORMATION" means (i) a comparison of the budgeted income and expenses and the actual income and expenses for the prior calendar year or corresponding calendar quarter for such prior year, (ii) a calculation of the average daily rate, RevPAR and average occupancy statistics for the Properties for the applicable period and (iii) such other financial reports as the subject entity shall routinely and regularly prepare. "SUPPLEMENTAL INSURANCE RESERVE PAYMENT" shall mean $1,189,062. "SURVEY" has the meaning set forth in Section 3.1. "TAX LIABILITIES" has the meaning set forth in Section 2.9. "TERRORISM INSURANCE CAP" means $250,000. "TEST RATE" means an interest rate equal to the greater of (x) the then current yield on the 10-year United States Treasury Note plus the Test Rate Spread, and (y) the then current LIBO Rate plus the Test Rate Spread. "TEST RATE SPREAD" means 4.0%; provided, however, if the Mezzanine Borrowers have not made the Reserve Principal Payment on or prior to the Payment Date occurring in November 2003, the "TEST RATE SPREAD" shall mean 4.15% throughout the remainder of the term of the Loan, including any Extension Terms. 23 "THIRD EXTENSION TERM" has the meaning set forth in Section 2.5(B). "TIER 1 HOTEL" means any of the Properties subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, as applicable, identified in the "Tier 1" category on EXHIBIT I. "TIER 2 HOTEL" means any of the Properties subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified in the "Tier 2" category on EXHIBIT I. "TIER 3 HOTEL" means any of the Properties subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified in the "Tier 3" category on EXHIBIT I. "TITLE COMPANIES" means Fidelity National Title Insurance Company of New York, Land America (as co-insurer), and such other national title insurance company as may be acceptable to Lender. "TITLE POLICIES" means, collectively, the ALTA mortgagee policies of title insurance pertaining to the Deeds of Trust issued by the Title Companies to Lender in connection with the Closing. "TRANSFER" has the meaning set forth in Section 11.2. "TRANSFEREE BORROWER" has the meaning set forth in Section 11.3. "UNCURED FRANCHISE DEFAULT" means (x) the voluntary or involuntary termination of any Franchise Agreement, or (y) the occurrence of one or more breaches or defaults (other than OSI Defaults) which do not result from the failure of the Borrowers to pay to the Franchisors amounts due under the applicable Franchise Agreements and the continuance thereof beyond all applicable notice and grace periods, if any, under Franchise Agreements (or such other cure periods as may be provided by Franchisor in writing) covering Properties with Aggregate Allocated Loan Amounts of ten percent (10%) or more of the outstanding principal balance of the Loan and the Mezzanine Loan; provided, however, no Uncured Franchise Default shall be deemed to have occurred following the voluntary or involuntary termination of any Franchise Agreement if (a) within ten (10) Business Days of the termination of the applicable Franchise Agreement (and at the time of delivery of each report pursuant to Section 5.1(A)(v)) the Borrowers deliver to Lender evidence reasonably satisfactory to Lender that the Borrowers are diligently pursuing a Franchise Agreement with an Acceptable Franchisor for the applicable Property and shall thereafter diligently and continuously pursue such Franchise Agreement, (b) at the time of such termination not more than the lesser of (i) four (4) Properties, or (ii) Properties with Aggregate Allocated Loan Amounts of five percent (5%) of the outstanding principal balance of the Loan and the Mezzanine Loan, in either case excluding the Non-Flagged Properties, shall be in operation without being subject to Franchise Agreements, and (c) no Property (other than the Non-Flagged Properties) shall be without a Franchise Agreement in place for a period in excess of six (6) months from the termination of the applicable Franchise Agreement. 24 "UNIFORM SYSTEM" means the Uniform System of Accounts for the Lodging Industry promulgated by the American Hotel and Motel Association, as in effect from time to time. "WAIVING PARTY" has the meaning set forth in Section 13.1. "WEST PALM BEACH PROPERTY" means the Property located at 1601 Belvedere Boulevard, West Palm Beach, Florida. "WORK" has the meaning set forth in Section 6.7. "WORK RESERVES" has the meaning set forth in Section 6.7. SECTION 1.2 ACCOUNTING TERMS. For purposes of this Loan Agreement, all accounting terms not otherwise defined herein shall have the meanings assigned to such terms in conformity with GAAP or the Uniform System, as the case may be. SECTION 1.3 OTHER DEFINITIONAL PROVISIONS. References to "ARTICLES", "SECTIONS", "SUBSECTIONS", "EXHIBITS" and "SCHEDULES" shall be to Articles, Sections, Subsections, Exhibits and Schedules, respectively, of this Loan Agreement unless otherwise specifically provided. Any of the terms defined in Section 1.1 may, unless the context otherwise requires, be used in the singular or the plural depending on the reference. In this Loan Agreement, "HEREOF", "HEREIN", "HERETO", "HEREUNDER" and the like mean and refer to this Loan Agreement as a whole and not merely to the specific article, section, subsection, paragraph or clause in which the respective word appears; words importing any gender include the other genders; references to "WRITING" include printing, typing, lithography and other means of reproducing words in a tangible visible form; the words "INCLUDING", "INCLUDES" and "INCLUDE" shall be deemed to be followed by the words "without limitation"; and any reference to any statute or regulation may include any amendments of same and any successor statutes and regulations. Further, (i) any reference to any agreement or other document may include subsequent amendments, assignments, and other modifications thereto, and (ii) any reference to any Person may include such Person's respective permitted successors and assigns or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons. ARTICLE II TERMS OF THE LOAN SECTION 2.1 LOAN. (A) LOAN. Subject to the terms and conditions of this Loan Agreement and in reliance upon the representations and warranties of the Borrowers contained herein, Lender agrees to lend to the Borrowers, and the Borrowers agree to borrow from Lender, a loan in the original principal amount of $224,036,325 (such loan and the obligation of the Borrowers to repay the same together with all interest and other amounts from time to time owing hereunder may be referred to as the "LOAN"). 25 (B) NOTE. On the Closing Date, the Borrowers shall execute and deliver to Lender a Promissory Note, dated of even date herewith (as amended, modified or restated, and any replacement or substitute notes therefor, by means of multiple notes or otherwise, collectively, the "NOTE"), made by the Borrowers to the order of Lender, in the original principal amount of $224,036,325. (C) USE OF PROCEEDS. The proceeds of the Loan funded at Closing shall be used to (i) refinance existing indebtedness; (ii) pay all recording fees and taxes, title insurance premiums, the reasonable out-of-pocket costs and expenses incurred by Lender, including reasonable legal fees and expenses of counsel to Lender, and other costs and expenses approved by Lender (which approval will not be unreasonably withheld) related to the Loan; (iii) establish the Reserves required hereunder; (iv) fund cash collateral requirements under certain letters of credit; and (v) provide for general corporate purposes, including, without limitation, payment of transaction costs and expenses incurred by the Borrowers. The remaining proceeds of the Loan, if any, shall be disbursed to or as otherwise directed by the Borrowers. SECTION 2.2 INTEREST. (A) RATE OF INTEREST. The outstanding principal balance of the Loan shall bear interest at a rate per annum equal to the Interest Rate in effect for each Interest Accrual Period during the term hereof. The "INTEREST RATE" for any Interest Accrual Period shall be the rate of interest per annum equal to the sum of (i) the Applicable Spread plus (ii) the LIBO Rate in effect for such Interest Accrual Period. (B) DEFAULT RATE. Notwithstanding the foregoing, upon the occurrence and during the continuance of an Event of Default and in any event from and after the Maturity Date of the Loan and until the Loan and all other Obligations are satisfied in full, the outstanding principal balance of the Loan and all other Obligations shall bear interest until paid in full at a rate per annum that is five percent (5.0%) in excess of the Interest Rate otherwise applicable under this Loan Agreement and the Note (the "DEFAULT RATE"). (C) COMPUTATION OF INTEREST. Interest on the Loan and all other Obligations owing to Lender shall be computed on the basis of a 360-day year, and shall be charged for the actual number of days elapsed during any month or other accrual period. Interest shall be payable in arrears (except with respect to the number of days from the Payment Date in any Interest Accrual Period to the last day of such Interest Accrual Period as to which interest shall be payable in advance, if any). (D) INTEREST LAWS. Notwithstanding any provision to the contrary contained in this Loan Agreement or the other Loan Documents, the Borrowers shall not be required to pay, and Lender shall not be permitted to collect, any amount of interest in excess of the maximum amount of interest permitted by law ("EXCESS INTEREST"). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Loan Agreement or in any of the other Loan Documents, then in such event: (1) the provisions of this subsection shall govern and control, (2) the Borrowers shall not be obligated to pay any Excess Interest; (3) any Excess Interest that Lender may have received hereunder shall be, at Lender's option, (a) applied as a credit against either or both of the outstanding principal balance of the 26 Loan or accrued and unpaid interest thereunder (not to exceed the maximum amount permitted by law), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (4) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "MAXIMUM RATE"), and this Loan Agreement and the other Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (5) the Borrowers shall not have any action against Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Obligation is calculated at the Maximum Rate rather than the applicable rate under this Loan Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Obligations shall, to the extent permitted by law, remain at the Maximum Rate until Lender shall have received or accrued the amount of interest which Lender would have received or accrued during such period on Obligations had the rate of interest not been limited to the Maximum Rate during such period. If the Default Rate shall be finally determined to be unlawful, then the Interest Rate shall be applicable during any time when the Default Rate would have been applicable hereunder, provided however that if the Maximum Rate is greater or lesser than the Interest Rate, then the foregoing provisions of this paragraph shall apply. (E) LATE CHARGES. If an Event of Default regarding non-payment of principal, interest or other sums due hereunder or under any of the other Loan Documents shall occur, then the Borrowers shall pay to Lender, in addition to all sums otherwise due and payable, a late fee in an amount equal to five percent (5.0%) of such principal, interest or other sums due hereunder or under any other Loan Document, such late charge to be immediately due and payable without demand by Lender. SECTION 2.3 INTEREST RATE CAP AGREEMENT. (A) As a condition to Closing, the Borrowers shall purchase and pledge and deliver to Lender an interest rate cap agreement satisfying the criteria set forth below (the "CAP"), and the Borrowers shall maintain such Cap in the possession of Lender, in full force and effect, until all Obligations are fully and finally repaid. The Cap (i) shall have a notional amount equal to the outstanding principal balance of the Loan calculated based upon the declining principal balance of the Loan scheduled to be outstanding over the term of such Cap taking into account scheduled principal amortization hereunder, (ii) shall provided that to the extent that the LIBO Rate exceeds six and one half percent (6.5%) per annum (the "CAP THRESHOLD RATE"), then the Cap Provider shall pay to Lender, on behalf of the Borrowers, not less than the amount of interest that would accrue on the Loan at a per annum rate equal to the difference between the LIBO Rate and the Cap Threshold Rate, (iii) shall be in form and substance reasonably satisfactory to Lender, (iv) shall have a term equal to the Initial Term of the Loan (or the applicable Extension Term), and (v) shall be issued by a financial institution (the "CAP PROVIDER") having a financial rating by S&P of at least "AA" (and at least an equivalent rating from each of the other Rating Agencies). (B) If at any time the financial rating assigned to any Cap Provider by S&P shall fall below AA- (or the equivalent rating for any other Rating Agency), the Borrowers shall be required to deliver a replacement Cap in substantially the form of the Cap delivered at Closing issued by a Cap Provider meeting the rating requirements for a Cap Provider under Section 27 2.3(A)(v), providing for a cap "strike price" not greater than the Cap Threshold Rate (a replacement Cap meeting all of the foregoing conditions, an "ACCEPTABLE REPLACEMENT CAP") within twenty (20) Business Days after receipt of notice from Lender or Servicer of such downgrade of the Cap Provider, together with an assignment of such Cap substantially in the form of the Assignment of Rate Cap and such Financing Statements and opinions of in-house or outside counsel to the Cap Provider as Lender may reasonably require each in form and substance acceptable to Lender. Notwithstanding the foregoing to the contrary, under no circumstances shall the Cap be terminated by the Borrowers prior to delivery of an Acceptable Replacement Cap, together with the required documentation with respect thereto, to Lender. If, for any reason, the Borrowers are unable to deliver a replacement Cap when required hereunder, then at or prior to the time when the replacement Cap is due hereunder, the Borrowers shall deliver to Lender cash security (such cash security together with any interest thereon, the "CAP RESERVE") in an amount sufficient to cover the amount of additional interest which Lender reasonably estimates may be incurred during the remaining term of the Loan (or remaining Extension Term then in effect) as a result of the LIBO Rate exceeding the Cap Threshold Rate, which Cap Reserve shall be held by Lender and applied to the Obligations in accordance with Section 6.1. Upon delivery of an Acceptable Replacement Cap reasonably acceptable to Lender, the remaining balance of the Cap Reserve shall be promptly returned to the Borrowers. (C) All payments made by the Cap Provider under the Cap shall be deposited directly by the Cap Provider into the Lock Box Account and applied in accordance with the Cash Management Agreement. SECTION 2.4 PAYMENTS. (A) PAYMENTS OF INTEREST AND PRINCIPAL. The Borrowers shall make payments of interest and principal on the Note as follows: (i) The Borrowers shall make a payment to Lender of interest only on the Closing Date for the first Interest Accrual Period; (ii) On each Payment Date commencing with the Payment Date in December 2002, and on each Payment Date thereafter through but not including the Payment Date in December 2003, the Borrowers shall make a payment of interest on the Loan for the Interest Accrual Period immediately preceding each such Payment Date, and in addition shall make a payment of principal on the Loan in an amount equal to the lesser of (x) the Scheduled Mortgage Principal Payment or (y) Mortgage Lender's Percentage of all Excess Cash Flow; provided that the amount of Mortgage Lender's Percentage of the amount of any Release Price Excess for any Property released during such period shall be deemed applied (without duplication) in reduction of each of the Scheduled Mortgage Principal Payments next becoming due and payable under this clause (ii) and under clause (iii) of this Section 2.4(A) through the Scheduled Maturity Date (but not beyond) in an amount equal to (x) Mortgage Lender's Percentage of such Release Price Excess divided by (y) the number of such Scheduled Mortgage Principal Payments remaining through the Scheduled Maturity Date; and (iii) On each Payment Date commencing with the Payment Date in December 2003, and on each Payment Date thereafter through the Maturity Date, the Borrowers shall make 28 a payment of interest on the Loan for the Interest Accrual Period immediately preceding each such Payment Date, and in addition shall make a payment of principal on the Loan in an amount equal to the Scheduled Mortgage Principal Payment; provided that the amount of Mortgage Lender's Percentage of the amount of any Release Price Excess for any Property released during such period shall be deemed applied (without duplication) in reduction of each of the Scheduled Mortgage Principal Payments next becoming due and payable under this Section 2.4(A)(iii) through the Scheduled Maturity Date (but not beyond), or, if the subject Release occurs during an Extension Term, through the last Scheduled Mortgage Principal Payment to be made during that Extension Term (but not beyond) in an amount equal to (x) the Mortgage Lender's Percentage of such Release Price Excess divided by (y) the number of such Scheduled Mortgage Principal Payments remaining through the current Maturity Date; and (iv) On each Payment Date prior to the Payment Date in December 2003, if Mortgage Lender's Percentage of Excess Cash Flow in any month exceeds the Scheduled Mortgage Principal Payment for such month, such excess amount shall be paid to Lender and applied to principal on the Loan until the amount of any Amortization Deficiency has been reduced to zero, and any remainder Excess Cash Flow thereafter shall be distributed in accordance with the terms of the Cash Management Agreement; and (v) At any time the then Aggregate Outstanding Principal Balance is less than $90,812,257.80, Mortgage Lender's Percentage of Excess Cash Flow shall be paid to Lender and applied on each Payment Date in reduction of the principal balance of the Loan (which payment shall be made without the imposition of any Prepayment Consideration). (B) DATE AND TIME OF PAYMENT. The Borrowers shall receive credit for payments on the Loan which are transferred to the account of Lender as provided below (i) on the day that such funds are received by Lender if such receipt occurs by 2:00 p.m. (New York time) on such day, or (ii) on the next succeeding Business Day after such funds are received by Lender if such receipt occurs after 2:00 p.m. (New York time). Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, the payment may be made on the next succeeding Business Day. (C) MANNER OF PAYMENT; APPLICATION OF PAYMENTS. The Borrowers promise to pay all of the Obligations relating to the Loan as such amounts become due or are declared due pursuant to the terms of this Loan Agreement. All payments by the Borrowers on the Loan shall be made without deduction, defense, set off or counterclaim and in immediately available funds delivered to Lender by wire transfer to such accounts at such banks as Lender may from time to time designate. Prior to an Event of Default, each payment shall be applied first to pay late charges and the charges and expenses of Lender, Servicer and any special servicer as provided hereunder, second to accrued and unpaid interest, and the balance to principal. Prior to an Event of Default, to the extent sufficient funds are contained in the Lock Box Account, or an Account or Sub-Account thereof, to make the required monthly payments to the applicable Reserves and Sub-Account on such Payment Date, the Borrowers shall be deemed to have satisfied its obligation to make such payments. Upon the occurrence and during the continuance of an Event of Default, payments shall be applied to the Obligations in such order as Lender shall determine in its sole and absolute discretion. 29 SECTION 2.5 MATURITY. (A) SCHEDULED MATURITY DATE. To the extent not sooner due and payable in accordance with the Loan Documents (and unless the Borrowers shall extend the term of the Loan for the First Extension Term, the Second Extension Term, or the Third Extension Term upon the terms and subject to the conditions of Section 2.5(B) below), the then outstanding principal balance of the Loan, all accrued and unpaid interest thereon (and including interest through the end of the Interest Accrual Period then in effect), and all other sums then owing to Lender hereunder and under the Note, the Deeds of Trust and the other Loan Documents, shall be due and payable on (i) the Scheduled Maturity Date or (ii) if the Borrowers shall have extended the term of the Loan for the First Extension Term, the Second Extension Term, or the Third Extension Term, upon the terms and subject to the conditions of Section 2.5(B) below, the applicable Maturity Date. (B) EXTENSION TERMS. The Borrowers may extend the term of the Loan for three extension terms of one year each (each, an "EXTENSION TERM", and, collectively the "EXTENSION TERMS"); (i) the first Extension Term (the "FIRST EXTENSION TERM") commencing on the day immediately following the Scheduled Maturity Date and ending (unless sooner terminated in accordance with the Loan Documents) on the first (1st) anniversary of the Scheduled Maturity Date, (ii) the second Extension Term (the "SECOND EXTENSION TERM") commencing on the day immediately following the last day of the First Extension Term and ending (unless sooner terminated in accordance with the Loan Documents) on the second (2nd) anniversary of the Scheduled Maturity Date and (iii) the third Extension Term (the "THIRD EXTENSION TERM") commencing on the day immediately following the last day of the Second Extension Term and ending (unless sooner terminated in accordance with the Loan Documents) on the third (3rd) anniversary of the Scheduled Maturity Date; subject to the following terms and conditions, provided that subsections (iii) and (iv) shall not be conditions to the exercise of the First Extension Term: (i) The Borrowers shall give Lender notice (an "EXTENSION NOTICE") of their request to extend the term of the Loan for the First Extension Term at any time not later than forty-five (45) days prior to the Scheduled maturity Date and for the Second Extension Term and the Third Extension Term, at least forty-five (45) days but not more than one hundred twenty (120) days prior to the expiration of the First Extension Term, or expiration of the Second Extension Term, as the case may be; (ii) With respect to the First Extension Term, no Event of Default under Sections 8.1(A) or (B) shall have occurred and be continuing as of the first (1st) day of the First Extension Term, and, with respect to the Second Extension Term and the Third Extension Term, no Event of Default shall have occurred and be continuing as of the date the Borrowers deliver the applicable Extension Notice or as of the expiration of the First Extension Term, or expiration of the Second Extension Term, as the case may be; (iii) The Debt Service Coverage Ratio for the trailing twelve (12) month period ended on the last day of the immediately preceding calendar quarter prior 30 to the expiration of the First Extension Term, or expiration of the Second Extension Term, as the case may be, is at least equal to the Minimum DSCR, and the Debt Yield for the twelve (12) month period ended on the last day of the immediately preceding calendar quarter prior to the expiration of the First Extension Term, or expiration of the Second Extension Term, as the case may be, is not less than 13.25%; provided however, if the Debt Service Coverage Ratio and/or the Debt Yield fail to satisfy such requirements, the Borrowers shall be entitled to make a principal prepayment of a portion of the Aggregate Outstanding Principal Balance (to be applied in accordance with the terms of the Cash Management Agreement) on the then current Maturity Date in an amount, as reasonably determined by Lender, sufficient to cause the Debt Service Coverage Ratio and/or the Debt Yield, as applicable, to satisfy such requirements based upon a recalculation thereof assuming that the prepayment amount were applied to reduce the Aggregate Outstanding Principal Balance as of the last day of the immediately preceding calendar quarter (and provided that the Prepayment Consideration shall be payable in connection with such prepayment); (iv) Prior to the date the applicable Extension Term commences, the Borrowers shall deliver to Lender an extension fee equal to one quarter of one percent (.25%) of the outstanding principal balance of the Loan as of the date the applicable Extension Term commences for each of the Second Extension Term and the Third Extension Term; (v) All of the conditions required to be satisfied for the extension of the Mezzanine Loan pursuant to Section 2.5(B)(viii) thereof (whether or not the Mezzanine Loan is actually extended) shall have been satisfied; (vi) The Borrowers shall execute all such documents and other agreements as Lender shall reasonably request; (vii) The Borrowers shall deliver to Lender an extension of the Cap or a replacement Cap in form substantially the same as the Cap delivered at Closing covering the term of the applicable Extension Term, providing for a cap "strike price" (such "strike price", the "EXTENSION CAP THRESHOLD RATE") not greater than six and one-half percent (6.5%) per annum (it being acknowledged that the Borrowers may purchase an extension or replacement Cap for the applicable Extension Term with an Extension Cap Threshold Rate lower than such rate in order to satisfy the Debt Service Coverage Ratio requirement under Section 2.5(B)(iii) above) and otherwise satisfying the requirements of Section 2.3 together with an assignment of such replacement Cap substantially in the form of the Assignment of Rate Cap and such Financing Statements and opinions of in-house or outside counsel to the Cap Provider as Lender may reasonably require each in form and substance reasonably acceptable to Lender. The Borrowers shall be required to pay any and all reasonable out-of-pocket 31 costs and expenses (including, without limitation, reasonable attorneys' fees and disbursements) incurred by Lender (and by any Servicer and trustee in connection with any Securitization backed in whole or in part by the Loan) in connection with delivery of such extension or replacement Cap and all related documentation and opinions required above; and (viii) The Borrowers shall have delivered evidence reasonably satisfactory to Lender that the environmental insurance, including mold coverage, in form and with coverages in effect as of the Closing Date has been renewed through the end of the applicable Extension Term. SECTION 2.6 PREPAYMENT. (A) LIMITATION ON PREPAYMENT; PREPAYMENT CONSIDERATION DUE ON ACCELERATION. The Borrowers shall have no right to prepay the Loan in whole or part, except as expressly set forth in this Loan Agreement or the other Loan Documents. The Borrowers may prepay the Loan in whole, or, to the extent expressly provided herein, in part, at any time, provided that (i) the Borrowers shall provide to Lender not less than fifteen (15) days prior written notice of such prepayment, (ii) together with such prepayment the Borrowers also shall pay all accrued and unpaid interest and all other Obligations then due and owing and (iii) if such prepayment occurs on any day other than a Payment Date, then together therewith the Borrowers also shall pay to Lender the amount of interest that would have accrued on the amount being prepaid from and including the date of such prepayment to the end of such Interest Accrual Period. (B) PREPAYMENT CONSIDERATION DUE. If any prepayment of all or any portion of the Loan shall occur on account of acceleration of the Loan (whether or not due to an Event of Default), or otherwise, then except only as expressly provided in this Loan Agreement or the other Loan Documents to the contrary, the Borrowers shall pay the Prepayment Consideration on the amount prepaid to Lender together with such prepayment, as liquidated damages and compensation for costs incurred, and in addition to all other amounts due and owing to Lender. Notwithstanding the foregoing, no Prepayment Consideration will be due as to a prepayment of the Loan in connection with (i) application of insurance or condemnation proceeds required by Lender pursuant to this Loan Agreement or the Deeds of Trust in the absence of an Event of Default, (ii) amortization payments made in accordance with Section 2.4(A), (iii) in connection with the first $36,324,903.12 of prepayments made in connection with one or more Releases (it being agreed that the Prepayment Consideration will be due with respect to all, or any portion of, a prepayment made in connection with a Release after the aggregate amount of all prepayments made in connection with Releases (other than Releases effectuated pursuant to Section 5.5(E)) exceeds $36,324,903.12, or (iv) upon prepayment of the Loan in full, on any date on or after the Payment Date occurring in October 2004, through the Scheduled Maturity Date (provided the amount of interest that would have accrued on the amount being prepaid from and including the date of such prepayment through the following Payment Date shall be payable with such prepayment). The foregoing designation of any amount of Prepayment Consideration in this Agreement shall not create a right to prepay at any time or in any circumstances where this Agreement does not expressly state that such a right exists. "PREPAYMENT CONSIDERATION" shall mean an amount equal to (i) prior to the Payment Date in December 2003, three percent (3%) of the Loan balance at the time of prepayment, and (ii) on and after the Payment Date in December 32 2003, but prior to the Payment Date in May 2004, two percent (2%) of the Loan balance at the time of prepayment, and (iii) thereafter through the Scheduled Maturity Date one percent (1%) of the Loan balance at the time of prepayment. SECTION 2.7 OUTSTANDING BALANCE. The balance on Lender's books and records shall be presumptive evidence (absent manifest error) of the amounts owing to Lender by the Borrowers; provided that any failure to record any transaction affecting such balance or any error in so recording shall not limit or otherwise affect the Borrowers' obligation to pay the Obligations. SECTION 2.8 TAXES. Any and all payments or reimbursements made hereunder or under the Note shall be made free and clear of and without deduction for any and all taxes, withholding taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto arising out of or in connection with the transactions contemplated by the Loan Documents (all such taxes, levies, imposts, deductions, charges or withholdings and all liabilities with respect thereto (excluding taxes imposed on net income in accordance with the following sentence) herein "TAX LIABILITIES"). Notwithstanding the foregoing, the Borrowers shall not be liable for taxes imposed on the net income of Lender by the jurisdiction under the laws of which Lender is organized or doing business or any political subdivision thereof and taxes imposed on its net income by the jurisdiction of Lender's applicable lending office or any political subdivision thereof. If the Borrowers shall be required by law to deduct any such Tax Liabilities (or amounts in estimation or reimbursement for the same) from or in respect of any sum payable hereunder to Lender, then the sum payable hereunder shall be increased as may be necessary so that, after making all required deduction, Lender receives an amount equal to the sum it would have received had no such deductions been made. SECTION 2.9 REASONABLENESS OF CHARGES. The Borrower Parties agree that (i) the actual costs and damages that Lender would suffer by reason of an Event of Default (exclusive of the attorneys' fees and other costs incurred in connection with enforcement of Lender's rights under the Loan Documents) or a prepayment would be difficult and needlessly expensive to calculate and establish, and (ii) the amounts of the Default Rate, the late charges, and the Prepayment Consideration are reasonable, taking into consideration the circumstances known to the parties at this time, and (iii) such Default Rate and late charges and Lender's reasonable attorneys' fees and other costs and expenses incurred in connection with enforcement of Lender's rights under the Loan Documents shall be due and payable as provided herein, and (iv) such interest at the Default Rate, late charges, Prepayment Consideration, and the obligation to pay Lender's reasonable attorneys' fees and other enforcement costs do not, individually or collectively, constitute a penalty. SECTION 2.10 FUNDING LOSSES/CHANGE IN LAW ETC. (A) The Borrowers hereby agree to pay to Lender any amount necessary to compensate Lender and any Funding Party for any losses or costs (including, without limitation, the costs of breaking any "LIBOR" contract, if applicable, or funding losses determined on the basis of Lender's or such Funding Party's reinvestment rate and the interest rate on the Loan) (collectively, "FUNDING LOSSES") sustained by Lender or any Funding Party: (i) if the Note, or any portion thereof, is repaid for any reason whatsoever on any date other than a Payment Date (including, without limitation, from condemnation or insurance proceeds); or (ii) as a 33 consequence of (x) any increased cost of funds that Lender or any Funding Party may sustain in maintaining the borrowing evidenced hereby or (y) the reduction of any amounts received or receivable from the Borrowers, in either case, due to the introduction of, or any change in, law or applicable regulation or treaty adopted after the date hereof (including the administration or interpretation thereof), whether or not having the force of law, or due to the compliance by Lender or the Funding Party, as the case may be, with any directive, whether or not having the force of law, or request from any central bank or domestic or foreign governmental authority, agency or instrumentality having jurisdiction made as of the date hereof, to the extent Lender reasonably determines that such Funding Losses are allocable to the Loan. (B) If Lender or any Funding Party shall have determined that the applicability of any law, rule, regulation or guideline adopted pursuant to or arising out of the July 1988 report of the Basle Committee on Banking Regulations and Supervisory Practices entitled "International Convergence of Capital Measurement and Capital Standards", or the adoption of any other law, rule, regulation or guideline (including but not limited to any United States law, rule, regulation or guideline) regarding capital adequacy, or any change becoming effective in any of the foregoing or in the enforcement or interpretation or administration of any of the foregoing by any court or any domestic or foreign governmental authority, central bank or comparable agency charged with the enforcement or interpretation or administration thereof, or compliance by Lender or its holding company or a Funding Party or its holding company, as the case may be, 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 made after the date hereof, has or would have the effect of reducing the rate of return on the capital of Lender or its holding company, or of the Funding Party's or its holding company, as the case may be, then, upon demand by Lender, the Borrowers shall pay to Lender, from time to time, such additional amount or amounts as will compensate Lender or such Funding Party for any such reduction suffered. (C) Any amount payable by the Borrowers under Section 2.10(A) or 2.10(B) shall be paid to Lender within fifteen (15) Business Days after receipt by the Borrowers of a certificate signed by an officer of Lender setting forth the amount due and the basis for the determination of such amount in reasonable detail and the computations made by Lender to determine the amount due, which statement shall be conclusive and binding upon the Borrowers, absent manifest error. Failure on the part of Lender to demand payment from the Borrowers for any such amount attributable to any particular period shall not constitute a waiver of Lender's right to demand payment of such amount for any subsequent or prior period. Lender shall use reasonable efforts to deliver to the Borrowers prompt notice of any event described in Sections 2.10(A) or 2.10(B) above and of the amount to be paid as a result thereof, provided, however, any failure by Lender to so notify the Borrowers shall not affect the Borrower's obligation to make the payments to be made under this Section as a result thereof. All amounts which may become due and payable by the Borrowers in accordance with the provisions of this Section shall constitute additional interest under the Loan and shall be secured by the Deeds of Trust and the other Loan Documents. (D) If Lender or any Funding Party requests compensation for any losses or costs to be reimbursed pursuant to any one or more of the provisions of clause (ii) of Sections 2.10(A) or 2.10(B), then, upon request of the Borrowers, Lender or such Funding Party shall use reasonable efforts in a manner consistent with such institution's practice in connection with loans like the 34 Loan to eliminate, mitigate or reduce amounts that would otherwise be payable by the Borrowers under the foregoing provisions, provided that such action would not be otherwise prejudicial to Lender or such Funding Party, including, without limitation, by designating another of Lender's or such Funding Party's offices, branches or affiliates; the Borrowers hereby agreeing to pay all reasonably incurred costs and expenses incurred by Lender or any Funding Party in connection with any such action. SECTION 2.11 SERVICING/SPECIAL SERVICING. Lender may change the Servicer from time to time without the consent of the Borrowers, on prior written notice to the Borrowers. The Borrowers expressly acknowledge and agree that the Servicer's fees (the "SERVICING FEE"), which shall in no event exceed .05% per annum on the outstanding principal balance of the Loan, payable in monthly installments, and if the Loan becomes a specially serviced loan, any fees of the special servicer, shall be payable by the Borrowers and shall constitute a portion of the Obligations; provided, however, that at no time shall the Borrowers be liable for Servicing Fees or special servicing fees in excess of those fees charged to Lender by the Servicer or any special servicer. ARTICLE III CONDITIONS TO LOAN SECTION 3.1 CONDITIONS TO FUNDING OF THE LOAN ON THE CLOSING DATE. The obligations of Lender to fund the Loan are subject to the prior or concurrent satisfaction or waiver of the conditions set forth below, and to satisfaction of any other conditions specified herein or elsewhere in the Loan Documents. With respect to facts and circumstances actually known to Lender at Closing, by funding the Loan Lender shall be deemed to have acknowledged that each of the conditions set forth below has been satisfied or waived (except as otherwise set forth in any other agreement in writing between the Borrowers and Lender). Where in this Section any documents, instruments or information are to be delivered to Lender, then the condition shall not be satisfied unless (i) the same shall be in form and substance satisfactory to Lender, and (ii) if so required by Lender, the Borrowers shall deliver to Lender a certificate duly executed by the Borrowers stating that the applicable document, instrument or information is true and complete and does not omit to state any information without which the same might reasonably be deemed materially misleading. (A) LOAN DOCUMENTS. On or before the Closing Date, the Borrowers shall execute and deliver and cause to be executed and delivered to Lender all of the Loan Documents specified in SCHEDULE 3.1(A), together with such other Loan Documents as may be reasonably required by Lender, each, unless otherwise noted, of even date herewith, duly executed, in form and substance satisfactory to Lender and in quantities designated by Lender (except for the Note, of which only one shall be signed), which Loan Documents shall become effective upon the Closing. (B) DEPOSITS. The deposits required herein, including without limitation, the initial deposits into the Reserves and Accounts, shall have been made (and at the Borrowers' option, the same may be made from the proceeds of the Loan). (C) PERFORMANCE OF AGREEMENTS, TRUTH OF REPRESENTATIONS AND WARRANTIES. Each Borrower Party and all other Persons executing any agreement on behalf of any Borrower 35 Party shall have performed in all material respects all agreements which this Loan Agreement provides shall be performed on or before the Closing Date. The representations and warranties contained herein and in the other Loan Documents shall be true, correct and complete in all material respects on and as of the Closing Date. (D) CLOSING CERTIFICATE. On or before the Closing Date, Lender shall have received certificates of even date herewith executed on behalf of each Borrower by the chief financial officer (or similar officer of the Borrowers) stating that: (i) on such date, to the Borrowers' Knowledge no Default exists; (ii) no material adverse change in the financial condition or operations of the business of the Borrowers or the projected cash flow of the Borrowers or the Properties has occurred since the delivery to Lender of any financial statements, budgets, proformas, or similar materials (or if there has been any change, specifying such change in detail), and that, to the Borrowers' Knowledge after due inquiry, such financial materials fairly present the financial condition and results of operations of the Borrowers and the Properties, and all other materials delivered to Lender are complete and accurate in all material respects; and (iii) the representations and warranties set forth in this Loan Agreement are true and correct in all material respects on and as of such date with the same effect as though made on and as of such date (or if any such representations or warranties require qualification, specifying such qualification in detail) and (iv) to the Borrowers' Knowledge, there are no material facts or conditions concerning the Properties or any Borrower Party that have not been disclosed to Lender which could have a Material Adverse Effect. (E) OPINIONS OF COUNSEL. On or before the Closing Date, Lender shall have received from Cadwalader, Wickersham & Taft or other legal counsel for the Borrowers satisfactory to Lender, written legal opinions, each in form and substance acceptable to Lender, as to such matters as Lender shall request, including opinions to the effect that (i) each of the Borrower Parties is duly formed, validly existing, and in good standing in its state of organization and, in the case of each Borrower, in each state where its Property is located, (ii) this Loan Agreement and the Loan Documents have been duly authorized, executed and delivered and are enforceable in accordance with their terms subject to customary qualifications for bankruptcy, general equitable principles, and other customary assumptions and qualifications; (iii) the Deposit Account Agreement and Cash Management Agreement have been duly authorized, executed and delivered by Borrower and Manager and are enforceable in accordance with their terms and the security interests in favor of Lender in the Account Collateral have been validly created and perfected; and (iv) no Borrower, Member or General Partner would be consolidated in any bankruptcy proceeding affecting Guarantor or certain other Affiliates of the Borrower Parties specified by Lender. Also on or before the Closing Date, Lender shall have received the following legal opinions, each in form and substance acceptable to Lender: (a) an opinion of the Borrowers' local counsel in each state where the Properties are located as to the enforceability of, and the creation and perfection of Liens under, the Deeds of Trust and the Assignments of Leases and such other matters as Lender may reasonably request; (b) an opinion of counsel to the Cap Provider (which may be in-house counsel) that the Cap has been duly authorized, executed and delivered by the Cap Provider and is enforceable in accordance with its terms and such other matters as Lender may reasonably request; (c) opinions of Richards, Layton & Finger or other Delaware legal counsel, acceptable to Lender, for each Borrower that is a single member limited liability company formed under the laws of the State of Delaware that, among other matters, (1) under Delaware law (x) the prior unanimous written consent of Member (and the unanimous 36 written consent of the board of directors of Member including the Independent Directors) would be required for a voluntary bankruptcy filing by each such Borrower, (y) the prior unanimous written consent of the board of directors of Member (including the Independent Directors), or the unanimous prior written consent of the board of managers' of each Borrower, including the Independent Directors' would be required for a voluntary bankruptcy filing by Member, (z) such unanimous consent requirements are enforceable against Member in accordance with their terms; (2) under Delaware law the bankruptcy or dissolution of Member would not cause the dissolution of any of the Borrowers and the bankruptcy or dissolution of the sole shareholder or member would not cause the dissolution of Member; (3) under Delaware law, creditors of Member shall have no legal or equitable remedies with respect to the assets of any of the Borrowers and creditors of Guarantor shall have no legal or equitable remedies with respect to the assets of Member; and (4) a federal bankruptcy court would hold that Delaware law governs the determination of what Persons have authority to file a voluntary bankruptcy petition on behalf of each Borrower and Member; and (d) such other legal opinions as Lender may reasonably request. (F) TITLE POLICIES. On or before the Closing Date, Lender shall have received and approved pro forma Title Policies for the Deeds of Trust, and as of the Closing, each Title Company shall be irrevocably committed and prepared immediately to issue the Title Policies or binding commitments. The Title Policies shall be in form and substance satisfactory to Lender. Without limitation, each Title Policy shall be issued on an ALTA form acceptable to Lender by each Title Company or if an ALTA form is not available in the applicable jurisdiction, another form acceptable to Lender, together with such reinsurance and direct access agreements as Lender may require, insuring that the Deeds of Trust are valid first and prior enforceable liens on each Borrower's fee simple interest or ground leasehold interest, as the case may be, in the applicable Property (including any easements appurtenant thereto) subject only to such exceptions to coverage as are acceptable to Lender, including the Permitted Exceptions. Each Title Policy shall contain such endorsements as Lender may require (to the extent available in the state where the Properties is located) in form acceptable to Lender, including deletion of the creditors' rights exception and affirmative endorsement coverage for creditors' rights risks. (G) SURVEY. Lender shall have received a survey of each of the Properties, certified to Lender and its successors, assigns and designees and to each Title Company by a surveyor reasonably satisfactory to Lender (the "SURVEY"). Each Survey shall contain the minimum detail for land surveys as most recently adopted by ALTA/ASCM, shall comply with Lender's survey requirements and shall contain Lender's standard form certification, and shall show no state of facts or conditions reasonably objectionable to Lender. (H) ZONING. On or before the Closing Date, Lender shall have received evidence reasonably satisfactory to Lender as to the zoning and subdivision compliance of each of the Properties. (I) CERTIFICATES OF FORMATION AND GOOD STANDING. On or before the Closing Date, Lender shall have received copies of the organizational documents and filings of each Borrower Party, together with good standing certificates (or similar documentation) (including verification of tax status) from the state of its formation and from all states in which the laws thereof require such Person to be qualified and/or licensed to do business (including without limitation, each 37 state in which the Properties are located for the applicable Borrower(s) and, to the extent required by law, Member and General Partner). Each such certificate shall be dated not more than 30 days prior to the Closing Date, as applicable, and certified by the applicable Secretary of State or other authorized governmental entity. In addition, on or before the Closing Date the secretary or corresponding officer of each Borrower Party, or the secretary or corresponding officer of the partner, trustee, or other Person as required by such Borrower Party's organizational documents (as the case may be, the "BORROWER PARTY SECRETARY") shall have delivered to Lender a certificate stating that the copies of the organizational documents as delivered to Lender are true and complete and are in full force and effect, and that the same have not been amended except by such amendments as have been so delivered to Lender. (J) CERTIFICATES OF INCUMBENCY AND RESOLUTIONS. On or before the Closing Date, Lender shall have received certificates of incumbency and resolutions of each Borrower Party and its constituents as requested by Lender, approving and authorizing the Loan and the execution, delivery and performance of the Loan Documents, certified as of the Closing Date by the Borrower Party Secretary as being in full force and effect without modification or amendment. (K) FINANCIAL STATEMENTS. On or before the Closing Date, Lender shall have received such financial statements and other financial information as shall be satisfactory to Lender for each Borrower Party (including for each Guarantor) and for the Properties. If any such statements are not available for the Properties, then the Borrowers shall provide such financial reports as are available. All such financial statements shall be certified to Lender by the applicable Borrower Party (through its chief financial officer or other officer charged with similar duties), which certification shall be in form and substance reasonably satisfactory to Lender. (L) OPERATING AND CAPEX/FF&E BUDGETS; CAPITAL IMPROVEMENT PLAN. On or before the Closing Date, Lender shall have received and approved the Operating Budget and CapEx/FF&E Budget for the Properties for the remainder of the current calendar year and the Capital Improvement Plan for the Properties. (M) AGREEMENTS. On or before the Closing Date, Lender shall have received a list of all Material Agreements and, to the extent requested by Lender, copies thereof. (N) MANAGEMENT AGREEMENT; FRANCHISE AGREEMENT. On or before the Closing Date, Lender shall have received copies of the Management Agreements and any leasing brokerage agreements pertaining to the Properties and the Assignments of Management Agreements, duly executed by each Manager and the Borrowers. On or before the Closing Date, Lender shall have received copies of the existing Franchise Agreements and each Franchisor Letter (including any Property Improvement Plan) duly executed by the applicable Franchisor and, if applicable, such additional Franchise Agreement (or commitment to issue such Franchise Agreement), together with Franchisor Letters (including any Property Improvement Plan) duly executed by the Franchisors. (O) RENT ROLL. Prior to the Closing, Lender shall have received from the Borrowers a rent roll for each of the Properties (collectively, the "RENT ROLL"), certified by the Borrowers, 38 and in form and substance satisfactory to Lender. The Rent Roll shall constitute a true, correct, and complete list of each and every Material Lease, together with all extensions and amendments thereof, and shall accurately and completely disclose all annual and monthly rents payable by all tenants, including all percentage rents, if any, and expiration dates of such Material Leases, and the amount of security deposit being held by the Borrowers under each Material Lease, if any. (P) MATERIAL LEASES. Prior to the Closing, Lender shall have received true, correct and complete copies of the Material Leases, as amended. (Q) LICENSES, PERMITS AND APPROVALS. On or before Closing Date, Lender shall have received copies of the final, unconditional certificates of occupancy issued with respect to each of the Properties, together with all other applicable licenses (including, without limitation, each liquor license and beer permit), permits and approvals required for each Borrower to own, use, occupy, operate and maintain each of the Properties as a hotel. (R) INSURANCE POLICIES AND ENDORSEMENTS. On or before the Closing Date, Lender shall have received copies of certificates of insurance (dated not more than 20 days prior to the Closing Date) regarding insurance required to be maintained under this Loan Agreement and the other Loan Documents, together with endorsements satisfactory to Lender naming Lender as an additional insured and loss payee, as required by this Loan Agreement, under such policies. In addition, as to any insurance matters arising under Environmental Laws or pertaining to any environmental insurance that any of the Borrowers has with respect to any Property, the same shall be endorsed to Lender as required by this Loan Agreement and shall name Lender as an insured, additional insured and/or loss payee, as applicable. (S) ENVIRONMENTAL ASSESSMENT. Lender shall have received the Environmental Reports relating to each of the Properties, together with a letter from each preparer thereof entitling Lender and its successors and assigns to rely upon said Environmental Report. (T) PROPERTY CONDITION REPORTS. On or before the Closing Date, Lender shall have received a property condition report for each of the Properties, which shall be prepared by an engineer or other consultant satisfactory to Lender and otherwise shall be in form and substance satisfactory to Lender in its sole discretion. Each such report shall set forth any items of deferred maintenance at the applicable Property. (U) APPRAISAL. On or before the Closing Date, Lender shall have received an independent appraisal of each of the Properties from a state certified appraiser engaged by Lender. Each such appraisal shall conform in all respects to the criteria for appraisals set forth in the Financial Institutions Reform and Recovery Act of 1989 and the regulations promulgated thereunder (as if Lender were an institution under the jurisdiction thereof) and the Uniform Standards of Professional Appraisal Practices of the Appraisal Foundation. (V) SEARCHES. Prior to the Closing Date, Lender shall have received copies of Uniform Commercial Code, judgment, lien, bankruptcy and litigation search reports with respect to the Borrowers, Guarantor, Managers, General Partner and Member, all dated not more than thirty (30) days prior to the Closing Date. 39 (W) DOCUMENTATION REGARDING APPLICATION OF PROCEEDS. At least two (2) days prior to the Closing Date, Lender shall have received payoff demand letters and wiring instructions from each lender or other obligee of any existing indebtedness which is required to be repaid pursuant to this Loan Agreement. (X) LEGAL FEES; CLOSING EXPENSES. The Borrowers shall have paid any and all reasonable legal fees and expenses of counsel to Lender, together with all recording fees and taxes, title insurance premiums, and other reasonable costs and expenses related to the Closing. (Y) COMMITMENT CONDITIONS. If a commitment letter or similar agreement shall have been issued by Lender for the Loan, such additional conditions as shall be specified in such commitment shall have been satisfied. (Z) OTHER REVIEW. Lender shall have completed all other review of the Borrower Parties, the Properties, and such other items as it reasonably determines relevant, and shall have determined based upon such review to fund the Loan. The Borrower Parties shall have satisfied such other reasonable criteria as Lender may reasonably specify. (AA) GROUND LEASES; GROUND LESSOR ESTOPPELS. On or before the Closing Date, Lender shall have received (i) true and complete copies of each of the Ground Leases, certified by the Borrowers, and (ii) estoppels and agreements substantially in the form of EXHIBIT H, or otherwise reasonably acceptable to Lender, duly executed by each Ground Lessor. (BB) MORTGAGED CONDOMINIUM PROPERTY AGREEMENTS. On or before the Closing Date, Lender shall have received an estoppel and agreement of the Board of Managers in form and substance reasonably acceptable to Lender. ARTICLE IV REPRESENTATIONS AND WARRANTIES In order to induce Lender to enter into this Loan Agreement and to make the Loan, each Borrower represents and warrants to Lender that the statements set forth in this Article IV, after giving effect to the Closing, will be, true, correct and complete in all material respects as of the Closing Date. SECTION 4.1 ORGANIZATION, POWERS, CAPITALIZATION, GOOD STANDING, BUSINESS. (A) ORGANIZATION AND POWERS. Each Borrower Party is duly organized, validly existing and in good standing under the laws of the state of its formation. Each Borrower Party has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and proposed to be conducted, and to enter into each Loan Document to which it is a party and to perform the terms thereof. (B) QUALIFICATION. Each Borrower Party is duly qualified and in good standing in the state of its formation. In addition, each Borrower Party is duly qualified and in good standing in each state where necessary to carry on its present business and operations, except in jurisdictions in which the failure to be qualified and in good standing could not reasonably be expected to have a Material Adverse Effect. 40 (C) ORGANIZATION. The organizational chart set forth as SCHEDULE 4.1(C) accurately sets forth the direct and indirect ownership structure of the Borrowers, General Partners and Members. SECTION 4.2 AUTHORIZATION OF BORROWING, ETC. (A) AUTHORIZATION OF BORROWING. The Borrowers have the power and authority to incur the Indebtedness evidenced by the Note. The execution, delivery and performance by each Borrower Party of each of the Loan Documents to which it is a party and the consummation of the transactions contemplated thereby have been duly authorized by all necessary limited liability company, partnership, trustee, corporate or other action, as the case may be. (B) NO CONFLICT. The execution, delivery and performance by each Borrower Party of the Loan Documents to which it is a party and the consummation of the transactions contemplated thereby do not and will not: (1) violate (x) any provision of law applicable to any Borrower Party; (y) the partnership agreement, certificate of limited partnership, certificate of incorporation, bylaws, declaration of trust, operating agreement or other organizational documents, as the case may be, of each Borrower Party; or (z) any order, judgment or decree of any Governmental Authority binding on any Borrower Party or any of its Affiliates; (2) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of any Borrower Party or any of its Affiliates (except where such breach will not cause a Material Adverse Effect); (3) result in or require the creation or imposition of any material Lien (other than the Lien of the Loan Documents) upon the Properties or assets of any Borrower Party; or (4) except as set forth on SCHEDULE 4.2, require any approval or consent of any Person under any material Contractual Obligation of any Borrower Party, which approvals or consents have been obtained on or before the dates required under such material Contractual Obligation, but in no event later than the Closing Date. (C) GOVERNMENTAL CONSENTS. The execution and delivery by each Borrower Party of the Loan Documents to which it is a party, and the consummation of the transactions contemplated thereby do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Governmental Authority. (D) BINDING OBLIGATIONS. This Loan Agreement is, and the Loan Documents, including the Note, when executed and delivered will be, the legally valid and binding obligations of each Borrower Party that is a party thereto, enforceable against each of the Borrower Parties, as applicable, in accordance with their respective terms, subject to bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting creditor's rights. No Borrower Party has any defense or offset to any of its obligations under the Loan Documents to which it is a party. No Borrower Party has any claim against Lender or any Affiliate of Lender. SECTION 4.3 FINANCIAL STATEMENTS. To the Borrowers' Knowledge after due inquiry, all financial statements concerning any of the Borrowers, their Affiliates and the Properties which have been furnished by or on behalf of the Borrowers to Lender pursuant to this Loan Agreement have been prepared in accordance with GAAP consistently applied (except as disclosed therein) and present fairly the financial condition of the Persons covered thereby as at the dates thereof and the results of their operations for the periods then ended. Since the date of the financial 41 statements delivered to Lender, there has been no material adverse change in the financial condition, operations or business of the Borrower Parties or the Properties from that set forth in said financial statements. SECTION 4.4 INDEBTEDNESS AND CONTINGENT OBLIGATIONS. As of the Closing, except as previously disclosed to and approved by Lender in writing and set forth on SCHEDULE 4.4, the Borrowers shall have no outstanding Indebtedness or Contingent Obligations other than the Obligations or any other Permitted Indebtedness. SECTION 4.5 TITLE TO THE PROPERTIES. The Borrowers have good and marketable fee simple title (or, in the case of the Ground Leased Properties, leasehold title) to the Properties, free and clear of all Liens except for the Permitted Encumbrances. The Borrowers own and will own at all times all FF&E relating to the Properties (other than personal property which is either owned by tenants of such Property, not used or necessary for the operation of the applicable Property, or leased by the Borrowers as permitted hereunder), subject only to the Permitted Encumbrances. The Deeds of Trust, when properly recorded in the appropriate records, together with any Uniform Commercial Code financing statements required to be filed in connection therewith, will create (i) a valid, perfected first lien on each of the Properties, subject only to the Permitted Encumbrances, and (ii) perfected first priority security interests in and to, and perfected collateral assignments of, all personalty (including the Rents and the Leases), all in accordance with the terms thereof, in each case subject only to any applicable Permitted Encumbrances. Lender will have a perfected first priority security interest in and to the FF&E owned by the Borrower, if any, not located at the Properties. To the Borrowers' Knowledge, except as set forth in SCHEDULE 4.5, there are no proceedings in condemnation or eminent domain affecting any of the Properties, and to the actual knowledge of the Borrower, none is threatened. No Person has any option or other right to purchase all or any portion of any of the Properties or any interest therein. To the Borrowers' Knowledge, there are no mechanic's, materialman's or other similar liens or claims which have been filed for work, labor or materials affecting the Properties which are or will be liens prior to, or equal or coordinate with, the lien of any of the Deeds of Trust. None of the Permitted Encumbrances, individually or in the aggregate, materially interfere with the benefits of the security intended to be provided by the Deeds of Trust and this Loan Agreement, materially and adversely affect the value of any of the Properties, impair the use or operations of the Properties or impair the Borrower's ability to pay its obligations in a timely manner. SECTION 4.6 ZONING; COMPLIANCE WITH LAWS. Except as set forth on SCHEDULE 4.6, to the Borrower's Knowledge, the Properties and the use thereof comply in all material respects with all applicable zoning, subdivision and land use laws, regulations and ordinances, rules and regulations applicable to the Properties, or any of them, including without limitation the Americans with Disabilities Act. To the Borrowers' knowledge, there are no illegal activities relating to controlled substances on any of the Properties. All material permits, licenses and certificates for the lawful use, occupancy and operation of each component of each of the Properties in the manner in which it is currently being used, occupied and operated, including, but not limited to liquor licenses and certificates of occupancy, or the equivalent, have been obtained and are current and in full force and effect. To the Borrower's Knowledge, except as disclosed on SCHEDULE 4.6, in the event that all or any part of the Improvements located on any 42 Property is destroyed or damaged, said Improvements can be legally reconstructed to their condition prior to such damage or destruction, and thereafter exist for the same use without violating any zoning or other ordinances applicable thereto and without the necessity of obtaining any variances or special permits, other than customary demolition, building and other construction related permits. To the Borrowers' Knowledge, no legal proceedings are pending or threatened with respect to the zoning of any Property. To the Borrowers' Knowledge, except as set forth in the Title Policies and/or the Surveys, neither the zoning nor any other right to construct, use or operate any Property is in any way dependent upon or related to any real estate other than such Property. No tract map, parcel map, condominium plan, condominium declaration, or plat of subdivision will be recorded by the Borrowers with respect to any Property without Lender's prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned. SECTION 4.7 LEASES; AGREEMENTS. (A) LEASES; AGREEMENTS. To the Borrowers' Knowledge, it has delivered to Lender true and complete copies (in all material respect) of all (i) Leases and (ii) Material Agreements affecting the operation and management of the Properties, and such Leases and Material Agreements have not been modified or amended except pursuant to amendments or modifications delivered to Lender. Except for the rights of each of the current Managers pursuant to the existing Management Agreements, no Person has any right or obligation to manage any of the Properties or to receive compensation in connection with such management. Except for the parties to any leasing brokerage agreement that has been delivered to Lender, no Person has any right or obligation to lease or solicit tenants for the Properties, or (except for cooperating outside brokers) to receive compensation in connection with such leasing. (B) RENT ROLL, DISCLOSURE. A true and correct copy of the Rent Roll is attached hereto as SCHEDULE 4.7(B) and, except for the Material Leases described in the Rent Roll, none of the Properties are subject to any Material Leases. Except only as specified in the Rent Roll, or as otherwise disclosed to Lender in the estoppel certificates delivered to Lender at Closing, to the Borrowers' Knowledge, (i) the Material Leases are in full force and effect; (ii) the Borrowers have not given any notice of default to any tenant under any Lease which remains uncured; (iii) no tenant has any set off, claim or defense to the enforcement of any Lease; (iv) no tenant is in arrears in the payment of rent, additional rent or any other charges whatsoever due under any Material Lease, or is materially in default in the performance of any other obligations under such Material Lease; (v) the Borrowers have completed all work or alterations required of the landlord or lessor under each Material Lease, and all of the other obligations of landlord or lessor under the Material Lease have been performed; and (vi) there are no rent concessions (whether in form of cash contributions, work agreements, assumption of an existing tenant's other obligations, or otherwise) or extensions of time whatsoever not reflected in such Rent Roll. There are no legal proceedings commenced (or, to the Knowledge of the Borrowers, threatened) against the Borrowers by any tenant or former tenant. No rental in excess of one month's rent has been prepaid under any of the Material Leases. To the Borrowers' Knowledge, each of the Material Leases is valid and binding on the parties thereto in accordance with its terms. 43 (C) NO RESIDENTIAL UNITS. There are no residential units in any of the Properties and, to each Borrower's Knowledge, no person (other than a site manager employed by Manager) occupies any part of the Properties for dwelling purposes other than on a transient basis. (D) MANAGEMENT AGREEMENT. The Borrowers have delivered to Lender a true and complete copy of each of the Management Agreements to which they are a party that will be in effect on the Closing Date, and such Management Agreements have not been modified or amended except pursuant to amendments or modifications delivered to Lender. The Management Agreements are in full force and effect and no default by any of the Borrowers or Manager exists thereunder. (E) FRANCHISE AGREEMENT. The Borrowers have delivered to Lender a true and complete copy of each of the Franchise Agreements to which they are a party, and such Franchise Agreements have not been modified or amended except pursuant to amendments or modification delivered to Lender. To the Borrowers' Knowledge, (i) the applicable Franchise Agreements are in full force and effect and (ii) except as set forth on SCHEDULE 4.7(E), no material default by the Borrowers, Manager or the applicable Franchisor exists thereunder. SECTION 4.8 CONDITION OF THE PROPERTIES. To each Borrower's Knowledge, except as set forth in the property condition report for the Properties delivered to Lender, all Improvements including, without limitation, the roof and all structural components, plumbing systems, HVAC systems, fire protection systems, electrical systems, equipment, elevators, exterior doors, parking facilities, sidewalks and landscaping are in working condition and repair. Except as disclosed in the Property Condition Reports, (i) the Borrowers are not aware of any latent or patent structural or other material defect or deficiency in the Properties and, (ii) to the Borrower's Knowledge, city water supply, storm and sanitary sewers, and electrical, gas (if applicable) and telephone facilities are available to each of the Properties within the boundary lines of each of the Properties (except as may be shown on the applicable Survey), are fully connected to the Improvements and are fully operational, are sufficient to meet the reasonable needs of each of the Properties as now used or presently contemplated to be used, and no other utility facilities are necessary to meet the reasonable needs of each of the Properties as now used or presently contemplated. Except as may be shown on the applicable Survey, to the Borrowers' Knowledge no part of any of the Properties is within a flood plain and none of the Improvements create encroachment over, across or upon the Properties' boundary lines, rights of way or easements, and no building or other improvements on adjoining land create such an encroachment which could reasonably be expected to have a Material Adverse Effect. All public roads and streets necessary for service of and access to each of the Properties for the current and contemplated uses thereof have been completed and are serviceable and are physically and legally open for use by the public. To the Borrowers' Knowledge after due inquiry, and except as disclosed in the Property Condition Reports, any septic system located at any of the Properties is in good and safe condition and repair and in compliance with all applicable law. SECTION 4.9 LITIGATION; ADVERSE FACTS. Except as set forth on SCHEDULE 4.9, to the Borrowers' Knowledge after due inquiry, there are no judgments outstanding against any Primary Borrower Party, or affecting any of the Properties or any property of any Borrower, nor is there any action, charge, claim, demand, suit proceeding, petition, governmental investigation or arbitration now pending or threatened against any Primary Borrower Party that could 44 reasonably be expected to result in a Material Adverse Effect. To the Borrowers' Knowledge after due inquiry, the actions, charges, claims, demand, suits, proceedings, petitions, investigations and arbitrations set forth on SCHEDULE 4.9 are not reasonably expected to result, either individually or in the aggregate, in any Material Adverse Effect. SECTION 4.10 PAYMENT OF TAXES. All federal, state and local tax returns and reports of each Primary Borrower Party required to be filed have been timely filed (or each Borrower has timely filed for an extension and the applicable extension has not expired), and all taxes, assessments, fees and other governmental charges (including any payments in lieu of taxes) upon such Person and upon its properties, assets, income and franchises which are due and payable have been paid. To the Borrowers' Knowledge, there is not presently pending any special assessment against any of the Properties or any part thereof. SECTION 4.11 ADVERSE CONTRACTS. Except for the Loan Documents, none of the Primary Borrower Parties is a party to or bound by, nor is any property of such Person subject to or bound by, any contract or other agreement which restricts such Person's ability to conduct its business in the ordinary course as currently conducted that, either individually or in the aggregate, has a Material Adverse Effect or could reasonably be expected to have a Material Adverse Effect. SECTION 4.12 PERFORMANCE OF AGREEMENTS. To the Borrowers' Knowledge, no Borrower Party is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Contractual Obligation of any such Person which could reasonably be expected to have a Material Adverse Effect, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default which could reasonably be expected to have a Material Adverse Effect. SECTION 4.13 GOVERNMENTAL REGULATION. No Primary Borrower Party is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940 or to any federal or state statute or regulation limiting its ability to incur indebtedness for borrowed money. SECTION 4.14 EMPLOYEE BENEFIT PLANS. Except as set forth on SCHEDULE 4.14, no Primary Borrower Party maintains or contributes to, or has any obligation (including a contingent obligation) under, any Employee Benefit Plans. SECTION 4.15 BROKER'S FEES. No broker's or finder's fee, commission or similar compensation will be payable by or pursuant to any contract or other obligation of any Primary Borrower Party with respect to the making of the Loan or any of the other transactions contemplated hereby or by any of the Loan Documents. The Borrowers shall indemnify, defend, protect, pay and hold Lender harmless from any and all broker's or finder's fees claimed to be due in connection with the making of the Loan arising from any Borrower Parties' actions. SECTION 4.16 INTENTIONALLY DELETED. SECTION 4.17 SOLVENCY. The Borrowers (a) have not entered into the transaction or any Loan Document with the actual intent to hinder, delay, or defraud any creditor and (b) received reasonably equivalent value in exchange for its obligations under the Loan Documents. Giving effect to the Loan, the fair saleable value of each Borrower's assets exceed and will, immediately 45 following the making of the Loan, exceed such Borrower's total liabilities, including, without limitation, subordinated, unliquidated, disputed and Contingent Obligations. The fair saleable value of each Borrower's assets is and will, immediately following the making of the Loan, be greater than the Borrower's probable liabilities, including the maximum amount of its Contingent Obligations on its debts as such debts become absolute and matured. Each Borrower's assets do not and, immediately following the making of the Loan will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. The Borrowers do not intend to, and do not believe that they will, incur Indebtedness and liabilities (including Contingent Obligations and other commitments) beyond its ability to pay such Indebtedness and liabilities as they mature (taking into account the timing and amounts of cash to be received by the Borrowers and the amounts to be payable on or in respect of obligations of the Borrowers). SECTION 4.18 DISCLOSURE. No financial statements furnished to Lender by or on behalf of any Primary Borrower Party contains any untrue representation, warranty or statement of a material fact, or omits to state a material fact necessary in order to make the statements contained therein not misleading. No Loan Document or any other document, certificate or written statement for use in connection with the Loan and prepared by any Borrower Party, or any information provided by any Borrower Party and contained in, or used in preparation of, any document or certificate for use in connection with the Loan, contains any untrue representation, warranty or statement of a material fact, or omits to state a material fact necessary in order to make the statements contained therein not misleading. There is no material fact actually known to the Borrowers that has had or will have a Material Adverse Effect and that has not been disclosed in writing to Lender by the Borrowers. SECTION 4.19 USE OF PROCEEDS AND MARGIN SECURITY. The Borrowers shall use the proceeds of the Loan only for the purposes set forth herein and consistent with all applicable laws, statues, rules and regulations. No portion of the proceeds of the Loan shall be used by the Borrowers or any Person in any manner that might cause the borrowing or the application of such proceeds to violate Regulation T, Regulation U or Regulation X or any other regulation of the Board of Governors of the Federal Reserve System. SECTION 4.20 INSURANCE. Set forth on SCHEDULE 4.20 is a complete and accurate description of all policies of insurance for each Borrower that are in effect as of the Closing Date. No notice of cancellation has been received with respect to such policies, and, to each Borrower's Knowledge, the Borrowers are in compliance with all conditions contained in such policies. SECTION 4.21 SEPARATE TAX LOTS. Each of the Properties are comprised of one (1) or more parcels which constitute separate tax lots. No part of any of the Properties is included or assessed under or as part of another tax lot or parcel, and no part of any other property is included or assessed under or as part of the tax lots or parcels comprising any of the Properties. SECTION 4.22 INVESTMENTS. The Borrowers have no (i) direct or indirect interest in, including without limitation stock, partnership interest or other securities of, any other Person, or (ii) direct or indirect loan, advance or capital contribution to any other Person, including all indebtedness and accounts receivable from that other Person. 46 SECTION 4.23 RESERVED. SECTION 4.24 DEFAULTS. To the Borrowers' Knowledge, except as disclosed to Lender in writing, no Default exists. SECTION 4.25 NO PLAN ASSETS. No Primary Borrower Party is or will be (i) an employee benefit plan as defined in Section 3(3) of ERISA which is subject to ERISA, (ii) a plan as defined in Section 4975(e)(1) of the IRC which is subject to Section 4975 of the IRC, or (iii) an entity whose underlying assets constitute "plan assets" of any such employee benefit plan or plan for purposes of Title I of ERISA of Section 4975 of the IRC; provided that, in making such representation, the Borrowers have assumed that (i) no portion of the Loan shall be funded with plan assets of any employee benefit plan that is subject to Title I of ERISA or any plan that is covered by Section 4975 of the Code unless the Lender is eligible to apply one or more exemptions such that the Loan will not constitute a nonexempt prohibited transaction under Section 406 of ERISA or that could subject a Borrower Party or its Affiliates to an excise tax under Section 4975 of the IRC; and (ii) such assumption in the preceding clause is true and correct with respect to any party to which Lender transfers or assigns any portion of the Loan. SECTION 4.26 GOVERNMENTAL PLAN. No Primary Borrower Party is or will be a "governmental plan" within the meaning of Section 3(32) of ERISA and transactions by or with the Borrowers are not and will not be subject to state statutes applicable to the Borrowers' regulating investments of and fiduciary obligations with obligations with respect to governmental plans. SECTION 4.27 NOT FOREIGN PERSON. No Primary Borrower Party is a "foreign person" within the meaning of Section 1445(f)(3) of the IRC. SECTION 4.28 NO COLLECTIVE BARGAINING AGREEMENTS. Except as set forth on SCHEDULE 4.28, no Primary Borrower Party is a party to any collective bargaining agreement. SECTION 4.29 MORTGAGED CONDOMINIUM DOCUMENTS. (A) The Borrowers have delivered true and correct copies of each of the Mortgaged Condominium Documents to Lender and same have not been modified, amended or assigned except as set forth on SCHEDULE 4.29, and to the Borrowers' Knowledge, there are no other material documents or agreements affecting the Condominium Borrower's interest in the Mortgaged Condominium Property. (B) Each of the Mortgaged Condominium Property Documents is in full force and effect and, to the Condominium Borrower's Knowledge, no breach or default, or event that, with the giving of notice or the passage of time or both would constitute a breach or default, under any of the Mortgaged Condominium Property Documents (a "CONDOMINIUM DEFAULT") exists or has occurred on the part of the Condominium Borrower or on the part of any other party to any of the Mortgaged Condominium Property Documents. SECTION 4.30 GROUND LEASES (A) Each Ground Lease contains the entire agreement of the Ground Lessor and the applicable Borrower pertaining to each Ground Leased Property covered thereby. The 47 Borrowers have no estate, right, title or interest in or to the Ground Leased Properties except under and pursuant to the Ground Leases. The Borrowers have delivered true and correct copies of each of the Ground Leases to Lender and the Ground Leases have not been modified, amended or assigned except as set forth on SCHEDULE 4.30. (B) To the knowledge of the Borrowers, each Ground Lessor is the exclusive fee simple owner of its Ground Leased Property, subject only to the Ground Lease and the Permitted Encumbrances, and each Ground Lessor is the sole owner of the lessor's interest in the applicable Ground Lease. (C) There are no right to terminate any Ground Lease other than any Ground Lessor's right to terminate by reason of default, casualty, condemnation or other reasons, in each case as expressly set forth in the applicable Ground Lease. (D) Each Ground Lease is in full force and effect and to the Borrowers' knowledge, no breach or default or event that with the giving of notice or passage of time would constitute a breach or default under any Ground Lease (a "GROUND LEASE DEFAULT") exists or has occurred on the part of the Borrowers or on the part of any Ground Lessor under any Ground Lease. The Borrowers have not received any written notice that a Ground Lease Default has occurred or exists, or that any Ground Lessor or any third party alleges the same to have occurred or exist. (E) The applicable Borrower set forth on SCHEDULE 4.30 is the exclusive owner of the lessee's interest under and pursuant to the applicable Ground Lease and has not assigned, transferred, or encumbered its interest in, to, or under any Ground Lease (other than assignments that will terminate on or prior to Closing), except in favor of Lender pursuant to this Loan Agreement and the other Loan Documents. ARTICLE V COVENANTS OF BORROWER PARTIES The Borrowers covenant and agree that until payment in full of the Loan, all accrued and unpaid interest and all other Obligations, the Borrowers shall perform and comply with all covenants in this Article V applicable to such Person. SECTION 5.1 FINANCIAL STATEMENTS AND OTHER REPORTS. (A) FINANCIAL STATEMENTS. (i) ANNUAL REPORTING. Within one hundred twenty (120) days after the end of each calendar year, the Borrowers (on a consolidated basis), and within ninety (90) days after the end of each calendar year, Guarantor shall provide true and complete copies of their Financial Statements for such year to Lender. All such Financial Statements shall be audited by an Approved Accounting Firm or by other independent certified public accountants reasonably acceptable to Lender, and shall bear the unqualified certification of such accountants that such Financial Statements present fairly in all material respects the financial position of the subject company. The annual Financial Statements shall be accompanied by Supplemental Financial Information for such calendar year. The annual Financial Statements for the Borrowers (on a consolidated basis) and Guarantor shall also be accompanied by a certification executed by the 48 entity's chief executive officer or chief financial officer (or other officer with similar duties), satisfying the criteria set forth in Section 5.1(A)(viii) below, and a Compliance Certificate (as defined below). (ii) QUARTERLY REPORTING - BORROWERS. Within forty-five (45) days after the end of each calender quarter, the Borrowers on a consolidated basis (other than with respect to income statements, which shall be on an individual property basis) shall provide copies of their Financial Statements for such quarter to Lender, together with a certification executed on behalf of each of the Borrowers by their respective chief executive officers or chief financial officers (or other officer with similar duties) in accordance with the criteria set forth in Section 5.1(A)(viii) below. Such quarterly Financial Statements shall be accompanied by Supplemental Financial Information and a Compliance Certificate for such quarter. (iii) QUARTERLY REPORTING - GUARANTOR. Within forty-five (45) days after the end of each calendar quarter, Guarantor shall provide copies of its Financial Statements for such quarter to Lender, together with a certification executed on behalf of Guarantor by its chief executive officer or chief financial officer (or other officer with similar duties) in accordance with the criteria set forth in Section 5.1(A)(viii) below. (iv) LEASING REPORTS. Within forty-five (45) days after each calendar quarter, each Borrower shall provide to Lender a certified Rent Roll and a schedule of security deposits held under Material Leases, each in form and substance reasonably acceptable to Lender. Within forty-five (45) days after each calendar quarter, each Borrower shall also provide to Lender (a) a schedule of any retail Material Leases that expired during such calendar quarter and a schedule of retail Material Leases scheduled to expire within the next twelve (12) months and (b) to the extent the Borrowers received notice thereof, a list of any retail tenants under Material Leases that filed bankruptcy, insolvency or reorganization proceedings during such calendar quarter. Within ninety (90) days after the end of each calendar year, each Borrower shall provide to Lender a statement of income and expenses for all retail space at each of the Properties owned and operated by the Borrowers and sales reports for retail tenants for such year. (v) MONTHLY REPORTING. Within thirty (30) days after the end of each calendar month, each Borrower shall provide, or cause Manager to provide, to Lender the following items determined on an accrual basis: (a) a calculation of the average daily rate, RevPAR and occupancy calculations and statistics for the Properties for the subject month; (b) Smith Travel Research "STAR" reports then available; (c) monthly and year to date operating statements prepared for such calendar month, noting Net Operating Income, Net Cash Flow and including budgeted and last year results for the same year-to-date period and other information necessary and sufficient under GAAP to fairly represent the results of operation of the Properties during such calendar month, all in form reasonably satisfactory to Lender; (d) reports for FF&E and Capital Expenditure projects completed during such calendar month (including a detailed explanation for any material deviations from budget); (e) monthly and year to date detailed reports of Operating Expenses, including supporting documentation satisfactory to Lender in its sole discretion for each item of Extraordinary Expense (as such term is defined in the Cash Management Agreement) for which Lender has approved a disbursement from the Cash Trap Reserve pursuant to the terms of Section 3.3(a)(viii) of the Cash Management Agreement; (f) most recently available "QFI", or similar quality index, scores; and (g) a report setting forth (i) 49 the date of termination by Property for each Franchise Agreement that has been terminated after the Closing Date and not replaced with an Approved Franchisor, (ii) the number of Properties for which a default has occurred and has continued beyond applicable notice and grace periods under the applicable Franchise Agreement (including the percentage of the original Aggregate Allocated Loan Amount represented by such Properties), (iii) a summary report establishing whether the Borrowers are diligently continuing to pursue reflagging efforts with respect to each such Property, and (iv) a summary report including (a) the aggregate number of Properties for which the Borrowers have entered into new Franchise Agreements as permitted by Sections 5.13(D)(i) and 5.13(D)(iv) together with the resulting Category of each such Property, and (b) the aggregate number of Properties for which any replacement (and, if more than one replacement has occurred to a single Property, the number of replacements with respect to such Property) of the applicable Franchise Agreements has occurred pursuant to the terms of Sections 5.13(D)(ii) and 5.13(D)(iii) together with the percentage of the Aggregate Outstanding Principal Balance represented by such Properties and including the resulting Category of each such Property. Along with such operating statements, each Borrower shall deliver to Lender a Compliance Certificate of such Borrower's chief executive officer or chief financial officer (or other officer with similar duties) satisfying the criteria set forth in Section 5.1(A)(viii) below. (vi) ADDITIONAL REPORTING. In addition to the foregoing, the Borrowers shall, and shall cause Guarantor and Manager to, promptly provide to Lender such further documents and information concerning its operations, properties, ownership, and finances as Lender shall from time to time reasonably request upon prior written notice to the Borrowers. (vii) GAAP; UNIFORM SYSTEM. The Borrowers will, and will cause Guarantor and Manager to, maintain systems of accounting established and administered in accordance with sound business practices and sufficient in all respects to permit preparation of Financial Statements in conformity with GAAP and the Uniform System. All Financial Statements shall be prepared in accordance with GAAP and the Uniform System, consistently applied; provided, however, in the event of a conflict between the Uniform System and GAAP, GAAP will be followed. (viii) CERTIFICATIONS OF FINANCIAL STATEMENTS AND OTHER DOCUMENTS, COMPLIANCE CERTIFICATE. Together with the Financial Statements and other documents and information provided to Lender by or on behalf of the Borrowers or Guarantor under this Section, the Borrowers or Guarantor also shall deliver to Lender a certification to Lender, executed on behalf of the Borrowers or Guarantor by their respective chief executive officer or chief financial officer (or other officer with similar duties), stating that to their Knowledge after due inquiry such quarterly and annual Financial Statements and information fairly present the financial condition and results of operations of the Borrowers, Guarantor and/or the Properties for the period(s) covered thereby, and do not omit to state any material information without which the same might reasonably be misleading, and all other non-financial documents submitted to Lender (whether monthly, quarterly or annually) are true, correct, accurate and complete in all material respects. In addition, where this Loan Agreement requires a "COMPLIANCE CERTIFICATE", the Person required to submit the same shall deliver a certificate duly executed on behalf of such Person by its chief executive officer or chief financial officer (or other officer with similar duties) stating that, to their Knowledge after due inquiry, there does not 50 exist any Default or Event of Default under the Loan Documents (or if any exists, specifying the same in detail). (ix) FISCAL YEAR. Each Borrower represents that its fiscal year and that of the Guarantor ends on December 31, and agrees that no change shall be made to each such fiscal year. (B) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, each Borrower will deliver copies of all material reports submitted by independent public accountants in connection with each annual, interim or special audit of the Financial Statements or other business operations of such Borrower made by such accountants, including the comment letter submitted by such accountants to management in connection with the annual audit. (C) TAX RETURNS. Within thirty (30) days after filing the same, each Borrower shall deliver to Lender a copy of its Federal income tax returns (or the return of the applicable Person into which such Borrower's Federal income tax return is consolidated) certified on its behalf by its chief financial officer (or similar position) to be true and correct. (D) ANNUAL OPERATING BUDGET, CAPEX/FF&E BUDGETS AND CAPITAL IMPROVEMENTS PLAN. Prior to February 15 of each calendar year, each Borrower shall deliver to Lender for its review for its Property a proposed Operating Budget, Capital Improvements Plan and CapEx/FF&E Budget (in each case presented on a monthly and annual basis) for such calendar year. Each Operating Budget, CapEx/FF&E Budget and, so long as any funds remain in the Capital Improvement Reserve or Required Capital Improvements remain to be performed, each Capital Improvements Plan shall be subject to Lender's approval which shall not be unreasonably withheld, conditioned or delayed. The Borrowers may make changes to the Operating Budget and the CapEx/FF&E Budget from time to time as deemed reasonably necessary by the Borrower, provided no such modification shall alter any single line item (or the applicable Budget as a whole) by more than ten percent (10%) without Lender's prior written approval, which approval shall not be unreasonably withheld. Notice of any modifications to the Operating Budget and the CapEx/FF&E Budget shall be delivered to Lender at the time of delivery of the next financial reporting required pursuant to Section 5.1(A)(v). Lender acknowledges that it has approved the annual Operating Budget for the 2002 calendar year, and the CapEx/FF&E Budget and Capital Improvements Plan for the 2002 and 2003 calendar years each as set forth on Schedule 5.1(D). The proposed Operating Budget shall identify and set forth each Borrower's reasonable estimate, after due consideration, of all revenue, costs, and expenses, and shall specify Operating Revenues and Operating Expenses on a line-item basis consistent with the form of Operating Budget delivered to Lender prior to Closing. If any of said budgets or plans requiring Lender's approval is not in form and substance reasonably satisfactory to Lender, Lender may disapprove the same and specify the reasons therefor in writing, and the Borrowers shall promptly amend and resubmit for approval revised budgets or plans, as applicable, making such changes as are necessary to comply with the reasonable requirements of Lender. If any such budget or plan requiring Lender's approval is not approved or deemed approved by the beginning of the calendar year covered thereby, the applicable budget or plan for the previous year shall remain in effect until the new budget or plan is approved or deemed approved. Lender's consent to any budget, plan or amendments thereto shall be deemed given, if the first correspondence from the Borrowers to Lender requesting such approval is in an 51 envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the same has been delivered and, if Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period, a second notice is delivered to Lender from the Borrowers in an envelope marked "PRIORITY" requesting approval containing a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny each request for approval within the ten (10) day period. (E) MATERIAL NOTICES. (i) The Borrowers shall promptly deliver, or cause to be delivered, copies of all notices given or received with respect to a default under any term or condition related to any Permitted Indebtedness of any Borrower, and shall notify Lender within five (5) Business Days of any potential or actual event of default with respect to any such Permitted Indebtedness. (ii) The Borrowers shall promptly deliver to Lender copies of any and all material notices (including without limitation any notice alleging any default or breach which is reasonably expected to result in a termination) received with respect to any Material Agreement or any Lease, including, without limitation, any inspection report and any progress reports related to any Property Improvement Plan received from a Franchisor related to such Borrower's Property. (F) EVENTS OF DEFAULT, ETC. Promptly upon any of the Borrowers obtaining knowledge of any of the following events or conditions, such Borrower shall deliver a certificate executed on its behalf by its chief financial officer or similar officer specifying the nature and period of existence of such condition or event and what action such Borrower or any Affiliate thereof has taken, is taking and proposes to take with respect thereto: (i) any condition or event that constitutes an Event of Default; (ii) any Material Adverse Effect; or (iii) any actual or alleged breach or default or assertion of (or written threat to assert) remedies under any Management Agreement, Franchise Agreement or Ground Lease. (G) LITIGATION. Promptly upon any of the Borrowers obtaining knowledge of (1) the institution of any action, suit, proceeding, governmental investigation or arbitration against the Borrowers or any of the Properties not previously disclosed in writing by the Borrowers to Lender which would be reasonably likely to have a Material Adverse Effect or is not covered by insurance or (2) any material development in any action, suit, proceeding, governmental investigation or arbitration at any time pending against or affecting the Borrowers or the Properties which, in each case, if adversely determined would reasonably be expected to have a Material Adverse Effect, the Borrowers will give notice thereof to Lender and, upon request 52 from Lender, provide such other information as may be reasonably available to them to enable Lender and its counsel to evaluate such matter. (H) INSURANCE. At least five (5) Business Days prior to the end of each insurance policy period of the Borrowers, the Borrowers will deliver certificates, reports, and/or other information (all in form and substance reasonably satisfactory to Lender), (i) outlining all material insurance coverage maintained as of the date thereof by the Borrowers and all material insurance coverage planned to be maintained by the Borrowers in the subsequent insurance policy period and (ii) evidencing payment in full of the premiums for such insurance policies. (I) OTHER INFORMATION. With reasonable promptness, Borrowers will deliver such other information and data with respect to such Person and its Affiliates or the Properties as from time to time may be reasonably requested by Lender. SECTION 5.2 EXISTENCE; QUALIFICATION. The Borrowers will at all times preserve and keep in full force and effect their existence as a limited partnership, limited liability company, or corporation, as the case may be, and all rights and franchises material to its business, including their qualification to do business in each state where it is required by law to so qualify. Without limitation of the foregoing, each Borrower and, to the extent required by applicable law, General Partner and Member, shall at all times be qualified to do business in each of the states where the Properties located. SECTION 5.3 PAYMENT OF IMPOSITIONS AND CLAIMS. (A) Except for those matter being contested pursuant to clause (B) below, the Borrowers will pay (i) all Impositions; (ii) all claims (including claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of its properties or assets (hereinafter referred to as the "CLAIMS"); and (iii) all federal, state and local income taxes, sales taxes, excise taxes and all other taxes and assessments of the Borrowers on their business, income or assets; in each instance before any penalty or fine is incurred with respect thereto. (B) The Borrowers shall not be required to pay, discharge or remove any Imposition or Claim relating to a Property so long as the Borrowers contest in good faith such Imposition, Claim or the validity, applicability or amount thereof by an appropriate legal proceeding which operates to prevent the collection of such amounts and the sale of the applicable Property or any portion thereof, so long as: (i) no Event of Default shall have occurred and be continuing, (ii) prior to the date on which such Imposition or Claim would otherwise have become delinquent, the Borrowers shall have given Lender prior written notice of their intent to contest said Imposition or Claim; (iii) prior to the date on which such Imposition or Claim would otherwise have become delinquent, the Borrowers shall have deposited with Lender (or with a court of competent jurisdiction or other appropriate body reasonably approved by Lender) such additional amounts as are necessary to keep on deposit at all times, an amount by way of cash, Dollar Equivalents, or a Letter of Credit, equal to at least one hundred twenty-five percent (125%) (or such higher amount as may be required by applicable law) of the total of (x) the balance of such Imposition or Claim then remaining unpaid, and (y) all interest, penalties, costs and charges accrued or accumulated thereon; (iv) no risk of sale, forfeiture or loss of any interest in the 53 applicable Property or any part thereof arises, in Lender's reasonable judgment, during the pendency of such contest; (v) such contest does not, in Lender's reasonable determination, have a Material Adverse Effect; and (vi) such contest is based on bona fide, material, and reasonable claims or defenses. Any such contest shall be prosecuted with due diligence, and the Borrowers shall promptly pay the amount of such Imposition or Claim as finally determined, together with all interest and penalties payable in connection therewith. Lender shall have full power and authority, but no obligation, to apply any amount deposited with Lender under this subsection to the payment of any unpaid Imposition or Claim to prevent the sale or forfeiture of the applicable Property for non-payment thereof, if Lender reasonably believes that such sale or forfeiture is threatened. Any surplus retained by Lender after payment of the Imposition or Claim for which a deposit was made shall be promptly repaid to the Borrowers unless an Event of Default shall have occurred, in which case said surplus may be retained by Lender to be applied to the Obligations. Notwithstanding any provision of this Section to the contrary, the Borrowers shall pay any Imposition or Claim which they might otherwise be entitled to contest if an Event of Default shall occur and be continuing, or if, in the reasonable determination of Lender, the applicable Property is in danger of being forfeited or foreclosed. If the Borrowers refuses to pay any such Imposition or Claim, Lender may (but shall not be obligated to) make such payment and the Borrowers shall reimburse Lender on demand for all such advances. SECTION 5.4 MAINTENANCE OF INSURANCE. The Borrowers will continuously maintain the following described policies of insurance on each of the respective Properties without cost to Lender (the "INSURANCE POLICIES"): (i) Property insurance against loss and damage by all risks of physical loss or damage, including fire, sprinkler leakage, windstorm, hurricane, terrorism, and other risks covered by the so-called extended coverage endorsement covering the Improvements and personal property in amounts not less than the full insurable replacement value of all Improvements (less building foundations and footings) and personal property from time to time on the Properties and without sublimits, and bearing a replacement cost agreed-amount endorsement; (ii) Commercial general liability insurance, including death, bodily injury, innkeeper legal liability and broad from property damage coverage with a combined single limit in an amount not less than One Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) in the aggregate for any policy year; (iii) If any of the Properties are in an area prone to geological phenomena, including, but not limited to, sinkholes, mine subsidence or earthquakes, insurance covering such risks in an amount equal to 100% of the full replacement cost of all improvements (without any deductions for depreciation) and with a maximum permissible deductible equal to the lesser of $25,000 or 10% of the face value of the policy; (iv) For each Property located in whole or in part in a federally designated "special flood hazard area", flood insurance in the maximum available amount; 54 (v) An umbrella excess liability policy with a limit of not less than Twenty Million Dollars ($20,000,000) over primary insurance, which policy shall include coverage for water damage, so-called assumed and contractual liability coverage, premises medical payment and automobile liability coverage, and coverage for safeguarding of personalty and shall also include such additional coverages and insured risks which are acceptable to Lender; (vi) Business interruption and/or rent loss insurance with an aggregate limit equal to at least the gross income from the Properties for an indemnity period commencing on the date of such casualty and ending at least six (6) months after completion of the Restoration (such amount being adjusted annually); (vii) Crime protection coverage with the same coverages, limits of coverage and deductibles as currently in place at the Properties; (viii) Steam boiler, machinery and pressurized vessel insurance insuring against breakdown or explosion of such equipment on a replacement cost value basis, which shall not contain any exclusions for testing procedures; (ix) Worker's Compensation Insurance in statutory amounts, if any, at all times; (x) Insurance against loss or damage from (A) leakage of sprinkler systems and (B) explosion of steam boilers, air conditioning equipment, high pressure piping, machinery and equipment, pressure vessels or similar apparatus now or hereafter installed in the Improvements (without exclusion for explosions), in an amount at least equal to the Aggregate Allocated Loan Amount; (xi) During any period of construction, repair or restoration, builder's "all risk" insurance in an amount equal to not less than the full insurable value of the Properties (excluding building foundations and footings) against such risks (including, without limitation, fire and extended coverage and collapse of the Improvements to agreed limits) as Lender may reasonably request; (xii) If the Properties are or become a "non-conforming use" under applicable zoning and building ordinances, or other requirements of the applicable Governmental Authority, law or ordinance coverage to compensate for the cost of demolition and the increased cost of construction, if available; (xiii) If the Borrowers, Manager or any of their respective Affiliates holds a liquor license for the Properties, liquor liability insurance (including "dram shop" liability) in an amount not less than $2,000,000; provided that if such liquor license is held by any tenant under a Lease, the Borrowers shall cause such tenant to cause liquor liability insurance in an amount not less than $2,000,000 to be carried in such tenant's name, and shall include the Borrowers and Lender as additional insureds thereunder; (xiv) Environmental insurance, including mold coverage, in form and with coverages (including business interruption coverage) reasonably satisfactory to Lender; 55 (xv) Fiduciary liability insurance and directors and officers liability insurance ("D&O INSURANCE") with coverages at levels in effect as of the Closing Date; (xvi) Such other insurance as may from time to time be reasonably required by Lender and which is then customarily required by institutional lenders for securitized loans secured by similar properties similarly situated, against other insurable hazards, including, but not limited to, malicious mischief, vandalism, windstorm and or earthquake, due regard to be given to the size and type of the Properties, Improvements, fixtures and equipment and their location, construction and use. Additionally, the Borrowers shall carry such insurance coverage as Lender may from time to time require if the failure to carry such insurance would result in a downgrade, qualification or withdrawal of any class of securities issued in connection with a Securitization. Notwithstanding the provision of this subsection (xv), any terrorism insurance required to be obtained by the Borrowers shall be subject to the provisions of subsection (xvi) below; (xvii) To the extent any of the commercial property insurance policies required under subsection (i), (ii), (v), or (vi) above (each a "REQUIRED INSURANCE POLICY," collectively, the "REQUIRED INSURANCE POLICIES"), or any renewal or replacement of any Required Insurance Policy, either does not include or specifically excludes coverage for damage resulting from terrorism with coverages as provided in the Required Insurance Policies delivered to Lender in connection with the origination of the Loan (collectively, the "EXCLUSIONS FROM COVERAGE"), the Borrowers shall either (x) obtain an endorsement to any such Required Insurance Policy or (y) maintain a separate insurance policy, in each case insuring against any damage resulting from such Exclusions from Coverage to the same extent each of the Required Insurance Policies would have provided such coverage had each Required Insurance Policy not contained an exclusion for such Exclusions from Coverage, in each case on terms consistent with the insurance policies required under subsections (i), (ii), (v), and (vi) above; provided that the cost for omission of such exclusions from any such policies, or separate insurance, shall not exceed the Terrorism Insurance Cap, in which instance the Borrowers shall obtain such maximum coverage as is available for the Terrorism Insurance Cap. Such insurance may, at the option of the Borrowers, be effected by a blanket policy of insurance issued to the Borrowers covering the Properties and other property, provided that, in each case, (A) such blanket policy is acceptable to Lender in its reasonable discretion (taking into account, by way of example only, such matters as the type and location of the other properties named in such blanket policy) and (B) such policy otherwise complies with the provisions of this Loan Agreement and allocates to the Properties, at all times that any portion of the Obligations remains outstanding, the coverage specified by this Loan Agreement, without possibility of reduction or coinsurance by reason of, or damage to, any other property (real or personal) named therein. Lender's prior written consent, which shall not be unreasonably withheld, shall be required prior to the Borrowers' addition of any property to any such blanket policy. If such insurance shall be effected by such blanket policy, the Borrowers shall furnish to Lender an original policy or certified copy thereof, and an original certificate of insurance together with reasonable access to the original of such policy to review such policy's coverage of the Properties, with schedules attached thereto showing the amount of the insurance provided under such policies applicable to the Properties. All Insurance Policies shall be in content (including, without limitation, endorsements or exclusions, if any), form, and amounts, and issued by companies, satisfactory to Lender from 56 time to time and shall name Lender and its successors and assignees as their interests may appear as (x) an "additional insured" for each of the liability policies under this Section 5.4 hereof, and (y) a "mortgagee" for each of the property and casualty policies under this Section hereof, and shall (except for Worker's Compensation Insurance) contain a waiver of subrogation clause reasonably acceptable to Lender. Other than with respect to D&O Insurance, an insurance company shall not be satisfactory unless such insurance company (a) is licensed or authorized to issue insurance in the State where the applicable Property is located and (b) has a claims paying ability rating by the Rating Agencies of AA- (or its equivalent). Notwithstanding the foregoing, a carrier which does not meet the foregoing ratings requirement shall nevertheless be deemed acceptable hereunder provided that such carrier is reasonably acceptable to Lender and the Borrowers shall obtain and deliver to Lender a Rating Confirmation with respect to such carrier from each of the Rating Agencies, provided, however, if any insurance coverage required under this Section 5.4 is maintained by a syndicate of insurers, the preceding ratings requirements shall be deemed satisfied (without any required Rating Confirmation) as long as at least seventy five percent (75%) of the coverage (if there are four or fewer members of the syndicate) or at least sixty percent (60%) of the coverage (if there are five or more members of the syndicate) is maintained with carriers meeting the claims-paying ability ratings requirements by S&P and Moody's (if applicable) set forth above and all carriers in such syndicate have a claims-paying ability rating by S&P of not less than "BBB" and by Moody's of not less than "Baa2" (to the extent rated by Moody's). All Insurance Policies under Sections 5.4 (i), (iv), (vi), (vii), (x), (xi) and (xii) hereof shall contain a Non-Contributory Standard mortgagee clause and a mortgagee's Loss Payable Endorsement (Form 438 BFU NS), or their equivalents (such endorsements shall entitle Lender to collect any and all proceeds payable under all such insurance, with the insurance company waiving any claim or defense against Lender for premium payment, deductible, self-insured retention or claims reporting provisions). All Insurance Policies shall provide that the coverage shall not be modified without (30) days' advance written notice to Lender and shall provide that no claims shall be paid thereunder to a Person other than Lender without ten (10) day's advance written notice to Lender. The Borrowers may obtain any insurance required by this Section through blanket policies; provided, however, that such blanket policies shall separately set forth the amount of insurance in force with respect to the Properties (which shall not be reduced by reason of events occurring on property other than the Properties) and shall afford all the protections to Lender as are required under this Section. Except as may be expressly provided above, all policies of insurance required hereunder shall contain no annual aggregate limit of liability, other than with respect to liability insurance. If a blanket policy is issued, a certified copy of said policy shall be furnished, together with a certificate indicating that Lender is an additional insured (and, if applicable, loss payee) under such policy in the designated amount. The Borrowers will deliver duplicate originals of all Insurance Policies, premium prepaid for a period of one (1) year, to Lender and, in case of Insurance Policies about to expire, the Borrowers will deliver duplicate originals of replacement policies satisfying the requirements hereof to Lender not less than thirty (30) days prior to the date of expiration; provided, however, if such replacement policy is not yet available, the Borrowers shall provide Lender with an insurance certificate executed by the insurer or its authorized agent evidencing that the insurance required hereunder is being maintained under such policy, which certificate shall be acceptable to Lender on an interim basis until the duplicate original of the policy is available. The Borrowers shall furnish Lender receipts for the payment of premiums on such insurance policies or other evidence of such payment reasonably satisfactory to Lender in the 57 event that such premiums have not been paid by Lender pursuant to the Loan Agreement. The requirements of this Section 5.4 shall apply to any separate policies of insurance taken out by the Borrowers concurrent in form or contributing in the event of loss with the Insurance Policies. Losses shall be payable to Lender notwithstanding (1) any act, failure to act or negligence of the Borrowers or their agents or employees, Lender or any other insured party which might, absent such agreement, result in a forfeiture or all or part of such insurance payment, other than the willful misconduct of Lender knowingly in violation of the conditions of such policy, (2) the occupation or use of the Properties or any part thereof for purposes more hazardous than permitted by the terms of such policy, (3) any foreclosure or other action or proceeding taken pursuant to this Loan Agreement or (4) any change in title to or ownership of the Properties or any part thereof. The property insurance and the boiler and machinery insurance described in Sections 5.4(i) and (x) hereof shall include "underground hazards" coverage; "time element" coverage by which Lender shall be assured payment of all amounts due under the Note, this Loan Agreement and the other Loan Documents; "extra expense" (i.e., soft costs), clean-up, transit and ordinary payroll coverage; and "expediting expense" coverage to facilitate rapid repair or restoration of the Properties. The Insurance Policies shall not contain any deductible in excess of $250,000. Notwithstanding anything contained in this Section 5.4 to the contrary, Lender acknowledges that the Borrowers's insurance in effect as of the Closing Date, and as described on SCHEDULE 4.20 are acceptable to Lender as of the Closing Date, and shall continue to be acceptable to Lender for so long as (x) the Borrowers do not change such insurance companies, and (y) no downgrade has occurred to the ratings in effect as of the Closing Date for each such insurance company. Notwithstanding the foregoing, not later than five (5) Business Days prior to the expiration of each of the Insurance Policies in effect as of the Closing Date, the Borrowers shall deliver to Lender replacements of each such Insurance Policy which provides coverage required hereunder for a period of one (1) year, together with evidence of the payment in full of the annual premium(s) payable for such policy. SECTION 5.5 OPERATION AND MAINTENANCE OF THE PROPERTIES; CASUALTY. (A) The Borrowers will operate and maintain the Properties as is necessary to maintain hotel standards at least as high as those that currently apply to each Property, subject to ordinary wear and tear, as reasonably determined by the Borrowers, and otherwise in compliance with the standards under the applicable Franchise Agreement and shall maintain or cause to be maintained in good repair, working order and condition all material property used in the business of each Borrower, including the applicable Property, and will make or cause to be made all appropriate repairs, renewals and replacements thereof. Without limitation of the foregoing, each Borrower will operate and maintain its Property substantially in accordance with the applicable Operating Budget and the CapEx/FF&E Budget. All work required or permitted under this Loan Agreement shall be performed in a workmanlike manner and in compliance with all applicable laws. So long as no Event of Default has occurred and is continuing, the Borrowers may, without Lender's consent, perform alterations to the Properties which do not constitute a Material Alteration. The Borrowers shall not perform any Material Alteration without Lender's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; 58 provided, however, that Lender may, in its sole and absolute discretion, withhold consent to any Material Alteration which is likely to result in a decrease of Net Operating Income (taking into consideration all Material Alterations being undertaken at the Properties at such time) by 5% or more below that which was in effect prior to the commencement of the first such Material Alteration being undertaken at the time of determination for a period of sixty (60) days or longer; provided, further, however, the Borrowers may perform a Material Alteration without Lender's consent if (i) the delay caused by obtaining Lender's prior consent may result in injury or death at, or further destruction or deterioration of, the applicable Property, (ii) such Material Alteration is necessary to prevent the likelihood of injury or death at, or further destruction or deterioration of, the applicable Property, and (iii) the Borrowers deliver notice to Lender within two (2) Business Days of commencement of such Material Alteration together with such supporting documentation as Lender may require with respect to such Material Alteration. Lender may, as a condition to giving its consent to a Material Alteration, require that the Borrowers deliver to Lender evidence reasonably satisfactory to Lender that the Borrowers have cash available for payment of the cost of such Material Alteration or, if the Borrowers fail to deliver such evidence, cash, Dollar Equivalents or a Letter of Credit, in an amount equal to 125% of the cost of such Material Alteration as reasonably estimated by Lender. Cash deposited by the Borrowers with Lender in connection with any Material Alteration pursuant to the foregoing sentence shall be held by Lender in a Sub-Account of the Lock Box Account and disbursed to the Borrowers to pay for the cost of such Material Alteration as such work progresses subject to satisfaction of the conditions for disbursement of amounts from the FF&E Reserve under Section 6.4 (including the requirements set forth under Section 6.7). Upon completion of the Material Alteration, the Borrowers shall provide evidence reasonably satisfactory to Lender that (i) the Material Alteration was constructed in accordance with all material applicable laws and substantially in accordance with plans and specifications approved by Lender (which approval shall not be unreasonably withheld or delayed), (ii) all contractors, subcontractors, materialmen and professionals who provided work, materials or services in connection with the Material Alteration have been paid in full and have delivered unconditional releases of lien and (iii) all material licenses necessary for the use, operation and occupancy of the Material Alteration (other than those which depend on the performance of tenant improvement work) have been issued. The Borrowers shall reimburse Lender upon demand for all reasonable out-of-pocket costs and expenses (including the reasonable fees of any architect, engineer or other professional engaged by Lender) incurred by Lender in reviewing plans and specifications or in making any determinations necessary to implement the provisions of this Section 5.5(A). (B) In the event of casualty or loss at any of the Properties, the Borrowers shall give immediate written notice of the same to the insurance carrier and to Lender and shall promptly commence and diligently prosecute to completion, in accordance with the terms hereof, the repair and restoration of the Property as nearly as possible to the Pre-Existing Condition (a "RESTORATION"). The Borrowers hereby authorize and empower Lender as attorney-in-fact for the Borrowers (jointly with the Borrowers unless an Event of Default has occurred and is continuing), or any of them, to make proof of loss, to adjust and compromise any claim under insurance policies, to appear in and prosecute any action arising from such insurance policies, to collect and receive insurance proceeds, and to deduct therefrom Lender's expenses incurred in the collection of such proceeds; provided however, that nothing contained in this Section shall require Lender to incur any expense or take any action hereunder. The Borrowers further authorize Lender, at Lender's option, (i) to hold the balance of such proceeds to be used to 59 reimburse the Borrowers for the cost of Restoration of any of the Properties or (ii) subject to Subsection 5.5(C), to apply such proceeds to payment of the Obligations whether or not then due, in any order. Notwithstanding the foregoing, in the event of a casualty where the loss does not exceed the Restoration Threshold, the Borrowers may settle and adjust such claim; provided that (a) no Event of Default has occurred and is continuing and (b) such adjustment is carried out in a commercially reasonable and timely manner. (C) Lender shall not exercise Lender's option to apply insurance proceeds to payment of the Obligations if all of the following conditions are met: (i) no Event of Default then exists; (ii) Lender reasonably determines that there will be sufficient funds to complete the Restoration of the Property to at least substantially the Pre-Existing Condition and to timely make all payments due under the Loan Documents during the Restoration of the affected Property; (iii) Lender reasonably determines that the Net Operating Income of the Properties (including rental income or business interruption insurance) will be sufficient to pay principal and interest on the Loan and the Mezzanine Loan and Operating Revenues of the Properties, after the Restoration thereof to the Pre-Existing Condition, will be sufficient to meet all Operating Expenses, payments for Reserves and payments of principal and interest under the Note and the Mezzanine Loan; (iv) Lender determines that the Restoration of the affected Property to the Pre-Existing Condition will be completed not later than five (5) months prior to the expiration of any business interruption insurance, but in no event later than six (6) months prior to the Maturity Date; (v) less than fifty percent (50%) of the total floor area of the Improvements has been damaged, destroyed or rendered unusable as a result of such fire or other casualty; and (vi) such Property can be restored and repaired substantially to the condition it was in immediately prior to such casualty and in compliance with all applicable zoning, building and other laws and codes (the "PRE-EXISTING CONDITION"). If Lender elects to apply insurance proceeds to payment of the Obligations, such application shall be made on the Payment Date immediately following such election in accordance with the terms of the Cash Management Agreement. (D) If Lender elects or is obligated to make the insurance proceeds available for the Restoration of any Property and Lender is holding such proceeds, the Borrowers agree that, if at any time during the Restoration, the cost of completing such Restoration, as reasonably determined by Lender, exceeds the undisbursed insurance proceeds, the Borrowers shall, within ten (10) Business Days following the written demand by Lender, deposit the amount of such excess with Lender, and Lender shall first disburse such deposit to pay for the costs of such Restoration on the same terms and conditions as the insurance proceeds are disbursed. If the Borrowers deposit such excess with Lender and if, after completion of the Restoration, any funds remain from the combination of insurance proceeds and the funds so deposited with Lender by the Borrowers, and if no Event of Default shall have occurred and be continuing, then Lender shall promptly disburse to the Borrowers such remaining funds. (E) Lender may, at Lender's option, condition disbursement of any insurance proceeds on Lender's approval (which approval shall not be unreasonably withheld) of plans and specifications of an independent architect licensed in the state where the Property is located and reasonably satisfactory to Lender (the "ARCHITECT"), any and all contractors, subcontractors and materialmen engaged in the Restoration and the contracts under which they have been engaged, contractor's cost estimates, architect's certificates, waivers of liens, sworn statements of mechanics and materialmen and such other evidence of costs, percentage completion of 60 construction, application of payments, and satisfaction of liens as Lender may reasonably require. Lender shall not be obligated to disburse insurance proceeds more frequently than once every calendar month. If insurance proceeds are applied to the payment of the Obligations and provided no Event of Default exists, any such application of proceeds to principal shall be without any Prepayment Consideration and shall not extend or postpone the due dates of the monthly payments due under the Note or otherwise under the Loan Documents, or change the amounts of such payments. If Lender elects to apply all of such insurance proceeds toward the repayment of the Obligations, the Borrowers shall (subject to compliance with clauses (A), (B), (D) and (F) of Section 11.4) be entitled to obtain from Lender a Property Release (without representation or warranty) of the applicable Property from the Lien of the Deed of Trust relating to such Property (in which event the Borrowers shall not be obligated to restore the applicable Property pursuant to Section 5.5(B) above) provided that the Borrowers pay to Lender the amount, if any, by which the Release Price for such Property exceeds the insurance proceeds received by Lender and applied to repayment of the Obligations. If any proceeds are applied to reduce the Obligations under this Section 5.5, provided that no Event of Default has occurred and is continuing, no Prepayment Consideration shall be due and payable in connection with such application. Any amount of insurance proceeds remaining in Lender's possession after full and final payment and discharge of all Obligations shall be refunded to, or as directed by, the Borrowers or otherwise paid in accordance with applicable law. If the Property is sold at foreclosure or if Lender acquires title to the Property, Lender shall have all of the right, title and interest of the applicable Borrower in and to any insurance policies and unearned premiums thereon and in and to the proceeds resulting from any damage to such Property prior to such sale or acquisition. (F) In no event shall Lender be obligated to make disbursements of insurance proceeds in excess of an amount equal to the costs actually incurred from time to time for work in place as part of the Restoration, as certified by the Architect, less a retainage equal to the lesser of (x) the actual retainage required pursuant to the permitted contract, or (y) ten percent (10%) of such costs incurred until the Restoration has been completed. The retainage shall in no event be less than the amount actually held back by the Borrowers from contractors, subcontractors and materialmen engaged in the Restoration. The retainage shall not be released until the Architect certifies to Lender, or, if no Architect has been retained by Lender, Lender is reasonably satisfied, that the Restoration has been completed in accordance with the provisions of this Section 5.5 and that all approvals necessary for the re-occupancy and use of the Property have been obtained from all appropriate governmental authorities, and Lender receives final lien waivers and such other evidence reasonably satisfactory to Lender that the costs of the Restoration have been paid in full or will be paid in full out of the retainage. SECTION 5.6 INSPECTION. Each Borrower shall permit any authorized representatives designated by Lender to visit and inspect during normal business hours its Property and its business, including its financial and accounting records, and to make copies and take extracts therefrom and to discuss its affairs, finances and business with its officers and independent public accountants (with such Borrower's representative(s) present), at such reasonable times during normal business hours and as often as may be reasonably requested. Unless an Event of Default has occurred and is continuing, Lender shall provide advance written notice of at least three (3) Business Days prior to visiting or inspecting any Property or such Borrower's offices. 61 SECTION 5.7 O&M PLAN. Each Borrower that is the owner of a Property set forth on SCHEDULE 5.7 shall cause to be prepared and delivered to Lender an operations and maintenance program (the "O&M PLANS") with respect to suspected asbestos, asbestos-containing materials, and/or mold located in its Property as set forth in the applicable Environmental Reports. Each Borrower shall at all times implement and carry out the O&M Plan in accordance with its terms. Lender's requirement that the Borrowers develop and comply with the O&M Plan shall not be deemed to constitute a waiver or modification of any covenants or agreements of the Borrowers or Guarantor with respect to Hazardous Material or Environmental Laws as set forth in the Environmental Indemnity. SECTION 5.8 INTENTIONALLY DELETED. SECTION 5.9 COMPLIANCE WITH LAWS AND CONTRACTUAL OBLIGATIONS. The Borrowers will (A) comply with the requirements of all present and future applicable laws, rules, regulations and orders of any governmental authority in all jurisdictions in which it is now doing business or may hereafter be doing business, other than those laws, rules, regulations and orders the noncompliance with which would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect, (B) maintain all licenses and permits now held or hereafter acquired by any Borrower, the loss, suspension, or revocation of which, or failure to renew, could have a Material Adverse Effect and (C) perform, observe, comply and fulfill all of its material obligations, covenants and conditions contained in any Contractual Obligation. SECTION 5.10 FURTHER ASSURANCES. The Borrowers shall, from time to time, execute and/or deliver such documents, instruments, agreements, financing statements, and perform such acts as Lender at any time may reasonably request to evidence, preserve and/or protect the Collateral at any time securing or intended to secure the Obligations and/or to better and more effectively carry out the purposes of this Loan Agreement and the other Loan Documents. SECTION 5.11 PERFORMANCE OF AGREEMENTS AND LEASES. Each Primary Borrower Party shall duly and punctually perform, observe and comply in all material respects with all of the terms, provisions, conditions, covenants and agreements on its part to be performed, observed and complied with (i) hereunder and under the other Loan Documents to which it is a party, (ii) under all Material Agreements and Leases and (iii) all other agreements entered into or assumed by such Person in connection with the Properties, and will not suffer or permit any material default or event of default (giving effect to any applicable notice requirements and cure periods) to exist under any of the foregoing except where the failure to perform, observe or comply with any agreement referred to in this clause (iii) would not reasonably be expected to have a Material Adverse Effect. SECTION 5.12 LEASES. (A) Without the prior written consent of Lender, which shall not be unreasonably withheld or delayed, the Borrowers shall not, nor shall the Borrowers authorize Manager or any other Person to, (i) enter into any Material Lease, (ii) cancel or terminate any Material Lease (except to enforce any such Lease after a default thereunder); (iii) amend or modify and Material Lease (except for minor modifications and amendments entered into in the ordinary course of business, consistent with prudent property management practices, not materially and adversely affecting the economic terms of the Material Lease); (iv) approve any assignment, sublease or underlease of any Material Lease (except as required pursuant to the 62 express terms of any existing Lease or Lease hereafter approved by Lender); or (v) cancel or modify any guaranty, or release any security deposit, letter of credit, or other item constituting security pertaining to any Material Lease (except as required pursuant to the express terms of any existing Lease or Lease hereafter approved by Lender). (B) Any request for approval of any Material Lease or assignment, termination, amendment or modification of any Material Lease shall be made to Lender in writing and together with such request the Borrowers shall furnish to Lender: (i) such biographical and financial information about the proposed tenant as Lender may reasonably require in conjunction with its review, (ii) a copy of the proposed form of Lease (or amendment or modification), and (iii) a summary of the material terms of such proposed Lease (or amendment or modification) including, without limitation, rental terms and the term of the proposed Lease and any options. Lender's approval of any Material Lease or assignment, termination, amendment or modification of any Material Lease, shall be deemed given, if the first correspondence from the Borrowers to Lender requesting such approval is in an envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the same has been delivered and, if Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period, a second notice is delivered to Lender from the Borrowers in an envelope marked "PRIORITY" requesting approval containing a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny each request for approval within the ten (10) day period. Except for security deposits, no Material Lease executed after the Closing Date shall provide for payment of rent more than one month in advance, and the Borrowers shall not under any circumstances collect any such rent more than one month in advance. The Borrowers, at Lender's request, shall furnish Lender with executed copies of all Material Leases hereafter made. Each new Material Lease or a separate agreement with the tenant of such Material Lease shall be in recordable form and shall specifically provide that such Material Lease (i) is subordinate to the Deeds of Trust; (ii) that the tenant attorns to Lender, such attornment to be effective upon Lender's acquisition of title to the Property; (iii) that the tenant agrees to execute such further evidences of attornment as Lender may from time to time request; (iv) that the attornment of the tenant shall not be terminated by foreclosure; (v) that in no event shall Lender, as holder of the Deeds of Trust or as successor landlord, be liable to the tenant for any act or omission of any prior landlord or for any liability or obligation of any prior landlord occurring prior to the date that Lender or any subsequent owner acquire title to the Property; and (vi) that Lender may, at Lender's option, accept or reject such attornment. 63 SECTION 5.13 MANAGEMENT; FRANCHISE AGREEMENT. (A) The Borrowers shall cause each Manager to manage the Properties in accordance with the Management Agreements including, without limitation, maintaining inventory in amounts and type customary for hotels comparable to each Property. The Borrowers shall (i) perform and observe all of the material terms, covenants and conditions of the Management Agreement on the part of each Borrower to be performed and observed, and (ii) promptly notify Lender of any notice to any of the Borrowers of any material default under the Management Agreement of which it is aware. If any of the Borrowers shall default in the performance or observance of any material term, covenant or condition of the applicable Management Agreement on the part of the Borrowers to be performed or observed, then, without limiting Lender's other rights or remedies under this Agreement or the other Loan Documents, and without waiving or releasing the Borrowers from any of their obligations hereunder or under the applicable Management Agreement, Lender shall have the right, upon prior written notice to the Borrower, but shall be under no obligation, to pay any sums and to perform any act as may be reasonably appropriate to cause such material conditions of the applicable Management Agreement on the part of the Borrowers to be performed or observed. (B) The Borrowers shall not surrender, terminate, cancel, modify (other than non-material changes), renew or extend the Management Agreement, or enter into any other Management Agreement with Manager or any new Manager (other than an Acceptable Manager), or consent to the assignment by the Manager of its interest under the Management Agreement, in each case without (i) prior to a Securitization, the express consent of Lender, which consent shall not be unreasonably withheld, or (ii) after a Securitization, delivery of Rating Confirmations from each of the Rating Agencies; provided, however, the Borrowers may terminate the Memphis Interim Agreement at any time provided that (x) the applicable Property continues to be managed by Lodgian Management Corp. pursuant to the terms of the applicable Management Agreement in effect as of the Closing Date, and (y) the applicable Borrower has obtained, in its or Manager's name, all licenses and permits required to operate the applicable Property. If at any time Lender consents to the appointment of a new Manager, or if an Acceptable Manager shall become the Manager, such new Manager, or the Acceptable Manager, as the case may be, and the Borrowers shall, as a condition of Lender's consent, or with respect to an Acceptable Manager, prior to commencement of its duties as Manager, execute a subordination of management agreement in substantially the form delivered in connection with the closing of the Loan. (C) Lender shall have the right to require any of the Borrowers to replace any Manager with a Person chosen by the Borrowers and reasonably acceptable to Lender (unless such proposed Manager is an Acceptable Manager) and the applicable Franchisor (to the extent the applicable Franchisor has consent rights), upon the earliest to occur of any one or more of the following events: (i) upon the occurrence and during the continuance of an Event of Default; (ii) thirty (30) days after notice from Lender to the Borrowers if Manager has engaged in fraud, gross negligence or willful misconduct arising from or in connection with its performance under the applicable Management Agreement; or (iii) upon a change of control of the current Manager. (D) The Borrowers shall not terminate or enter into any Franchise Agreement without Lender's prior written consent, which may be granted or withheld in Lender's sole discretion. 64 Notwithstanding the foregoing, the following changes to Franchise Agreements shall be permitted without Lender's prior written consent: (i) Replacement of any Franchise Agreement with a new Franchise Agreement in form substantially similar to a form previously approved by Lender with any Franchisor that would cause a Tier 3 Hotel to become either a Tier 2 Hotel or a Tier 1 Hotel, or that would cause a Tier 2 Hotel to become a Tier 1 Hotel; (ii) Replacement of any Franchise Agreement with a new Franchise Agreement in form substantially similar to a form previously approved by Lender with a Franchisor that would cause the Property to remain within the same Category, provided no such replacement shall occur (in the aggregate) with respect to more than the lesser of (x) five (5) Properties, or (y) Properties with Aggregate Allocated Loan Amounts (in the aggregate) of ten percent (10%) of the Aggregate Outstanding Principal Balance; (iii) Replacement of any Franchise Agreement at a Tier 2 Hotel with a new Franchise Agreement in form substantially similar to a form previously approved by Lender for Tier 3 Hotels, provided no such replacements shall occur (in the aggregate) with respect to more than the lesser of (x) three (3) Properties, or (y) Properties with Aggregate Allocated Loan Amounts (in the aggregate) of two percent (2%) of the Aggregate Outstanding Principal Balance; and (iv) Entering into a new Franchise Agreement in form substantially similar to a form previously approved by Lender with an Approved Franchisor (or with respect to the Property located at 3071 Ross Clark Circle, Dothan, Alabama (the "DOTHAN HOTEL"), La Quinta Corporation under the La Quinta brand) for any of the Non-Flagged Hotels, the Dothan Hotel, and the Property located at 7330 Plantation Road, Pensacola, Florida, at which time the applicable Property shall be deemed to be within the Category determined by the applicable Franchise Agreement; provided that the La Quinta brand shall be deemed to be within the Tier 3 Hotel category solely for the purpose of determining the Dothan Hotel's Category. In connection with the replacement of any Franchisors permitted hereunder, the applicable Borrower shall, within ten (10) Business Days of the execution of such Franchise Agreement, deliver to Lender Franchisor Letter from any replacement Franchisor in form and substance reasonably acceptable to Lender. In all cases, each Borrower shall (a) cause the hotel located on the applicable Property to be operated pursuant to the applicable Franchise Agreement; (b) promptly perform and observe in all material respects all of the covenants required to be performed and observed by it under the applicable Franchise Agreement (including the requirements of any Property Improvement Plan); (c) promptly notify Lender of any material default under the applicable Franchise Agreement of which it is aware; and (d) promptly enforce in a commercially reasonable manner the performance and observance of all of the material covenants required to be performed and observed by the Franchisor under the 65 Franchise Agreement. In addition, the Borrowers shall not, without Lender's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed: (x) increase or consent to the increase of the aggregate amount of any fees under any Franchise Agreement; or (y) otherwise materially modify, change, supplement, alter or amend, or waive or release any of its material rights and remedies under, any Franchise Agreement. Lender's consent to any replacement of any Franchise Agreement, or the termination, renewal, extension or modification of an existing Franchise Agreement, shall be deemed given, if the first correspondence from the Borrowers to Lender requesting such consent is in an envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL MAY BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the same has been delivered and, if Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period, a second notice is delivered to Lender from the Borrowers in an envelope marked "PRIORITY" requesting approval containing a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN (10) DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN" and Lender fails to respond or to expressly deny each request for approval within the ten (10) day period. SECTION 5.14 MATERIAL AGREEMENTS. The Borrowers shall not enter into or become obligated under any Material Agreement pertaining to any Property, including without limitation brokerage agreements, without Lender's prior written approval, which approval shall not be unreasonably withheld or conditioned; except that the following Material Agreements shall not require Lender approval: (i) Leases complying with the Loan Documents, (ii) the Management Agreement, (iii) the existing Material Agreements described on SCHEDULE 5.14 attached hereto, (iv) any Franchise Agreement complying with the provisions of Section 5.13(E) or (v) any other agreement that may be terminated without cause and without payment of a penalty or premium, on not more than thirty (30) days' prior written notice. SECTION 5.15 DEPOSITS; APPLICATION OF RECEIPTS. The Borrowers will deposit all Receipts from the Properties into, and otherwise comply with, the Accounts established from time to time hereunder. Subject to Article VII hereof and the Cash Management Agreement, each Borrower shall promptly apply all Receipts to the payment of all current and past due Operating Expenses, and to the repayment of all sums currently due or past due under the Loan Documents, including all payments into the Reserves. SECTION 5.16 ESTOPPEL CERTIFICATES. (A) Within ten (10) Business Days following a request by Lender, the Borrowers shall provide to Lender a duly acknowledged written statement confirming (i) the amount of the outstanding principal balance of the Loan, (ii) the terms of payment and maturity date of the Note, (iii) the date to which interest has been paid, (iv) whether any offsets or defenses exist 66 against the Obligations, and if any such offsets or defenses are alleged to exist, the nature thereof shall be set forth in detail and (v) that this Loan Agreement, the Note, the Deeds of Trust and the other Loan Documents are legal, valid and binding obligations of the Borrowers and have not been modified or amended, or if modified or amended, describing such modification or amendments. (B) Within ten (10) Business Days following a written request by the Borrowers, Lender shall provide to the Borrowers a duly acknowledged written statement setting forth the amount of the outstanding principal balance of the Loan, the date to which interest has been paid, and whether Lender has provided the Borrowers with written notice of any Event of Default. Compliance by Lender with the requirements of this Section shall be for informational purposes only and shall not be deemed to be a waiver of any rights or remedies of Lender hereunder or under any other Loan Document. SECTION 5.17 INDEBTEDNESS. The Borrowers will not directly or indirectly create, incur, assume, guaranty, or otherwise become or remain directly or indirectly liable with respect to any Indebtedness except for the following (collectively, "PERMITTED INDEBTEDNESS"): (A) The Obligations; (B) (i) Unsecured trade payables not evidenced by a note and arising out of purchases of goods or services in the ordinary course of business and (ii) Indebtedness incurred in the financing of equipment or other personal property used at any Property in the ordinary course of business, provided that (a) each such trade payable is payable not later than ninety (90) days after the original invoice date and is not overdue by more than thirty (30) days, and (b) the aggregate amount of such trade payables and Indebtedness relating to financing of equipment and personal property or otherwise referred to in clauses (i) and (ii) above (excluding therefrom utility expenses of the Properties and fees payable to the Franchisors pursuant to the terms of the Franchise Agreements) outstanding does not, at any time, exceed five percent (5%) of the outstanding principal balance of the Loan; and (C) That certain unsecured loan in the original principal amount of $17,686,292, evidenced by a certain replacement promissory note dated as of November 15, 2002 given by Servico Center Associates, Ltd. to Servico Palm Beach General Partner SPE, Inc., the outstanding principal balance of which on the Closing Date is $17,686,292, and which is subject to the terms that certain Subordination and Standstill Agreement given by the holder of such note in favor of Lender and dated as of the Closing Date; (D) Other Indebtedness of the Borrowers pursuant to the terms of those certain promissory notes required to be delivered pursuant to the terms of the Plan of Reorganization with respect to certain tax liabilities of the Borrowers not to exceed $1,700,000. In no event shall any Indebtedness other than the Loan be secured, in whole or in part, by the Properties or any portion thereof or interest therein, SECTION 5.18 NO LIENS. The obligations of each Borrower under this Section are in addition to and not in limitation of its obligations under Article XI herein. The Borrower shall not create, incur, assume or permit to exist any Lien on or with respect to the Properties, any other 67 Collateral or any such direct or indirect ownership interest in the Borrowers, except the Permitted Encumbrances and Liens on the ownership interests in the Borrowers securing the Mezzanine Loan. SECTION 5.19 CONTINGENT OBLIGATIONS. Other than Permitted Indebtedness, no Primary Borrower Party shall directly or indirectly create or become or be liable with respect to any Contingent Obligation except Contingent existing on the Closing Date and described in SCHEDULE 4.4. SECTION 5.20 RESTRICTION ON FUNDAMENTAL CHANGES. Except as otherwise expressly permitted in this Loan Agreement, no Primary Borrower Party shall, or shall permit any other Person to, (i) amend, modify or waive any term or provision of such Borrower Party's partnership agreement, certificate of limited partnership, articles of incorporation, by-laws, articles of organization, operating agreement or other organizational documents so as to violate or permit the violation of the single-purpose entity provisions set forth in Article IX, unless required by law; or (ii) liquidate, wind-up or dissolve such Primary Borrower Party. SECTION 5.21 TRANSACTIONS WITH RELATED PERSONS. Except for fees and expenses payable to the Manager under the Management Agreement, the Borrowers shall not pay any management, consulting, director or similar fees to any Related Person of the Borrowers or to any director, officer or employee of the Borrowers. The Borrowers shall not directly or indirectly enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Related Person of any of the Borrowers or with any director, officer or employee of any Borrower Party, except transactions in the ordinary course of and pursuant to the reasonable requirements of the business of the Borrowers and upon fair and reasonable terms and are no less favorable to any of the Borrowers than would be obtained in a comparable arm's length transaction with a Person that is not a Related Person of any Borrower. The Borrowers shall not make any payment or permit any payment to be made to any Related Person of any of the Borrowers when or as to any time when any Event of Default shall exist. SECTION 5.22 BANKRUPTCY, RECEIVERS, SIMILAR MATTERS. (A) VOLUNTARY CASES. The Borrower Parties shall not commence any voluntary case under the Bankruptcy Code or under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect. (B) INVOLUNTARY CASES, RECEIVERS, ETC. The Borrower Parties shall not apply for, consent to, or aid, solicit, support, or otherwise act, cooperate or collude to cause the appointment of or taking possession by, a receiver, trustee or other custodian for all or a substantial part of the assets of any Borrower. As used in this Loan Agreement, an "INVOLUNTARY BORROWER BANKRUPTCY" shall mean any involuntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, in which any of the Borrowers is a debtor or any portion of the Properties is property of the estate therein. The Borrowers shall not file a petition for, consent to the filing of a petition for, or aid, solicit, support, or otherwise act, cooperate or collude to cause the filing of a petition for an Involuntary Borrower Bankruptcy. In any Involuntary Borrower Bankruptcy, no Borrower Party shall, without the prior written consent of Lender, consent to the entry of any order, file any motion, or 68 support any motion (irrespective of the subject of the motion), and the Borrowers shall not file or support any plan of reorganization. The Borrowers having any interest in any Involuntary Borrower Bankruptcy shall do all things reasonably requested by Lender to assist Lender in obtaining such relief as Lender shall seek, and shall in all events vote as directed by Lender. Without limitation of the foregoing, each such Borrower shall do all things reasonably requested by Lender to support any motion for relief from stay or plan of reorganization proposed or supported by Lender. SECTION 5.23 ERISA. (A) NO ERISA PLANS. None of the Primary Borrower Parties will establish any Employee Benefit Plan, Pension Plan or Multiemployer Plan, or will commence making contributions to (or become obligated to make contributions to) any Employee Benefit Plan, Pension Plan or Multiemployer Plan. (B) COMPLIANCE WITH ERISA. The Borrowers shall not: (i) engage in any nonexempt prohibited transaction under Section 406 of ERISA or Section 4975 of the IRC; or (ii) except as may be necessary to comply with applicable laws, establish or amend any Employee Benefit Plan which establishment or amendment could result in liability to the Borrowers or any ERISA Affiliate or increase the obligation of the Borrowers, provided that the Borrower shall not be in default of this covenant if, in either case, any portion of the Loan has been, or will be, funded with plan assets of any employee benefit plan that either (x) is subject to Title I of ERISA or any plan that is covered by Section 4975 of the Code (unless the Lender is eligible to apply for one or more exemptions such that the Loan will not constitute a nonexempt prohibited transaction under Section 406 of ERISA) or (y) could subject a Borrower Party or its Affiliates to an excise tax under Section 4975 of the IRC. (C) NO PLAN ASSETS. The Borrowers shall not at any time during the term of this Loan Agreement become (1) an employee benefit plan defined in Section 3(3) of ERISA which is subject to ERISA, (2) a plan as defined in Section 4975(e)(1) of the IRC which is subject to Section 4975 of the IRC, (3) a "governmental plan" within the meaning of Section 3(32) of ERISA or (4) an entity any of whose underlying assets constitute "plan assets" of any such employee benefit plan, plan or governmental plan for purposes of Title I or ERISA, Section 4975 of the IRC or any state statutes applicable to the Borrowers regulating investments of governmental plans. SECTION 5.24 PRESS RELEASE. The Borrowers shall not, and shall not permit any other Person within its control to, disclose the name of Lender or terms of this Loan Agreement or the Loan Documents in any press release without the prior written consent of Lender, which shall not be unreasonably withheld. Notwithstanding the foregoing to the contrary, the Borrowers shall be permitted to make such filings and disclosures with respect to the Loan as are required by law. SECTION 5.25 GROUND LEASES. (A) NO MODIFICATION. The Borrowers shall not modify or amend any material or economic terms of, or terminate or surrender any Ground Lease, in each case without the prior written consent of Lender, which consent may be withheld by Lender in its sole and absolute 69 discretion. Any attempted or purported material modification, amendment, or any surrender or termination of any Ground Lease without Lender's prior written consent shall be null and void and of no force or effect. (B) PERFORMANCE OF GROUND LEASES. The Borrowers shall fully perform as and when due each and all of its obligations under each Ground Lease in accordance with the terms of such Ground Lease, and shall not cause or suffer to occur any material breach or default in any of such obligations. The Borrowers shall keep and maintain each Ground Lease in full force and effect. The Borrowers shall exercise any option to renew or extend any Ground Lease and give written confirmation thereof to Lender within thirty (30) days after such option is exercised. Notwithstanding that certain of the obligations of the Borrowers under this Loan Agreement may be similar or identical to certain of the obligations of the Borrowers under the Ground Leases, all of the obligations of the Borrowers under this Loan Agreement are and shall be separate from and in addition to its obligations under the Ground Leases. (C) NOTICE OF DEFAULT. If any of the Borrowers shall have or receive any written notice that any Ground Lease Default has occurred, then the Borrowers immediately shall notify Lender in writing of the same and immediately deliver to Lender a true and complete copy of each such notice. Further, the Borrowers shall provide such documents and information as Lender shall reasonably request concerning the Ground Lease Default. (D) LENDER'S RIGHT TO CURE. If any Ground Lease Default shall occur and be continuing, or if any Ground Lessor asserts that a Ground Lease Default has occurred (whether or not the Borrowers question or deny such assertion), then, subject to the terms and conditions of the applicable Ground Lease, Lender, upon five (5) Business Days' prior written notice to the Borrowers, unless Lender reasonably determines that a shorter period (or no period) of notice is necessary to protect Lender's interest in the Ground Lease, may (but shall not be obligated to) take any action that Lender deems reasonably necessary, including, without limitation, (i) performance or attempted performance of the applicable Borrower's obligations under the applicable Ground Lease, (ii) curing or attempting to cure any actual or purported Ground Lease Default, (iii) mitigating or attempting to mitigate any damages or consequences of the same and (iv) entry upon the applicable Ground Leased Property for any or all of such purposes. Upon Lender's request, each Borrower shall submit satisfactory evidence of payment or performance of any of its obligations under each Ground Lease. Lender may pay and expend such sums of money as Lender in its sole discretion deems necessary or desirable for any such purpose, and the Borrowers shall pay to Lender within five (5) Business Days of the written demand of Lender all such sums so paid or expended by Lender, together with interest thereon from the date of expenditure at the Default Rate. (E) LEGAL ACTION. The Borrowers shall not commence any action or proceeding against any Ground Lessor or affecting or potentially affecting any Ground Lease or the Borrowers' or Lender's interest therein, the effect of which could cause an event of default or termination of any such Ground Lease, without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed. The Borrowers shall notify Lender immediately if any action or proceeding shall be commenced between any Ground Lessor and either Borrower, or affecting or potentially affecting any Ground Lease or either Borrower's or Lender's interest therein (including, without limitation, any case commenced by 70 or against any Ground Lessor under the Bankruptcy Code). Lender shall have the option, exercisable upon notice from Lender to the Borrowers, to participate in any such action or proceeding with counsel of Lender's choice. The Borrowers shall cooperate with Lender, comply with the reasonable instructions of Lender, execute any and all powers, authorizations, consents or other documents reasonably required by Lender in connection therewith, and shall not settle any such action or proceeding without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed. (F) ESTOPPEL CERTIFICATE. Subject to the terms and conditions of the applicable Ground Lease, the Borrowers shall use commercially reasonable efforts to obtain and deliver to Lender within the time period required under the applicable Ground Lease, an estoppel certificate from each Ground Lessor setting forth (A)(i) the identities of the original lessor and lessee under the applicable Ground Lease and each of their respective successors, (ii) that the Ground Lease has not been modified or, if it has been modified, the date of each modification (together with copies of each such modification), (iii) the rent payable under the Ground Lease, (iv) the dates to which all rent and other charges have been paid, (v) whether there are any alleged Ground Lease Defaults and, if so, setting forth the nature thereof in reasonable detail, and (vi) such other matters as Lender may reasonably request or (B) the matters required to be certified by the Ground Lessor under the applicable Ground Lease. The Borrowers shall not be required to request an estoppel from any Ground Lessor more than two (2) times in any calendar year. (G) BANKRUPTCY. (i) If any Ground Lessor shall reject any Ground Lease under or pursuant to Section 365 of Title 11 of the Bankruptcy Code, the Borrowers shall not elect to treat the Ground Lease as terminated but shall elect to remain in possession of the applicable Ground Leased Property and the leasehold estate under such Ground Lease. The lien of the Deed of Trust covering such Property does and shall encumber and attach to all of the Borrowers' rights and remedies at any time arising under or pursuant to Section 365 of the Bankruptcy Code, including without limitation, all of such Borrower's rights to remain in possession of such Property and the leasehold estate. (ii) The Borrowers acknowledge and agree that in any case commenced by or against the Borrowers under the Bankruptcy Code, Lender by reason of the liens and rights granted under the Deed of Trust covering such Property and the Loan Documents shall have a substantial and material interest in the treatment and preservation of such Borrower's rights and obligations under such Ground Lease, and that such Borrower shall, in any such bankruptcy case, provide to Lender immediate and continuous reasonably adequate protection of such interests. Each Borrower and Lender agree that such adequate protection shall include but shall not necessarily be limited to the following: (a) Lender shall be deemed a party to the Ground Lease (but shall not have any obligations thereunder) for purposes of Section 365 of the Bankruptcy Code, and shall, provided that, prior to an Event of Default, no such action by Lender would adversely and materially affect the Borrowers' ability to prosecute, or defend, any such claims asserted therein, 71 have standing to appear and act as a party in interest in relation to any matter arising out of or related to the Ground Lease or such Property. (b) The Borrowers shall serve Lender with copies of all notices, pleadings and other documents relating to or affecting the Ground Lease or the applicable Property. Any notice, pleading or document served by the Borrowers on any other party in the bankruptcy case shall be contemporaneously served by such Borrower on Lender, and any notice, pleading or document served upon or received by such Borrower from any other party in the bankruptcy case shall be served by such Borrower on Lender promptly upon receipt by such Borrower. (c) Upon written request of Lender, the Borrowers shall assume the Ground Lease, and shall take such steps as are necessary to preserve such Borrower's right to assume the Ground Lease, including without limitation using commercially reasonable efforts to obtain extensions of time to assume or reject the Ground Lease under Subsection 365(d) of the Bankruptcy Code to the extent it is applicable. (H) If the Borrowers or the applicable Ground Lessor seeks to reject any Ground Lease or have the Ground Lease deemed rejected, then prior to the hearing on such rejection Lender shall, subject to applicable law, be given no less than twenty (20) days' notice and opportunity to elect in lieu of rejection to have the Ground Lease assumed and assigned to a nominee of Lender. If Lender shall so elect to assume and assign the Ground Lease, then the Borrowers shall, subject to applicable law, continue any request to reject the Ground Lease until after the motion to assume and assign has been heard. If Lender shall not elect to assume and assign the Ground Lease, then Lender may, subject to applicable law, obtain in connection with the rejection of the Ground Lease a determination that the applicable Ground Lessor, at Lender's option, shall (1) agree to terminate the Ground Lease and enter into a new lease with Lender on the same terms and conditions as the Ground Lease, for the remaining term of the Ground Lease, or (2) treat the Ground Lease as breached and provide Lender with the rights to cure defaults under the Ground Lease and to assume the rights and benefits of the Ground Lease. Each Borrower shall join with and support any request by Lender to grant and approve the foregoing as necessary for adequate protection of Lender's interests. Notwithstanding the foregoing, Lender may seek additional terms and conditions, including such economic and monetary protections as it deems reasonably appropriate to adequately protect its interests, and any request for such additional terms or conditions shall not delay or limit Lender's right to receive the specific elements of adequate protection set forth herein. Each Borrower hereby appoints Lender as its attorney in fact to act on behalf of Lender in connection with all matters relating to or arising out of the assumption or rejection of any Ground Lease, in which the other party to the lease is a debtor in a case under the Bankruptcy Code. This grant of power of attorney is present, unconditional, irrevocable, durable and coupled with an interest. 72 SECTION 5.26 MORTGAGED CONDOMINIUM PROPERTY. (A) NO MODIFICATION. The Condominium Borrowers shall not modify or amend any material terms of, or terminate any of the Mortgaged Condominium Property Documents, in each case, without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed. (B) PERFORMANCE OF MORTGAGED CONDOMINIUM PROPERTY DOCUMENTS. The Condominium Borrowers shall fully and faithfully pay when due and payable all assessments, common charges and other charges payable by the Condominium Borrowers under the Mortgaged Condominium Property Documents and shall perform as and when due each of its material obligations under the Mortgaged Condominium Property Documents in substantial accordance with their respective terms, and shall not cause or suffer to occur any breach or default in any of such obligations. The Condominium Borrowers shall keep and maintain each of the Mortgaged Condominium Property Documents in full force and effect. (C) NOTICE OF DEFAULT. If the Condominium Borrowers shall receive any written notice of any Condominium Default, the Condominium Borrowers immediately shall notify Lender of same and deliver to Lender a true and complete copy of each such notice, and provide such documents and information as Lender may reasonably request concerning such Condominium Default. (D) LENDER'S RIGHT TO CURE. If any Condominium Default shall occur and be continuing, or if any party to any Mortgaged Condominium Property Document asserts that a Condominium Default has occurred (whether or not the Borrowers question or deny such assertion), then, subject to the terms and conditions of the applicable Mortgaged Condominium Property Documents, after notice to Condominium Borrower, Lender upon five (5) Business Days' prior written notice to the Borrowers, unless Lender reasonably determines that a shorter period (or no period) of notice is necessary to protect Lender's interest in the Ground Lease, may (but shall not be obligated to) take any action that Lender deems reasonably necessary to cure such Condominium Default, including, without limitation, (i) performance or attempted performance of the Borrowers' obligations under the applicable Mortgaged Condominium Property Documents, (ii) curing or attempting to cure any actual or purported Condominium Default, (iii) mitigating or attempting to mitigate any damages or consequences of the same and (iv) entry upon the Mortgaged Condominium Property for any or all of such purposes. Upon Lender's request, the Condominium Borrowers shall submit satisfactory evidence of payment or performance of any of its obligations under each of the Mortgaged Condominium Property Documents. Lender may pay and expend such sums of money as Lender in its sole discretion deems necessary or desirable for any such purpose, and the Borrowers shall pay to Lender within five (5) Business Days of the written demand of Lender all such sums so paid or expended by Lender pursuant to this Section 5.26, together with interest thereon from the date of expenditure at the Default Rate. (E) PRESERVATION OF CONDOMINIUM. The Condominium Borrowers will do all things necessary to preserve and to keep unimpaired its material rights, powers and privileges under the Mortgaged Condominium Property Documents and to prevent the termination or expiration of the Mortgaged Condominium Property Documents, or the withdrawal of the Mortgaged 73 Condominium Property from a condominium form of ownership under applicable law, to the end that the Condominium Borrowers may enjoy all of the material rights granted to it as a party to the Mortgaged Condominium Property Documents. (F) NOTICE OF CONDOMINIUM DEFAULTS. The Condominium Borrowers will (i) promptly notify Lender of the receipt by the Condominium Borrowers of any notice from the Board of Managers, or the owner of any other unit in the condominium, covering the Mortgaged Condominium Property, asserting or claiming a default by the Condominium Borrowers thereunder or lack of compliance by the Condominium Borrowers with the Mortgaged Condominium Property Documents, (ii) promptly notify Lender of the receipt by the Condominium Borrowers of any notice or request from the Board of Managers or owner of any unit of the termination or purported termination of the Mortgaged Condominium Property Documents or to withdraw the Mortgaged Condominium Property from condominium ownership pursuant to applicable law or to seek any action for partition, (iii) promptly notify Lender of the receipt by the Condominium Borrowers of any notice or request from the Board of Managers or owner of any unit of the material modification or change or proposed material modification or change of the Mortgaged Condominium Property Documents and (iv) promptly cause a copy of each such notice of request received by the Condominium Borrowers from the Board of Managers or any unit owner, or from a mortgagee of a mortgage on such other unit, to be delivered to Lender. The Condominium Borrowers will permit Lender to participate in any such partition or withdrawal proceeding to the extent permitted by law and the Mortgaged Condominium Property Documents (but Lender shall not be obligated so to do). The Condominium Borrowers will promptly deliver to Lender a copy of each notice, pleading, brief and preliminary, interim and final determination or decision and other papers received by it in each such partition or withdrawal proceeding. (G) INTENTIONALLY DELETED. (H) STATEMENTS, NOTICES. The Condominium Borrowers will, within twenty (20) days after demand from Lender (which shall not be required more than two (2) times in any calendar year), obtain, if and to the extent that the Condominium Borrowers is entitled to the same under the Mortgaged Condominium Property Documents, and otherwise request from and make good faith efforts to obtain, from the Board of Managers and deliver to Lender a duly signed and acknowledged certificate (signed also by Condominium Borrower) that the Mortgaged Condominium Property Documents are unmodified and in full force and effect (or, if the same have been modified in compliance with this Loan Agreement, that the Mortgaged Condominium Property Documents are in full force and effect as to modified and that there have been no other modifications), stating the dates to which the assessments, common charges and other charges payable under the Mortgaged Condominium Property Documents have been paid and stating whether to the certifying party's and Condominium Borrower's knowledge Condominium Borrower's is in compliance with the Mortgaged Condominium Property Documents, or, if not, specifying each default or failure of compliance of which the certifying party has knowledge. The Condominium Borrowers will, promptly upon receipt thereof by Condominium Borrower, furnish Lender with a copy of all notices and statements, however characterized, issued by the Board of Managers or relating to the Mortgaged Condominium Property Documents including without limitation, financial statements and projected budgets. 74 SECTION 5.27 LENDER'S EXPENSES. The Borrowers shall pay, on demand by Lender, all reasonable out-of-pocket expenses, charges, costs and fees (including reasonable attorneys' fees and expenses) in connection with the negotiation, documentation, closing, administration, servicing, enforcement interpretation, and collection of the Loan and the Loan Documents, and in the preservation and protection of Lender's rights hereunder and thereunder. Without limitation the Borrowers shall pay all costs and expenses, including reasonable attorneys' fees, incurred by Lender in any case or proceeding under the Bankruptcy Code (or any law succeeding or replacing any of the same). At the Closing, Lender is authorized to pay directly from the proceeds of the Loan any or all of the foregoing expenses then or theretofore incurred and approved by the Borrowers. SECTION 5.28 DISTRIBUTIONS. During the continuance of any Event of Default, and at any time that a Cash Trap Event is in effect, the Borrowers shall not make any distributions of cash or other property to any Borrower Party, or make any payments in lieu thereof, without Lender's prior written approval, which may be granted or withheld in Lender's sole discretion. SECTION 5.29 COMPLETION OF REQUIRED CAPITAL IMPROVEMENTS. The Borrowers shall commence the Required Capital Improvements promptly following the Closing and complete the Required Capital Improvements in accordance with Section 6.5 hereof. SECTION 5.30 COMPLIANCE WITH PLAN OF REORGANIZATION. The Borrowers shall comply, and shall cause all other parties under the control of Borrower or Guarantor or any Affiliates thereof, to comply, in all material respects with the Plan of Reorganization. SECTION 5.31 CANCELLATION OF INDEBTEDNESS; SETTLEMENT OF CLAIMS. Unless otherwise specifically provided herein to the contrary, the Borrowers shall not cancel any indebtedness from any Person owing to any Borrower, or settle any claims without Lender's prior written consent which shall not be unreasonably withheld. ARTICLE VI RESERVES SECTION 6.1 SECURITY INTEREST IN RESERVES; OTHER MATTERS PERTAINING TO RESERVES. (A) The Borrowers hereby pledge, assign and grant to Lender a security interest in and to all of the Borrowers' right, title and interest in and to the Account Collateral, including the Reserves, as security for payment and performance of all of the Obligations hereunder and under the Note and the other Loan Documents. The Reserves constitute Account Collateral and are subject to the security interest in favor of Lender created herein and all provisions of this Loan Agreement and the other Loan Documents pertaining to Account Collateral. (B) In addition to the rights and remedies provided in Article VII and elsewhere herein, upon the occurrence and during the continuance of any Event of Default, Lender shall have all rights and remedies pertaining to the Reserves as are provided for in any of the Loan Documents or under any applicable law. Without limiting the foregoing, upon and at all times after the occurrence and during the continuance of an Event of Default, Lender in its sole and absolute discretion, may use the Reserves (or any portion thereof) for any purpose, including but not limited to any combination of the following: (i) payment of any of the Obligations including 75 the Prepayment Consideration (if any) applicable upon such payment in such order as Lender may determine in its sole discretion; provided, however, that such application of funds shall not cure or be deemed to cure any default; (ii) reimbursement of Lender for any actual losses or expenses (including, without limitation, reasonable legal fees) suffered or incurred as a result of such Event of Default; (iii) payment for the work or obligation for which such Reserves were reserved or were required to be reserved; and (iv) application of the Reserves in connection with the exercise of any and all rights and remedies available to Lender at law or in equity or under this Loan Agreement or pursuant to any of the other Loan Documents. Nothing contained in this Loan Agreement shall obligate Lender to apply all or any portion of the funds contained in the Reserves during the continuance of an Event of Default to payment of the Loan or in any specific order of priority. SECTION 6.2 FUNDS DEPOSITED WITH LENDER. (A) INTEREST, OFFSETS. Except only as expressly provided otherwise herein, all funds of the Borrowers which are deposited with Lock Box Account Bank as Reserves hereunder shall be held by Lock Box Account Bank in one or more Permitted Investments, such Permitted Investments, prior to an Event of Default, to be as directed by Borrower. All interest which accrues on the Reserves shall be taxable to the Borrowers and shall be added to and disbursed in the same manner and under the same conditions as the principal sum on which said interest accrued. Additional provisions pertaining to investments are set forth in Article VII. After repayment of all of the Obligations, all funds held as Reserves will be promptly returned to, or as directed by, the Borrowers. (B) FUNDING AT CLOSING. The Borrowers shall deposit with Lender the amounts necessary to fund each of the Reserves as set forth below. Deposits into the Reserves at Closing may occur by deduction from the amount of the Loan that otherwise would be disbursed to the Borrowers, followed by deposit of the same into the applicable Sub-Account or Account of the Lock Box Account in accordance with the Cash Management Agreement on the Closing Date. Notwithstanding such deductions, the Loan shall be deemed for all purposes to be fully disbursed at Closing. SECTION 6.3 IMPOSITIONS AND INSURANCE RESERVE. On the Closing Date, the Borrowers shall deposit with Lock Box Account Bank $4,225,548.90 and, pursuant to the Cash Management Agreement, the Borrowers shall deposit monthly, on each Payment Date commencing on the Payment date in December 2002, 1/12th of the annual charges (as reasonably estimated by Lender) for all Impositions and all Insurance Premiums (other than for D&O Insurance) payable with respect to the Properties hereunder (said funds, together with any interest thereon and additions thereto, the "IMPOSITIONS AND INSURANCE RESERVE"). The initial amount of the monthly deposit to be made to the Impositions and Insurance Reserve from and after the date hereof is $1,100,249. The Borrowers shall also deposit with Lock Box Account Bank within ten (10) Business Days of the written demand by Lender, to be added to and included within such reserve, a sum of money which Lender reasonably estimates, together with such monthly deposits, will be sufficient to make the payment of each such charge at least ten (10) Business Days prior to the date initially due. The Borrowers shall provide Lender with bills and all other documents necessary for the payment of the foregoing charges at least thirty (30) days prior to the date on which each payment shall first become subject to penalty or interest if not paid. So 76 long as (i) no Event of Default has occurred and is continuing, (ii) the Borrowers have provided Lender with the foregoing bills and other documents in a timely manner, and (iii) sufficient funds are held by Lender for the payment of the Impositions and insurance premiums relating to the Property, as applicable, Lender shall pay said items or disburse to the Borrowers from such Reserve an amount sufficient to pay said items. Interest shall accrue in favor of the Borrowers on funds in the Impositions and Insurance Reserve. In addition to (and not in lieu of) the aforementioned reserves, at Closing, the Borrowers shall deposit with Lock Box Bank the Supplemental Insurance Reserve Payment to be held in the Impositions and Insurance Reserve. Lender shall be under no obligation to cause any portion of the Supplemental Insurance Reserve Payment to be released to the Borrowers for the payment of any Impositions. Notwithstanding the foregoing to the contrary, provided no Event of Default has occurred and is then continuing, Lender shall cause the remainder, if any, of the Supplemental Insurance Reserve Payment to be disbursed to the Borrowers within five (5) Business Days of the delivery by the Borrowers to Lender of each of the Insurance Policies required pursuant to the terms of Section 5.4 hereof providing coverage for a period of one (1) year, together with evidence of the payment in full of the annual premiums payable for such Insurance Policies. SECTION 6.4 FF&E RESERVE. On or prior to the Closing Date, Lender or Servicer on behalf of Lender shall establish and maintain with the Lock Box Bank an account, for the purpose of creating a reserve for replacements of the furniture, fixtures and equipment at or in, or used in connection with, the Property (the "REPLACEMENTS") in accordance with the applicable CapEx/FF&E Budget approved by Lender (said funds, together with any interest thereon and additions thereto, the "FF&E RESERVE") which account shall be an Eligible Account entitled "FF&E Reserve Account for the benefit of Merrill Lynch Mortgage Lending, Inc., as secured party" and shall be under the sole dominion and control of Lender, subject to the terms of the Cash Management Agreement. Pursuant to the Cash Management Agreement, the Borrowers shall deposit with Lock Box Account Bank monthly, on each Payment Date commencing with the Payment Date in December 2002, an amount equal to 4.0% of the Operating Revenues generated from the Properties for the prior calendar month (such amount, the "MONTHLY FF&E PAYMENT"). Funds held in the FF&E Reserve may be withdrawn by the Borrowers, subject in all instances to the terms of the Cash Management Agreement, only in accordance with the approved CapEx/FF&E Budget, and no funds held in the FF&E Reserve shall be used in connection with the Required Capital Improvements. Upon and at all times after the occurrence and during the continuance of an Event of Default, no draws will be permitted from the FF&E Reserve other than for normal repairs, replacements, maintenance expenses, and otherwise in accordance with the terms of the Management Agreement, subject, in each instance, to Manager's compliance with the FF&E reporting requirements set forth in Section 5.1(A)(v)(d). SECTION 6.5 CAPITAL IMPROVEMENT RESERVE; REQUIRED CAPITAL IMPROVEMENTS. At Closing, the Borrowers shall reserve from the proceeds of the Loan and shall deposit with Lock Box Account Bank $6,953,315.50 (said funds, together with any interest thereon, the "CAPITAL IMPROVEMENT RESERVE"), which funds shall be made available to the Borrowers solely for payment of certain Capital Improvements required to be made to the Properties and designated as "Required Capital Improvements" on the Capital Improvement Plan attached hereto as EXHIBIT A (the "REQUIRED CAPITAL IMPROVEMENTS") and shall not be used by the Borrowers for purposes for which any other Reserve is established or for any other purpose other than completion of the Required Capital Improvements. The Borrowers shall promptly commence and diligently 77 prosecute to completion, subject to Force Majeure, the Required Capital Improvements within the time periods for each Required Capital Improvement set forth on EXHIBIT A. Funds held in the Capital Improvement Reserve shall be disbursed in accordance with Section 6.7. Subject to the foregoing conditions, the Borrowers shall be entitled to draw any remaining balance in the Capital Improvement Reserve when all Required Capital Improvements are complete, and paid for, in accordance with the terms hereof. Section 6.6 HAZARDOUS MATERIALS REMEDIATION RESERVE. At Closing, the Borrowers shall reserve from the proceeds of the Loan and shall deposit with Lock Box Account Bank, an amount equal to $1,039,688.00 (said funds, together with any interest thereon and additions thereto, the "HAZARDOUS MATERIALS REMEDIATION RESERVE") for certain work related to Hazardous Materials on the Properties as indicated in the Environmental Reports for the Properties prepared and delivered prior to the Closing and as such work is more particularly described on SCHEDULE 6.6 (the "ENVIRONMENTAL WORK"). Prior to the earlier of (x) the date required by any applicable Governmental Authority or (y) nine (9) months after the Closing, the Borrowers shall, subject to Force Majeure, complete such Environmental Work and shall provide to Lender such closure reports, no-further-action letters, or other evidence of compliance with law as Lender may reasonably require. The funds contained in the Hazardous Materials Remediation Reserve shall be utilized by the Borrowers solely for performance of the Environmental Work in accordance with the Environmental Reports, and shall not be used by the Borrowers for purposes for which any other Reserve is established. Subject to the Borrowers' satisfaction of the applicable conditions of Section 6.7, the Borrowers shall be entitled to draw upon the Hazardous Materials Remediation Reserve to pay for costs that have been incurred by the Borrowers for such Environmental Work, provided that the Borrowers deliver to Lender such evidence as may be reasonably satisfactory to Lender that, after payment of such draw, the funds remaining in the Hazardous Materials Remediation Reserve shall be sufficient to pay for the remainder of such Environmental Work. Subject to the foregoing conditions, the Borrowers shall be entitled to draw any remaining balance in the Hazardous Materials Remediation Reserve when all such Environmental Work is complete, and is paid for, in accordance with the terms hereof. SECTION 6.7 CONDITIONS TO DISBURSEMENTS FROM HAZARDOUS MATERIALS REMEDIATION RESERVE AND CAPITAL IMPROVEMENT RESERVE; PERFORMANCE OF WORK. (A) DISBURSEMENTS FROM THE HAZARDOUS MATERIALS REMEDIATION RESERVE AND CAPITAL IMPROVEMENT RESERVE. Upon the Borrowers' written request for disbursement, Lender shall authorize Lock Box Account Bank to disburse funds to or for the account of the Borrowers (x) from the Hazardous Materials Remediation Reserve, to pay to, or pay on behalf of, the Borrowers for the amount of the Borrowers' actual bona fide out-of-pocket expenditures or costs incurred for Environmental Work (the "APPROVED ENVIRONMENTAL EXPENDITURES", and (y) from the Capital Improvement Reserve, to pay to, or pay on behalf of, the Borrowers for the amount of the Borrowers' actual bona fide out-of-pocket expenditures or costs incurred for Required Capital Improvements ("APPROVED CAPITAL IMPROVEMENT EXPENDITURES"; and together with the Approved Environmental Expenditures, collectively, "APPROVED EXPENDITURES"; and the related Environmental Work or Required Capital Improvements to which any such request for disbursement relates shall be referred to as the "WORK"), upon satisfaction of each of the 78 conditions listed on SCHEDULE 6.7 and each of the conditions set forth below in Lender's reasonable discretion: (i) Except as provided in this Section 6.7, each request for disbursement from the Hazardous Materials Remediation Reserve or the Capital Improvement Reserve (such Reserves, the "WORK RESERVES") shall be made for completion of the Approved Expenditures for which disbursement is requested. (ii) A request for disbursement from the Work Reserves may be made after completion of a portion of the work under such contract, provided (1) all other conditions in this Loan Agreement for disbursement have been satisfied, (2) funds remaining in the Hazardous Materials Remediation Reserve are, in Lender's reasonable judgment, sufficient to complete the Environmental Work when required and/or funds remaining in the Capital Improvement Reserve are, in Lender's reasonable judgment, sufficient to complete such item of Required Capital Improvements and any other Required Capital Improvements remaining to be performed, as the case may be, and (3) if reasonably required by Lender, each contractor or subcontractor receiving payments in excess of $100,000 under such contract shall provide a waiver of lien with respect to amounts which have been paid to that contractor or subcontractor. (iii) To the extent the contract with the relevant contractor or supplier provides for a retainage, each disbursement from a Work Reserve, except for a final disbursement, shall be in the amount of actual costs incurred less the percentage of such costs that the contract with the relevant contractor or supplier specifies to be retained and advanced as part of the final disbursement. No funds will be advanced for materials stored at any Property unless such materials are properly stored and secured at the applicable Property in accordance with the Borrowers' customary procedures and sound construction practices as reasonably determined by Lender. No funds will be advanced for materials stored at any location other than at the Properties unless Lender determines in its reasonable discretion that Lender has a perfected first priority security interest in any such materials. (iv) The amount of all invoices in connection with the Work with respect to which a disbursement is requested and which has been approved by Lender shall be disbursed by Lock Box Account Bank as directed by the Borrowers (in which event, the Borrowers covenant and agree to promptly pay such invoices) or, if an Event of Default has occurred and is continuing, at Lender's option and in Lender's sole and absolute discretion, directly to the contractor, supplier, materialman, mechanic or subcontractor indicated on said invoices unless already paid by the Borrowers and Lender has received satisfactory evidence of such payment in which case Lender shall reimburse the Borrowers. If the Borrowers request that any amounts be disbursed directly to the Borrowers pursuant to the foregoing sentence, the Borrowers shall be required to deliver evidence reasonably acceptable to Lender of payment of all invoices for which disbursements were previously made to the Borrowers as a condition to such requested disbursement. (v) No more than two (2) disbursements will be made by Lender from the Hazardous Materials Remediation Reserve or the Capital Improvement Reserve in any calendar month, and, if made in accordance herewith or otherwise approved by Lender, requested disbursements will be made within five (5) Business Days after the request therefor. Lender 79 shall not be required to make any disbursement from a Work Reserve with respect to the Property unless such requested disbursement is in an amount equal to or greater than $25,000 (other than the final disbursement). (vi) Lender reserves the right, at its option and as a condition to any disbursement from a Work Reserve, to approve (which shall not be unreasonably withheld, delayed or conditioned) (i) all drawings and plans and specifications, if any, for any Work which require aggregate payments in amounts exceeding the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000, and (ii) all contracts and work orders with materialmen, mechanics, suppliers, subcontractors, contractors and other parties providing labor or materials in connection with any Work which require aggregate payments in amounts exceeding the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000. Upon Lender's reasonable request, the Borrowers shall assign (to the extent assignable) any drawings, plans and specifications, contracts or subcontracts to Lender. Drawings, plans and specifications, contracts and work orders approved by Lender shall not be changed in any material respect without Lender's prior written consent, which shall not be unreasonably withheld, delayed or conditioned. (vii) The Borrowers shall have delivered a certificate to Lender from an Architect certifying that the Work has been completed in a good and workmanlike manner in accordance with all applicable laws for any item in excess of the greater of (x) five percent (5%) of the Aggregate Allocate Loan Amount with respect to the applicable Property or (y) $250,000. Lender may retain its own architect or engineer ("LENDER'S CONSULTANT") to review any plans and specifications for any items in excess of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000, and to periodically inspect any Work at the Borrowers' sole cost and expense. (viii) The Borrowers shall have delivered to Lender a certificate of the Borrowers certifying as to the actual costs which were incurred by the Borrowers to complete such Work, which costs shall not materially exceed the amount budgeted for such Work under the Capital Improvement Plan then in effect unless approved by Lender, which shall not be unreasonably withheld, delayed or conditioned (together with supporting documentation reasonably acceptable to Lender). (ix) The Borrowers shall have delivered to Lender all necessary material certificates, authorizations, permits and licenses which are required to permit the construction and completion of the Work, as issued by the appropriate Governmental Authority. The Borrowers, to the full extent permitted by applicable law, hereby assigns to Lender as additional security for the payment of the Obligations and the observance and performance by the Borrowers of the terms, covenants and provisions of the Loan Documents all right, title and interest which the Borrowers may now have or may hereafter acquire in and to such certificates, authorizations, permits and licenses. (x) Lender may require an inspection of the Property prior to making a monthly disbursement from the applicable Work Reserve in order to verify completion of the Work for which disbursement is sought in excess of the greater of (x) five percent (5%) of the 80 Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000. Lender may require that such inspection be conducted by Lender's Consultant and/or may require a copy of a certificate of completion by an independent qualified architect or engineer acceptable to Lender prior to the disbursement of any amounts from the applicable Work Reserve. The Borrowers shall pay the reasonable out-of-pocket expense of such inspections as reasonably required hereunder, whether such inspections are conducted by Lender, Servicer, Lender's Consultant or by an independent qualified professional. (B) PERFORMANCE OF WORK. (i) The Borrowers shall complete all Work in a good and workmanlike manner as soon as practicable following the commencement thereof substantially in accordance with the applicable budget approved by Lender in accordance with the terms of this Loan Agreement. The insufficiency of the balance in the applicable Work Reserve shall not relieve the Borrowers from their obligations to perform and complete the related Work as herein provided or to fulfill all other preservation and maintenance covenants in the Loan Documents. (ii) If Lender determines in its reasonable discretion that any Work is not being performed in a workmanlike or timely manner or that any Work has not been completed in a workmanlike manner, Lender shall have the option to withhold disbursement for such unsatisfactory work and so notify the Borrowers with reasonable detail regarding the basis for Lender's dissatisfaction and, after the expiration of forty-five (45) days from the giving of such notice by Lender to the Borrowers of such unsatisfactory work without the cure thereof (or, if such unsatisfactory work is susceptible of a cure but cannot reasonably be cured within said forty-five (45) day period and provided that the Borrowers shall have commenced to cure such unsatisfactory work within said forty-five (45) day period and thereafter diligently and expeditiously proceeds to cure the same, after the expiration of such longer period as is reasonably necessary for the Borrowers in the exercise of due diligence to cure such unsatisfactory work, up to a maximum of an additional sixty (60) days, subject to Force Majeure, without the cure thereof). Lender may proceed under existing contracts or contract with third parties to complete such Work, as the case may be, and apply amounts contained in the applicable Work Reserve toward the labor and materials necessary to complete the same, without providing any additional prior notice to the Borrowers, and exercise any and all other remedies available to Lender upon and during the continuance of an Event of Default hereunder. (iii) In order to facilitate Lender's completion or making of any Work pursuant to Section 6.7(B)(ii) above, the Borrowers grant Lender the right to enter onto each Property during normal business hours after the expiration of the notice specified above and perform, subject to the rights of tenants, any and all work and labor necessary to complete the applicable Work and/or employ watchmen to protect the Property from damage. All sums so expended by Lender shall be deemed to have been advanced under the Loan to the Borrowers and secured by the applicable Deed of Trust. For this purpose, the Borrowers constitute and appoint Lender their true and lawful attorney-in-fact with full power of substitution to complete or undertake the applicable Work in the name of the Borrowers pursuant to Section 6.7(B)(ii) above. Such power of attorney shall be deemed to be a power coupled with an interest and cannot be revoked. Upon the occurrence and during the continuance of an Event of Default, the Borrowers empower said attorney-in-fact as follows: (i) to use any funds in the applicable Work Reserve for the purpose 81 of making or completing any Work; (ii) to make such additions, changes and corrections to any Work as shall be reasonably necessary or desirable to complete the same; (iii) to employ such contractors, subcontractors, agents, architects and inspectors as shall be required for such purposes; (iv) to pay, settle or compromise all existing bills and claims which are or may become Liens against any Property, or as may be necessary or desirable for the completion of any Work, or for clearance of title; (v) to execute all applications and certificates in the name of the Borrowers which may be required by any of the contract documents; (vi) in its reasonable discretion, to prosecute and defend all actions or proceedings in connection with any Property or the rehabilitation and repair of such Property; and (vii) to do any and every act which the Borrowers might do in their own behalf to fulfill the terms of this Loan Agreement. (iv) Nothing in this Section shall: (i) make Lender responsible for making or completing any Work; (ii) require Lender to expend funds in addition to the amounts on deposit in the applicable Work Reserve to make or complete any Work; (iii) obligate Lender to proceed with any Work; or (iv) obligate Lender to demand from the Borrowers additional sums to make or complete any Work. (v) The Borrowers shall permit Lender and Lender's agents and representatives (including, without limitation, Lender's engineer, architect or inspector) or third parties performing any Work pursuant to this Section 6.7 to enter onto any Property during normal business hours upon reasonable notice (subject to the rights of tenants under their Leases) to inspect the progress of any Work and all materials being used in connection therewith, to examine all plans and shop drawings relating thereto which are or may be kept at any Property, and to complete any Work made pursuant to Section 6.7(B)(ii). The Borrowers shall use commercially reasonable efforts to cause all contractors and subcontractors to cooperate with Lender or Lender's representatives or such other persons described above in connections with inspections described in this Section 6.7(B) or the completion of the Work pursuant to this Section 6.7(B). (vi) All Work and all materials, equipment, fixtures and any other item comprising a part thereof shall be constructed, installed or completed, as applicable, free and clear of all mechanic's, materialman's or other liens (except for the Permitted Encumbrances). (vii) All Work shall comply with all applicable legal requirements of all Governmental Authorities having jurisdiction over the Properties and applicable insurance requirements, including, without limitation, applicable building codes, special use permits, environmental regulations and requirements of insurance underwriters. (C) INDEMNIFICATION. The Borrowers shall indemnify Lender and hold Lender harmless from and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations, out-of-pocket costs and expenses (including, without limitation, litigation costs and reasonable attorneys fees and expenses) arising from or in any way connected with the performance of the Work, except to the extent caused by the bad faith, willful misconduct or gross negligence of Lender. The Borrowers shall assign to Lender all rights and claims the Borrowers may have against all Persons supplying labor or materials in connection with the Work; provided, however, that Lender may not pursue any such right or claim or pursue any 82 other action with respect to such rights and claims unless an Event of Default has occurred and remains uncured. SECTION 6.8 CASH TRAP RESERVE. (i) If, at any time prior to the repayment of the Obligations in full, a Cash Trap Event shall occur, then, from and after the occurrence of such Cash Trap Event and for so long as such Cash Trap Event continues to exist, all Excess Cash Flow (except as otherwise expressly provided below) shall be deposited with Lender (or its Servicer or agent) and held in the Lock Box Account in accordance with the terms of the Cash Management Agreement (said funds, together with any interest thereon, the "CASH TRAP RESERVE"). A "CASH TRAP EVENT" shall occur as of any Calculation Date when (x) the Debt Yield is less than the Minimum Debt Yield or (y) the Debt Service Coverage Ratio is less than the Minimum DSCR, in each case for the trailing twelve (12) month period ending on such Calculation Date and shall continue to exist until such time as the Minimum Debt Yield and the Minimum DSCR tests have been satisfied for three (3) consecutive Calculation Dates (on a trailing twelve (12) month basis) following such Calculation Date. Notwithstanding that the Debt Yield is less than the Minimum Debt Yield or the Debt Service Coverage Ratio is less than the Minimum DSCR as of any Calculation Date, no Cash Trap Event shall be deemed to have occurred as a result of such event if the Borrowers make a principal prepayment of the Aggregate Outstanding Principal Balance (which prepayment amount shall be disbursed in accordance with the term of the Cash Management Agreement) in such amounts, and applied, on the next Payment Date), within three (3) Business Days after the date of delivery of the financial statements disclosing the existence of such Cash Trap Event (or the date on which such financial statements are required to be delivered pursuant to Section 5.1), in an amount equal to the greater of (x) one percent (1%) of the Aggregate Outstanding Principal Balance, or (y) 120% of the amount, as determined by Lender in its reasonable discretion, sufficient to cause the Debt Yield to meet or exceed the Minimum Debt Yield and the Debt Service Coverage Ratio to meet or exceed the Minimum DSCR if such calculations were recalculated as provided above assuming that such amount was applied to reduce the Aggregate Outstanding Principal Balance as of the first day of the relevant measuring period. During the continuance of a Cash Trap Event, any funds on deposit in the Cash Trap Reserve may, at the Borrowers' election, be retained in the Cash Trap Reserve or may be applied to (i) prepayment of the Aggregate Outstanding Principal Balance as provided above, (ii) Capital Expenditures reasonably approved by Lender, or (iii) scheduled payments (not to exceed $3,000,000 in the aggregate) of principal and interest under the Loan and the Mezzanine Loan (to be applied in accordance with the terms of the Cash Management Agreement). Any funds of deposit in the Cash Trap Reserve shall continue to be held as additional Collateral in accordance with this Section 6.8 until the earlier of (a) the date that such funds are applied or disbursed pursuant to the foregoing sentence and (b) the date the Minimum Debt Yield and the Minimum DSCR tests have each been satisfied for three (3) consecutive months (as determined above), at which time, provided no Event of Default exists, such funds shall be released to the Borrowers. The existence of a Cash Trap Event shall be determined by Lender in its reasonable good faith determination. If Lender determines that a Cash Trap Event has occurred, Lender shall send the Borrowers written notice thereof. Notwithstanding any provision herein to the contrary, if an Event of Default has occurred and is continuing, all funds on deposit in the Cash Trap Reserve and any subsequent Excess Cash Flow, while such Event of Default is continuing, may be applied by Lender to payment of the Loan (including payment of any Prepayment Consideration) or other Obligations (or to the obligations of the Mezzanine Borrowers to Mezzanine Lender) as Lender may elect. 83 ARTICLE VII LOCK BOX; CLEARING ACCOUNT; CENTRAL ACCOUNT; CASH MANAGEMENT SECTION 7.1 ESTABLISHMENT OF DEPOSIT ACCOUNT AND LOCK BOX ACCOUNT. (A) (i) DEPOSIT ACCOUNT. On or before the Closing Date, one or more deposit accounts shall be established at the Borrowers' sole cost and expense in the name of Lender, as secured party hereunder (said accounts, and any accounts replacing same in accordance with this Loan Agreement and the Deposit Account Agreement, collectively, the "DEPOSIT ACCOUNT") with one or more financial institutions reasonably approved by Lender (collectively, the "DEPOSIT BANK"), pursuant to one or more agreements (collectively, the "DEPOSIT ACCOUNT AGREEMENT") substantially similar to Lender's form or otherwise in form and substance reasonably acceptable to Lender, executed and delivered by the Borrowers and the Deposit Bank. The Deposit Account shall be under the sole dominion and control of Lender (which dominion and control may be exercised by Servicer). Among other things, the Deposit Account Agreement shall provide that the Borrowers shall have no access to or control over the Deposit Account, that all available funds on deposit in the Deposit Account shall be transferred by wire transfer (or transfer via the ACH System) on each Business Day by the Deposit Bank into the Lock Box Account, for application in accordance with the Cash Management Agreement. The Deposit Bank and the Lock Box Account Bank shall be directed to deliver to the Borrowers copies of bank statements and other information made available by the Deposit Bank and the Lock Box Account Bank concerning the Deposit Account and the Lock Box Account. (ii) Upon establishing the Deposit Account, (1) the Borrowers shall cause any and all Operating Revenues, including distributions or other payments made directly or indirectly to the Borrowers, Manager, or any of their respective Affiliates, from any Beverage Company, but excluding any award made to the Borrowers with respect to the Pre-Closing Condemnation, to be deposited promptly into the Deposit Account and in no event later than two (2) Business Days after the same are paid to or for the benefit of the Borrowers, and (2) the Borrowers shall each obtain an agreement (each, a "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER") from each of the Persons paying or disbursing credit card receivables (the "CREDIT CARD COMPANIES"), substantially similar to Lender's form or otherwise in form and substance reasonably acceptable to Lender, pursuant to which the Credit Card Companies agree to pay all credit card receivables into the Lock Box Account, and acknowledge and agree that Lender shall have a first priority perfected security interest in such credit card receivables. To the extent that the Borrowers or any Person on the Borrowers' behalf holds any Receipts, whether in accordance with this Loan Agreement or otherwise, the Borrowers shall be deemed to hold the same in trust for Lender for the protection of the interests of Lender hereunder and under the Loan Documents. The Borrowers represent and warrant that, as of the date hereof, the only Credit Card Companies paying or disbursing credit card receivables with respect to the Property are Chase Merchant Services, American Express, Discover Financial Service, Diners Club, JCB (Japanese Credit Bureau), and, if any of the Borrowers shall hereafter enter into an agreement with any other Credit Card Company pursuant to which such Credit Card Company shall pay credit card receivables with respect to the Properties, such Borrower shall promptly obtain a Credit Card Receivables Payment Direction Letter in form and substance reasonably acceptable to Lender from such Credit Card Company. 84 (iii) The Borrowers shall pay all reasonable out-of-pocket costs and expenses incurred by Lender in connection with the transactions and other matters contemplated by this Section 7.1, including but not limited to, Lender's reasonable attorneys fees and expenses, and all reasonable fees and expenses of the Deposit Bank and the Lock Box Account Bank, including without limitation their reasonable attorneys fees and expenses. (B) LOCK BOX ACCOUNT. On or before the Closing Date, pursuant to the terms of the Cash Management Agreement, an Eligible Account shall be established in the name of Lender, as secured party hereunder, to serve as the "Lock Box Account" (said account, and any account replacing the same in accordance with this Loan Agreement and the Cash Management Agreement, the "LOCK BOX ACCOUNT"; and the depositary institution in which the Lock Box Account is maintained, the "LOCK BOX ACCOUNT BANK"). The Lock Box Account shall be under the sole dominion and control of Lender (which dominion and control may be exercised by Servicer); and except as expressly provided hereunder and/or in the Cash Management Agreement, the Borrowers shall not have the right to control or direct the investment or payment of funds therein during the continuance of an Event of Default. Lender may elect to change any financial institution in which the Lock Box Account shall be maintained if such institution is no longer an Eligible Bank, upon not less than five (5) Business Days' notice to the Borrower. The Lock Box Account shall be deemed to contain such sub-accounts as Lender may designate ("SUB-ACCOUNTS"), which may be maintained as separate ledger accounts and need not be separate Eligible Accounts. The Sub-Accounts shall include the following as more particularly described in the Cash Management Agreement. (i) "DEBT SERVICE SUB-ACCOUNT" shall mean the Sub-Account of the Lock Box Account established for the purposes of reserving for payments of principal and interest and other amounts due under the Loan Documents (but without duplication of amounts covered under item (ii) below); and (ii) "RESERVE SUB-ACCOUNTS" shall mean the Sub-Accounts of the Lock Box Account established for the purpose of holding funds in the Reserves including: (a) the "Imposition and Insurance Reserve Sub-Account"; (b) the "Hazardous Materials Remediation Reserve Sub-Account"; (c) the "Extraordinary Receipts Sub-Account" (d) the "Mezzanine Loan Debt Service Sub-Account"; and (e) the "Cash Trap Reserve Sub-Account". SECTION 7.2 APPLICATION OF FUNDS IN LOCK BOX ACCOUNT. Funds in the Lock Box Account shall be allocated to the Sub-Accounts or the other Accounts (or paid, as the case may be) in accordance with the Cash Management Agreement. SECTION 7.3 APPLICATION OF FUNDS AFTER EVENT OF DEFAULT. If any Event of Default shall occur and be continuing, then notwithstanding anything to the contrary in this Section or elsewhere, Lender shall have all rights and remedies available under applicable law and under the Loan Documents. Without limitation of the foregoing, for so long as an Event of Default exists, Lender may apply any and all funds in the Deposit Account, the FF&E Reserve, the Lock Box Account, the Hazardous Materials Remediation Reserve Sub-Account, the Extraordinary Receipts Sub-Account, the Cash Trap Reserve Sub-Account and/or any Sub-Accounts against all or any portion of any of the Obligations, in any order. 85 ARTICLE VIII DEFAULT, RIGHTS AND REMEDIES SECTION 8.1 EVENT OF DEFAULT. "EVENT OF DEFAULT" shall mean the occurrence or existence of any one or more of the following: (A) SCHEDULED PAYMENTS. Failure of the Borrowers to pay any scheduled payment amount when the same is due under this Loan Agreement, the Note, or any other Loan Documents (whether such amount is interest, principal, Reserves, or otherwise), or to pay for any Insurance Policies required pursuant to Section 5.4 hereof; or (B) OTHER PAYMENTS. Failure of the Borrowers to pay any amount from time to time owing under this Loan Agreement, the Note, or any other Loan Documents (other than amounts subject to the preceding paragraph) within ten (10) days after written notice to the Borrowers; or (C) BREACH OF REPORTING PROVISIONS. Failure of any Borrower Party to perform or comply with any term or condition contained in Section 5.1 which continues for a period of ten (10) days after written notice to the Borrowers (except that no notice or grace period shall be granted for any breach under Section 5.1(H)); or (D) BREACH OF PROVISIONS REGARDING INSURANCE, TRANSFERS, LIENS, SINGLE PURPOSE. Breach or default under any of Section 5.4, 5.12, 5.17, 5.18, 5.19, 5.20, Article IX, or Section 11.1 (provided that in the case of an involuntary Lien under Section 5.18 or 11.1, the same shall not constitute an Event of Default if within thirty (30) days after the filing thereof, the Borrowers shall either (i) cause the same to be removed of record, or (ii) provide to Lender security for the same in an amount and pursuant to terms both satisfactory to Lender in Lender's sole discretion; provided however that if (x) the default under Section 5.18 or 11.1 is capable of cure but with diligence cannot be cured within such period of thirty (30) days, (y) the Borrowers (or the applicable Borrower Party) has commenced the cure within such thirty (30) day period and has pursued such cure diligently, and (z) each Borrower delivers to Lender promptly following written demand (which demand may be made from time to time by Lender) evidence reasonably satisfactory to Lender of the foregoing, then such period shall be extended for so long as is reasonably necessary for the Borrowers in the exercise of due diligence to cure such default, but in no event beyond ninety (90) days after the original notice of default); or (E) BREACH OF WARRANTY. Any representation, warranty, certification or other statement made by any Borrower, Guarantor or Manager thereof in any Loan Document or in any statement or certificate at any time given in writing pursuant to or in connection with any Loan Document is false in any material respect as of the date made; or (F) OTHER DEFAULTS UNDER LOAN DOCUMENTS. A default shall occur in the performance of or compliance with any term contained in this Loan Agreement or the other Loan Documents and such default is not fully cured within thirty (30) days after receipt by the Borrowers of written notice from Lender of such default (other than occurrences described in other provisions of this Section 8.1 for which a different grace or cure period is specified or which constitute immediate Events of Default); provided however that if (i) the default is capable 86 of cure but with diligence cannot be cured within such period of thirty (30) days, (ii) the Borrowers (or the applicable Borrower Party) has commenced the cure within such thirty (30) day period and has pursued such cure diligently, and (iii) each Borrower delivers to Lender promptly following written demand (which demand may be made from time to time by Lender) evidence reasonably satisfactory to Lender of the foregoing, then such period shall be extended for so long as is reasonably necessary for the Borrowers in the exercise of due diligence to cure such default, but in no event beyond one hundred and twenty (120) days after the original notice of default; or (G) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) A court enters a decree or order for relief with respect to any Borrower Party, in an Involuntary Borrower Bankruptcy, which decree or order is not stayed or other similar relief is not granted under any applicable federal or state law unless dismissed within ninety (90) days; (ii) the occurrence and continuance of any of the following events for ninety (90) days unless dismissed or discharged within such time: (x) an Involuntary Borrower Bankruptcy is commenced, (y) a decree or order of a court for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over any Borrower Party or over all or a substantial part of its property, is entered, or (z) an interim receiver, trustee or other custodian is appointed without the consent of any Borrower Party, for all or a substantial part of the property of such Person; or (H) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) An order for relief is entered with respect to any Borrower Party, or any Borrower Party commences a voluntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case or to the conversion of an involuntary case to a voluntary case under any such law or consents to the appointment of or taking possession by a receiver, trustee or other custodian for any Borrower Party or for all or a substantial part of the property of any Borrower Party; (ii) any Borrower Party makes any assignment for the benefit of creditors; or (iii) the Board of Directors or other governing body of any Borrower Party adopts any resolution or otherwise authorizes action to approve any of the actions referred to in this subsection 8.1(H); or (I) BANKRUPTCY INVOLVING OWNERSHIP INTERESTS OR PROPERTIES. Other than as described in either of Subsections 8.1(G) or 8.1(H), all or any portion of the Collateral becomes property of the estate or subject to the automatic stay in any case or proceeding under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect (provided that if the same occurs in the context of an involuntary proceeding, it shall not constitute an Event of Default if it is dismissed or discharged within ninety (90) days following its occurrence); or (J) SOLVENCY. Any Borrower Party ceases to be solvent or admits in writing its present or prospective inability to pay its debts as they become due; or (K) JUDGMENT AND ATTACHMENTS. Any lien, money judgment, writ or warrant of attachment, or similar process is entered or filed against any Borrower Party or any of its assets,, which claim is not fully covered by insurance (other than with respect to the amount of commercially reasonable deductibles permitted hereunder), would have a Material Adverse 87 Effect and remains undischarged, unvacated, unbonded or unstayed for a period of forty-five (45) days; or (L) INJUNCTION. The Borrowers are enjoined, restrained or in any way prevented by the order of any court or any administrative or regulatory agency from conducting all or any material part of their business and such order continues for more than thirty (30) days; or (M) INVALIDITY OF LOAN DOCUMENTS. This Loan Agreement, any Deed of Trust or any of the Loan Documents for any reason ceases to be in full force and effect or ceases to be a legally valid, binding and enforceable obligation of the Borrowers or any Lien securing the Obligations shall, in whole or in part, cease to be a perfected first priority Lien, subject to the Permitted Encumbrances (except in any of the foregoing cases in accordance with the terms hereof or under any other Loan Document) and the Borrowers do not take all actions requested by Lender to correct such defect within ten (10) days after the written request by Lender to take such action, or any Person under the control of the Borrowers or Guarantor who is a party thereto, other than Lender, denies that it has any further liability (as distinguished from denial of the existence of a Default or Event of Default) under any Loan Documents to which it is party, or gives notice to such effect; or (N) CROSS-DEFAULT WITH OTHER LOAN DOCUMENTS. A default beyond any applicable grace periods shall occur under any of the other Loan Documents; or (O) DEFAULT UNDER MANAGEMENT AGREEMENTS OR FRANCHISE AGREEMENTS. (i) An Uncured Franchise Default occurs; (ii) or any breach or default shall occur in the material obligations of the Borrowers under any of the Management Agreements, and such breach or default either is of such a nature or continues for such a period of time beyond applicable notice and cure periods, if any, that Manager shall have the right to exercise material remedies as a consequence thereof; or (P) GROUND LEASE/MORTGAGED CONDOMINIUM PROPERTY. Any default by any of the Borrowers beyond any applicable grace period shall occur under any Ground Lease or any Mortgaged Condominium Property Document or any actual or attempted surrender, termination, modification or amendment of any Ground Lease or any Mortgaged Condominium Property Document without Lender's prior written consent. If more than one of the foregoing paragraphs shall describe the same condition or event, then Lender shall have the right to select which paragraph or paragraphs shall apply. In any such case, Lender shall have the right (but not the obligation) to designate the paragraph or paragraphs which provide for non-written notice (or for no notice) or for a shorter time to cure (or for no time to cure). SECTION 8.2 ACCELERATION AND REMEDIES (A) Upon the occurrence and during the continuance of any Event of Default described in any of Subsections 8.1(G), 8.1(H), or 8.1(I), the unpaid principal amount of and accrued interest and fees on the Loan and all other Obligations shall automatically become immediately due and payable, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other requirements of any kind, all of which are hereby 88 expressly waived by the Borrowers. Upon and at any time after the occurrence of any other Event of Default, at the option of Lender, which may be exercised without notice or demand to anyone, all or any portion of the Loan and other Obligations shall immediately become due and payable. (B) Upon the occurrence and during the continuance of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to Lender against the Borrowers under this Loan Agreement or any of the other Loan Documents, or at law or in equity, may be exercised by Lender at any time and from time to time, whether or not all or any of the Obligations shall be declared due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to the Properties. Any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in such order as Lender may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein or in the other Loan Documents. Without limiting the generality of the foregoing, if an Event of Default is continuing (i) to the fullest extent permitted by law, Lender shall not be subject to any "one action" or "election of remedies" law or rule, and (ii) all liens and other rights, remedies or privileges provided to Lender shall remain in full force and effect until Lender has exhausted all of its remedies against each Property and the Deeds of Trust have been foreclosed, sold and/or otherwise realized upon in satisfaction of the Obligations or the Obligations have been paid in full. (C) Lender shall have the right from time to time to partially foreclose the Deeds of Trust in any manner and for any amounts secured by the Deeds of Trust then due and payable as determined by Lender in its sole discretion including, without limitation, the following circumstances: (i) in the event the Borrowers default beyond any applicable grace period in the payment of one or more scheduled payments of principal and interest, Lender may foreclose the Deed of Trust to recover such delinquent payments, or (ii) in the event Lender elects to accelerate less than the entire outstanding principal balance of the Loan, Lender may foreclose the Deed of Trust or any of them to recover so much of the principal balance of the Loan as Lender may accelerate and such other sums secured by the Deed of Trust as Lender may elect. Notwithstanding one or more partial foreclosures, the Property shall remain subject to the Deed of Trust to secure payment of sums secured by the Deed of Trust and not previously recovered. (D) During the continuance of an Event of Default, Lender shall have the right from time to time to sever the Note and the other Loan Documents into one or more separate notes, mortgages and other security documents in such denominations as Lender shall determine in its sole discretion for purposes of evidencing and enforcing its rights and remedies provided hereunder. The Borrowers shall execute and deliver to Lender from time to time, within ten (10) days after the request of Lender, a severance agreement and such other documents as Lender shall reasonably request in order to effect the severance described in the preceding sentence, all in form and substance reasonably satisfactory to Lender. The Borrowers hereby absolutely and irrevocably appoint Lender as their true and lawful attorney, coupled with an interest, in their name and stead to make and execute all documents reasonably necessary to effect the aforesaid 89 severance if the Borrowers fail to do so within ten (10) days of Lender's written request, the Borrowers ratifying all that their said attorney shall do by virtue thereof. (E) Any amounts recovered from the Properties or any other collateral for the Loan after an Event of Default may be applied by Lender toward the payment of any interest and/or principal of the Loan and/or any other amounts due under the Loan Documents in such order, priority and proportions as Lender in its sole discretion shall determine. (F) The rights, powers and remedies of Lender under this Loan Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender may have against the Borrowers pursuant to this Loan Agreement or the other Loan Documents, or existing at law or in equity or otherwise. Lender's rights, powers and remedies may be pursued singly, concurrently or otherwise, at such time and in such order as Lender may determine in Lender's sole discretion. No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient. A waiver of one Default or Event of Default with respect to the Borrowers shall not be construed to be a waiver of any subsequent Default or Event of Default by the Borrowers or to impair any remedy, right or power consequent thereon. SECTION 8.3 PERFORMANCE BY LENDER. (A) Upon the occurrence and during the continuance of an Event of Default, if any of the Borrowers shall fail to perform, or cause to be performed, any material covenant, duty or agreement contained in any of the Loan Documents (subject to applicable notice and cure periods), Lender may perform or attempt to perform such covenant, duty or agreement on behalf of the Borrowers including making protective advances on behalf of any Borrower, or, in its sole discretion, causing the obligations of any of the Borrowers to be satisfied with the proceeds of any Reserve. In such event, the Borrowers shall, at the request of Lender, promptly pay to Lender, or reimburse, as applicable, any of the Reserves, any actual amount reasonably expended or disbursed by Lender in such performance or attempted performance, together with interest thereon at the Default Rate (including reimbursement of any applicable Reserves), from the date of such expenditure or disbursement, until paid. Any amounts advanced or expended by Lender to perform or attempt to perform any such matter shall be added to and included within the indebtedness evidenced by the applicable Note and shall be secured by all of the Collateral securing the applicable Loan. Notwithstanding the foregoing, it is expressly agreed that Lender shall not have any liability or responsibility for the performance of any obligation of the Borrowers under this Loan Agreement or any other Loan Document, and it is further expressly agreed that no such performance by Lender shall cure any Event of Default hereunder. (B) Lender may cease or suspend any and all performance required of Lender under the Loan Documents upon and at any time after the occurrence and during the continuance of any Event of Default. SECTION 8.4 EVIDENCE OF COMPLIANCE. Promptly following request by Lender, each Borrower shall provide such documents and instruments as shall be reasonably satisfactory to Lender to 90 evidence compliance with any material provision of the Loan Documents applicable to the Borrowers. ARTICLE IX SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS SECTION 9.1 APPLICABLE TO ALL PRIMARY BORROWER PARTIES. The Borrowers hereby represent, warrant and covenant as of the Closing Date and until such time as all Obligations are paid in full, that absent express advance written waiver from Lender, which may be withheld in Lender's sole discretion, that each Primary Borrower Party: (A) does not own and will not own any assets other than the Properties (including incidental personal property necessary for the operation thereof and proceeds therefrom) or direct or indirect ownership interests in the Borrowers, and such other wholly owned subsidiaries of the Primary Borrower Parties established solely for the purpose of holding liquor licenses with respect to one or more of the Properties or, with respect to each of the Primary Borrower Parties, such incidental assets as are necessary to enable it to discharge its obligations with respect to the Borrowers (the "OWNERSHIP INTERESTS"); (B) is not engaged and will not engage in any business, directly or indirectly, other than the ownership, management and operation of the Properties or the Ownership Interests; (C) will not enter into any contract or agreement with any partner, member, shareholder, trustee, beneficiary, principal or Affiliate of any Primary Borrower Party except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties other than such Affiliate (including the Management Agreements); (D) has not incurred any debt that remains outstanding as of Closing and will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than (i) the Obligations, (ii) Permitted Indebtedness, and (iii) the Mezzanine Loan; (E) has not made any loans or advances to any Person that remains outstanding as of Closing and will not make any loan or advances to any Person (including any of its Affiliates), and has not acquired and will not acquire obligations or securities of any of its Affiliates other than the other Borrower Parties; (F) is and reasonably expects to remain solvent and pay its own liabilities, indebtedness, and obligations of any kind from its own separate assets as the same shall become due other than the other Borrower Parties; (G) has done or caused to be done and will do all things necessary to preserve its existence, and will not, nor will any partner, member, shareholder, trustee, beneficiary, or principal amend, modify or otherwise change its partnership certificate, partnership agreement, articles of incorporation, by-laws, articles of organization, operating agreement, or other organizational documents in any manner with respect to the matters set forth in this Article IX; 91 (H) shall continuously maintain its existence and be qualified to do business in all states necessary to carry on its business, specifically including in the case of each Borrower, the state where its Property is located; (I) will conduct and operate its business as presently contemplated with respect to the ownership of its Property, or the ownership interests in the Borrowers, as applicable; (J) will maintain books and records and bank accounts (other than bank accounts established hereunder, or established by Manager with respect to the operations of the Properties pursuant to the Management Agreement) separate from those of its partners, members, shareholders, trustees, beneficiaries, principals, Affiliates, and any other Person and will maintain separate financial statements except that it may also be included in consolidated financial statements of its Affiliates; (K) will be, and at all times will hold itself out to the public as, a legal entity separate and distinct from any other Person (including any of its partners, members, shareholders, trustees, beneficiaries, principals and Affiliates, and any Affiliates of any of the same), and not as a department or division of any Person and will correct any known misunderstandings regarding its existence as a separate legal entity; (L) will pay the salaries of its own employees, if any; (M) will allocate fairly and reasonably any overhead for shared office space; (N) will use stationery, invoices and checks; (O) will file its own tax returns with respect to itself (or consolidated tax returns, if applicable) as may be required under applicable law; (P) reasonably expects to maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; (Q) will not seek, acquiesce in, or suffer or permit its liquidation, dissolution or winding up, in whole or in part; (R) will not enter into any transaction of merger or consolidation, or acquire by purchase or otherwise all or substantially all of the business or assets of, or any stock or beneficial ownership of, any Person; (S) will not commingle or permit to be commingled its funds or other assets with those of any other Person (other than, with respect to the Borrowers, each other Borrower, or as may be held by Manager, as agent, for each Borrower pursuant to the terms of the Management Agreement); (T) has and will maintain its assets in such a manner that it is not costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person; 92 (U) does not and will not hold itself out to be responsible for the debts or obligations (other than the Obligations) of any other Person; (V) has not guaranteed or otherwise become liable in connection with any obligation of any other Person that remains outstanding, and will not guarantee or otherwise become liable on or in connection with any obligation (other than the Obligations) of any other Person that remains outstanding; (W) except for funds deposited into the Accounts in accordance with the Loan Documents, shall not hold title to its assets other than in its name; and (X) shall comply with all of the assumptions, statements, certifications, representations, warranties and covenants regarding or made by it contained in or appended to the nonconsolidation opinion delivered pursuant hereto. SECTION 9.2 APPLICABLE TO BORROWERS, GENERAL PARTNER AND MEMBER. In addition to their respective obligations under Section 9.1, each Borrower, General Partner and Member (other than the sole member of a single member limited liability company) hereby represents, warrants and covenants as of the Closing Date and until such time as all Obligations are paid in full, that absent express advance written waiver from Lender, which may be withheld in Lender's sole discretion, it: (A) General Partner shall at all times act as the sole general partner of each Borrower that is a limited partnership, with all of the rights, powers, obligations and liabilities thereof under the limited partnership agreement of such Borrower and shall take any and all actions and do any and all things necessary or appropriate to the accomplishment of the same and will engage in no other business; (B) Member shall at all times act as the sole member of each Borrower that is a limited liability company with all of the rights, powers, obligations and liabilities thereof under the limited liability company operating agreement of such Borrower and shall take any and all actions and do any and all things necessary or appropriate to the accomplishment of the same and will engage in no other business; (C) The Borrowers that are limited liability companies shall not, without the prior written consent of Member (including the unanimous written consent of Member's board of directors including the Independent Directors or the unanimous written consent of each of the Borrowers' board of managers including the Independent Directors), and the Borrowers that are limited partnerships shall not, without the prior written consent of General Partner (including the unanimous written consent of General Partner's Independent Directors), institute proceedings for itself to be adjudicated bankrupt or insolvent; consent to the institution of bankruptcy or insolvency proceedings against itself; file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) for itself or a substantial part of its property; make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; 93 (D) The Borrowers that are corporations shall not, without the prior unanimous written consent of its board of directors, including its two Independent Directors (if required to have Independent Directors), institute proceedings for itself to be adjudicated bankrupt or insolvent; consent to the institution of bankruptcy or insolvency proceedings against it; file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) for itself or a substantial part of its property; make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; (E) Neither Member nor General Partner shall, without the unanimous vote of its board of directors including its Independent Directors, institute proceedings for itself or any Borrower, to be adjudicated bankrupt or insolvent; consent to the institution of a bankruptcy or insolvency proceeding against it or any Borrower; file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) for itself or any Borrower; or a substantial part of its or any Borrower's property; make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; (F) Except as otherwise permitted hereunder, General Partner shall not for itself or for any of the Borrowers (i) liquidate or dissolve, in whole or in part; (ii) consolidate, merge or enter into any form of consolidation with or into any other Person, nor convey, transfer or lease its or any Borrower's assets substantially as an entirety to any Person nor permit any Person to consolidate, merge or enter into any form of consolidation with or into itself or any Borrower, nor convey, transfer or lease its or any Borrower's assets substantially as an entirety to any Person; and (iii) amend any provisions of its or any Borrower's organizational documents containing provisions similar to those contained in this Article IX; and (G) Member, General Partner and each Borrower that is a corporation shall each promptly elect and at all times maintain at least two (2) Independent Directors on its board of directors, who shall be selected by Member, General Partner and such Borrower, as applicable. Each Borrower that is a single member limited liability company shall promptly appoint and at all times maintain at least two (2) Independent Directors on its board of managers, who shall be selected by such Borrower. ARTICLE X RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS SECTION 10.1 SECONDARY MARKET TRANSACTIONS GENERALLY. Lender shall have the right to engage in one or more Secondary Market Transactions with respect to the Loan, and to structure and restructure all or any part of the Loan, including without limitation in multiple tranches, as a wraparound loan, or for inclusion in a REMIC or other Securitization. Without limitation, Lender shall have the right, at Lender's sole cost (other than each Borrower's internal costs and expenses and the costs and expenses of the Borrowers' counsel), to cause the Note and any Deed of Trust to be split into a first and a second mortgage loan, or into one or more loans evidenced by multiple notes and secured by multiple deeds of trust and/or by ownership interests in any of 94 the Borrowers in whatever proportion Lender determines, and thereafter to engage in Secondary Market Transactions with respect to all or any part of the indebtedness and loan documentation. Each of the Borrower Parties acknowledge that it is the intention of the parties that all or a portion of the Loan will be securitized and that all or a portion of the Loan will be rated by one or more Rating Agencies. Each of the Borrower Parties further acknowledge that additional structural modifications may be required to satisfy issues raised by any Rating Agencies. As used herein, "SECONDARY MARKET TRANSACTION" means any of (i) the sale, assignment, or other transfer of all or any portion of the Obligations or the Loan Documents or any interest therein to one or more investors, (ii) the sale, assignment, or other transfer of one or more participation interests in the Obligations or Loan Documents to one or more investors, (iii) the transfer or deposit of all or any portion of the Obligations or Loan Documents to or with one or more trusts or other entities which may sell certificates or other instruments to investors evidencing an ownership interest in the assets of such trust or the right to receive income or proceeds therefrom or (iv) any other Securitization backed in whole or in part by the Loan or any interest therein. SECTION 10.2 COOPERATION; LIMITATIONS. The Borrower Parties shall use all reasonable efforts and cooperate reasonably and in good faith with Lender in effecting up to three (3) such restructuring or Secondary Market Transactions at Lender's sole cost (other than, with respect to the first successful Secondary Market Transaction only, each Borrower's internal costs and expenses and the costs and expenses of the Borrowers' counsel). Such cooperation shall include without limitation, executing and delivering such reasonable amendments to the Loan Documents and the organizational documents of each Borrower as Lender or any Interested Party (as defined below) may request, provided however that, no such amendment shall modify (i) the weighted average interest rate payable under the Note (or notes); (ii) the stated maturity date of the Note, (iii) the amortization of the principal amount of the Note, (iv) any other material economic terms of the Obligations, (v) the non-recourse provisions of the Loan or (vi) any provision, the effect of which would increase the Borrowers' obligations or decrease the Borrowers' rights under the Loan Documents except to a de minimis extent. The Borrower Parties shall not be required to provide additional collateral to effect any such restructuring or Secondary Market Transaction after the Closing Date. The Borrower Parties shall not be required to pay any third party (other than, with respect to the first successful Secondary Market Transaction only, the costs and expenses of the Borrowers' counsel) costs and expenses incurred by Lender in connection with any such Secondary Market Transaction unless otherwise expressly payable by the Borrower Parties under this Loan Agreement or the other Loan Documents. SECTION 10.3 INFORMATION. The Borrower Parties, at Lender's cost and expense (other than the Borrowers' internal costs and, with respect to the first successful Secondary Market Transaction only, expenses and the costs and expenses of the Borrowers' counsel), shall provide such access to personnel and such information and documents relating to the Borrower Parties, Manager, the Properties and Collateral and the business and operations of all of the foregoing and access to such opinions of counsel (including nonconsolidation opinions) as any Rating Agency may request or as Lender or any other Interested Party may reasonably request in connection with any such Secondary Market Transaction including, without limitation, updated financial information, appraisals, market studies, environmental reviews (Phase I's and, if appropriate, Phase II's), mold inspection, property condition reports and other due diligence investigations together with appropriate verification of such updated information and reports through letters of auditors and 95 consultants and, as of the closing date of the Secondary Market Transaction, updated representations and warranties made in the Loan Documents and such additional representations and warranties as any Rating Agency may request or any purchaser, transferee, assignee, trustee, servicer or potential investor (the Rating Agencies and all of the foregoing parties, collectively, "INTERESTED PARTIES") may reasonably request, to the extent such updated representations and warranties are true. On or prior to the date of closing of any Secondary Market Transaction, the Borrowers, at Lender's cost and expense (other than the Borrowers' internal costs and expenses and, with respect to the first successful Secondary Market Transaction only, the costs and expenses of the Borrowers' counsel), shall, if required by any Rating Agency or reasonably required by Lender, provide revisions or "bringdowns" to any opinions delivered at Closing (including nonconsolidation opinions), or if required by the Rating Agencies, new versions of such opinions, which opinions shall be consistent in substance with the opinions covered by the original opinions, addressed to Lender, any trustee under any Securitization backed in whole or in part by the Loan, any Rating Agency that assigns a rating to any securities in connection therewith and any investor purchasing securities therein. Lender shall be permitted to share all such information with the investment banking firms, Rating Agencies, accounting firms, law firms, other third party advisory firms, potential investors, servicers and other service providers and other parties directly involved in any proposed Secondary Market Transaction. The Borrowers understand that any such information may be incorporated into any offering circular, prospectus, prospectus supplement, private placement memorandum or other offering documents for any Secondary Market Transaction. Lender and the Rating Agencies shall be entitled to rely upon such information. Without limiting the foregoing, the Borrowers and Guarantor shall each provide in connection with each of (i) a preliminary and a final private placement memorandum or (ii) a preliminary and final prospectus or prospectus supplement, as applicable (the documents referred to in the foregoing clauses (i) and (ii), collectively, the "DISCLOSURE DOCUMENTS"), an agreement reasonably satisfactory to the Borrowers and Guarantor certifying that the Borrowers and Guarantor have examined such Disclosure Documents specified by Lender and, that the sections of such Disclosure Document describing the Borrowers, Guarantor, the Properties and Manager do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not materially misleading. The Borrowers and Guarantor shall each indemnify, defend, protect and hold harmless Lender, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MERRILL LYNCH"), and their respective Affiliates, directors, employees, agents and each Person, if any, who controls Lender, Merrill Lynch or any such Affiliate within the meaning of Section 15 of the Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934, and any other placement agent or underwriter with respect to any Securitization or Secondary Market Transaction from and against any losses, claims, damages and liabilities that arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Disclosure Document as to the Borrowers, Guarantor, Manager and the Properties or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated in such information or necessary in order to make the statements in such information not materially misleading; provided, however, the Borrowers shall not be required to indemnify Merrill Lynch for any liabilities arising out of untrue statements or omissions that were identified to Lender in writing or are set forth in any third party report not prepared by the Borrowers or their Affiliates unless such reports are caused to be incorrect or misleading based upon information provided by the Borrowers or their Affiliates. Lender may publicize the existence of 96 the Obligations in connection with Lender's Secondary Market Transaction activities or otherwise. SECTION 10.4 ADDITIONAL PROVISIONS. In any Secondary Market Transaction, Lender may transfer its obligations under this Loan Agreement and under the other Loan Documents (or may transfer the portion thereof corresponding to the transferred portion of the Obligations), and thereafter Lender shall be relieved of any obligations hereunder and under the other Loan Documents arising after the date of said transfer with respect to the transferred interest. Each transferee investor shall become a "Lender" hereunder. ARTICLE XI RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES SECTION 11.1 RESTRICTIONS ON TRANSFER AND ENCUMBRANCE. Except for a Transfer or a Permitted Assumption expressly permitted under this Article XI, Leases entered into as permitted hereunder, and pledges in connection with the Mezzanine Loan, the Borrowers shall not cause or suffer to occur or exist, directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, any sale, transfer, mortgage, pledge, Lien or encumbrance (other than the Permitted Encumbrances) of (i) all or any part of the Properties or any interest therein, or (ii) any direct or indirect ownership or beneficial interest in any Borrower (other than to Mezzanine Lender), irrespective of the number of tiers of ownership without Lender's consent. SECTION 11.2 TRANSFERS OF BENEFICIAL INTERESTS IN BORROWERS. The following voluntary or involuntary sales, encumbrances, conveyances, transfers and pledges (each, a "TRANSFER") of a direct, indirect or beneficial interest in any Borrower shall be permitted without Lender's consent ("PERMITTED OWNERSHIP INTEREST TRANSFERS"): (A) A Transfer of no more than forty-nine percent (49%) of the direct or indirect ownership interests in such Borrower (in the aggregate), provided that, following such Transfer, Guarantor maintains control of such Borrower. (B) A Transfer or a series of Transfers that result in the proposed transferee, together with Affiliates of such transferee, owning in the aggregate (directly or indirectly) more than forty-nine percent (49%) of the economic and beneficial interests in such Borrower (where, prior to such Transfer, such proposed transferee and its Affiliates owned in the aggregate (directly or indirectly) forty-nine percent (49%) or less of such interests in that Borrower); and, provided that such Transfer shall not be a Permitted Ownership Interest Transfer unless Lender receives, prior to such Transfer, both (x) evidence reasonably satisfactory to Lender (which shall include a legal non-consolidation opinion reasonably acceptable to Lender and the Rating Agencies) that the single purpose nature and bankruptcy remoteness of such Borrower (and its members and general partners, as applicable) following such Transfer or Transfers will be the same as prior to such Transfer or Transfers and (y) a Rating Agency Confirmation. (C) For so long as Guarantor's (or its successor's) stock is traded through the "over-the-counter market" or through any recognized stock exchange, any Transfer of all or any portion of the issued and outstanding capital stock of Guarantor, or the issuance of additional 97 capital stock of Guarantor (including common or preferred shares) through the "over-the-counter market" or through any recognized stock exchange. (D) The pledge of ownership interests granted by the Mezzanine Borrowers pursuant to the Pledge Agreement (as such term is defined in the Mezzanine Loan Agreement). For purposes of this Section 11.2, "control" shall have the meaning given thereto in the definition of "Affiliate" in Section 1.1 and a "change of control" of any Person shall include the Transfer of legal or equitable ownership interests in such Person which after giving effect to such Transfer results in any transferee or pledgee of such interests holding more than a 49% legal or equitable ownership interest or security interest in such Person. SECTION 11.3 ASSUMABILITY. (A) The Borrowers shall have the right to request that Lender consent to (i) a transfer of all of the Properties to another Person (the "TRANSFEREE BORROWER") and the assumption by the Transferee Borrower of all of the Borrowers' obligations under the Loan Documents, (ii) replacement of Guarantor with new guarantors and indemnitors who shall assume all of the obligations of the Guarantors arising from and after such date and release of the Borrowers and Guarantor from obligations arising after such date and (iii) the replacement of the Mezzanine Borrowers with pledgors of the ownership interests in the Transferee Borrower (collectively, an "ASSUMPTION"), subject to the conditions set forth in paragraphs (C) and (D) of this Section. Together with such written application, the Borrowers will pay to Lender the reasonable review fee of $10,000. The Borrowers also shall pay on demand all of the reasonable out-of-pocket costs and expenses incurred by Lender, including reasonable attorneys' fees and expenses, and the fees and expenses of Rating Agencies, if any, and other outside entities, in connection with considering any proposed Transfer and Assumption, whether or not the same is permitted or occurs. (B) Lender shall not withhold its consent to an Assumption (any such Assumption consented to by Lender, a "PERMITTED ASSUMPTION") provided and upon the conditions that: (i) No Event of Default shall have occurred and be continuing at the time of such Assumption; (ii) The Borrowers shall have submitted to Lender true, correct and complete copies of any and all information and documents reasonably requested by Lender concerning the Transferee Borrower, replacement guarantors and indemnitors and all of such information and documents shall be reasonably acceptable to Lender; (iii) Evidence reasonably satisfactory to Lender shall have been provided showing that the Transferee Borrower and such of its Affiliates as shall reasonably be designated by Lender comply and will comply with Article IX, as those provisions may be modified by Lender taking into account the ownership structure of Transferee Borrower and its Affiliates; (iv) The Borrowers shall have obtained (and delivered to Lender) a Rating Confirmation with respect to the Assumption, the Transferee Borrower, the new guarantors and indemnitors and all related transactions; 98 (v) The Borrowers shall have paid all of Lender's reasonable out-of-pocket costs and expenses in connection with considering the Assumption, and shall have paid the amount reasonably requested by Lender as a deposit against Lender's reasonable costs and expenses in connection with effecting the Assumption; (vi) The Borrowers, the Transferee Borrower, and the replacement guarantors and indemnitors shall have indicated in writing in form and substance reasonably satisfactory to Lender their readiness and ability to satisfy the conditions set forth in Subsection (C) below; (vii) (a) The Transferee Borrower shall be a Permitted Transferee or (b) the identity, experience and financial condition of the Transferee Borrower shall otherwise be satisfactory to Lender in its sole discretion; and (viii) The identity and financial condition of the replacement guarantors and indemnitors shall be satisfactory to Lender. (C) If Lender consents to the proposed Assumption, the Transferee Borrower and/or Borrowers, as the case may be, shall promptly and as a condition to the Assumption deliver the following to Lender: (i) The Borrowers, Transferee Borrower, the original and replacement guarantors and indemnitors shall execute and deliver any and all documents reasonably required by Lender to evidence the Transfer and Assumption of the Loan, in form and substance reasonably required by Lender and similar to those received at Closing; (ii) Counsel to the Transferee Borrower and replacement guarantors and indemnitors shall deliver to Lender opinions in form and substance reasonably satisfactory to Lender as to such matters as Lender shall reasonably require in connection with such Assumption, which may include opinions as to substantially the same matters as were required in connection with the origination of the Loan including, without limitation, a bankruptcy non-consolidation opinion; (iii) The Borrowers shall cause to be delivered to Lender, an endorsement (relating to the change in the identity of the Borrowers and execution and delivery of the Assumption documents) to Lender's policy of title insurance in form and substance acceptable to Lender, in Lender's reasonable discretion; and (D) The Borrowers shall deliver to Lender a payment in the amount of all remaining unpaid reasonable costs incurred by Lender in connection with the Assumption, including but not limited to, Lender's reasonable attorneys' fees and expenses, all recording fees, and all fees payable to the title company in connection with the Transfer and Assumption. SECTION 11.4 RELEASE OF PROPERTIES. On one or more occasions, the Borrowers may obtain the release (each, a "RELEASE") of one (1) or more of the Properties from the Lien of the applicable Deed of Trust in connection with (x) a sale of the applicable Property or Properties to one or more Persons which are not Related Persons of the Borrowers or Guarantor, (y) a Release necessary to prevent an Uncured Franchise Default, or (z) a Release necessary to enable the Borrowers to comply with the restrictions set forth in Section 5.13(D), and prepayment of all or a 99 portion of the Loan subject to the conditions of the Note and subject to the satisfaction of the following conditions: (A) Lender shall have received from the Borrowers at least fifteen (15) days prior written notice of the date proposed for such release (the "RELEASE DATE") which notice is revocable; (B) No Event of Default shall have occurred and be continuing as of the date of such notice and the Release Date; (C) Lender shall have received from the Borrowers on the date proposed for such Release, the Release Price, for deposit into the Lock Box Account and disbursement in accordance with the terms of the Cash Management Agreement, and following such disbursement, Lender shall have received Mortgage Lender's Percentage of the Release Price and Mezzanine Lender shall have received Mezzanine Lender's Percentage of the Release Price; (D) The Borrowers at their sole cost and expense, shall have delivered to Lender, one or more endorsements to the Title Policies delivered to Lender on the date hereof in connection with the Deeds of Trust insuring that, after giving effect to such Release, (i) the Liens created hereby and thereby and insured under the Title Policies are first priority Liens on the respective remaining Properties subject only to the Permitted Encumbrances applicable to the remaining Properties and (ii) that the Title Policies remain in full force and effect and unaffected by such Release; (E) Immediately following any Release both the Debt Service Coverage Ratio and the Debt Yield (based upon a trailing twelve (12) month period) shall be equal to or greater than the Debt Service Coverage Ratio and the Debt Yield in effect immediately prior to the Release (based upon a trailing twelve (12) month period); (F) The Borrowers shall pay all reasonable out-of-pocket costs and expenses (including, without limitation, title search costs and endorsement premiums and reasonable attorney's fees and disbursements) incurred by Lender, Servicer, and any custodian employed by Lender or Servicer, in connection with the Release; and (G) Immediately following such Property Release, the Released Property will be owned by a Person other than the Borrowers. Upon satisfaction of the above conditions, Lender shall effectuate the following (hereinafter referred to as a "PROPERTY RELEASE"): the security interest of Lender under the Deed of Trust and other Loan Documents relating to the Released Property shall be released and Lender will execute and deliver any agreements reasonably requested by the Borrowers to release and terminate or reassign, at the Borrowers' option, the Deed of Trust, the applicable Assignment of Leases, and financing statements as to the released Property; provided, that such release and termination or reassignment shall be without recourse to Lender and without any representation or warranty except that Lender shall be deemed to have represented that such release and termination or reassignment has been duly authorized and that it has not assigned or encumbered the Deed of Trust or the other Loan Documents relating to the released Property (except as contemplated hereby) and Lender shall return the originals of any Loan Documents that relate 100 solely to the released Property to the Borrowers; provided, further, that upon the release and termination or reassignment of Lender's security interest in the Deed of Trust relating to the released Property all references herein to the Deed of Trust relating to the released Property shall be deemed deleted, except as otherwise provided herein with respect to indemnities. SECTION 11.5 CONVERSION/RELEASE. The Borrower that owns the West Palm Beach Property may (i) convert the West Palm Beach Property to a condominium form of ownership (the "CONVERSION") consisting of two (2) units, one consisting of the hotel located on the West Palm Beach Property and appurtenances thereto (the HOTEL UNIT"), and the other consisting of the office building located on the West Palm Beach Property (the "OFFICE UNIT"), in accordance with all legal requirements, and (ii) cause the simultaneous release of the Office Unit from the lien of the applicable Deed of Trust (the "OFFICE UNIT RELEASE"). Notwithstanding anything in this Loan Agreement to the contrary, the Borrowers shall not allow nor cause a Conversion until the satisfactory completion, as determined by Lender, in its reasonable discretion, of the following conditions (hereinafter collectively referred to as the "CONVERSION CONDITIONS"): (A) No Event of Default shall have occurred and be continuing. (B) The Borrowers shall have given Lender at least forty-five (45) days prior written notice of its election to seek a Conversion. (C) The documents delivered or executed by the Borrowers in connection with the Conversion shall have been properly recorded and/or placed of record as required by the applicable Governmental Authority and Lender shall have received (i) an endorsement to the title insurance policy insuring the lien of the applicable Deed of Trust insuring that the Hotel Unit and the Office Unit will each constitute, or will constitute after Conversion, a separate tax lot, and that, following the Office Unit Release, the Hotel Unit will remain subject to the lien of the applicable Deed of Trust, and (ii) endorsements to each of the Title Policies insuring that the Office Unit Release will not have an adverse affect on the priority of the liens of any of the Deeds of Trust. (D) Lender shall have received the following opinions of counsel (which opinions shall be in form and substance and issued by counsel reasonably satisfactory to Lender) in connection with the Conversion: (i) organization, foreign qualification and good standing with respect to such Persons as Lender may reasonably require; (ii) due authorization, validity and enforceability of documents, absence of conflicts with law and documents and agreements, and absence of litigation; and (iii) such other matters as Lender may reasonably request. (E) Lender shall have received and reasonably approved all of the Condominium Documents. (F) The Borrowers shall have paid or reimbursed Lender for all third party out-of-pocket costs and expenses incurred by Lender (including, without limitation, reasonable attorneys' fees and disbursements) in connection with the Conversion and the Office Unit Release, and the Borrowers shall have paid all recording charges, filing fees, taxes or other 101 expenses (including, without limitation, mortgage and intangibles taxes and documentary stamp taxes) payable in connection with the Conversion and the Office Unit Release. (G) The Borrowers shall submit to Lender, or cause to be provided to Lender, any other items reasonably requested by Lender and Lender shall have received such other and further approvals, opinions, documents and information in connection with the Conversion as Lender may reasonably request and shall take any actions reasonably requested by Lender. (H) The Borrowers shall, at their sole expense, prepare any and all documents and instruments necessary to effect the Office Unit Release, all of which shall be subject to the reasonable approval of Lender. (I) Title to the Office Unit shall have been or shall simultaneously be conveyed to a Person other than the Borrowers or the Primary Borrower Parties. SECTION 11.6 SALE OF BUILDING EQUIPMENT. Notwithstanding anything to the contrary contained herein, provided no Event of Default exists, the Borrowers may Transfer or dispose of building equipment which is being replaced or which is no longer necessary in connection with the operation of the Property free from the lien of the Deed of Trust, provided that such transfer or disposal will not have a Material Adverse Effect on the value of any individual Property or on the Properties taken as a whole, will not materially impair the utility of any individual Property or on the Properties, taken as a whole, and will not result in a reduction or abatement of, or right of offset against, the Rents payable under any Lease, in either case as a result thereof, and provided further that any new building equipment acquired by the Borrowers (and not so disposed of) shall be subject to the lien of the Deed of Trust. Lender shall, from time to time, upon the reasonable request of any Borrower, execute a written instrument in form reasonably satisfactory to Lender to confirm that such building equipment which is to be, or has been, sold or disposed of is free from the lien of the Deed of Trust. SECTION 11.7 IMMATERIAL TRANSFERS AND EASEMENTS, ETC. Provided no Event of Default exists, the Borrowers may, without the consent of Lender, (i) make immaterial Transfers of portions of the applicable Property to Governmental Authorities for dedication for public use, and (ii) grant easements, restrictions, covenants, reservations and rights of way in the ordinary course of business for access, water and sewer lines, telephone and telegraph lines, electric lines or other utilities or for other similar purposes, provided that no such transfer, conveyance or encumbrance set forth in the foregoing clauses (i) and (ii) shall materially impair the utility and operation of such Property or have a Material Adverse Effect on the value of such Property taken as a whole. In connection with any Transfer permitted pursuant to this Section 11.7, Lender shall execute and deliver any instrument reasonably necessary or appropriate, in the case of the Transfers referred to in clause (i) above, to release the portion of such Property affected by such transfer from the lien of the Deed of Trust to such easements, restrictions, covenants, reservations and rights of way or other similar grants within ten (10) days of Lender's receipt of the following: (A) Ten (10) days prior written notice thereof. (B) A copy of the instrument or instruments of transfer. 102 (C) An officer's certificate given by the Borrowers stating that such transfer does not materially impair the utility and operation of the Property, materially reduce the value of the Property or have a Material Adverse Effect. (D) Reimbursement of all of Lender's reasonable, out-of-pocket costs and expenses incurred in connection with such Transfer. ARTICLE XII RECOURSE; LIMITATIONS ON RECOURSE SECTION 12.1 LIMITATIONS ON RECOURSE. Subject to the provisions of this Article, and notwithstanding any provision of the Loan Documents other than this Article, the personal liability of the Borrowers to pay any and all Obligations including but not limited to the principal of and interest on the debt evidenced by the Note and any other agreement evidencing the Borrowers' obligations under the Note shall be limited to (i) the Properties, (ii) the rents, profits, issues, products and income of the Properties, received or collected by or on behalf of the Borrowers or any Borrower Party after an Event of Default, and (iii) any other Collateral. Notwithstanding anything to the contrary in this Loan Agreement, the Deeds of Trust or any of the Loan Documents, Lender shall not be deemed to have waived any right which Lender may have under Section 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code to file a claim for the full amount of the Obligations secured by the Deeds of Trust or to require that all collateral shall continue to secure all of the Obligations owing to Lender in accordance with the Loan Documents. SECTION 12.2 PARTIAL RECOURSE. Notwithstanding Section 12.1, the Borrowers (but not their members, partners (other than the General Partners), employees, shareholders agents, directors or officers (the "EXCULPATED PARTIES")) and Guarantor shall be personally liable to the extent of any liability, loss, damage, cost or expense (including, without limitation, attorneys' fees and expenses) suffered or incurred by Lender resulting from any and all of the following: (i) fraud of any of the Borrower Parties or their agents or employees; (ii) any material misrepresentation made by the Borrowers or any Borrower Party in this Loan Agreement or any other Loan Document; (iii) insurance proceeds, condemnation awards, or other sums or payments attributable to the Properties which are not applied in accordance with the provisions of the Loan Documents; (iv) all rents, profits, issues, products and income of the Properties received or collected by or on behalf of the Borrowers or any Borrower Party or Manager and not deposited into the Deposit Account in accordance with Article VII and the Cash Management Agreement; (v) failure to turn over to Lender, after an Event of Default, or misappropriation of any tenant security deposits or rents collected in advance (other than by Lender or Servicer); (vi) failure to notify Lender of any change in the principal place of business address of the Borrowers or of any change in the name of any of the Borrowers or if any of the Borrowers takes any other action which could make the information set forth in the Financing Statements relating to the Loan materially misleading; (vii) failure by the Borrowers, any general partner or managing member of the Borrowers, or any indemnitor or guarantor to comply with the covenants, obligations, liabilities, warranties and representations contained in the Environmental Indemnity or otherwise pertaining to environmental matters; (viii) material waste; (ix) all liabilities and expenses under the indemnification provisions of Section 10.3; (x) any uncured default under Section 11.1; (xi) 103 any material uncured default under Article IX; and (xii) any distributions made in violation of Section 5.28 (to the extent of any such distribution) including amounts improperly paid or distributed, directly or indirectly, by Manager in circumvention of such restrictions. Notwithstanding the preceding sentence, the Loan shall be fully recourse to the Borrowers and Guarantor (but, with respect to Guarantor only, not in excess of ten percent (10%) of the original principal balance of the Loan) upon the happening of any of the following: (i) any Borrower Party's defense of any such collection efforts following maturity of the Loan or acceleration of the Loan on account of an Event of Default under Section 8.1(A), or any other defense of any collection efforts without a good faith basis following any other Event of Default), and (ii) any condition or event described in any of Subsections 8.1(G), 8.1(H), or 8.1(I) (except that the Borrowers and Guarantor shall not be liable under this Section 12.2 in connection with any Involuntary Borrower Bankruptcy unless such involuntary proceeding is solicited, procured, consented to or acquiesced in by any Borrower, Guarantor or any Affiliate of either of them or any Involuntary Borrower Bankruptcy caused by Mezzanine Lender following the exercise by Mezzanine Lender of its rights under the Mezzanine Loan Documents). SECTION 12.3 MISCELLANEOUS. No provision of this Article shall (i) affect the enforcement of the Environmental Indemnity, the Guaranty or any guaranty or similar agreement executed in connection with the Loan, (ii) release or reduce the debt evidenced by the Note, (iii) impair the lien of any of the Deeds of Trust or any other security document, (iv) impair the rights of Lender to enforce any provisions of the Loan Documents, or (v) limit Lender's ability to obtain a deficiency judgment or judgment on the Note or otherwise against any Borrower Party but not any Exculpated Party to the extent necessary to obtain any amount for which such Borrower Party may be liable in accordance with this Article or any other Loan Document. ARTICLE XIII WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES SECTION 13.1 WAIVERS. To the extent that any of the Borrowers (in this Article, a "WAIVING PARTY") is deemed for any reason to be a guarantor or surety of or for any other Borrower Party or Affiliate or to have rights or obligations in the nature of the rights or obligations of a guarantor or surety (whether by reason of execution of a guaranty, provision of security for the obligations of another, or otherwise) then this Article shall apply. This Article shall not affect the rights of the Waiving Party other than to waive or limit rights and defenses that Waiving Party would have (i) in its capacity as a guarantor or surety or (ii) in its capacity as one having rights or obligations in the nature of a guarantor or surety. Waiving Party hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of receivership or bankruptcy of any of the other Borrower Parties, protest or notice with respect to any of the obligations of any of the other Borrower Parties, setoffs and counterclaims and all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor and notices of acceptance, the benefits of all statutes of limitation, and all other demands whatsoever (and shall not require that the same be made on any of the other Borrower Parties as a condition precedent to the obligations of Waiving Party), and covenants that the Loan Documents will not be discharged, except by complete payment and performance of the obligations evidenced and secured thereby, except only as limited by the express contractual provisions of the Loan Documents. Waiving 104 Party further waives all notices that the principal amount, or any portion thereof, and/or any interest on any instrument or document evidencing all or any part of the obligations of any of the other Borrower Parties to Lender is due, notices of any and all proceedings to collect from any of the other Borrower Parties or any endorser or any other guarantor of all or any part of their obligations, or from any other person or entity, and, to the extent permitted by law, notices of exchange, sale, surrender or other handling of any security or collateral given to Lender to secure payment of all or any part of the obligations of any of the other Borrower Parties. Except only to the extent provided otherwise in the express contractual provisions of the Loan Documents, Waiving Party hereby agrees that all of its obligations under the Loan Documents shall remain in full force and effect, without defense, offset or counterclaim of any kind, notwithstanding that any right of Waiving Party against any of the other Borrower Parties or defense of Waiving Party against Lender may be impaired, destroyed, or otherwise affected by reason of any action or inaction on the part of Lender. Waiving Party waives all rights and defenses arising out of an election of remedies by the Lender, even though that election of remedies, may have destroyed the Waiving Party's rights of subrogation and reimbursement against the other Borrower Parties. Lender is hereby authorized, without notice or demand, from time to time, (a) to renew, extend, accelerate or otherwise change the time for payment of, or other terms relating to, all or any part of the obligations of any of the other Borrower Parties; (b) to accept partial payments on all or any part of the obligations of any of the other Borrower Parties; (c) to take and hold security or collateral for the payment of all or any part of the obligations of any of the other Borrower Parties; (d) to exchange, enforce, waive and release any such security or collateral for such obligations; (e) to apply such security or collateral and direct the order or manner of sale thereof as in its discretion it may determine; (f) to settle, release, exchange, enforce, waive, compromise or collect or otherwise liquidate all or any part of such obligations and any security or collateral for such obligations. Any of the foregoing may be done in any manner, and Waiving Party agrees that the same shall not affect or impair the obligations of Waiving Party under the Loan Documents. Waiving Party hereby assumes responsibility for keeping itself informed of the financial condition of all of the other Borrower Parties and any and all endorsers and/or other guarantors of all or any part of the obligations of the other Borrower Parties, and of all other circumstances bearing upon the risk of nonpayment of such obligations, and Waiving Party hereby agrees that Lender shall have no duty to advise Waiving Party of information known to it regarding such condition or any such circumstances. Waiving Party agrees that neither Lender nor any person or entity acting for or on behalf of Lender shall be under any obligation to marshal any assets in favor of Waiving Party or against or in payment of any or all of the obligations secured hereby. Waiving Party further agrees that, to the extent that any of the other Borrower Parties or any other guarantor of all or any part of the obligations of the other Borrower Parties makes a payment or payments to Lender, or Lender receives any proceeds of collateral for any of the obligations of the other Borrower Parties, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid or refunded, then, to the extent of such payment or repayment, the part of such obligations which has been paid, 105 reduced or satisfied by such amount shall be reinstated and continued in full force and effect as of the time immediately preceding such initial payment, reduction or satisfaction. Waiving Party (i) shall have no right of subrogation with respect to the obligations of the other Borrower Parties; (ii) waives any right to enforce any remedy that Lender now has or may hereafter have against any of the other Borrower Parties any endorser or any guarantor of all or any part of such obligations or any other person; and (iii) waives any benefit of, and any right to participate in, any security or collateral given to Lender to secure the payment or performance of all or any part of such obligations or any other liability of the other parties to Lender. Waiving Party agrees that any and all claims that it may have against any of the other Borrower Parties, any endorser or any other guarantor of all or any part of the obligations of the other Borrower Parties, or against any of their respective properties, shall be subordinate and subject in right of payment to the prior payment in full of all obligations secured hereby. Notwithstanding any right of any of the Waiving Party to ask, demand, sue for, take or receive any payment from the other Borrower Parties, all rights, liens and security interests of Waiving Party, whether now or hereafter arising and howsoever existing, in any assets of any of the other Borrower Parties (whether constituting part of the security or collateral given to Lender to secure payment of all or any part of the obligations of the other Borrower Parties or otherwise) shall be and hereby are subordinated to the rights of Lender in those assets. ARTICLE XIV MISCELLANEOUS SECTION 14.1 EXPENSES AND ATTORNEYS' FEES. Whether or not the transactions contemplated hereby shall be consummated, the Borrowers agree to promptly pay all reasonable fees, costs and expenses incurred by Lender in connection with any matters contemplated by or arising out of this Loan Agreement, including the following, and all such fees, costs and expenses shall be part of the Obligations, payable on demand: (A) reasonable fees, costs and expenses (including reasonable attorneys' fees, and other professionals retained by Lender) incurred in connection with the examination, review, due diligence investigation, documentation and closing of the financing arrangements evidenced by the Loan Documents; (B) subject to Section 10.2, reasonable fees, costs and expenses (including reasonable attorneys' fees and other professionals retained by Lender) incurred in connection with the administration of the Loan Documents and the Loan and any amendments, modifications and waivers relating thereto; (C) subject to Section 10.2, reasonable fees, costs and expenses (including reasonable attorneys' fees) incurred in connection with the review, documentation, negotiation, closing and administration of any subordination or intercreditor agreements; and (D) reasonable fees, costs and expenses (including attorneys' fees and fees of other professionals retained by Lender) incurred in any action to enforce or interpret this Loan Agreement or the other Loan Documents or to collect any payments due from the Borrowers under this Loan Agreement, the Note or any other Loan Document or incurred in connection with any refinancing or restructuring of the credit arrangements provided under this Loan Agreement, whether in the nature of a "workout" or in connection with any insolvency or bankruptcy proceedings or otherwise. Any costs and expenses due and payable to Lender after the Closing Date may be paid to Lender pursuant to the Cash Management Agreement. 106 SECTION 14.2 INDEMNITY. In addition to the payment of expenses as required elsewhere herein, whether or not the transactions contemplated hereby shall be consummated, the Borrowers agree to indemnify, defend, protect, pay and hold Lender, Servicer and their successors and assigns (including, without limitation, the trustee and/or the trust under any trust agreement executed in connection with any Securitization backed in whole or in part by the Loan and any other Person which may hereafter be the holder of the Note or any interest therein), and the officers, directors, stockholders, partners, members, employees, agents, Affiliates and attorneys of Lender and such successors and assigns (collectively called the "INDEMNITEES") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, Tax Liabilities, broker's or finders fees, reasonable costs, expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of outside counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto) that are imposed on, incurred by, or asserted against that Indemnitee, in any manner relating to or arising out of (A) the negotiation, execution, delivery, performance, administration, ownership, or enforcement of any of the Loan Documents; (B) any of the transactions contemplated by the Loan Documents; (C) any breach by the Borrowers of any material representation, warranty, convenant, or other agreement contained in any of the Loan Documents; (D) Lender's agreement to make the Loan hereunder; (E) any claim brought by any third party arising out of any condition or occurrence at or pertaining to the Properties; (F) any design, construction, operation, repair, maintenance, use, non-use or condition of the Properties or Improvements, including claims or penalties arising from violation of any applicable laws or insurance requirements, as well as any claim based on any patent or latent defect, whether or not discoverable by Lender; (G) any performance of any labor or services or the furnishing of any materials or other property in respect of the Properties or any part thereof; (H) any contest referred to in Section 5.3(B) hereof; (I) any obligation or undertaking relating to the performance or discharge of any of the terms, covenants and conditions of the landlord contained in the Leases; or (J) the use or intended use of the proceeds of any of the Loan (the foregoing liabilities herein collectively referred to as the "INDEMNIFIED LIABILITIES"); provided that the Borrowers shall not have an obligation to an Indemnitee hereunder with respect to Indemnified Liabilities arising from the fraud, gross negligence or willful misconduct of such Indemnitee as determined by a court of competent jurisdiction. The obligations and liabilities of the Borrowers under this Section 14.2 shall survive the term of the Loan and the exercise by Lender of any of its rights or remedies under the Loan Documents, including the acquisition of the Properties by foreclosure or a conveyance in lieu of foreclosure. SECTION 14.3 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no amendment, modification, termination or waiver of any provision of this Loan Agreement, the Note or any other Loan Document, or consent to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by Lender and any other party to be charged. Each amendment, modification, termination or waiver shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on the Borrowers in any case shall entitle the Borrowers or other Person to any other or further notice or demand in similar or other circumstances. SECTION 14.4 RETENTION OF THE BORROWERS' DOCUMENTS. Lender may, in accordance with Lender's customary practices, destroy or otherwise dispose of all documents, schedules, invoices 107 or other papers, delivered by the Borrowers to Lender (other than the Note) unless the Borrowers request in writing that same be returned. Upon such request and at the Borrowers' expense, Lender shall return such papers when Lender's actual or anticipated need for same has terminated. SECTION 14.5 NOTICES. Unless otherwise specifically provided herein, any notice or other communication required or permitted to be given shall be in writing and addressed to the respective party as set forth below. Notices shall be effective (i) three (3) days after the date such notice is mailed, (ii) on the next Business Day if sent by a nationally recognized overnight courier service, (iii) on the date of delivery by personal delivery and (iv) on the date of transmission if sent by telefax during business hours on a Business Day (otherwise on the next Business Day). Notices shall be addressed as follows: If to the Borrowers or any Borrower Party: c/o Lodgian 3445 Peachtree Road NE Suite 700 Atlanta, Georgia 30326 Attention: General Counsel Facsimile: (404) 364-0088 With a copy to: Cadwalader Wickersham & Taft 100 Maiden Lane New York, New York 10038 Attention: Robert F. McDonough Facsimile: (212) 504-6666 If to Lender: c/o Merrill Lynch & Co. 4 World Financial Center New York, New York 10080 Attention: John Gluszak Facsimile: (212) 449-7298 and Attention: Steve Glassman Facsimile: (212) 738-1013 With a copy to: 108 Sidley Austin Brown & Wood LLP 787 Seventh Avenue New York, New York 10019 Attn: Alan S. Weil, Esq. Facsimile: (212) 839-5599 Any party may change the address at which it is to receive notices to another address in the United States at which business is conducted (and not a post-office box or other similar receptacle), by giving notice of such change of address in accordance with the foregoing. This provision shall not invalidate or impose additional requirements for the delivery or effectiveness of any notice (i) given in accordance with applicable statutes or rules of court, or (ii) by service of process in accordance with applicable law. If there is any assignment or transfer of Lender's interest in the Loan, then the new Lenders may give notice to the parties in accordance with this Section, specifying the addresses at which the new Lenders shall receive notice, and they shall be entitled to notice at such address in accordance with this Section. SECTION 14.6 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All agreements, representations and warranties made herein shall survive the execution and delivery of this Loan Agreement, the making of the Loan hereunder and the execution and delivery of the Note. Notwithstanding anything in this Loan Agreement or implied by law to the contrary, the agreements of the Borrowers to indemnify or release Lender or Persons related to Lender, or to pay Lender's costs, expenses, or taxes shall survive the payment of the Loan and the termination of this Loan Agreement. SECTION 14.7 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of Lender in the exercise of any power, right or privilege hereunder or under the Note or any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing under this Loan Agreement, the Note and the other Loan Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available. SECTION 14.8 MARSHALING; PAYMENTS SET ASIDE. Lender shall not be under any obligation to marshal any assets in favor of any Person or against or in payment of any or all of the Obligations. To the extent that any Person makes a payment or payments to Lender, or Lender enforces its remedies or exercises its rights of set off, and such payment or payments or the proceeds of such enforcement or set off or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such recovery, the Obligations or part thereof originally intended to be satisfied, and all Liens, if any, and rights and remedies therefor, shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or set off had not occurred. SECTION 14.9 SEVERABILITY. The invalidity, illegality or unenforceability in any jurisdiction of any provision in or obligation under this Loan Agreement, the Note or other Loan Documents 109 shall not affect or impair the validity, legality or enforceability of the remaining provisions or obligations under this Loan Agreement, the Note or other Loan Documents or of such provision or obligation in any other jurisdiction. SECTION 14.10 HEADINGS. Section and subsection headings in this Loan Agreement are included herein for convenience of reference only and shall not constitute a part of this Loan Agreement for any other purpose or be given any substantive effect. SECTION 14.11 APPLICABLE LAW. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS WERE NEGOTIATED IN THE STATE OF NEW YORK, AND EXECUTED AND DELIVERED IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN WERE DISBURSED FROM NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW YORK AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT TO THE DEED OF TRUST AND THE ASSIGNMENT OF LEASES SHALL BE GOVERNED BY THE LAWS OF THE STATE WHERE THE PROPERTY IS LOCATED, EXCEPT THAT THE SECURITY INTERESTS IN ACCOUNT COLLATERAL SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK OR THE STATE WHERE THE SAME IS HELD, AT THE OPTION OF LENDER. SECTION 14.12 SUCCESSORS AND ASSIGNS. This Loan Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns except that the Borrowers may not assign their rights or obligations hereunder or under any of the other Loan Documents except as expressly provided in Article XI. SECTION 14.13 SOPHISTICATED PARTIES, REASONABLE TERMS, NO FIDUCIARY RELATIONSHIP. The Borrowers, on behalf of themselves and all Borrower Parties, represent, warrant and acknowledge that (i) they are sophisticated real estate investors, familiar with transactions of this kind, and (ii) they have entered into this Loan Agreement and the other Loan Documents after conducting their own assessment of the alternatives available to them in the market, and after lengthy negotiations in which they have been represented by legal counsel of their choice. The Borrowers, on behalf of themselves and all Borrower Parties, also acknowledge and agree that the rights of Lender under this Loan Agreement and the other Loan Documents are reasonable and appropriate, taking into consideration all of the facts and circumstances including without limitation the quantity of the Loan, the nature of the Properties, and the risks incurred by Lender in this transaction. No provision in this Loan Agreement or in any of the other Loan Documents and no course of dealing between the parties shall be deemed to create (i) any partnership or joint venture between Lender and the Borrowers or any other Person, or (ii) any fiduciary or similar 110 duty by Lender to the Borrowers or any other Person. The relationship between Lender and the Borrowers is exclusively the relationship of a creditor and a debtor, and all relationship between Lender and any other Borrower are ancillary to such creditor/debtor relationship. SECTION 14.14 REASONABLENESS OF DETERMINATIONS. In any instance where any consent, approval, determination or other action by Lender is, pursuant to the Loan Documents or applicable law, required to be done reasonably or required not to be unreasonably withheld, then Lender's action shall be presumed to be reasonable, and the Borrowers shall bear the burden of proof of showing that the same was not reasonable. In the event that a claim or adjudication is made that Lender or its agents have acted unreasonably or unreasonably delayed acting in any case where, by law or under this Loan Agreement or the other Loan Documents, Lender or such agent, as the case may be, has an obligation to act reasonably or promptly, neither Lender nor its agents shall be liable for any monetary damages, and the Borrowers' sole remedy shall be limited to commencing an action seeking injunctive relief or declaratory judgment. Any action or proceeding to determine whether Lender has acted reasonably shall be determined by an action seeking declaratory judgment. SECTION 14.15 LIMITATION OF LIABILITY. Neither Lender, nor any Affiliate, officer, director, employee, attorney, or agent of Lender, shall have any liability with respect to, and each of the Borrowers hereby waives, releases, and agrees not to sue any of them upon, any claim for any special, indirect, incidental, or consequential damages suffered or incurred by the Borrower Parties in connection with, arising out of, or in any way related to, this Loan Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Loan Agreement or any of the other Loan Documents, other than the gross negligence or willful misconduct of Lender. Each of the Borrowers hereby waives, releases, and agrees not to sue Lender or any of Lender's Affiliates, officers, directors, employees, attorneys, or agents for punitive damages in respect of any claim in connection with, arising out of, or in any way related to, this Loan Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Loan Agreement or any of the transactions contemplated hereby, except to the extent the same is caused by the gross negligence or willful misconduct of Lender. SECTION 14.16 NO DUTY. All attorneys, accountants, appraisers, and other professional Persons and consultants retained by Lender shall have the right to act exclusively in the interest of Lender and shall have no duty of disclosure, duty of loyalty, duty of care, or other duty or obligation of any type or nature whatsoever to any of the Borrowers or Affiliates therof, or any other Person. SECTION 14.17 ENTIRE AGREEMENT. This Loan Agreement, the Note, and the other Loan Documents referred to herein embody the final, entire agreement among the parties hereto and supersede any and all prior commitments, agreements, representations, and understandings, whether written or oral, relating to the subject matter hereof and may not be contradicted or varied by evidence of prior, contemporaneous, or subsequent oral agreements or discussions of the parties hereto. There are no oral agreements among the parties to the Loan Documents. SECTION 14.18 CONSTRUCTION; SUPREMACY OF LOAN AGREEMENT. The Borrowers and Lender acknowledge that each of them has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review this Loan Agreement and the other Loan Documents with its legal counsel and that this Loan Agreement and the other Loan Documents shall be construed 111 as if jointly drafted by the Borrowers and Lender. If any term, condition or provision of this Loan Agreement shall be inconsistent with any term, condition or provision of any other Loan Document, then this Loan Agreement shall control. SECTION 14.19 CONSENT TO JURISDICTION. EACH OF THE BORROWERS HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK OR WITHIN THE COUNTY AND STATE IN WHICH THE PROPERTY IS LOCATED AND IRREVOCABLY AGREES THAT, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH OF THE BORROWERS ACCEPTS FOR ITSELF AND IN CONNECTION WITH THE PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE NOTE, SUCH OTHER LOAN DOCUMENTS OR SUCH OBLIGATION. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDER TO BRING PROCEEDINGS AGAINST ANY BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. SECTION 14.20 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS AND LENDER HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS LOAN AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN ANY BORROWER PARTY AND LENDER RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. EACH OF THE BORROWER PARTIES AND LENDER ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF IT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH OF THE BORROWERS AND LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO THIS LOAN AGREEMENT, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS LOAN AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THE FUTURE. EACH OF THE BORROWERS AND LENDER FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR 112 MODIFICATIONS TO THIS LOAN AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOAN. IN THE EVENT OF LITIGATION, THIS LOAN AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. SECTION 14.21 COUNTERPARTS; EFFECTIVENESS. This Loan Agreement and other Loan Documents and any amendments or supplements thereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which counterparts together shall constitute but one and the same instrument. This Loan Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto. SECTION 14.22 SERVICER. Lender shall have the right from time to time to designate and appoint a Servicer and special servicer, and to change or replace any Servicer or special servicer. Provided that the Borrowers have been notified of such Servicer's role, all rights of the Lender hereunder may be exercised by Servicer on behalf of Lender and provided the Borrowers shall not be required to deal with more than one such servicing entity at any time. Lender shall notify the Borrowers in writing as to the identity of the Servicer and any special servicer. SECTION 14.23 OBLIGATIONS OF BORROWER PARTIES. The Borrower Parties other than the Borrowers are parties to this Loan Agreement only with regard to the representation, warranties, and covenants specifically applicable to them. SECTION 14.24 ADDITIONAL INSPECTIONS; REPORTS. Notwithstanding anything contained in this Loan Agreement to the contrary, if for any reason whatsoever Lender suspects that any conditions exist or may exist at any Property which might have a Material Adverse Effect, Lender shall have the right, at the Borrowers' sole reasonable cost and expense, to cause such inspections and reports to be prepared and performed with respect to any Property as Lender shall reasonably determine. [signatures follow on next page] 113 IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Loan Agreement as of the date first written above. BORROWER: ALBANY HOTEL, INC., a Florida corporation, APICO HILLS, INC., a Pennsylvania corporation, APICO INNS OF GREEN TREE, INC., a Pennsylvania corporation, BRUNSWICK MOTEL ENTERPRISES, INC., a Georgia corporation, DOTHAN HOSPITALITY 3053, INC., an Alabama corporation, DOTHAN HOSPITALITY 3071, INC., an Alabama corporation, GADSDEN HOSPITALITY, INC., an Alabama corporation, LODGIAN AMI, INC., a Maryland corporation, MINNEAPOLIS MOTEL ENTERPRISES, INC., a Minnesota corporation, NH MOTEL ENTERPRISES, INC., a Michigan corporation, SERVICO AUSTIN, INC., a Texas corporation, SERVICO CEDAR RAPIDS, INC., an Iowa corporation, SERVICO COLUMBIA, INC., a Maryland corporation, SERVICO GRAND ISLAND, INC., a New York corporation, SERVICO HOUSTON, INC., a Texas corporation, SERVICO JAMESTOWN, INC., a New York corporation, SERVICO LANSING, INC., a Michigan corporation, SERVICO MARKET CENTER, INC., a Texas corporation, SERVICO MARYLAND, INC., a Maryland corporation, SERVICO METAIRIE, INC., a Louisiana corporation, SERVICO NEW YORK, INC., a New York corporation, SERVICO NIAGARA FALLS, INC., a New York corporation, SERVICO NORTHWOODS, INC., a Florida corporation, SERVICO PENSACOLA 7200, INC., a Delaware corporation, SERVICO PENSACOLA 7330, INC., a Delaware corporation, SERVICO PENSACOLA, INC., a Delaware corporation, SERVICO ROLLING MEADOWS, INC., an Illinois corporation, SERVICO WINTER HAVEN, INC., a Florida corporation, SHEFFIELD MOTEL ENTERPRISES, INC., an Alabama corporation, IMPAC HOTELS I, L.L.C., a Georgia limited liability company, LODGIAN MEMPHIS PROPERTY OWNER, LLC, a Delaware limited liability company, By: /s/ Daniel E. Ellis -------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary, or Authorized Signatory for each of the entities listed above AMI OPERATING PARTNERS, L.P., a Delaware limited partnership By: AMIOP ACQUISITION GENERAL PARTNER SPE CORP., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis ----------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary DEDHAM LODGING ASSOCIATES I, LIMITED PARTNERSHIP, a Georgia limited partnership By: DEDHAM LODGING SPE, INC., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis ----------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary LITTLE ROCK LODGING ASSOCIATES I, LIMITED PARTNERSHIP, a Georgia limited partnership By: LODGIAN LITTLE ROCK SPE, INC., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis ----------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary SERVICO CENTRE ASSOCIATES, LTD., a Florida limited partnership By: SERVICO PALM BEACH GENERAL PARTNER SPE, INC., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis ----------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary LENDER: MERRILL LYNCH MORTGAGE LENDING, INC. By: /s/ Steven Glassman ---------------------------- Name: STEVEN GLASSMAN Title: AUTHORIZED SIGNATORY EXHIBIT A CAPITAL IMPROVEMENT PLAN Exhibit A EXHIBIT A CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ----------------------------------------------------------------------------------------------------------------------------------- IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ----------------------------------------------------------------------------------------------------------------------------------- 0220 Holiday Inn Dothan AL $ 0 $ 0 - ----------------------------------------------------------------------------------------------------------------------------------- 0230 Hampton Inn Dothan AL $ 0 $ 74,530 Common area, carpet($1080) Guestroom: carpet (limited service) ($45,200) Guestroom: soft goods (limited service) ($28,250) - ----------------------------------------------------------------------------------------------------------------------------------- 0240 Holiday Inn Gadsden AL $164,600 Immediate Needs $ 60,750 Roof covering, built-up Express Identified in the EMG system replacement report: ADA ($35,000) accessibility $2,600; HVAC, thru-the-wall units (older Foundation and units)($9,913) sidewalk settlement on DHW heaters,>150 gal. NE side of Bldg. D, Building D($3,500) $1,500, Asphalt repair Guestroom: carpet($9,400) overlay $142,500; Roof Guestroom: paint and covering, built-up wallcovering ($2,938) system replacement on Building D, $18,000. - ----------------------------------------------------------------------------------------------------------------------------------- 0210 Holiday Inn Sheffield AL $ 6,000 Immediate Needs: $136,162 Exterior walls, painting & $6,000 of ADA coating ($40,200) accessibility upgrades. HVAC, thru-the-wall units ($10,238) Elevator, machinery ($60,000) Guestroom: carpet ($20,100) Commercial laundry: washers ($5,625) - ----------------------------------------------------------------------------------------------------------------------------------- 0505 Courtyard by Bentonville AR $ 0 $ 0 Marriott - ----------------------------------------------------------------------------------------------------------------------------------- 0560 Residence Inn Little Rock AR $ 0 EMG PSA notes that $ 0 - -----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT A CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ----------------------------------------------------------------------------------------------------------------------------------- IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ----------------------------------------------------------------------------------------------------------------------------------- the last lifesafety service/inspection was March, 2000. Need to confirm date of last inspection - ----------------------------------------------------------------------------------------------------------------------------------- 0850 Holiday Inn East CT $ 1,000 Immediate Needs: $ 70,500 Asphalt pavement ($9,000) Hartford $1,000 to repair a Rooftop package unit per leaking hydraulic ton ($8,000) elevator. Elevator, machinery ($19,000) Guestroom: soft goods ($32,500) Commercial kitchen: ice machine ($2,000) - ----------------------------------------------------------------------------------------------------------------------------------- 1168 Hampton Inn Pensacola FL $ 0 $ 0 - ----------------------------------------------------------------------------------------------------------------------------------- 1113 Holiday Inn Pensacola FL $ 30,000 Immediate Needs: $ 0 Express replace the roof on the building at the southwest corner of the property adjacent to the "L" -shaped building due to leaks and ponding, $30,000. - ----------------------------------------------------------------------------------------------------------------------------------- 1116 Holiday Inn Pensacola FL $ 87,351 Engineering Report $ 0 (University Immediate Needs: ADA Mall) Accessibility $10,700, Roof covering replacement$45,401; Soffits - -----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT A CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ----------------------------------------------------------------------------------------------------------------------------------- IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ----------------------------------------------------------------------------------------------------------------------------------- replacement/repair $7,000; Mansard roofing shingles replacement $2,250; Bay window replacement and lounge restoration $20,000; Down unit restoration $3,000. - ----------------------------------------------------------------------------------------------------------------------------------- 1108 Crowne Plaza West Palm FL $ 17,400 Immediate Needs: $ 0 Beach Damaged hollow metal exterior doors to be replaced, $2,400; Repair leaks at lobby skylights $10,000; Replace insulation at roof top piping for the chilled water, $5,000. - ----------------------------------------------------------------------------------------------------------------------------------- 1132 Holiday Inn Winter FL $ 0 $ 0 Haven - ----------------------------------------------------------------------------------------------------------------------------------- 1212 Courtyard by Atlanta GA $186,950 Engineering Report $ 0 Marriott Immediate Needs: $108,600 guestroom carpet replacement; $63,800 guestroom - -----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT A CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ----------------------------------------------------------------------------------------------------------------------------------- IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ----------------------------------------------------------------------------------------------------------------------------------- paint and wallcovering replacement; $15,000 in Lobby case good and furniture replacement. - ----------------------------------------------------------------------------------------------------------------------------------- 1206 Holiday Inn Brunswick GA $ 39,513 Immediate Repair needs $418,840 Asphalt pavement (seal coat are 3,100 sq. ft. of over term) ($8,890) Sidewalk Concrete Curbing, concrete ($2,500) Repair, $7,813; Swimming pool equipment ($4,000) Kitchen and laundry Swimming pool relining ($3,500) floor tile repairs to Exterior walls, EIFS minor prevent tripping patching, cleaning, caulking and hazards, $6,500; and, recoating ($54,000) Guestroom bathroom tub Common area floors, carpet-lobby, surroundings need meeting rooms, rest. & replacement to due lounge ($22,770) improper prepping for Guestroom: carpet (full service) refinishing, 126 ($75,600) rooms, $25,200. Guestroom: soft goods (full service) (newer) ($13,300) Guestroom: television sets (older) ($22,880) Guestroom: case goods & furniture (full service - older) ($105,600) Guestroom: soft goods (full service) (older) ($30,800) Commercial kitchen: range ($8,500) Commercial kitchen: refrigerator ($4,500) Commercial kitchen: walk in cooler/freezer ($28,500) - -----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT A CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ----------------------------------------------------------------------------------------------------------------------------------- IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ----------------------------------------------------------------------------------------------------------------------------------- Guest laundry equipment ($1,000) Ice machines ($4,000) Lobby: case goods & furniture ($13,500) Meeting room: case goods & furniture ($15,000) - ----------------------------------------------------------------------------------------------------------------------------------- 1255 Holiday Inn Marietta GA $ 0 Engineering Report $119,600 Asphalt pavement (seal coat (hotel & references on-going over term, striping, minor suites) capital construction repair) ($27,000) and significant room Rooftop package unit per ton renovations. ($24,000) Guestroom: soft goods (full service) ($68,600) - ----------------------------------------------------------------------------------------------------------------------------------- 1280 Fairfield Inn Valdosta GA $ 0 $ 78,465 Asphalt pavement (seal coat over term) ($5,565) Common area floors, carpet ($2,700) Guestroom: carpet (limited service) ($43,200) Guestroom: soft goods (limited service) ($27,000) - ----------------------------------------------------------------------------------------------------------------------------------- 1285 Holiday Inn Valdosta Ga $ 0 $237,850 Asphalt pavement (seal coat over term) ($7,700) Roof covering, rubber membrane ($63,600) Roof covering, metal ($7,200) Common area floors, carpet ($18,900) Rooftop package unit per ton ($30,400) Hot and cold water distribution ($1,500) - -----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT A CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ----------------------------------------------------------------------------------------------------------------------------------- IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ----------------------------------------------------------------------------------------------------------------------------------- Guestroom: carpet (limited service) ($66,800) Guestroom: soft goods (limited service) ($41,750) - ----------------------------------------------------------------------------------------------------------------------------------- 1840 Crowne Plaza Cedar IA $ 401,000 Immediate Needs: $ 0 Rapids Repair leaks in the pool skylight $1,000; Metal Frames of Window units to be adjusted, seals replaced and/or caulked to prevent leaks $40,000; Replacement of a fire damaged hot water boiler/storage tank $150,000; Replace obsolete and malfunctioning components of the fire monitoring panel and related alarm system components $200,000; Replace in adequate kitchen range hood fire suppression systems $10,000. - -----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT A CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ----------------------------------------------------------------------------------------------------------------------------------- IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ----------------------------------------------------------------------------------------------------------------------------------- 1310 Holiday Inn Rolling IL $ 15,000 Immediate Needs: $ 396,040 ADA Survey ($6,000) Asphalt Meadows $15,000 to bring pool repair (cut & patch, up to code. full-depth) ($65,625) Asphalt pavement (seal coat over term) ($13,125) Curbing, concrete - Replace sections in varoius locations ($1,500) Retaining walls, wood timber south and west property ($8,000) Roof covering, built-up system, ballast - five story sect. ($25,000) Roof covering, rubber membrane, ballast-ninestory section ($16,500) Window glazing and seal - replace - 5 and 9 story building ($17,400) Concrete balcony repair -5 story building front elevation ($8,640) Rooftop make-up air unit ($54,000) Holding tank - 2 story building ($15,000) Emergency generator -replace 730KVA - 9-story building ($20,000) Guestroom: carpet (limited service) ($84,400) Guestroom: soft goods (limited service) ($52,750) Commercial laundry: dryers - 50 lb ($2,100) - -----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT A CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ----------------------------------------------------------------------------------------------------------------------------------- IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ----------------------------------------------------------------------------------------------------------------------------------- Commercial laundry: washers - 75 lb ($4,000) Guest laundry equipment - coin washers and dryers ($2,000) - ----------------------------------------------------------------------------------------------------------------------------------- 2035 Courtyard by Florence KY $ 0 0 $ 61,770 ADA Accessibility ($50) Marriott Asphalt pavement (seal coat over term) ($3,220) Guestroom: carpet (limited service) ($31,200) Guestroom: soft goods (limited service) ($27,300) - ----------------------------------------------------------------------------------------------------------------------------------- 2040 Hurstbourne Louisville KY $403,000 Immediate Needs from $741,000 ADA Accessibility ($20,100) Hotel EMG PSA are as Common area floors, carpet follows: 4 City ($99,000) mandated Backflow HVAC, thru-the-wall units protectors, $40,000; ($228,800) Pool area ceiling DHW heaters,>150 gal. ($12,000) repair, $30,000; Pool Fire alarm, horn and strobe de-humidification lights ($3,000) equipment $333,000. Guestroom: carpet (full service) ($238,800) Guestroom: soft goods (full service) ($139,300) - ----------------------------------------------------------------------------------------------------------------------------------- 2007 Courtyard by Paducah KY $ 0 $ 0 Marriott - -----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT A CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ----------------------------------------------------------------------------------------------------------------------------------- IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ----------------------------------------------------------------------------------------------------------------------------------- 1502 Quality Hotel Metairie LA $ 60,600 Immediate Need in the $ 0 PSA are as follows: $9,000 of misc. roof repairs to counter leaks, ponding and lack of ventilation; $5,000 in repairs to the rusting exterior stairs; $1,600 replace corroded metal exterior doors and reseal same; re-sealing and caulking of the windows, $30,000; repair the damaged exit stairwell doors and replace inoperable hardware and closers in compliance with code, 2 per floor, $15,000; replace penthouse roof vent, $2,000. - ----------------------------------------------------------------------------------------------------------------------------------- 2777 Residence Inn Dedham MA $ 0 $ 52,650 Guestroom: carpet (limited service) ($32,400) Guestroom: soft goods (limited service) ($20,250) - ----------------------------------------------------------------------------------------------------------------------------------- 1775 Holiday Inn Baltimore - MD $ 6,000 Immediate Needs: Seal, $ 0 - -----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT A CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ----------------------------------------------------------------------------------------------------------------------------------- IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ----------------------------------------------------------------------------------------------------------------------------------- BWI patch and layer asphalt Airport cracks and depressions in the parking lot ($6,000). - ----------------------------------------------------------------------------------------------------------------------------------- 1785 Holiday Inn Baltimore MD $ 26,400 Immediate Needs: $137,929 Sidewalk maintenance West Replace 2, 12.5-ton in program ($845) (Belmont) operable and failing Roof covering, built-up system units serving the overlay (Commercial Building) cocktail lounge, ($36,000) restaurant and lobby Roof drainage, provide adequate to maintain slope temperature and (Buildings A & C) ($39,000) climate control Gas distribution system ($1,500) $20,000; Replace two Guestroom: soft goods ($11,333) leaking water storage Commercial kitchen equipment tanks, $6,400. ($3,500) Commercial laundry: dryers ($18,000) Commercial laundry: washers ($27,750) - ----------------------------------------------------------------------------------------------------------------------------------- 1765 Holiday Inn Baltimore, MD $ 0 $ 0 Inn Harbor - ----------------------------------------------------------------------------------------------------------------------------------- 1710 Hilton Columbia MD $ 30,000 Immediate Repair Needs $219,710 ADA Accessibility ($23,110) are as follows: Asphalt pavement (seal coat $10,000 in Mold over term) ($7,525) remediation mentioned Curbing, concrete ($1,000) above; Asphalt repair Compactor/coling tower enclosures, $7,500; Repair of various ($4,000) compactor/cooling Swimming pool equipment $0 tower pad and gas Level pre-cast concrete plank floor joints ($3,000) - -----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT A CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ----------------------------------------------------------------------------------------------------------------------------------- IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ----------------------------------------------------------------------------------------------------------------------------------- meter pad, $2,000; Roof covering, asphalt Repair damaged shingles ($1,875) sidewalk concrete, Exterior walls, caulking and $2,000; Repair damaged sealants ($45,000) face brink and Exterior walls, EIFS patch and spalling concrete on repair $0 exterior walls, Exterior doors, hollow metal $3,250, $1,500 in roof ($1,600) and soffit repair in Common area floors, carpet the pool area; and, ($41,400) repair/replace leaking Common area walls, refinish $0 pipe for the hot water Cooling tower $0 distribution,$3,750. Heat pumps, air to air $0 Guestroom: carpet(full service) ($91,200) - ----------------------------------------------------------------------------------------------------------------------------------- 1776 Holiday Inn Frederick MD $ 0 Immediate Needs: $ 49,000 Concrete balconies ($1,000) $2,000 to patch roof Elevator, machinery leaks. ($48,000) - ----------------------------------------------------------------------------------------------------------------------------------- 1770 Holiday Inn Glen MD $ 53,500 Immediate Needs of $ 0 Burnie $53,000 are as follows: Asphalt repair, $2,500; repair damaged concrete pavement in service area, $1,500; repair damaged concrete retaining wall, $3,500; repair damaged - -----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT A CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ----------------------------------------------------------------------------------------------------------------------------------- IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ----------------------------------------------------------------------------------------------------------------------------------- masonry retaining wall, $2,000; repair cracking and spalling pool deck, $1,000; and, replace three rooftop package units servicing the common corridors, they are currently inoperable, $42,000. - ----------------------------------------------------------------------------------------------------------------------------------- 1720 Holiday Inn Silver MD $126,000 Two Chillers are down. $ 0 Spring Loss of 110T capacity, needs replacement, $121K. (mold concern). Lodgian has a temporary HVAC system in place to provide AC. Sprinkler heads will need replacement. Confirm that the hydraulic elevator is being repaired. - ----------------------------------------------------------------------------------------------------------------------------------- 1780 Holiday Inn Towson MD $ 6,800 Immediate Needs are as $ 0 (Cromwell follows: Asphalt Bridge) repair $2,500; review - -----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT A CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ----------------------------------------------------------------------------------------------------------------------------------- IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ----------------------------------------------------------------------------------------------------------------------------------- and repair subsidence at drainage inlet to prevent retaining wall failure $3,500; patch and repair damaged EIFS at rear overhang adjacent to banquet room $800. - ----------------------------------------------------------------------------------------------------------------------------------- 3970 Holiday Inn Lansing MI $ 14,600 Immediate Needs are $ 65,000 Asphalt overlay ($65,000) ADA upgrades of $2,100 and Asphalt repairs of $12,500. - ----------------------------------------------------------------------------------------------------------------------------------- 3930 Hilton Troy MI $ 7,800 Immediate Needs $ 0 (Northfield) include ADA accessibility $4,800; and, $3,000 in roofing repairs. - ----------------------------------------------------------------------------------------------------------------------------------- 1910 Holiday Inn Arden MN $ 15,000 ADA Upgrades to the $214,200 Lobby floors; carpet ($10,800) Hills/St. Elevators totaling Common area floors; carpet Paul $15,000 are the only ($45,000) immediate needs. Meeting room floors; carpet ($27,000) Restaurant/lounge floors; carpet ($13,500) Guestroom: carpet (limited service)($62,400) Guestroom: soft goods (limited service) ($39,000) Commercial laundry: washers($16,500) - -----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT A CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ----------------------------------------------------------------------------------------------------------------------------------- IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ----------------------------------------------------------------------------------------------------------------------------------- 2222 Holiday Inn St. Louis MO $ 2,500 Preliminary inspection $ 0 North revealed cracks in the balcony's that might need review by a structural engineer. In addition the hotel has a adjacent vacant office building that is used for storage. Immediate Needs $2,500 in structural engineering review of the A Building balcony's. - ----------------------------------------------------------------------------------------------------------------------------------- 3311 Crowne Plaza Albany NY $ 3,600 Immediate Needs: $ 0 $1,600 in masonry and concrete repair on an exterior retaining wall with visible displacement and cracks; $2,000 in concrete repair on the exterior stairs at the loading dock area. - ----------------------------------------------------------------------------------------------------------------------------------- 3345 Holiday Inn Grand NY $ 4,000 Immediate Needs: $ 0 Island $4,000 in fencing - -----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT A CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ------------------------------------------------------------------------------------------------------------------------------ IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ------------------------------------------------------------------------------------------------------------------------------ repair/replacement and fencing for shored up fence in the service area; $1,000 in soffit repair on the mansard roofing at the pool area; and, $500 in bathroom vent repairs, some bathroom fans were not working and led to mold problems.. - ------------------------------------------------------------------------------------------------------------------------------ 3330 Holiday Inn Jamestown NY $ 20,200 Immediate Repair $ 0 Needs: $12,500; Concrete Entrance Apron Repair, $2,000; Sidewalk Concrete Repair, $1,000; Elevated pedestrian walkway skylight leakage, $4,700. - ------------------------------------------------------------------------------------------------------------------------------ 3314 Holiday Inn Niagara NY $ 6,400 $ 151,730 Planters, brick ($1,500) Select Falls Skylights ($4,000) Window units, metal frame ($40,000) Corridor area floors, carpet ($36,000) Common area floors, carpet ($43,200) - ------------------------------------------------------------------------------------------------------------------------------
EXHIBIT A CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ---------------------------------------------------------------------------------------------------------------------------------- IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ---------------------------------------------------------------------------------------------------------------------------------- Commercial laundry: dryers ($27,030) - ---------------------------------------------------------------------------------------------------------------------------------- 3326 Four Points Niagara NY $ 0 Immediate Repairs: $ 0 Falls replacement and repair of brick pavers $3,500; concrete stoop adjacent to the loading dock area is in poor condition with cracking, misalignment, spalling and missing handrails, $1,200; and, repair of spalling concrete on the loading dock $1,700. - ---------------------------------------------------------------------------------------------------------------------------------- 3515 Holiday Inn Strongsville OH $ 2,000 Immediate Needs $ 108,300 ADA Accessibility ($39,300) Select are only $2,000 Commercial laundry: washers ($69,000) for asphalt repair work. - ------------------------------------------------------------------------------------------------------------------------------------ 3802 Holiday Inn Greentree PA $ 10,400 Immediate Needs: $ 0 $2,500 for engineering review of spalling loading dock - ------------------------------------------------------------------------------------------------------------------------------------ 3890 Holiday Inn Lancaster PA $ 17,500 Immediate Needs $ 79,000 Rooftop package unit per ton ($24,000) are $17,500 in Commercial laundry: dryers ($25,000) asphalt - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT A CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------ IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ------------------------------------------------------------------------------------------------------------------------------------ repair for Commercial laundry: washers ($30,000) alligatored areas in the parking lot. - ------------------------------------------------------------------------------------------------------------------------------------ 3838 Doubletree Philadelphia PA $ 4,000 EMG noted $4,000 of $ 0 Club Immediate Needs in the form of roofing repairs for the mansard and membrane roofing. The Philadelphia Building Department has the following building and fire code violation on file: Storm water should be conducted to the public storm water system; secure annual electric permit; submit annual fire test records. - ------------------------------------------------------------------------------------------------------------------------------------ 3804 Holiday Inn Pittsburgh PA $ 12,900 Immediate Needs: $ 85,000 Epoxy traffic surface at roof of (Pkwy East) ADA upgrades, garage area ($35,000) $10,400 and a Repairs to underside of deck at engineering review loading dock ($50,000) of the spalling concrete on the underside of the loading dock floor structure ($2,500). - ---------------------------------------------------------------------------------------------------------------------------------
EXHIBIT A CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- --------------------------------------------------------------------------------------------------------------------------------- IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - --------------------------------------------------------------------------------------------------------------------------------- 3875 Holiday Inn York PA $ 0 $ 0 - --------------------------------------------------------------------------------------------------------------------------------- 4021 Clarion Charleston SC $ 0 $ 0 - --------------------------------------------------------------------------------------------------------------------------------- 4040 Holiday Inn Myrtle Beach SC $ 0 $ 614,540 Common area floors, carpet ($207,000) SunSpree Rooftop package unit per ton ($5,040) Boiler ($2,500) Elevator, machinery ($400,000) - --------------------------------------------------------------------------------------------------------------------------------- 4215 French Memphis TN $ 18,020 Immediate Needs: $ 0 Quarter ADA Deficiencies - Suites One car and one van stall with signage $350, Signage indicating accessible parking spaces $100, exterior accessible route from access aisles adjacent to parking space, crossing hazardous vehicle areas, from main roadways and public transportation stops to the building sidewalks and entrances $100, Signage (4 signs) indicating accessible - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT A CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------ IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ------------------------------------------------------------------------------------------------------------------------------------ restrooms $100, restroom modifications $1,370. ($2,020 in total ADA Upgrades) There are also a number of PTAC units that are not in service. Termite infested meeting room doors to be replaced, $8,000. Repair mold damaged meeting rooms, $8,000. - ------------------------------------------------------------------------------------------------------------------------------------ 4343 Courtyard Abilene TX $ 0 $ 96,300 Asphalt pavement (seal coat over term) by Marriott ($5,250) Guestroom: carpet (full service) ($29,700) Guestroom: soft goods (full service) ($34,650) Common area floors, carpet ($26,730) - ------------------------------------------------------------------------------------------------------------------------------------ 4375 Holiday Inn Austin TX $ 50,000 Repair Inoperable $ 0 irrigation system allowance ($20,000), Paint metal mansards ($25,000), Replace tower coping ($5,000) - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT A CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------ IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ------------------------------------------------------------------------------------------------------------------------------------ 4388 Holiday Inn Dallas (DFW TX $ 0 $ 321,907 Asphalt pavement (seal coat over Select Airport) term) ($14,875) Curbing, concrete ($4,000) Exterior walls, painting & coating ($112,800) Common area floors, carpet ($30,600) Common area floors, VCT ($1,350) Common area walls, refinish ($51,000) Public restroom finishes ($12,000) Rooftop package unit per ton ($12,032) Boilers - package unit ($32,000) Elevator, cab interiors ($1,500) Commercial laundry: dryers ($11,000) Commercial laundry: washers ($11,250) Ice machines ($2,500) Meeting room: case goods & furniture ($25,000) - ------------------------------------------------------------------------------------------------------------------------------------ 4380 Holiday Inn Dallas (Mkt TX $ 40,000 Immediate Needs: $ 0 Center) Roof is leaking and requires repair to avoid further interior damage to the meeting rooms and lobby areas where water intrusion was evident, $40,000. - ------------------------------------------------------------------------------------------------------------------------------------ 4310 Crowne Plaza Houston TX $ 0 $ 0 - ------------------------------------------------------------------------------------------------------------------------------------ Totals $1,892,534 $ 4,590,773 - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT B ENVIRONMENTAL REPORTS Exhibit B Lodgian Phase I and Phase II Environmental Reports and Visible Mold and Moisture Assessments
Report Chain/Name City ST Address - --------------------------------------------- --------------------- ----------------- -- ---------------------- EMG: Phase I Environmental Site Assessment of Hampton Inn Dothan AL 3071 Ross Clark Circle EMG: Phase I Environmental Site Assessment of Holiday Inn West Dothan AL 3053 Ross Clark EMG: Phase I Environmental Site Assessment of Holiday Inn Express Gadsden AL 801 Cleveland Ave. EMG: Visible Mold and Moisture Assessment of Holiday Inn Express Gadsden AL 801 Cleveland Ave. EMG: Phase I Environmental Site Assessment of Holiday Inn Sheffield AL 4900 Halch Blvd. EMG: Phase I Environmental Site Assessment of Courtyard by Marriott Bentonville AR 1001 McClain Rd. EMG: Phase I Environmental Site Assessment of Residence Inn Little Rock AR 1401 S. Shackleford Rd. EMG: Phase I Environmental Site Assessment of Holiday Inn East Hartford CT 363 Roberts St. EMG: Phase I Environmental Site Assessment of Hampton Inn Pensacola FL 7330 Plantation Rd. EMG: Phase I Environmental Site Assessment of Holiday Inn Express Pensacola FL 6501 Pensacola Blvd. EMG: Phase I Environmental Site Assessment of Holiday Inn Pensacola FL 7200 Plantation Rd. (University Mail) EMG: Phase I Environmental Site Assessment of Crowne Plaza West Palm Beach FL 1601 Belvedere Rd. EMG: Phase I Environmental Site Assessment of Holiday Inn Winter Haven FL 1150 3rd St., SW EMG: Phase I Environmental Site Assessment of Courtyard by Marriott Atlanta GA 3332 Peachtree Rd. EMG: Phase I Environmental Site Assessment of Holiday Inn Brunswick GA 5252 New Jesup Hwy EMG: Phase I Environmental Site Assessment of Holiday Inn Marietta (hotel & GA 2265 Kingston Cl. suites) EMG: Phase I Environmental Site Assessment of Fairfield Inn Valdosta GA 1311 St. Augustine Rd. EMG: Phase I Environmental Site Assessment of Holiday Inn Valdosta GA 1309 St. Augustine Rd. EMG: Phase I Environmental Site Assessment of Crowne Plaza Cedar Rapids IA 350 1st Ave, NE EMG: Phase I Environmental Site Assessment of Holiday Inn Rolling Meadows IL 3405 Algonquin Rd. EMG: Phase I Environmental Site Assessment of Courtyard by Marriott Florence KY 46 Cavaler Blvd. EMG: Phase I Environmental Site Assessment of Hurstbourne Hotel Louisville KY 9700 Blue Grass Parkway EMG: Phase I Environmental Site Assessment of Courtyard by Marriott Paducah KY 3835 Technology Dr. EMG: Phase I Environmental Site Assessment of Quality Hotel Metairie LA 2261 N. Causeway Blvd. EMG: Visible Mold and Moisture Assessment of Quality Hotel Metairie LA 2261 N. Causeway Blvd. EMG: Phase I Environmental Site Assessment of Residence Inn Dedham MA 259 Elm St. EMG: Phase I Environmental Site Assessment of Holiday Inn Baltimore - BWI MD 890 Elkrdge Landing Rd. Airport EMG: Phase I Environmental Site Assessment of Holiday Inn Baltimore West MD 1800 Belmont Ave. (Belmont) EMG: Phase I Environmental Site Assessment of Holiday Inn Baltimore, Inn MD 301 W. Lombard St. Harbor EMG: Phase I Environmental Site Assessment of Hilton Columbia MD 5485 Twin Knolls Rd. EMG: Phase I Environmental Site Assessment of Holiday Inn Frederick MD 999 W. Patrick St.

EMG Project Report Chain/Name City/ST/Zip Dated Number - --------------------------------------------- --------------------- -------------------------- --------------- ------- EMG: Phase I Environmental Site Assessment of Hampton Inn Dothan, AL 36301 August 16, 2002 94677 EMG: Phase I Environmental Site Assessment of Holiday Inn West Dothan, AL 36301 August 15, 2002 94679 EMG: Phase I Environmental Site Assessment of Holiday Inn Express Gadsden, AL 35954 August 15, 2002 94681 EMG: Visible Mold and Moisture Assessment of Holiday Inn Express Gadsden, AL 35954 October 22, 2002 97020 EMG: Phase I Environmental Site Assessment of Holiday Inn Sheffield, AL 35660 August 15, 2002 94683 EMG: Phase I Environmental Site Assessment of Courtyard by Marriott Bentonville, AR 72712 August 15, 2002 94685 EMG: Phase I Environmental Site Assessment of Residence Inn Little Rock, AR 72211 August 15, 2002 94687 EMG: Phase I Environmental Site Assessment of Holiday Inn E. Hartford, CT 06108 October 24, 2002 94691 EMG: Phase I Environmental Site Assessment of Hampton Inn Pensacola, FL 32504 August 17, 2002 94697 EMG: Phase I Environmental Site Assessment of Holiday Inn Express Pensacola, FL 32505 August 15, 2002 94699 EMG: Phase I Environmental Site Assessment of Holiday Inn Pensacola, FL 32504 August 15, 2002 94701 EMG: Phase I Environmental Site Assessment of Crowne Plaza West Palm Beach, FL 33406 August 15, 2002 94704 EMG: Phase I Environmental Site Assessment of Holiday Inn Winter Haven, FL 33830 August 20, 2002 94706 EMG: Phase I Environmental Site Assessment of Courtyard by Marriott Atlanta, GA 30326 August 15, 2002 94708 EMG: Phase I Environmental Site Assessment of Holiday Inn Brunswick, GA 31525 August 15, 2002 94712 EMG: Phase I Environmental Site Assessment of Holiday Inn Marietta, GA 30067 August 15, 2002 94718 EMG: Phase I Environmental Site Assessment of Fairfield Inn Valdosta, GA 31601 August 15, 2002 94722 EMG: Phase I Environmental Site Assessment of Holiday Inn Valdosta, GA 31601 August 15, 2002 94720 EMG: Phase I Environmental Site Assessment of Crowne Plaza Cedar Rapids, IA 52401 August 15, 2002 94724 EMG: Phase I Environmental Site Assessment of Holiday Inn Rolling Meadows, IL 60008 November5, 2002 94728 EMG: Phase I Environmental Site Assessment of Courtyard by Marriott Florence, KY 41042 August 19, 2002 94730 EMG: Phase I Environmental Site Assessment of Hurstbourne Hotel Louisvile, KY 40299 August 15, 2002 94735 EMG: Phase I Environmental Site Assessment of Courtyard by Marriott Paducah, KY 42001 August 15, 2002 94739 EMG: Phase I Environmental Site Assessment of Quality Hotel Metairie, LA 70001 August 15, 2002 94741 EMG: Visible Mold and Moisture Assessment of Quality Hotel Metairie, LA 70001 22-Oct-02 97022 EMG: Phase I Environmental Site Assessment of Residence Inn Dedham, MA 02026 August 16, 2002 94745 EMG: Phase I Environmental Site Assessment of Holiday Inn Linthicum Heights,MD 21090 August 16, 2002 94748 EMG: Phase I Environmental Site Assessment of Holiday Inn Baltimore, MD 21244 EMG: Phase I Environmental Site Assessment of Holiday Inn August 15, 2002 94750 EMG: Phase I Environmental Site Assessment of Hilton Baltimore, MD 21201 August 15, 2002 94752 EMG: Phase I Environmental Site Assessment of Holiday Inn Columbia, MD 21045 August 15, 2002 94755 Frederick, MD 21702 August 15, 2002 94759
EMG: Phase I Environmental Site Assessment of Holiday Inn Glen Burnie MD 6323 Governor Ritchie Hwy EMG: Phase I Environmental Site Assessment of Holiday Inn Silver Spring MD 8777 Georgia Ave. EMG: Phase I Environmental Site Assessment of Holiday Inn Towson (Cromwell MD 1100 Cromwell Bridge Rd. Bridge) EMG: Phase I Environmental Site Assessment of Holiday Inn Lansing MI 7501 W. Saginaw Hwy EMG: Phase I Environmental Site Assessment of Hilton Troy (Northfield) MI 5500 Crooks Rd. EMG: Phase I Environmental Site Assessment of Holiday Inn Arden Hills/St. Paul MN 1201 West Country Rd. E EMG: Phase I Environmental Site Assessment of Holiday Inn St. Louis North MO 4545 N. Lindbergh Blvd. EMG: Phase I Environmental Site Assessment of Crowne Plaza Albany NY Ten Eyck Flaza EMG: Phase I Environmental Site Assessment of Holiday Inn Grand Island NY 100 Whitehaven Rd. EMG: Phase I Environmental Site Assessment of Holiday Inn Jamestown NY 150 W. 4th St. EMG: Phase II Environmental Site Assessment of Holiday Inn Jamestown NY 150 W. 4th St. EMG: Phase I Environmental Site Assessment of Four Points Niagara Falls NY 114 Buffalo Ave. EMG: Phase I Environmental Site Assessment of Holiday Inn Select Niagara Falls NY 300 Third st. EMG: Phase I Environmental Site Assessment of Holiday Inn Select Strongsville OH 15471 Royalton Rd. EMG: Phase I Environmental Site Assessment of Holiday Inn Select Windsor ONT 1855 Huron Church Road EMG: Phase I Environmental Site Assessment of Holiday Inn Greentree PA 401 Holiday Drive EMG: Phase I Environmental Site Assessment of Holiday Inn Lancaster PA 521 Greenfield Rd. EMG: Phase I Environmental Site Assessment of Doubletree Club Philadelphia PA 9461 Roosavelt Blvd. EMG: Phase I Environmental Site Assessment of Holiday Inn Pittsburgh (Pkwy PA 915 Brinton Rd. East) EMG: Phase II Environmental Site Assessment of Holiday Inn Pittsburgh (Pkwy PA 915 Brinton Rd. East) EMG: Phase I Environmental Site Assessment of Holiday Inn York PA 334 Arsenal Rd. EMG: Phase I Environmental Site Assessment of Clarton North Charleston SC 7401 Northwoods Blvd. EMG: Visible Mold and Molslure Assessment of Clarton North Charleston SC 7401 Northwoods Blvd. EMG: Phase I Environmental Site Assessment of Holiday Inn SunSpree Myrtle Beach SC 1601 N. Ocean Blvd. EMG: Phase I Environmental Site Assessment of French Quarter Suites Memphis TN 2144 Madison Ave. EMG: Visible Mold and Moisture Assessment of French Quarter Suites Memphis TN 2144 Madison Ave. EMG: Phase I Environmental Site Assessment of Courtyard by Marriott Abllene TX 4350 Ridgemont Dr. EMG: Phase I Environmental Site Assessment of Holiday Inn Austin TX 3401 South 1-35 EMG: Phase I Environmental Site Assessment of Holiday Inn Select Dallas (DFW Airport) TX 4441 Hwy 114 & Esters Blvd. EMG: Phase I Environmental Site Assessment of Holiday Inn Dallas (Mkt Center) TX 1955 Market Center Blvd. EMG: Phase I Environmental Site Assessment of Crowne Plaza Houston TX 12801 NW Freeway US 290

EMG: Phase I Environmental Site Assessment of Holiday Inn Glen Burrie, MD 21061 August 15, 2002 94761 EMG: Phase I Environmental Site Assessment of Holiday Inn Silver Spring, MD 20910 August 15, 2002 94763 EMG: Phase I Environmental Site Assessment of Holiday Inn Towson, Md 21286 August 15, 2002 94765 EMG: Phase I Environmental Site Assessment of Holiday Inn Lansing, MI 48917 August 15, 2002 94767 EMG: Phase I Environmental Site Assessment of Hilton Troy, MI 48098 August 19, 2002 94770 EMG: Phase I Environmental Site Assessment of Holiday Inn St. Paul, MN 55112 August 20, 2002 94772 EMG: Phase I Environmental Site Assessment of Holiday Inn St. Louis, MO 63044 August 15, 2002 94774 EMG: Phase I Environmental Site Assessment of Crowne Plaza Albany, NY 12207 August 15, 2002 94776 EMG: Phase I Environmental Site Assessment of Holiday Inn Grand Island, NY 14072 August 15, 2002 94778 EMG: Phase I Environmental Site Assessment of Holiday Inn Jamestown, NY 14701 August 15, 2002 94781 EMG: Phase II Environmental Site Assessment of Holiday Inn Jamestown, NY 14701 October 17, 2002 97025 EMG: Phase I Environmental Site Assessment of Four Points Niagara Falls, NY 14303 August 15, 2002 94785 EMG: Phase I Environmental Site Assessment of Holiday Inn Select Niagara Falls, NY 14303 August 15, 2002 94783 EMG: Phase I Environmental Site Assessment of Holiday Inn Select Strongsville, OH 44136 August 15, 2002 94787 EMG: Phase I Environmental Site Assessment of Holiday Inn Select Canada N9C 2L6 August 15, 2002 94789 EMG: Phase I Environmental Site Assessment of Holiday Inn Pittsburgh, PA 15220 August 15, 2002 94791 EMG: Phase I Environmental Site Assessment of Holiday Inn Lancaster, PA 17601 August 15, 2002 94793 EMG: Phase I Environmental Site Assessment of Doubletree Club Philadelphia, PA 19114 August 15, 2002 94795 EMG: Phase I Environmental Site Assessment of Holiday Inn Pittsburgh, PA 15221 August 15, 2002 94797 EMG: Phase II Environmental Site Assessment of Holiday Inn Pittsburgh, PA 15221 October 21, 2002 97024 EMG: Phase I Environmental Site Assessment of Holiday Inn York, PA 17402 August 15, 2002 94799 EMG: Phase I Environmental Site Assessment of Clarton Charleston SC 29406 August 15, 2002 94801 EMG: Visible Mold and Moisture Assessment of Clarton Charleston, SC 29406 October 22, 2002 97023 EMG: Phase I Environmental Site Assessment of Holiday Inn SunSpree Surfside Beach, SC 29575 August 22, 2002 94803 EMG: Phase I Environmental Site Assessment of French Quarter Suites Memphis, TN 38104 August 15, 2002 94805 EMG: Visible Mold and Moisture Assessment of French Quarter Suites Memphis, TN 38104 October 22, 2002 97021 EMG: Phase I Environmental Site Assessment of Courtyard by Marriott Abllene, TX 79606 August 15, 2002 94812 EMG: Phase I Environmental Site Assessment of Holiday Inn Austin, TX 78741 August 20, 2002 94814 EMG: Phase I Environmental Site Assessment of Holiday Inn Select Irving, TX 75063 August 15, 2002 94817 EMG: Phase I Environmental Site Assessment of Holiday Inn Dallas, TX 75207 August 15, 2002 94822 EMG: Phase I Environmental Site Assessment of Crowne Plaza Houston, TX 77040 August 15, 2002 94824

EXHIBIT C FRANCHISE AGREEMENTS
PROPERTY NAME STATE FRANCHISOR - -------------------------------------------------------------------------------------------- Clarion Charleston SC Choice Quality Hotel Metairie LA Choice Doubletree Club Philadelphia PA Hilton Hampton Inn Dothan AL Hampton Inn Pensacola FL Hilton Inn Columbia MD Hilton Hilton Inn Northfield MI Hilton Courtyard by Marriott - Abilene TX Marriott Courtyard by Marriott - Atlanta GA Marriott Courtyard by Marriott - Bentonville AR Marriott Courtyard by Marriott - Florence KY Marriott Courtyard by Marriott - Paducah KY Marriott Fairfield Inn Valdosta GA Marriott Residence Inn Dedham MA Marriott Residence Inn Little Rock AR Marriott Crowne Plaza Albany NY Six Continents Crowne Plaza Cedar Rapids IA Six Continents Crowne Plaza Houston TX Six Continents Crowne Plaza West Palm Beach FL Six Continents Holiday Inn Arden Hills/St. Paul MN Six Continents Holiday Inn Austin TX Six Continents Holiday Inn Belmont MD Six Continents Holiday Inn Brunswick GA Six Continents Holiday Inn BWI Airport MD Six Continents Holiday Inn Cromwell Bridge MD Six Continents Holiday Inn Dothan AL Six Continents Holiday Inn East Hartford CT Six Continents Holiday Inn Express Gadsden AL Six Continents Holiday Inn Express Pensacola FL Six Continents Holiday Inn Frederick MD Six Continents Holiday Inn Glen Burnie North MD Six Continents Holiday Inn Grand Island NY Six Continents Holiday Inn Greentree PA Six Continents Holiday Inn Hotel & Suites Marietta GA Six Continents Holiday Inn Inner Harbor MD Six Continents Holiday Inn Jamestown NY Six Continents Holiday Inn Lancaster PA Six Continents Holiday Inn Market Center Dallas TX Six Continents Holiday Inn Parkway East PA Six Continents Holiday Inn Rolling Meadows IL Six Continents Holiday Inn Select DFW Airport TX Six Continents Holiday Inn Select Niagara Falls NY Six Continents Holiday Inn Select Strongsville OH Six Continents Holiday Inn Sheffield AL Six Continents Holiday Inn Silver Spring MD Six Continents Holiday Inn St. Louis North MO Six Continents Holiday Inn Sunspree Myrtle Beach SC Six Continents Holiday Inn University Mall FL Six Continents Holiday Inn Valdosta GA Six Continents Holiday Inn West Lansing MI Six Continents Holiday Inn Winter Haven FL Six Continents Holiday Inn York PA Six Continents Four Points Niagara Falls NY Starwood French Quarter Suites Memphis TN Hurtsbourne Hotel KY
EXHIBIT D LODGIAN: ALA SCHEDULE
ALA ----------------------------------- ALLOCATED AGGREGATE LOAN ALLOCATED No. Hotel Location State Rms AMOUNT LOAN AMOUNT - -------------------------- ------------------------ ----- ---- ------------- ------------- 1 Holiday Inn Baltimore - Inner Harbor MD 375 $ 17,363,078 $ 23,359,709 2 Crowne Plaza Albany NY 384 $ 12,983,512 $ 17,467,585 3 Holiday Inn Silver Spring MD 231 $ 12,442,532 $ 16,739,769 4 Holiday Inn Baltimore - BWI Airport MD 259 $ 12,101,539 $ 16,281,009 5 Crowne Plaza Houston TX 291 $ 11,049,232 $ 14,865,269 6 Courtyard by Marriott Atlanta GA 181 $ 9,930,047 $ 13,359,555 7 Holiday Inn Lansing MI 244 $ 6,945,221 $ 9,343,883 8 Doubletree Club Philadelphia PA 282 $ 6,785,620 $ 9,092,823 9 Holiday Inn Select Dallas (DFW Airport) TX 189 $ 6,313,847 $ 8,494,440 10 Hilton Troy (Northfield) MI 191 $ 5,950,776 $ 8,005,977 11 Hilton Columbia MD 152 $ 5,787,693 $ 7,786,570 12 Residence Inn Dedham MA 219 $ 5,261,539 $ 7,078,700 13 Holiday Inn Select Strongsville OH 304 $ 5,261,539 $ 7,078,700 14 Crowne Plaza West Palm Beach FL 81 $ 5,261,539 $ 7,078,700 15 Holiday Inn Rolling Meadows IL 420 $ 4,945,847 $ 6,653,978 16 Courtyard by Marriott Bentonville AR 392 $ 4,209,231 $ 5,662,960 17 Holiday Inn St. Louis North MO 90 $ 4,209,231 $ 5,662,960 18 Holiday Inn Select Niagara Falls NY 397 $ 3,946,154 $ 5,309,025 19 Holiday Inn Greentree PA 200 $ 3,788,308 $ 5,096,664 20 Crowne Plaza Cedar Rapids IA 275 $ 3,788,308 $ 5,096,664 21 Holiday Inn Towson (Cromwell Bridge) MD 139 $ 3,683,077 $ 4,955,090 22 Holiday Inn Arden Hills/St. Paul MN 156 $ 3,630,462 $ 4,884,303 23 Holiday Inn Winter Haven FL 228 $ 3,577,846 $ 4,813,516 24 Residence Inn Little Rock AR 96 $ 3,367,385 $ 4,530,368 25 Courtyard by Marriott Abilene TX 99 $ 3,104,308 $ 4,176,400 26 Hampton Inn Pensacola FL 124 $ 3,081,264 $ 4,145,430 27 Courtyard by Marriott Paducah KY 100 $ 2,999,077 $ 4,034,859 28 Holiday Inn SunSpree Myrtle Beach SC 133 $ 2,946,462 $ 3,964,072 29 Holiday Inn Austin TX 210 $ 2,841,231 $ 3,822,498 30 Holiday Inn Jamestown NY 146 $ 2,841,231 $ 3,822,498 31 Holiday Inn Glen Burnie MD 127 $ 2,788,616 $ 3,751,711 32 Holiday Inn Frederick MD 158 $ 2,683,385 $ 3,610,137 33 Holiday Inn Lancaster PA 189 $ 2,683,385 $ 3,610,137 34 Holiday Inn Pensacola (University Mall) FL 152 $ 2,630,769 $ 3,539,350 35 Fairfield Inn Valdosta GA 108 $ 2,630,769 $ 3,539,350 36 Holiday Inn Sheffield AL 201 $ 2,262,462 $ 3,043,841 37 Hurstbourne Hotel Louisville KY 398 $ 2,054,176 $ 2,763,620 38 Holiday Inn Brunswick GA 126 $ 2,052,000 $ 2,760,693 39 Courtyard by Marriott Florence KY 78 $ 1,999,385 $ 2,689,906 40 Quality Hotel Metairie LA 205 $ 1,946,769 $ 2,619,119 41 Holiday Inn York PA 100 $ 1,946,769 $ 2,619,119 42 Holiday Inn Valdosta GA 167 $ 1,736,308 $ 2,335,971 43 Holiday Inn East Hartford CT 130 $ 1,736,308 $ 2,335,971 44 Hampton Inn Dothan AL 113 $ 1,633,978 $ 2,198,299 45 Holiday Inn Express Pensacola FL 214 $ 1,631,077 $ 2,194,397 46 French Quarter Suites Memphis TN 105 $ 1,516,177 $ 2,039,815 47 Holiday Inn Pittsburgh (Pkwy East) PA 180 $ 1,420,615 $ 1,911,249 48 Four Points Niagara Falls NY 189 $ 1,315,385 $ 1,769,675 49 Holiday Inn Baltimore West (Belmont) MD 135 $ 1,262,769 $ 1,698,888 50 Holiday Inn Express Gadsden AL 141 $ 1,262,769 $ 1,698,888 51 Holiday Inn Marietta (hotel & suites) GA 196 $ 1,157,539 $ 1,557,314 52 Holiday Inn Select Dallas (Mkt Center) TX 246 $ 1,052,308 $ 1,415,740 53 Clarion Charleston SC 197 $ 894,462 $ 1,203,379 54 Holiday Inn Grand Island NY 261 $ 684,000 $ 920,231 55 Holiday Inn Dothan AL 102 $ 684,000 $ 920,231 Total 10,806 $ 224,036,325 $ 302,707,526
EXHIBIT E MANAGEMENT AGREEMENTS 1. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Albany Hotel, Inc. as owner, re: Crowne Plaza, Albany, NY. 2. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and AMI Operating Partners, Limited Partnership, as owner, re: Holiday Inn, East Hartford, CT. 3. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and AMI Operating Partners, Limited Partnership, as owner, re: Holiday Inn, Fredrick, MD. 4. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and AMI Operating Partners, Limited Partnership, as owner, re; Holiday Inn, Cromwell Bridge, MD. 5. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and AMI Operating Partners, Limited Partnership, as owner, re: Holiday Inn, Belmont, MD. 6. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and AMI Operating Partners, Limited Partnership, as owner, re: Holiday Inn, York, PA. 7. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Apico Hills, Inc., as owner, re: Holiday Inn, Pittsburgh, PA. 8. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Apico Inns of Green Tree, Inc., as owner, re: Holiday Inn Green Tree, Pittsburgh, PA. 9. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Brunswick Motel Enterprises, Inc., as owner, re: Holiday Inn, Brunswick, GA. 10. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Dedham Lodging Associates I, Limited Partnership, as owner, re: Residence Inn, Dedham, MA. 11. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Dothan Hospitality 3053, Inc., as owner, re: Holiday Inn, Dothan, AL. 12. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Dothan Hospitality 3071, Inc., as owner, re: Hampton Inn, Dothan, AL. 13. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Gadsden Hospitality, Inc., as owner, re: Holiday Inn Express, Gadsden, AL. 14. Management Agreement, dated November 12, 2002 between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: Courtyard by Marriott, Atlanta, GA. 15. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: Courtyard by Marriott, Abilene TX. 16. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: Courtyard by Marriott, Florence, KY. 17. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: Courtyard by Marriott, Bentonville, AR. 18. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: DoubleTree Club, Philadelphia, PA. 19. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: The Hurtsbourne Hotel, Louisville, KY. 20. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: Fairfield Inn, Valdosta, GA. 21. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: Holiday Inn, Valdosta, GA. 22. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: Holiday Inn Select, Dallas/Fort Worth Airport, TX. 23. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: Holiday Inn, North St. Louis, MO. 24. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: Holiday Inn, Surfside Beach, SC. 25. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: Holiday Inn Select, Strongsville OH. 26. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: Holiday Inn Suites, Marieeta, GA. 27. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: Courtyard by Marriott, Paducah, KY. -2- 28. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Little Rock Lodging Associates I, Limited Partnership, as owner, re: Residence Inn, Little Rock, AR. 29. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Lodgian AMI, Inc., as owner, re: Holiday Inn, Inner Harbor, Baltimore, MD. 30. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Lodgian AMI, Inc., as owner, re: Holiday Inn, Glen Burnie, MD. 31. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Lodgian AMI, Inc., as owner, re: Holiday Inn, BWI Airport, Baltimore, MD. 32. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Lodgian AMI, Inc., as owner, re: Holiday Inn, Lancaster, PA. 33. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Minneapolis Motel Enterprises, Inc., as owner, re: Holiday Inn, St. Paul, MN. 34. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and NH Motel Enterprises, Inc., as owner, re: Hilton Norfield, Troy, MI. 35. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Cedar Rapids, Inc., as owner, re: Crowne Plaza, Cedar Rapids, IA. 36. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Centre Associates, Ltd., as owner, re: Crowne Plaza, West Palm Beach, FL. 37. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Grand Island, Inc., as owner, re: Holiday Inn, Grand Island, NY. 38. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Jamestown, Inc., as owner, re: Holiday Inn, Jamestown, NY. 39. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Lansing, Inc., as owner, re: Holiday Inn, Lansing, MI. 40. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Maryland, Inc., as owner, re: Holiday Inn, Silver Springs, MD. 41. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Metairie, Inc., as owner, re: Quality Hotel, Metaire, LA. -3- 42. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico New York, Inc., as owner, re: Holiday Inn Select, Niagara Falls, NY. 43. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Niagara Falls, as owner, re: Four Points Sheraton, Niagara Falls, NY. 44. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Northwoods, Inc., as owner, re: Clarion Hotel, Charleston, SC. 45. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Pensacola 7200, Inc., as owner, re: Holiday Inn, Pensacola, FL. 46. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Pensacola 7330, Inc., as owner, re: Hampton Inn, Pensacola, FL. 47. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Pensacola, Inc., as owner, re: Holiday Inn Express, Pensacola, FL. 48. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Rolling Meadows, Inc., as owner, re: Holiday Inn, Rolling Meadows, IL. 49. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Winter Haven, Inc., as owner, re: Holiday Inn, Winter Haven, FL. 50. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Sheffield Motel Enterprises, Inc., as owner, re: Holiday Inn, Sheffield, AL. 51. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Austin, Inc., as owner, re: Holiday Inn, Austin, TX. 52. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Columbia, Inc., as owner, re: Hilton, Columbia, MD. 53. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Houston, Inc., as owner, re: Crowne Plaza, Houston, TX. 54. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Market Center, Inc., as owner, re: Holiday Inn, Dallas, TX. 55. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Lodgian Memphis Property Owner, LLC, as owner, re: French Quarter Suites, Memphis, TN. -4- EXHIBIT F LODGIAN
CHAIN/NAME CITY ST ADDRESS CITY/ST/ZIP - --------------------- -------------------------- -- ---------------------- --------------------------- Hampton Inn Dothan AL 3071 Ross Clark Circle Dothan, AL 36301 Holiday Inn West Dothan AL 3053 Ross Clark Dothan, AL 36301 Holiday Inn Express Gadsden AL 801 Cleveland Ave. Gadsden, AL 35954 Holiday Inn Sheffield AL 4900 Hatch Blvd. Sheffield, AL 35660 Courtyard by Marriott Bentonville AR 1001 McClain Rd. Bentonville, AR 72712 Residence Inn Little Rock AR 1401 S. Shackleford Rd. Little Rock, AR 72211 Holiday Inn East Hartford CT 363 Roberts St. E. Hartford, CT 06108 Hampton Inn Pensacola FL 7330 Plantation Rd. Pensacola, FL 32504 Holiday Inn Express Pensacola FL 6501 Pensacola Blvd. Pensacola, FL 32505 Holiday Inn Pensacola (University Mall) FL 7200 Plantation Rd. Pensacola, FL 32504 Crowne Plaza West Palm Beach FL 1601 Belvedere Rd. West Palm Beach, FL 33406 Holiday Inn Winter Haven FL 1150 3rd St., SW Winter Haven, FL 33880 Courtyard by Marriott Atlanta GA 3332 Peachtree Rd. Atlanta, GA 30326 Holiday Inn Brunswick GA 5252 New Jesup Hwy Brunswick, GA 31525 Holiday Inn Marietta (hotel & suites) GA 2265 Kingston Ct. Marietta, GA 30067 Fairfield Inn Valdosta GA 1311 St. Augustine Rd. Valdosta, GA 31601 Holiday Inn Valdosta GA 1309 St. Augustine Rd. Valdosta, GA 31601 Crowne Plaza Cedar Rapids IA 350 1st Ave, NE Cedar Rapids, IA 52401 Holiday Inn Rolling Meadows IL 3405 Algonquin Rd. Rolling Meadows, IL 60008 Courtyard by Marriott Florence KY 46 Cavalier Blvd. Florence, KY 41042 Hurstbourne Hotel Louisville KY 9700 Blue Grass Parkway Louisville, KY 40299 Courtyard by Marriott Paducah KY 3835 Technology Dr. Paducah, KY 42001 Quality Hotel Metairie LA 2261 N. Causeway Blvd. Metairie, LA 70001 Residence Inn Dedham MA 259 Elm St. Dedham, MA 02026 Holiday Inn Baltimore - BWI Airport MD 890 Elkridge Landing Rd. Linthicum Heights, MD 21090 Holiday Inn Baltimore West (Belmont) MD 1800 Belmont Ave. Baltimore, MD 21244 Holiday Inn Baltimore, Inn Harbor MD 301 W. Lombard St. Baltimore, MD 21201 Hilton Columbia MD 5485 Twin Knolls Rd. Columbia, MD 21045 Holiday Inn Frederick MD 999 W. Patrick St. Frederick, MD 21702 Holiday Inn Glen Burnie MD 6323 Governor Ritchie Hwy Glen Burnie, MD 21061 Holiday Inn Silver Spring MD 8777 Georgia Ave. Silver Spring, MD 20910 Holiday Inn Towson (Cromwell Bridge) MD 1100 Cromwell Bridge Rd. Towson, MD 21286 Holiday Inn Lansing MI 7501 W. Saginaw Hwy Lansing, MI 48917 Hilton Troy (Northfield) MI 5500 Crooks Rd. Troy, MI 48098
EXHIBIT F Holiday Inn Arden Hills/St. Paul MN 1201 West Country Rd. E St. Paul, MN 55112 Holiday Inn St. Louis North MO 4545 N. Lindbergh Blvd. St. Louis, MO 63044 Crowne Plaza Albany NY Ten Eyck Plaza Albany, NY 12207 Holiday Inn Grand Island NY 100 Whitehaven Rd. Grand Island, NY 14072 Holiday Inn Jamestown NY 150 W. 4th St. Jamestown, NY 14701 Four Points Niagara Falls NY 114 Buffalo Ave. Niagara Falls, NY 14303 Holiday Inn Select Niagara Falls NY 300 Third St. Niagara Falls, NY 14303 Holiday Inn Select Strongsville OH 15471 Royalton Rd. Strongsville, OH 44136 Holiday Inn Greentree PA 401 Holiday Drive Pittsburgh, PA 15220 Holiday Inn Lancaster PA 521 Greenfield Rd. Lancaster, PA 17601 Doubletree Club Philadelphia PA 9461 Roosevelt Blvd. Philadelphia, PA 19114 Holiday Inn Pittsburgh (Pkwy East) PA 915 Brinton Rd. Pittsburgh, PA 15221 Holiday Inn York PA 334 Arsenal Rd. York, PA 17402 Clarion North Charleston SC 7401 Northwoods Blvd. Charleston, SC 29406 Holiday Inn SunSpree Myrtle Beach SC 1601 N. Ocean Blvd. Surfside Beach, SC 29575 French Quarter Suites Memphis TN 2144 Madison Ave. Memphis, TN 38104 Courtyard by Marriott Abilene TX 4350 Ridgemont Dr. Abilene, TX 79606 Holiday Inn Austin TX 3401 South I-35 Austin, TX 78741 Holiday Inn Select Dallas (DFW Airport) TX 4441 Hwy 114 & Irving, TX 75063 Esters Blvd. Holiday Inn Dallas (Mkt Center) TX 1955 Market Center Blvd. Dallas, TX 75207 Crowne Plaza Houston TX 12801 NW Freeway US 290 Houston, TX 77040

EXHIBIT G Property Improvement Plans Clarion Hotel Charleston, SC Hilton Hotel Troy (Northfield), MI Hilton Hotel Columbia, MD Doubletree Club Hotel Philadelphia, PA Holiday Inn Sheffield, AL PROPERTY IMPROVEMENT PLAN CLARION HOTEL CHARLESTON, SC SC237 CLARION HOTEL ADDENDUM NO.1 The Franchise Agreement ( "Agreement ") of even date between Choice Hotels International, Inc., a Delaware corporation ( "we" or "us") and SERVICO NORTHWOODS INC., a Florida corporation, TOM GRYBOSKI, Individually, jointly and severally ( "you") is amended by the following: 1. You agree to make the following changes and additions to upgrade the Hotel to meet our standards or to cure existing deficiencies before entering the CLARION HOTEL System, BUT IN NO EVENT LATER THAN SEPTEMBER 15, 2000. You may not use the proprietary marks until we authorize you to do so. (a) replace informational/ directional signage package (b) provide minimally 4 Guest Privileges "upgrade" type rooms. (c) install towel rack at all guest bath room vanity's (d) replace all damaged guest bath room ceiling grids and tiles in atrium rooms. (e) install Clarion Sleeper by SERTA bedding in 50% of guest rooms (f) replace all guest room door signage, numbers, to a more contemporary design (g) paint guest room entry doors (h) install a microwave oven in all Clarion Class Leisure rooms. (i) install refrigerators in all Clarion Leisure and Business Class rooms. All refrigerators are to be placed in enclosed cabinet. (j) renovate and equip no less than 20% of available room inventory as Clarion Class Leisure Rooms. (k) renovate and equip no less than 35% of available room inventory as Clarion Class Business rooms. These must include the Class One Business Station per the Clarion rules & regulations. (l) replace damaged luggage carts (m) replace all desk chairs not meeting Clarion minimum specifications. Desk chairs must have a fully upholstered seat and back (n) repaint all damaged restaurant and lounge furniture (in Atrium) (o) paint all railings (interior and exterior) (p) install full sized irons and ironing boards in all guestrooms (q) install a hair dryer (minimum heat output of 1500 watts) in all guestrooms (r) install telephone data ports in all guest rooms Addendum No. 1 Page 2 (s) install required furniture at pool, to include, but not limited to umbrella tables with chairs, chaise lounges and suntan lounges per the Clarion minimum specifications. (t) repair pool fence and gate(s). Pool gates must be self closing and self locking. (u) replace damaged wall vinyl in atrium/ lobby. Paint damaged area as needed. (v) replace stained/ damaged ceiling tile in all public bathrooms. (w) replace damaged/ stained ceiling tile in public corridors. Restore acoustic spray where lacking. (x) replace damaged windows in atrium/ lobby. (y) clean all walkways and driveway(under porte-cochere) thoroughly. 2. You agree to make the following changes and additions to upgrade the Hotel to meet our standards or to cure existing deficiencies in accordance with the CLARION HOTEL Rules and Regulations AFTER ENTERING THE SYSTEM IN ACCORDANCE WITH THE FOLLOWING SCHEDULE: By December 1, 2001 (a) install new Clarion Sleeper by Serta bed sets in all remaining guestrooms (b) replace guest bath room tile floors with ceramic tile of at least 2 square inches. (c) replace all television sets with 25", swivel mounted remote control television sets (d) replace wall vinyl in all guest rooms and guest bath rooms. By December 31, 2001 (e) enclose closets in guest rooms per requirements of the Clarion rules and regulations. (f) install window sheers in all guest rooms. (g) modify and equip an area to comply with all requirements of the Clarion BIZNET business center. It is strongly recommended that guests have access to this area 24 hours per day. (h) replace all wall vinyl in interior (atrium) hallways (i) recondition both elevator cabs by renovating ceiling, walls and floor. (j) replace damaged lobby entrance doors. 3. You acknowledge and agree that the changes and additions stated in paragraphs 1 and 2 are in addition to your continuing obligation to comply with the Rules and Regulations under paragraph 6.a. of the Franchise Agreement. Addendum No. 1 Page 3 4. You represent and warrant to us that you are not party to any contract that would conflict with this Agreement. If the Hotel is presently operated under a franchise agreement with another franchisor, this Agreement is contingent on you furnishing verification satisfactory to us within thirty (30) days, but in any event before entering the System, evidencing your right to terminate the other franchise. Furthermore, you agree to defend, indemnify and hold us harmless against any claims, losses, or liabilities that may be asserted against us by the other franchisor arising out of or related to the termination of the other franchise, including tortious interference with contractual relations or similar claims. 5. The secondary name "Airport" may be used so long as the Hotel is located within five (5) miles of the airport, you provide or have arranged transportation to and from the airport upon guest demand (this service does not need to be complimentary) and you must have a direct-dial telephone in the terminal of the airport. In the event any of the aforementioned requirements have not been met or cease to be met, the Hotel will not be authorized to use the secondary name. 6. We agree that you may use the secondary name of airport. Your property will now be referred to as "CLARION HOTEL Airport". Please bear in mind that our approval of this secondary marketing name does not grant you a contractual right to use this name indefinitely. If the circumstances, market conditions, or our criteria change, we reserve the right to revoke our approval of this secondary name at a later date. 7. Subject to the provisions of paragraph 8 below, paragraph 4(b) of the Agreement thereto are hereby replaced by the following: (a) "You must pay to Us a monthly Royalty Fee as follows: beginning on the Opening Date, a sum equal to 3.13% of the Gross Room Revenues for each month. (b) "You must pay to Us a monthly Marketing Fee as follows: beginning on the Opening Date, a sum equal to 0.83% of the Gross Room Revenues for each month. We may increase the Marketing Fee for increases in inflation or costs of advertising, publicity, public relations or marketing so long as any the increases apply to all or most of the U.S. hotels in the System unless we get your approval to a greater amount. (c) "You must pay to Us a monthly Reservations Fee as follows: beginning on the Opening Date, sum equal to 1.04% of the Gross Room Revenues for each month. We may increase the Reservations Fee for increases in our cost of providing the reservations system so long as any the increases apply to all or most of the U.S. hotels in the System unless we get your approval to a greater amount Addendum No. 1 Page 4 8. The modifications referred to in paragraph 7 above are made upon the express conditions that you permit no material default of your obligations in this Agreement (including any Addenda thereto) to continue for more than 30 days or, after the Opening Date, that you not receive a failing Quality Assurance Review score in any of the categories which are scored (i.e., Housekeeping, Mandatory or Maintenance & Capital Improvements). "Material default" includes non payment of any fees or other monies required to be paid by this Agreement. In the event either of the aforementioned deficiencies shall occur, the modification(s) referred to in paragraph 7 shall thereafter automatically become null and void and shall not be reinstated even if the conditions are subsequently removed and paragraph 4(b) of the Agreement thereto shall be reinstated. Such modification is exclusive to you and is not transferable to any other party. 9. Notwithstanding anything to the contrary contained in paragraph 10 of the Agreement, if the Hotel is sold to a bona fide purchaser and the purchaser does not enter into a Franchise Agreement with us for the Hotel or does not assume this Agreement, the amount of liquidated damages shall not exceed $25,000 so long as liquidated damages and all fees accruing under the Agreement are paid in certified funds within 30 days from the sale of the Hotel. 10. Notwithstanding anything contained in paragraph 9(b) of the Agreement, you may transfer a direct or indirect interest in the Hotel or in this Agreement to a limited liability company, a corporation or a partnership formed within 60 months of the date of this Agreement without payment of any affiliation fee, if: (a) You send us prior written notice of the transfer; (b) You are not in default under this Agreement; (c) You execute and deliver to us a general release of all claims you have against us; (d) You will own a majority of the beneficial interest in the limited liability company, corporation or partnership after the transfer; (e) You agree that you are not relieved of your obligation under this Agreement unless we specifically release you in writing; (f) Your successor assumes, in a writing that we accept, your obligations under this Agreement; (g) Your successor submits evidence to us that it owns the Hotel; and (h) We approve of the transfer after a credit and legal review. 11. Notwithstanding anything to the contrary, if we approve and enter into 2 additional franchise agreements with you for NE069-CLHO (Omaha) and IA078-QIIN (Council Bluffs) by September 10, 2000, then the Affiliation Fee pursuant to paragraph 4(a) of this Agreement will be $25,000, the discounted fees contained in paragraph 7 of Addendum No. 1 will be in effect and liquidated damages pursuant to paragraph 9 of Addendum No. 1 will be in effect. The additional franchise agreements will be entitled to the same discounted fees in this Agreement. If we do not approve and enter into the 2 additional franchise agreements with you pursuant to this paragraph, then the affiliation fee will be $40,000 and you must pay the balance according to the terms of the attached Promissory Note that you will execute, and the modification(s) referred to in paragraphs 7 and 9 shall thereafter automatically become null and void and paragraph 4(b) of the Agreement shall be reinstated. If we do execute the 2 additional franchise agreements with you, then we will waive the terms of the Promissory Note. (SEE NEXT PAGE FOR SIGNATURES) Addendum No. 1 Page 5 IN WITNESS WHEREOF, you and we have signed this Addendum to the Franchise Agreement. Attest: CHOICE HOTELS INTERNATIONAL, INC., A Delaware corporation __________________________ By:_________________________________________ L.S. Name: Kevin M. Rooney Name: Michael J. DeSantis Title: Assistant Secretary Title: Senior Vice President SERVICO NORTHWOODS INC., a Florida corporation, TOM GRYBOSKI, Individually, jointly and severally Witness: SERVICO NORTHWOODS INC., a Florida corporation __________________________ By:__________________________________________L.S. Name: Name: Karyn M. Gutierrez Title: Title: President Date:____________________________ Witness: TOM GRYBOSKI, Individually __________________________ _____________________________________________L.S. Name: Date:____________________________ Witness: __________________________ By:__________________________________________L.S. Name: Name: Title: Title: Date:____________________________ Witness: __________________________ By:__________________________________________L.S. Name: Name: Title: Title: Date:____________________________ PROPERTY IMPROVEMENT PLAN HILTON HOTEL TROY (NORTHFIELD), MI PRELIMINARY PRODUCT IMPROVEMENT REPORT HILTON HOTEL-DETROIT, NORTHFIELD, MI CONDUCTED ON: 7/15/02. BY C. ENGELHARDT THE IMPROVEMENTS IDENTIFIED IN THIS REPORT ARE BASED ON CONDITIONS EXISTING ON THE ABOVE DATE. PROPERTY TRANSACTIONS OCCURRING AFTER 180 DAYS WILL REQUIRE AN UPDATED REPORT. ANY WAIVERS AND/OR VARIANCES ISSUED ARE CANCELLED AND NO LONGER EFFECTIVE AT TIME OF SALE, CLOSING, OR ANY OTHER AMENDMENT TO THE ORIGINAL FRANCHISE AGREEMENT. HILTON HOTELS DOES NOT AND CANNOT WARRANT CONFORMANCE WITH INTERPRETATION OF THE AMERICANS WITH DISABILITIES ACT ("ADA") AND THE ADA ACCESSIBILITY GUIDELINES. OWNERSHIP IS RESPONSIBLE FOR COMPLIANCE WITH APPLICABLE PROVISIONS OF THE ADA. APPROPRIATE COUNSEL TO ENSURE COMPLIANCE IS URGED. EXTERIOR
============================================================================================================================== START FINISH STATUS DATE SCOPE OF WORK DATE ============================================================================================================================== BUILDING, ENTRANCE, PORTE COCHERE AND SIGNAGE ============================================================================================================================== 7/31/02 Replace T-10-11 Surface with EIFS. 180 days - ------------------------------------------------------------------------------------------------------------------------------ 7/31/02 Add decorative stamped paver slab under Porte Cochere 180 days - ------------------------------------------------------------------------------------------------------------------------------ 7/31/02 Add new recessed lighting package to underside of Porte Cochere roof. 180 days - ------------------------------------------------------------------------------------------------------------------------------ 7/31/02 Repair water stains Porte Cochere ceiling. 180 days - ------------------------------------------------------------------------------------------------------------------------------ 7/31/02 Replace damaged PTAC grills. 180 days - ------------------------------------------------------------------------------------------------------------------------------ 7/31/02 Resurface cracked areas of building exterior 180 days - ----------------------------------------------------------------------------------------------------------------------------- 7/31/02 Add electronic card swipes at all entrances 180 days - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ ============================================================================================================================== PARKING LOT, LANDSCAPING, LIGHTING, ETC. ============================================================================================================================== 7/31/02 Resurface and stripe entire parking area. 180 days - ------------------------------------------------------------------------------------------------------------------------------ 7/31/02 Add additional landscaping around perimeter of hotel and on all island beds in parking lot. 180 days - ------------------------------------------------------------------------------------------------------------------------------ 7/31/02 Replace all exterior signage with new Hilton logo. 180 days - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ ==============================================================================================================================
Page 1 of 9 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 ================================================================================ PUBLIC AREAS ================================================================================
========================================================================================= START FINISH DATE SCOPE OF WORK DATE STATUS ========================================================================================= LOBBY/ENTRANCE - ----------------------------------------------------------------------------------------- 7/31/02 Cover all concrete surfaces with gypsum board or 180 days an appropriate millwork treatment. - ----------------------------------------------------------------------------------------- 7/31/02 Replace wall sconces. 180 days - ----------------------------------------------------------------------------------------- 7/31/02 Replace carpet a entrance. 180 days - ----------------------------------------------------------------------------------------- 7/31/02 Replace and upgrade all millwork on telephone 180 days partitions must be modified to comply with ADA requirements. - ----------------------------------------------------------------------------------------- 7/31/02 Replace wall vinyl in lobby area and first floor 180 days corridors. - ----------------------------------------------------------------------------------------- 7/31/02 Refinish front desk surfaces. 180 days - ----------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------- ========================================================================================= PUBLIC RESTROOMS ========================================================================================= 7/31/02 Remodel restrooms to include; wall coverings, 180 days partitions, vanities, tile, lighting package and mirrors. - ----------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------- ========================================================================================= CORRIDORS/ELEVATOR/STAIRWELLS ========================================================================================= 7/31/02 Replace all carpet and carpet pad 180 days - ----------------------------------------------------------------------------------------- 7/31/02 Upgrade wall sconces on floors 1 and 3 to same 180 days style as 2nd floor. - ----------------------------------------------------------------------------------------- 7/31/02 Provide artwork in all guest room corridors. 180 days - ----------------------------------------------------------------------------------------- 7/31/02 Upgrade ceiling in guest corridors. 180 days - ----------------------------------------------------------------------------------------- 7/31/02 Refinish elevator cabs to include; walls floors 180 days ceilings and lighting. - ----------------------------------------------------------------------------------------- 7/31/02 Ensure panel controls are ADA compliant. 180 days - -----------------------------------------------------------------------------------------
Page 2 0f 9 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 ========================================================================================= COMPLIMENTARY SERVICES AREA ========================================================================================= - ----------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------- ========================================================================================= RESTAURANT ========================================================================================= 7/31/02 Completely remodel the restaurant facility, to 180 days include; carpet, carpet pad, walls, lighting package, artwork, tables, chairs, ceiling, entrance/host stand and buffet line. - ----------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------- ========================================================================================= KITCHENS ========================================================================================= 7/31/02 Professionally deep clean walls and equipment. 180 days - ----------------------------------------------------------------------------------------- 7/31/02 Replace ceiling tiles. 180 days - ----------------------------------------------------------------------------------------- 7/31/02 Replace kitchen floor file 180 days - ----------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------
================================================================================ PUBLIC AREAS ================================================================================
========================================================================================= START FINISH DATE SCOPE OF WORK DATE STATUS ========================================================================================= LOUNGE ========================================================================================= 7/31/02 Refinish bar surface and front. Replace bar 180 days stools. - ----------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------
Page 3 of 9 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 ================================================================================ MEETING FACILITIES ================================================================================
========================================================================================= START FINISH DATE SCOPE OF WORK DATE STATUS ========================================================================================= BALLROOM ========================================================================================= 7/31/02 Replace existing lay-in ceiling tile with a 180 days combination of gyp board and lay-in tile. New ceiling tile must be a tegular edge tile with a fine line 9/16" grid system. - ----------------------------------------------------------------------------------------- 7/31/02 Replace vinyl wall covering. 180 days - ----------------------------------------------------------------------------------------- 7/31/02 Repair or replace existing air walls. 180 days - ----------------------------------------------------------------------------------------- 7/31/02 Replace carpet and carpet pad. 180 days - ----------------------------------------------------------------------------------------- 7/31/02 Replace all banquet stack chairs. 180 days - ----------------------------------------------------------------------------------------- 7/31/02 Replace lighting package. 180 days - ----------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------- ========================================================================================= PRE-FUNCTION AREA ========================================================================================= 7/31/02 Replace carpet and carpet pad 180 days - ----------------------------------------------------------------------------------------- 7/31/02 Replace all wall vinyl 180 days - ----------------------------------------------------------------------------------------- 7/31/02 Replace soft seating groups 180 days - ----------------------------------------------------------------------------------------- 7/31/02 Replace lighting package 180 days - ----------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------- ========================================================================================= MEETING ROOM ========================================================================================= 7/31/02 Replace lay in ceiling system with a 2x2' tile 180 days with tegular edge and a 9/16" grid system. - ----------------------------------------------------------------------------------------- 7/31/02 Replace carpet and carpet pad 180 days - ----------------------------------------------------------------------------------------- 7/31/02 Replace all wall vinyl 180 days - ----------------------------------------------------------------------------------------- 7/31/02 Replace lighting package 180 days - ----------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------- ========================================================================================= RESTROOMS-PRE-FUNCTION AREA ========================================================================================= 7/31/02 Completely remodel restrooms to include; floors, 180 days vanities, mirrors, partitions, wall vinyl, ceilings, and chrome - ----------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------
Page 4 of 9 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 ================================================================================ BACK OF HOUSE/STORAGE AREAS ================================================================================
========================================================================================= START FINISH DATE SCOPE OF WORK DATE STATUS ========================================================================================= HOUSEKEEPING/MAINTENANCE ========================================================================================= - ----------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------- ========================================================================================= STORAGE AREAS ========================================================================================= - ----------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------- =========================================================================================
================================================================================ RECREATIONAL FACILITIES ================================================================================
========================================================================================= START FINISH DATE SCOPE OF WORK DATE STATUS ========================================================================================= POOL AND ADJACENT AREAS ========================================================================================= 7/31/02 Remodel pool area to include; new deck, replace 180 days vinyl and resurface bottom of pool. - ----------------------------------------------------------------------------------------- 7/31/02 Repair broken window seals. 180 days - ----------------------------------------------------------------------------------------- 7/31/02 Add required exercise room with appropriate 180 days pieces of equipment. - ----------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------
Page 5 of 9 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 ================================================================================ POOL-PUBLIC RESTROOMS ================================================================================ 7/31/02 Remodel Men's and Women's Locker rooms, restrooms 180 days and shower areas to include: ceramic tile surfaces, wall finishes, ceilings, vanities, fixtures, chrome and lighting package. - -------------------------------------------------------------------------------- ================================================================================ GUESTROOMS ================================================================================
========================================================================================= START FINISH DATE SCOPE OF WORK DATE STATUS ========================================================================================= BEDROOM ========================================================================================= 9/1/01 Add two line telephones with two phones present 180 days in each room. The telephone on the desk must be equipped with an RJ11 jack located at the base of the phone that is clearly labeled Data Port. - ----------------------------------------------------------------------------------------- 7/31/02 Install 27" televisions per brand standards. 180 days - ----------------------------------------------------------------------------------------- 7/31/02 Install approved closer rod system as stated in 180 days the Design and Construction Standards Manual. - ----------------------------------------------------------------------------------------- 7/31/02 Add new "soft goods" and case good pieces to 180 days rooms to include; Carpet, carpet pad, drapes, bedspreads, soft seating, lamps and Hilton approved work desk and ergonomic chair. - ----------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------
Page 6 of 9 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 ================================================================================ GUEST ROOMS ================================================================================
========================================================================================= START FINISH DATE SCOPE OF WORK DATE STATUS ========================================================================================= BATHROOM ========================================================================================= 7/31/02 Remodel all guest bathrooms on 1st and 3rd floor 180 days to include; minimum 6x6" ceramic tile, new tub surrounds that meet current standards, new VWC, new lighting package, replace vanities, new chrome and paint ceilings. - ----------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------
Page 7 of 9 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 ================================================================================ OTHER ================================================================================
========================================================================================= DATE AREA STATUS ========================================================================================= ========================================================================================= 7/31/02 Replace carpet in back office area. 180 days - ----------------------------------------------------------------------------------------- 7/31/02 Replace flooring in back of house offices. 180 days - ----------------------------------------------------------------------------------------- 7/31/02 Replace office furniture in back of house 180 days offices - ----------------------------------------------------------------------------------------- 7/31/02 Repair leaks in stairwells and repair water 180 days damage. - ----------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------- ========================================================================================= ========================================================================================= - ----------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------
Page 8 of 9 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 Page 9 of 9 PROPERTY IMPROVEMENT PLAN HILTON HOTEL COLUMBIA, MD PRELIMINARY PRODUCT IMPROVEMENT REPORT ================================================================================ HILTON HOTEL-COLUMBIA. MD. ================================================================================ CONDUCTED ON: 7/16/02 BY: C. ENGELHARDT THE IMPROVEMENTS IDENTIFIED IN THIS REPORT ARE BASED ON CONDITIONS EXISTING ON THE ABOVE DATE. PROPERTY TRANSACTIONS OCCURRING AFTER 180 DAYS WILL REQUIRE AN UPDATED REPORT. ANY WAIVERS AND/OR VARIANCES ISSUED ARE CANCELLED AND NO LONGER EFFECTIVE AT TIME OF SALE, CLOSING, OR ANY OTHER AMENDMENT TO THE ORIGINAL FRANCHISE AGREEMENT. HILTON HOTELS DOES NOT AND CANNOT WARRANT CONFORMANCE WITH INTERPRETATION OF THE AMERICANS WITH DISABILITIES ACT ("ADA") AND THE ADA ACCESSIBILITY GUIDELINES. OWNERSHIP IS RESPONSIBLE FOR COMPLIANCE WITH APPLICABLE PROVISIONS OF THE ADA. APPROPRIATE COUNSEL TO ENSURE COMPLIANCE IS URGED. ================================================================================ EXTERIOR ================================================================================
========================================================================================= START FINISH DATE SCOPE OF WORK DATE STATUS ========================================================================================= BUILDING, ENTRANCE, PORTE COCHERE AND SIGNAGE ========================================================================================= 7/31/02 The Porte Cochere requires renovation in 180 days conjunction with the exterior improvements to heighten curb appeal and create a "First Class" sense of arrival. Provide new roofline, strong architectural detail at the fascia, built out columns with capitals and bases, decorative lighting, new ceiling treatment and upgraded stamped paving. The entrance walk areas where matting exists are to receive upgraded treatments. Architect renderings are to be submitted to Hilton for approval. - ----------------------------------------------------------------------------------------- 7/31/02 Resurfacing of exterior wall finishes with 180 days synthetic stucco, stone or brick. Reseal or replace all exterior windows and repaint frames. Install upgraded exterior lighting package and exterior entrances. Architect renderings are to be submitted to Hilton for approval. - ----------------------------------------------------------------------------------------- 7/31/02 Replace all sidewalks that are cracked, graveled 180 days or sunken. - ----------------------------------------------------------------------------------------- 7/31/02 Replace existing Hilton signage with new logo 180 days and cartouche to meet all current Hilton standards and requirements. - ----------------------------------------------------------------------------------------- 7/31/02 Install Hilton Brand Standard flagpoles (3) and 180 days flags in front of building. - ----------------------------------------------------------------------------------------- 7/31/02 Vans to be repainted and conform to the current 180 days graphic identity standards. - ----------------------------------------------------------------------------------------- 7/31/02 Remove existing enclosure of trash/dumpster 180 days area. Remove and replace concrete pad and adequately seal at wall joint to prevent further sub structure leakage. Resurface exterior walls and provide additional lighting. - ----------------------------------------------------------------------------------------- 7/31/02 Replace awning at exterior restaurant entrance. 180 days - ----------------------------------------------------------------------------------------- 7/31/02 Properly enclose chilling tower to include 180 days wooden louvered vent panels. - ----------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------
Page 1 of 10 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 ===================================================================================================== PARKING LOT, LANDSCAPING, LIGHTING, ETC. ===================================================================================================== 7/31/02 Patch, resurface and stripe entire parking lot. Remove or replace all 180 days concrete car curbs. - ----------------------------------------------------------------------------------------------------- 7/31/02 Retain a professional landscape artist that will design and install 180 days an upgraded landscaping package to create a "First Class" sense of arrival. Ensure tree, shrubbery and plantings are designed for a four-season approach with seasonal foliage at all times of year. Submit design plan to Hilton for approval. - ----------------------------------------------------------------------------------------------------- 7/31/02 Install upgraded parking lot lighting package that meets Hilton 180 days lighting design specifications. - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- =====================================================================================================

================================================================================ PUBLIC AREAS ================================================================================
===================================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS ===================================================================================================== LOBBY/ENTRANCE - ----------------------------------------------------------------------------------------------------- 7/31/02 Remodel entire lobby to include: carpet, carpet pad, VWC, soft 180 days seating, case good pieces and artwork. - ----------------------------------------------------------------------------------------------------- 7/31/02 Refinish front desk millwork. 180 days - ----------------------------------------------------------------------------------------------------- 7/31/02 Replace floor to ceiling windows in lobby with a dry wall surface. 180 days - ----------------------------------------------------------------------------------------------------- 7/31/02 Install upgraded directional signage package that meets Hilton and 180 days ADA specifications. - ----------------------------------------------------------------------------------------------------- 7/31/02 Place business center in public area to increase guest 180 days impact/utilization. - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- ===================================================================================================== - ----------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------
Page 2 of 10 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 ===================================================================================================== PUBLIC RESTROOMS ===================================================================================================== 7/31/02 Replace vanities with corian or equal, marble or granite with under- 180 days mount china bowl. - ----------------------------------------------------------------------------------------------------- 7/31/02 Replace all chrome, mirrors and provide an upgraded lighting package. 180 days - ----------------------------------------------------------------------------------------------------- 7/31/02 Upgrade/refinish restroom entrance doors. 180 days - ----------------------------------------------------------------------------------------------------- 7/31/02 Upgrade ceiling tile with a 2x2" tegular tile with 9/16 grid. 180 days - ----------------------------------------------------------------------------------------------------- 7/31/02 Replace VWC. 180 days - ----------------------------------------------------------------------------------------------------- 7/31/02 Replace ceramic floor tile with 8x8" 180 days - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- ===================================================================================================== CORRIDORS/ELEVATOR/STAIRWELLS ===================================================================================================== 7/31/02 The corridors will require a complete renovation to include carpet 180 days and pad (ensure new carpet has 'rug' inset style design), wall vinyl and color coordinated corner guards, ceiling finish, lighting upgrade, window treatments, artwork and ADA compliant signage. - ----------------------------------------------------------------------------------------------------- 7/31/02 Upgrade the appearance of the elevator foyers with appropriately 180 days scaled accent furnishings, decorative lighting, artwork and accessories. - ----------------------------------------------------------------------------------------------------- 7/31/02 Paint and install VCT flooring in all stairways. 180 days - ----------------------------------------------------------------------------------------------------- 7/31/02 Resurface all finishes in elevators including floor, wall and ceiling. 180 days Ensure panel controls meet all ADA requirements. - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- ===================================================================================================== COMPLIMENTARY SERVICES AREA ===================================================================================================== - ----------------------------------------------------------------------------------------------------- ===================================================================================================== RESTAURANT ===================================================================================================== 7/31/02 Repair wood floor, replace bar stools, apply new fabric/vinyl to all 180 days booth type seating. - ----------------------------------------------------------------------------------------------------- 7/31/02 Replace carpeting in both restaurant and lounge areas. Replace stained 180 days and damaged ceiling tile in both areas. - ----------------------------------------------------------------------------------------------------- 7/31/02 Replace or repair all restaurant tables and seating to "like new 180 days condition." - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- ===================================================================================================== KITCHENS ===================================================================================================== - -----------------------------------------------------------------------------------------------------

Page 3 of 10 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 PUBLIC AREAS
===================================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS ===================================================================================================== LOUNGE ===================================================================================================== See restaurant area... - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- =====================================================================================================
================================================================================ MEETING FACILITIES ================================================================================
===================================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS ===================================================================================================== BALLROOM ===================================================================================================== 7/31/02 Repair and paint all millwork. 180 days - ----------------------------------------------------------------------------------------------------- 7/31/02 Replace carpet and carpet pad. 180 days - ----------------------------------------------------------------------------------------------------- 7/31/02 Replace VWC. 180 days - ----------------------------------------------------------------------------------------------------- 7/31/02 Replace all banquet stack chairs. 180 days - ----------------------------------------------------------------------------------------------------- 7/31/02 Replace both ballrooms' entrance signage and upgrade the overall 180 days meeting room sign package. - ----------------------------------------------------------------------------------------------------- 7/31/02 Replace or repair air walls to like new condition. 180 days - ----------------------------------------------------------------------------------------------------- 7/31/02 Replace or refinish all podiums. 180 days - ----------------------------------------------------------------------------------------------------- ===================================================================================================== PRE-FUNCTION AREA ===================================================================================================== 7/31/02 In conjunction with the adjacent Atrium renovation the pre-function 180 days - -----------------------------------------------------------------------------------------------------
Page 4 of 10 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 - ----------------------------------------------------------------------------------------------------- area will require a complete renovation to include floor and wall surfaces, base and wall moldings, ceiling and lighting upgrade, art and accessories package. - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- ===================================================================================================== MEETING ROOM ===================================================================================================== 7/31/02 Repair and paint all millwork 180 days - ----------------------------------------------------------------------------------------------------- 7/31/02 Install window treatments allowing blackout conditions for 180 days audio/visual purposes. - ----------------------------------------------------------------------------------------------------- 7/31/02 Replace all VWC. 180 days - ----------------------------------------------------------------------------------------------------- 7/31/02 Replace all carpet and carpet pad. 180 days - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- ===================================================================================================== RESTROOMS-PRE-FUNCTION AREA ===================================================================================================== 7/31/02 Complete restroom remodel in Women's restroom 180 days - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------

================================================================================ BACK OF HOUSE/STORAGE AREAS ================================================================================
===================================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS ===================================================================================================== HOUSEKEEPING/MAINTENANCE ===================================================================================================== - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- ===================================================================================================== STORAGE AREAS ===================================================================================================== - ----------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------
Page 5 of 10 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 RECREATIONAL FACILITIES
===================================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS ===================================================================================================== POOL AND ADJACENT AREAS ===================================================================================================== 7/31/02 Replace flooring in pool area. Resurface pool and spa. 180 days - ----------------------------------------------------------------------------------------------------- 7/31/02 Repaint depth markers on coping around pool. 180 days - ----------------------------------------------------------------------------------------------------- 7/31/02 Replace pool expansion joint seal. 180 days - ----------------------------------------------------------------------------------------------------- 7/31/02 Reseal exterior windows. Repair water damage on wall above window. 180 days Repaint rusted sprinkler pipes. - ----------------------------------------------------------------------------------------------------- 7/31/02 Refinish or replace any entrance doors. 180 days - ----------------------------------------------------------------------------------------------------- 7/31/02 Replace carpet, pad and base at pool as well as fitness center 180 days entrance. - ----------------------------------------------------------------------------------------------------- 7/31/02 Replace pool and deck furniture. 180 days - ----------------------------------------------------------------------------------------------------- 7/31/02 Replace fitness area exercise equipment to Hilton specifications. 180 days - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- ===================================================================================================== POOL-PUBLIC RESTROOMS ===================================================================================================== 7/31/02 Repair and refinish saumas in both the women and men's restrooms. 180 days - ----------------------------------------------------------------------------------------------------- 7/31/02 Install new toiletry dispensers in both women's and men's restrooms. 180 days - ----------------------------------------------------------------------------------------------------- 7/31/02 Install upgraded lighting package. 180 days - -----------------------------------------------------------------------------------------------------
================================================================================ GUESTROOMS ================================================================================
===================================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS ===================================================================================================== BEDROOM ===================================================================================================== 7/31/02 The guest rooms will require a complete replacement of the FF&E to 180 days include but not limited to: carpet, pad and base, wall vinyl, ceiling paint, case-goods to include desks (ensure desks are replaced with over-scaled work desks that meet all Hilton requirements), desk chairs (ensure desk chairs are replaced with ergonomic chairs), coverlets and dust ruffles, drapery treatments and sheers, lighting package, art, mirrors, lever type door hardware and Serta Perfect Sleeper "Suite Dreams by Hilton". - -----------------------------------------------------------------------------------------------------
Page 6 of 10 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 - ----------------------------------------------------------------------------------------------------- 7/31/02 All HVAC units must have wall mounted remote thermostats. Replace 180 days all dented, damaged, poorly operating and noisy PTAC units. - ----------------------------------------------------------------------------------------------------- 7/31/02 Replace or repair all closet doors. 180 days - ----------------------------------------------------------------------------------------------------- 7/31/02 The suites will require a complete replacement of the FF&E to 180 days include, but not limited to: carpet, pad and base, wall vinyl, ceiling paint, case-goods to include desks (ensure desks are replaced with over-scaled work desks that meet Hilton requirements), desk chairs (ensure desk chairs are replaced with ergonomic chairs), coverlets and dust ruffles, drapery treatments and sheers, lighting package, art, mirrors, and Serta Perfect Sleeper "Suite Dreams by Hilton". - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------

Page 7 of 10 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 ================================================================================ GUEST ROOMS ================================================================================
===================================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS ===================================================================================================== BATHROOM ===================================================================================================== 7/31/02 Replace remaining 65 rooms of bathrooms floor tiles with either 180 days ceramic, marble or granite tiles with dimensions of 8X8 or greater. - ----------------------------------------------------------------------------------------------------- 7/31/02 Replace remaining 65 rooms of fiberglass inserts in tub surrounds 180 days with either a ceramic tile, marble or granite with same dimensions as above. Caulk existing tub surrounds. - ----------------------------------------------------------------------------------------------------- 7/31/02 Move remaining 65 rooms of towel racks to the back of the shower 180 days in all guest baths and vinyl walls. - ----------------------------------------------------------------------------------------------------- 7/31/02 Repaint remaining 65 rooms of bathroom ceilings. 180 days - ----------------------------------------------------------------------------------------------------- 7/31/02 Replace vanity hardware and relocate toilet tissue holders. 180 days - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------
Page 8 of 10 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 ================================================================================ OTHER ================================================================================
===================================================================================================== DATE AREA STATUS ===================================================================================================== LIFE SAFETY ===================================================================================================== 7/31/02 Ensure all systems are in complete compliance with Hilton and 180 days Governmental requirements for Life Safety. - ----------------------------------------------------------------------------------------------------- 7/31/02 Ensure all Hilton requirements are met to ensure guest security. 180 days - ----------------------------------------------------------------------------------------------------- 7/31/02 Ensure all applicable Federal, State, and Local codes have been 180 days met to ensure compliance with ADA requirements. - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- ===================================================================================================== STRUCTURAL/MECHANICAL/OFFICES ===================================================================================================== 7/31/02 Repair or replace concrete foundation located in cooling tower and 180 days gas main area. Repair or replace loading-dock doors and walls. - ----------------------------------------------------------------------------------------------------- 7/31/02 Repair and seal basement walls caused by water leakage from 180 days concrete foundation collapse and sinking. - ----------------------------------------------------------------------------------------------------- 7/31/02 Replace public area air exchange or heating and cooling towers for 180 days proper ventilation. - ----------------------------------------------------------------------------------------------------- 7/31/02 Replace carpet in back offices to include behind front desk and 180 days executive offices. - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- =====================================================================================================
Page 9 of 10 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 Page 10 of 10 PROPERTY IMPROVEMENT PLAN DOUBLETREE CLUB HOTEL PHILADELPHIA, PA PRELIMINARY PRODUCT IMPROVEMENT REPORT ================================================================================ DOUBLETREE CLUB HOTEL - PHILADELPHIA, PA ================================================================================ CONDUCTED ON: April 6, 2002 THE IMPROVEMENTS IDENTIFIED IN THIS REPORT ARE BASED ON CONDITIONS EXISTING ON THE ABOVE DATE. PROPERTY TRANSACTIONS OCCURRING AFTER 180 DAYS WILL REQUIRE AN UPDATED REPORT. ANY WAIVERS AND/OR VARIANCES ISSUED ARE CANCELLED AND NO LONGER EFFECTIVE AT TIME OF SALE, CLOSING, OR ANY OTHER AMENDMENT TO THE ORIGINAL FRANCHISE AGREEMENT. HILTON HOTELS DOES NOT AND CANNOT WARRANT CONFORMANCE WITH INTERPRETATION OF THE AMERICANS WITH DISABILITIES ACT ("ADA") AND THE ADA ACCESSIBILTY GUIDELINES. OWNERSHIP IS RESPONSIBLE FOR COMPLIANCE WITH APPLICABLE PROVISIONS OF THE ADA. APPROPRIATE COUNSEL TO ENSURE COMPLIANCE IS URGED. ================================================================================ EXTERIOR ================================================================================ This is a six-story interior corridor hotel. It was converted to a Doubletree Club hotel approximately six years ago. The actual building is twenty-eight years old. The curb appeal is average at best. The repair of the damaged canopy ceiling and the addition of decorative pavers under the canopy will help create a sense of arrival for guests. The numerous areas of ceiling damaged throughout the interior of the property indicate the need for a new roof. There is a missing section of mansard that will also need to be replaced.
===================================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS ===================================================================================================== BUILDING, ENTRANCE, PORTE COCHERE AND SIGNAGE ===================================================================================================== Closing Replace roof of building. Ensure all open seams of flashing are 6 months covered. - ----------------------------------------------------------------------------------------------------- Closing Replace missing section of mansard 6 months - ----------------------------------------------------------------------------------------------------- Closing Repair damage to building at Dumpster entrance 6 months - ----------------------------------------------------------------------------------------------------- Closing Repair/replace all inoperative exhaust fans 6 months - ----------------------------------------------------------------------------------------------------- Closing Add decorative pavers under canopy 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace mismatched windows (some are clear and some are bronze) 6 months - ----------------------------------------------------------------------------------------------------- Closing Repair all broken window seals 6 months - ----------------------------------------------------------------------------------------------------- Closing Add entrance or primary sign at secondary entrance (Grant Ave.) 6 months - ----------------------------------------------------------------------------------------------------- Closing Repair peeling/damaged ceiling areas of canopy ceiling 6 months - ----------------------------------------------------------------------------------------------------- Closing Repair to a like new appearance all holes left in building from 6 months previous signs - ----------------------------------------------------------------------------------------------------- Closing Replace heating core and compressor of roof mounted unit 6 months - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- ===================================================================================================== PARKING LOT, LANDSCAPING, LIGHTING, ETC. ===================================================================================================== Closing Add additional building mounted down lights to front of building 6 months - ----------------------------------------------------------------------------------------------------- Closing Repair damaged asphalt at rear of building. 6 months - ----------------------------------------------------------------------------------------------------- Closing Repair landscape damage to islands and ends of parking lot by snow 6 months plows - ----------------------------------------------------------------------------------------------------- Closing Add drainage to sunken area at end of building 6 months - ----------------------------------------------------------------------------------------------------- Closing Trim overhanging trees at rear of building 6 months - ----------------------------------------------------------------------------------------------------- Closing Add 20 ft. concrete pad at Dumpster - ----------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------
Page 1 of 8 HILTON HOTELS CORP. DOUBLETREE HOTELS PRODUCT IMPROVEMENT REPORT 2002 ================================================================================ PUBLIC AREAS ================================================================================ The public areas of the hotel are in overall poor condition and most items will need to be replaced. The soft seating in the lobby and registration areas is worn and will need to be replaced. The carpet is also in poor condition and will require replacement. As in most areas of the hotel, there were numerous ceiling tiles that will need to be replaced after roof repairs. Corridor carpet is also worn.
===================================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS ===================================================================================================== LOBBY/ENTRANCE - ----------------------------------------------------------------------------------------------------- Closing Electrostatically repaint faded finish on electric entry doors 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace carpet 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace all soft seating 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace all discolored or water damaged ceiling tiles 6 months - ----------------------------------------------------------------------------------------------------- Closing Repair any ceilings that have been water damaged 6 months - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- REGISTRATION AREA ===================================================================================================== Closing Add ADA tray to registration desk. Repair small chip in counter top 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace soft seating (worn and misshapen) 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace wall vinyl (holed where previous sign was mounted) 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace vinyl cove base with carpet cove base (at wall behind registration desk) 6 months - ----------------------------------------------------------------------------------------------------- Closing Add cookie warmer 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace carpet (at area from registration desk to elevators) 6 months - ----------------------------------------------------------------------------------------------------- Closing Repair chips on pay telephone enclosures 6 months - ----------------------------------------------------------------------------------------------------- ===================================================================================================== PUBLIC RESTROOMS ===================================================================================================== Closing 6 months - ----------------------------------------------------------------------------------------------------- Closing Add recessed feminine hygiene machine to ladies room 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace dated wall tile with vinyl wall covering. 6 months Repair any damaged vinyl in stall areas - ----------------------------------------------------------------------------------------------------- Closing Replace vanities and basins (china undermounts required) 6 months - ----------------------------------------------------------------------------------------------------- Closing Recess towel dispenses and other equipment 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace discolored ceiling tiles 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace scratched vanity mirrors 6 months - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- ===================================================================================================== CORRIDORS/ELEVATOR/STAIRWELLS ===================================================================================================== Closing Replace carpet 6 months - ----------------------------------------------------------------------------------------------------- Closing Add additional lighting in elevator landings. Increase light levels 6 months in corridors and stairwells. Increase light levels in vending areas - ----------------------------------------------------------------------------------------------------- Closing Return handrails to wall in stairwells 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace sign package (all signs throughout the hotel should be 6 months coordinated). Additional directional signage required in corridors - ----------------------------------------------------------------------------------------------------- Closing Regrout floor tile in vending areas 6 months - ----------------------------------------------------------------------------------------------------- Closing Refinish elevator cabs and landings 6 months - ----------------------------------------------------------------------------------------------------- Closing Paint and seal discolored stairwell landings 6 months - -----------------------------------------------------------------------------------------------------
Page 2 of 8 HILTON HOTELS CORP. DOUBLETREE HOTELS PRODUCT IMPROVEMENT REPORT 2002 - ----------------------------------------------------------------------------------------------------- Closing Paint all back of house doors 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace or refinish all worn door handles 6 months - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- ===================================================================================================== ADMINISTRATIVE AREAS ===================================================================================================== Closing Add window treatment to sales office 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace all discolored ceiling tiles 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace vinyl wall covering in back offices 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace ceiling tiles in admin areas 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace carpet in back offices 6 months ===================================================================================================== CLUB ROOM ===================================================================================================== Closing Replace carpet 6 months - ----------------------------------------------------------------------------------------------------- Closing Add additional phones and lines to Club Room 6 months - ----------------------------------------------------------------------------------------------------- Closing Add supplies to personal harbors 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace chairs in Steel Case units. Repair controls (fan, lights) 6 months - ----------------------------------------------------------------------------------------------------- Closing Repair damaged ceilings 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace damaged ceiling tiles 6 months - ----------------------------------------------------------------------------------------------------- Closing Refinish foot rails at bar in Club Lounge 6 months - ----------------------------------------------------------------------------------------------------- Closing Professionally mount light fixture under counter at 6 months employee side of bar - ----------------------------------------------------------------------------------------------------- Closing Clean or replace chairs/fabric in conference room 6 months - ----------------------------------------------------------------------------------------------------- Closing Repair chipped bar (employee side) 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace wall vinyl in business center and Club Room. 6 months - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- ===================================================================================================== GIFT SHOP ===================================================================================================== Closing The gift shop has been eliminated and is now currently being 6 months used as a vending area. There are numerous vending machines lining the walls. Although a vending area is required on each floor, this space could potentially be used as an arcade area or other amenity for guests. Approval must be obtained and specifications must be submitted for approval. An arcade would require a door (with view panel) to reduce the noise level as this area is adjacent to the registration area. As a vending area, vinyl wall covering must be added and ceramic floor tile installed. - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------

================================================================================ PUBLIC AREAS ================================================================================
===================================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS ===================================================================================================== AU BON PAIN ===================================================================================================== Closing Replace carpet 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace discolored ceiling tiles (guest and employee side) 6 months - ----------------------------------------------------------------------------------------------------- Closing Remove banquet tables used for serving. Suggest installing counters 6 months for buffet service. - ----------------------------------------------------------------------------------------------------- Closing Replace worn laminate counter top at beverage 6 months service station. Solid surface required. - -----------------------------------------------------------------------------------------------------
Page 3 of 8 HILTON HOTELS CORP. DOUBLETREE HOTELS PRODUCT IMPROVEMENT REPORT 2002 - ----------------------------------------------------------------------------------------------------- Closing Refinish or replace worn tables and chairs (wooden 6 months arms and table edges are scarred). Metal frame chairs are in good condition. - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- ===================================================================================================== GUEST LAUNDRY ===================================================================================================== Closing Replace door. Must have view panel and electronic 6 months card reader to ensure access by guests only - ----------------------------------------------------------------------------------------------------- Closing Add folding table or counter 6 months - ----------------------------------------------------------------------------------------------------- Closing Increase light levels 6 months - ----------------------------------------------------------------------------------------------------- Closing Conceal exposed pipes and valves in ceiling. Add 6 months lowered ceiling - ----------------------------------------------------------------------------------------------------- Closing Replace discolored floor with tile 6 months - ----------------------------------------------------------------------------------------------------- Closing Paint walls or add vinyl wall covering 6 months - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------

================================================================================ MEETING FACILITIES ================================================================================ There are four separate meeting spaces at this property. Overall, these areas are in acceptable condition. As in all other areas of the hotel, there are some discolored ceiling tiles that will need to be replaced. The Philadelphia and Roosevelt rooms were guestrooms at one time. The carpet must be replaced as well as window treatment. The wall vinyl may be repaired to a like new condition and appearance.
===================================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS ===================================================================================================== MEETING ROOM(S) ===================================================================================================== Closing Add incandescent lighting and rheostats to Philadelphia and Roosevelt 6 months rooms. - ----------------------------------------------------------------------------------------------------- Closing Laminate at wet bars in all meeting rooms is chipped and damaged. 6 months Replace with solid surface countertops - ----------------------------------------------------------------------------------------------------- Closing Upgrade restrooms (former guestrooms). Replace small floor tile, 6 months replace de-silvered mirrors - ----------------------------------------------------------------------------------------------------- Closing Replace HVAC units 6 months - ----------------------------------------------------------------------------------------------------- Closing Repair any damaged wall vinyl 6 months - ----------------------------------------------------------------------------------------------------- Closing Repair ceiling damage (Roosevelt, Pennsylvania) 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace seating 6 months - ----------------------------------------------------------------------------------------------------- Closing Add under counter lighting at wet bar areas where missing 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace window treatment (Philadelphia) 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace carpet 6 months - ----------------------------------------------------------------------------------------------------- Closing Refinish or replace worn podiums 6 months - ----------------------------------------------------------------------------------------------------- ===================================================================================================== ===================================================================================================== BALL ROOM (BRANDYWINE) ===================================================================================================== Closing Replace carpet 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace all discolored ceiling tiles 6 months - ----------------------------------------------------------------------------------------------------- Closing Repair any damaged wall vinyl 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace drapes and sheers 6 months - ----------------------------------------------------------------------------------------------------- Closing Repaint or clean discolored glass panels above windows 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace tarnished door hardware at entry 6 months - ----------------------------------------------------------------------------------------------------- Closing Repair, replace, or remove portable dance floor 6 months - ----------------------------------------------------------------------------------------------------- Closing Repair / refinish chipped window ledges 6 months - -----------------------------------------------------------------------------------------------------
Page 4 of 8 HILTON HOTELS CORP. DOUBLETREE HOTELS PRODUCT IMPROVEMENT REPORT 2002 ================================================================================ BACK OF HOUSE/STORAGE AREAS ================================================================================
===================================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS ===================================================================================================== HOUSEKEEPING/MAINTENANCE ===================================================================================================== Closing Add central air to laundry area 6 months - ----------------------------------------------------------------------------------------------------- Closing Enclose dryers from general work area. Add smoke detector and heat 6 months detector to dryer enclosure after completion - ----------------------------------------------------------------------------------------------------- Closing Repair damaged walls in housekeeping and laundry areas. 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace worn laundry carts and maids carts 6 months - ----------------------------------------------------------------------------------------------------- Closing Add full size refrigerator to break rooms. Upgrade employee 6 months breakrooms. This includes painting, ventilation, carpet, and bathrooms. - ------------------------------------------------------------------------------------------------------ Closing Replace vinyl wall covering and carpet in break rooms 6 months - ----------------------------------------------------------------------------------------------------- Closing Add additional venting to smoking break room 6 months - ----------------------------------------------------------------------------------------------------- Closing Clean and paint all back of house area walls 6 months - ----------------------------------------------------------------------------------------------------- Closing Clean and paint (or replace) rusted employee lockers 6 months - ----------------------------------------------------------------------------------------------------- Closing Repair ceiling damage. Replace discolored or damaged ceiling tiles in 6 months all back of house areas - ----------------------------------------------------------------------------------------------------- Closing Repair or replace chipped folding table in laundry 6 months ===================================================================================================== STORAGE AREAS/MECHANICALROOMS ===================================================================================================== Closing Replace rusted pipes and fittings on boilers 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace worn rollaway beds 6 months - ----------------------------------------------------------------------------------------------------- Closing Repair ceiling damage 6 months - -----------------------------------------------------------------------------------------------------
================================================================================ RECREATIONAL FACILITIES ================================================================================ The swimming pool area is in very poor condition. It is covered by a dome type structure that will need to be replaced, repaired, or removed. It is cracking and the leaks from the cracks and condensation create a need for constant operational attention. This area will require a complete renovation/refurbishment.
===================================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS ===================================================================================================== POOL AND ADJACENT AREAS ===================================================================================================== Closing Repair leaks in dome 6 months - ----------------------------------------------------------------------------------------------------- Closing Add dehumidification unit 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace pool furniture and patio/deck furniture 6 months - ----------------------------------------------------------------------------------------------------- Closing Resurface pool bottom 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace pool deck (new deck must have proper drainage capabilities) 6 months - ----------------------------------------------------------------------------------------------------- Closing Add heating, air conditioning, and ventilation 6 months - ----------------------------------------------------------------------------------------------------- Closing Repair damaged walls and door in entry way 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace peeling tint on windows 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace, repair to a like new condition, or remove wooden deck at 6 months exterior of pool. - -----------------------------------------------------------------------------------------------------
Page 5 of 8 HILTON HOTELS CORP. DOUBLETREE HOTELS PRODUCT IMPROVEMENT REPORT 2002 - ----------------------------------------------------------------------------------------------------- Closing Replace cracked windows 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace all tarnished door and window hardware 6 months ===================================================================================================== EXERCISE ROOM ===================================================================================================== Closing Replace drapes 6 months - ----------------------------------------------------------------------------------------------------- Closing Add carpet cove base where missing 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace ceiling tiles 6 months - ----------------------------------------------------------------------------------------------------- Closing Add door with view panel and card reader to separate from pool area 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace rusted HVAC unit 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace vinyl wall covering 6 months - ----------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------

================================================================================ GUEST ROOMS ================================================================================ The guestrooms are dated and in severe need of a complete facelift. Carpet, bedspreads, mattresses and box springs, window treatment, wall vinyl all need to be replaced. On the positive side, the guestrooms are large and there is tremendous potential with a new room package in place. The undersized desk will need to be replaced with the larger executive workspace and an ergonomic desk chair must also be added. The required new lamp package must also contain a task lamp for the desk surface.
===================================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS ===================================================================================================== BEDROOM ===================================================================================================== Closing Replace carpet 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace wall vinyl 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace HVAC units 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace mattresses and box springs 6 months - ----------------------------------------------------------------------------------------------------- Closing Professionally refinish casegoods to a like new appearance 6 months (credenzas, nightstands, headboards, etc.). Refinished product must coordinate/match with the required addition of large desks and ergonomic desk chairs. - ----------------------------------------------------------------------------------------------------- Closing Replace lamp package. Most shades are yellowed and many are misshapen. 6 months Task lamp is required at desk. Bases of floor lamps are dented. One wall-mounted lamp is currently positioned behind the television set and does not provide illumination to any guest impact area. Table lamps at nightstands will be acceptable. - ----------------------------------------------------------------------------------------------------- Closing Replace bedspreads 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace drapery sheers and drapes 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace soft seating. Wingback chairs will also need to be replaced. 6 months Standards require a chair/ottoman combo or a recliner. - ----------------------------------------------------------------------------------------------------- Closing Replace guest service directories 6 months - ----------------------------------------------------------------------------------------------------- Closing Remove extension cords from guestrooms 6 months - ----------------------------------------------------------------------------------------------------- Closing Refurbish/renovate suites (one each on fifth and sixth floors). The 6 months small tile at the wet bar area will need to be replaced. Microwaves must be enclosed in cabinets and the painted and laminate surfaces at the wet bars should be replaced with a solid surface. Repair damaged wall and ceiling in sixth floor suite (from roof leaks)
Page 6 of 8 HILTON HOTELS CORP. DOUBLETREE HOTELS PRODUCT IMPROVEMENT REPORT 2002 - ----------------------------------------------------------------------------------------------------- Closing Add wall mounted door stops 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace sofa sleepers. Mechanisms are binding and fabric is worn 6 months - ----------------------------------------------------------------------------------------------------- Closing Refinish/paint chipped entry doors 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace any missing door guards at entry doors 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace telephones that do not meet current standards (CareLine 6 months button/info missing, bedside phones do not have 2 line capabilities, etc.) - -----------------------------------------------------------------------------------------------------

================================================================================ GUEST ROOMS ================================================================================
===================================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS ===================================================================================================== BATHROOM ===================================================================================================== Closing Replace 2"floor tile (6" min. required) 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace any missing sound deadening pads/tabs 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace basins with china undermounts. Vanities must be restored to a 6 months like new condition or replaced. - ----------------------------------------------------------------------------------------------------- Closing Replace all chrome (single lever chrome required) 6 months - ----------------------------------------------------------------------------------------------------- Closing Resurface tub bottoms. All tub bottoms currently are discolored and 6 months the non slip provision is gone - ----------------------------------------------------------------------------------------------------- Closing Add pulsating shower heads to all showers 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace door knobs with lever type hardware 6 months - ----------------------------------------------------------------------------------------------------- Closing Add second soap dish in showers 6 months - ----------------------------------------------------------------------------------------------------- Closing Refinish/paint chipped entry doors 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace wall vinyl 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace hollow core doors (or remove full length mirrors from doors) 6 months - ----------------------------------------------------------------------------------------------------- Closing Add support bracket to towel shelves 6 months - ----------------------------------------------------------------------------------------------------- Closing Wrap exposed vanity popes with insulation in accessible rooms 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace any metal soap dishes in showers with non metal soap dish 6 months - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------
================================================================================ OTHER ================================================================================
===================================================================================================== DATE STATUS ===================================================================================================== KITCHEN ===================================================================================================== Closing Replace rusted bins on ice machines. Repair door. 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace ceiling tiles 6 months - ----------------------------------------------------------------------------------------------------- Closing Repair ceiling damage 6 months - ----------------------------------------------------------------------------------------------------- Closing Clean and refinish scarred floors 6 months - ----------------------------------------------------------------------------------------------------- Closing Clean walls 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace door hardware leading into dry goods storage area 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace, remove, or repair any inoperative equipment. ex: cold line 6 months prep unit now used for storage - ----------------------------------------------------------------------------------------------------- Closing Replace worn cutting boards 6 months - ----------------------------------------------------------------------------------------------------- Closing Replace microwave (interior discolored) 6 months - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------
Page 7 of 8 PROPERTY IMPROVEMENT PLAN HOLIDAY INN SHEFFIELD, AL BASS HOTELS & RESORTS LICENSE RENEWAL OF THE HOLIDAY INN SHEFFIELD, AL. - LOCATION #4419 PROPERTY IMPROVEMENT PLAN January 25, 1999 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 TABLE OF CONTENTS: PROPERTY INFORMATION ............................. 1 LIFE SAFETY ...................................... 3 EXTERIOR ......................................... 5 LOBBY/ENTRANCE/FRONT DESK ........................ 9 PUBLIC RESTROOMS ................................. 12 FOOD SERVICE FACILITIES .......................... 14 LOUNGE FACILITIES ................................ 15 MEETING / BANQUET ROOMS .......................... 17 ATRIUMS/POOL ENCLOSURES .......................... 18 KITCHEN .......................................... 20 INTERIOR CORRIDORS ............................... 21 GUEST ROOMS ...................................... 23 GUEST ROOM BATHS ................................. 26 BACK OF HOUSE .................................... 27

PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 PROPERTY INFORMATION Address: Holiday Inn - Sheffield. AL Florence-Muscle Shoals Area 4900 Hatch Blvd. Sheffield, AL 35660 256-381-7313 GENERAL DESCRIPTION: This 3-story, interior corridor hotel (with ground level rooms also having exterior doors as well as interior doors) was originally constructed in 1982. The hotel will require varying degrees of renovation to all areas of the hotel; guest room areas, commercial areas and the exterior. More specifically, the guest rooms will require the installation of the Standardized Room Decor Package, while 2/3's of the guest bathrooms will vanity/sink/hardware replacement. The commercial areas will require a complete renovation of the restaurant and lounge. The exterior will require roofline enhancements, new stucco finishes and replacement of the guestroom storefronts with a new insulated synthetic stucco wall system and new windows. Submit all plans, specifications and color boards to Bass Hotels & Resorts for review and approval, prior to purchasing or renovation. Any items not submitted for approval may be required to be replaced or modified. Professional Architectural and design assistance is required. Franchisee to ensure all areas of the hotel are in complete compliance with local codes and Americans with Disabilities Act (ADA). An ADA certification letter is required to be submitted during the design review and prior to final sign off of the PIP. Owner is required to repair or replace all items and finishes in the hotel that may be damaged during the course of the renovation. Ensure all areas of the hotel are in new condition upon completion of the PIP. During the Property Improvement process, signage from the Holiday Inn "Renovation Kit" must be put on display, in a professional manner, throughout appropriate areas of the hotel. You will receive this kit within 90 days from license execution. All areas of the hotel must meet current Holiday Inn standards, including all supplements and addendum's. Year Built: 1982 Year(s) Renovated: 1991 Parking Spaces: 250 Swimming Pool 20 x 15 Dimensions/maximum depth: Number of Stories: 3 COMMERCIAL AREA CAPACITIES Food Service Facility: Great Southern Mining Company seats: 45 1 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 Lounge: Fizz seats: 75 Meeting/Banquet Room: Cedar, Cypress, Willow, Magnolia seats: 450 Fitness Room: yes X no _____ Guest Rooms: No. of Rooms/Opening Date Original Rooms: 201 1st. Addition: 2nd. Addition: Total Rooms: 201 HVAC Systems: (2/4 pipe: thru-wall or split system) Commercial Area 2/4 pipe Guest room Building thru-wall Fire Safety Systems: Hardwire Smoke Commercial Area yes X no ___ Guest room Building yes X no ___ Holidomes Structure yes ___ no ___ Sprinkler System Commercial Area yes ___ no X Guest room Building yes ___ no X Holidomes Structure yes ___ no ___ This Property Improvement Plan was developed from an on-site review of the subject hotel on 1/14/99 by Jim Brink of Bass Hotels and Resorts accompanied by General Manager Linda Whitaker, and Chief Engineer Keith Yerbey. 2 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 LIFE SAFETY
AREAS REQUIRING ACTION CURE/REMEDY - --------------------------------- ------------------------------------------------------------------------------------------------ FIRE SAFETY SYSTEM Prior to issuance of the license, written documentation must be submitted certifying that the Fire Safety System meets or exceeds Holiday Inn's Standards and that the system if fully operational as of that date. - --------------------------------- ------------------------------------------------------------------------------------------------ - --------------------------------- ------------------------------------------------------------------------------------------------ COMMERCIAL & PUBLIC AREAS - --------------------------------- ------------------------------------------------------------------------------------------------ Emergency Lighting: Ensure emergency lighting is in proper working condition. - --------------------------------- ------------------------------------------------------------------------------------------------ Exit Signs: Ensure adequate exit signage is provided per standards and codes. Ensure bright illumination. - --------------------------------- ------------------------------------------------------------------------------------------------ Panic Hardware: Ensure panic hardware at all exit doors is in proper working condition. - --------------------------------- ------------------------------------------------------------------------------------------------ Fire Separation: Ensure area meets fire separation requirements per codes and standards. - --------------------------------- ------------------------------------------------------------------------------------------------ Visual Heat/Smoke Detectors: Ensure adequate heat and smoke detectors are present per code and standards. - --------------------------------- ------------------------------------------------------------------------------------------------ Manual Pull Stations: Ensure manual pull stations are present per code and standards. - --------------------------------- ------------------------------------------------------------------------------------------------ - --------------------------------- ------------------------------------------------------------------------------------------------ PUBLIC RESTROOMS - --------------------------------- ------------------------------------------------------------------------------------------------ Emergency Lighting: Ensure emergency lighting is provided. Lights must remain on continuously in all public restrooms. - --------------------------------- ------------------------------------------------------------------------------------------------ Visual Heat/Smoke Detectors: Ensure adequate heat and smoke detectors are present per code and standards. - --------------------------------- ------------------------------------------------------------------------------------------------ - --------------------------------- ------------------------------------------------------------------------------------------------ HOLIDOMES/ATRIUMS/POOL ENCLOSURES - --------------------------------- ------------------------------------------------------------------------------------------------ Emergency Lighting: Ensure emergency lighting is provided at indoor pool area. - --------------------------------- ------------------------------------------------------------------------------------------------ Exit Signs: Ensure adequate exit signage is provided at indoor pool area per standards and codes. Ensure bright illumination. - --------------------------------- ------------------------------------------------------------------------------------------------ Panic Hardware: Provide panic hardware at all exit doors in the indoor pool area - --------------------------------- ------------------------------------------------------------------------------------------------ Fire Separation: Ensure indoor pool area meets fire separation requirements per codes and standards. - --------------------------------- ------------------------------------------------------------------------------------------------ Visual Heat/Smoke Detectors: Ensure adequate heat and smoke detectors are present at the indoor pool area per code and standards. - --------------------------------- ------------------------------------------------------------------------------------------------ Manual Pull Stations: Ensure manual pull stations are present at the indoor pool area per code and standards. - --------------------------------- ------------------------------------------------------------------------------------------------ - --------------------------------- ------------------------------------------------------------------------------------------------ KITCHEN - --------------------------------- ------------------------------------------------------------------------------------------------ Emergency Lighting: Ensure emergency lighting is provided. - --------------------------------- ------------------------------------------------------------------------------------------------ Exit Signs: Ensure adequate exit signage is provided per standards and codes. Ensure bright illumination. - --------------------------------- ------------------------------------------------------------------------------------------------ Panic Hardware: Provide panic hardware at all exit doors. - --------------------------------- ------------------------------------------------------------------------------------------------ Fire Extinguisher: Provide required fire extinguishers per codes and standards. - --------------------------------- ------------------------------------------------------------------------------------------------ Fire Separation: Ensure area meets fire separation requirements per codes and standards - --------------------------------- ------------------------------------------------------------------------------------------------ Heat/Smoke Detectors: Ensure adequate heat and smoke detectors are present per code and standards. - --------------------------------- ------------------------------------------------------------------------------------------------ Manual Pull Stations: Ensure manual pull stations are present per code and standards. Ensure a pull station is located at the rear exit door wall. - --------------------------------- ------------------------------------------------------------------------------------------------ Sprinklers: - --------------------------------- ------------------------------------------------------------------------------------------------
3 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 - --------------------------------- ------------------------------------------------------------------------------------------------ Req. Number of Exits: Ensure adequate exit signage is provided per standards and codes. Ensure bright illumination. - --------------------------------- ------------------------------------------------------------------------------------------------ - --------------------------------- ------------------------------------------------------------------------------------------------ INTERIOR CORRIDORS - --------------------------------- ------------------------------------------------------------------------------------------------ Emergency Lighting: Ensure emergency lighting is provided, including in all stairwells and in all elevator cabs. - --------------------------------- ------------------------------------------------------------------------------------------------ Exit Signs: Ensure adequate exit signage is provided per standard and codes. Ensure bright illumination. - --------------------------------- ------------------------------------------------------------------------------------------------ Panic Hardware: Provide panic hardware at all exit doors. - --------------------------------- ------------------------------------------------------------------------------------------------ Fire Extinguisher: Ensure fire extinguisher boxes are recessed into corridor walls. - --------------------------------- ------------------------------------------------------------------------------------------------ Fire Separation: Ensure fire separation is maintained per standards. - --------------------------------- ------------------------------------------------------------------------------------------------ Visual Heat/Smoke Detectors: Ensure adequate heat and smoke detectors are present per code and standards, including in all stairwells. - --------------------------------- ------------------------------------------------------------------------------------------------ Manual Pull Stations: Ensure manual pull stations are present per code and standards. - --------------------------------- ------------------------------------------------------------------------------------------------ Sprinklers: - --------------------------------- ------------------------------------------------------------------------------------------------ Req. Number of Exits: Ensure adequate exit signage is provided per standards and codes. Ensure bright illumination. - --------------------------------- ------------------------------------------------------------------------------------------------ Dead End (+25 Feet) - --------------------------------- ------------------------------------------------------------------------------------------------ Fire Separation (1 hour min) Ensure area meets fire separation requirements per codes and standards. - --------------------------------- ------------------------------------------------------------------------------------------------ Sounding Devises: Ensure sounding devises are present per code and standards, including in all stairwells. - --------------------------------- ------------------------------------------------------------------------------------------------ - --------------------------------- ------------------------------------------------------------------------------------------------ GUEST ROOMS - --------------------------------- ------------------------------------------------------------------------------------------------ Fire Separation: Ensure area meets fire separation requirements per codes and standards. - --------------------------------- ------------------------------------------------------------------------------------------------ Heat/Smoke Detectors: Ensure hard wire smoke detectors are present per standards. - --------------------------------- ------------------------------------------------------------------------------------------------ Visual Heat/Smoke Detectors in Ensure that visual heat and smoke detectors are present in the wheelchair accessible and rooms ADA rooms for the deaf and hard of hearing per ADAAG standards. - --------------------------------- ------------------------------------------------------------------------------------------------ Sprinklers: - --------------------------------- ------------------------------------------------------------------------------------------------ Fire Separation (1 hour min) Ensure guest rooms meet fire separation requirements per codes and standards. - --------------------------------- ------------------------------------------------------------------------------------------------ - --------------------------------- ------------------------------------------------------------------------------------------------ BACK OF HOUSE - --------------------------------- ------------------------------------------------------------------------------------------------ Emergency Lighting: Ensure emergency lighting is provided. - --------------------------------- ------------------------------------------------------------------------------------------------ Exit Signs: Ensure adequate exit signage is provided per standards and codes. Ensure bright illumination. - --------------------------------- ------------------------------------------------------------------------------------------------ Panic Hardware: Provide panic hardware at all exit doors. - --------------------------------- ------------------------------------------------------------------------------------------------ Fire Extinguisher: Provide required fire extinguishers per codes and standards. - --------------------------------- ------------------------------------------------------------------------------------------------ Fire Separation: Ensure area meets fire separation requirements per codes and standards. - --------------------------------- ------------------------------------------------------------------------------------------------ Heat/Smoke Detectors: Ensure adequate heat and smoke detectors are present per code and standards. - --------------------------------- ------------------------------------------------------------------------------------------------ Manual Pull Stations: Ensure manual pull stations are present per code and standards. - --------------------------------- ------------------------------------------------------------------------------------------------ Sprinklers: - --------------------------------- ------------------------------------------------------------------------------------------------ Req. Number of Exits: Ensure adequate exit signage is provided per standards and codes. Ensure bright illumination. - --------------------------------- ------------------------------------------------------------------------------------------------ Dead End (+25 Feet) Ensure area meets fire separation requirements per codes and standards - --------------------------------- ------------------------------------------------------------------------------------------------ Fire Separation (1 hour min) - --------------------------------- ------------------------------------------------------------------------------------------------ 18 Gauge Steel Cabinet Provide an 18 gauge steel cabinet for storage of flammable materials. - --------------------------------- ------------------------------------------------------------------------------------------------

4 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 EXTERIOR GENERAL DESCRIPTION: The exterior will require moderate renovations to the Porte Cochere, roofline and facade to update the appearance and address conditional issues. Professional design assistance is required. All plans, color renderings and specifications are to reviewed by Holiday Inn for approval prior to any renovation and installation. ADA compliance certification letters are required at the time of plan review.
- ------------------------- ----------- ----------------------------------------------------------------------- BASIS FOR REQUIRED AREAS REQUIRE ACTION ACTION CURE/REMEDY - ------------------------- ----------- ----------------------------------------------------------------------- COMMERCIAL BUILDING - ------------------------- ----------- ----------------------------------------------------------------------- Porte Cochere Competitive The Porte Cochere requires renovation in conjunction with the exterior improvements to heighten curb appeal Install a new decorative synthetic stucco parapet or metal hip, gable, mansard, or other appropriate roof structure to coincide with the new commercial and rental building roofline enhancements. Incorporate new interesting design elements into the structure, such as frieze work, medallions, accent lighting and the addition of built-out column capitals and bases. Provide new upgraded light fixtures to the Porte Cochere underside and decorative fixtures at the columns. - ------------------------- ----------- ----------------------------------------------------------------------- Drive through surface Competitive Provide a new colored stamped concrete of new interlocking pavers beneath the Porte Cochere. Integrate ADA compliant ramp into the new drive through surface to eliminate the steep existing-ramp in front of the entry doors. - ------------------------- ----------- ----------------------------------------------------------------------- Building roof line / arch. Competitive Upgrade the existing flat, linear roof line. The roofline lacks detail finishes & features and architectural interest. Incorporate new architectural details into the existing commercial building parapet with an emphasis on vertical roof line elements. These vertical roof line elements should be repeated in a reoccurring pattern around the structure. Conceal all rooftop equipment. Design enhancements must coordinate with the new rental building and Porte Cochere upgrades. Submit new plans to Bass Hotels & Resorts for review. - ------------------------- ----------- ----------------------------------------------------------------------- Entrance doors Competitive Recommend installing power actuated (2 sets within a vestibule) doors for guest convenience. - ------------------------- ----------- ----------------------------------------------------------------------- Color scheme Condition Provide new color scheme to update and freshen the exterior appearance Competitive of the Porte Cochere, commercial and rental buildings. Consider horizontal or vertical earth tone contrasting colors or shading to add interest. - ------------------------- ----------- ----------------------------------------------------------------------- Service doors Repair all holes and refinish doors to like new condition. Replace the service door and frame into the laundry area. - ------------------------- ----------- -----------------------------------------------------------------------
5 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 - ------------------------- ----------- ----------------------------------------------------------------------- Auxiliary entrance doors Competitive Provide new permanent roof structures with decorative columns over the Fizz, and three side entrances. Awnings are not permitted. Coordinate with new Porte Cochere design. - ------------------------- ----------- ----------------------------------------------------------------------- Commercial Windows/frames Condition Clean oxidation and repaint if necessary to achieve like new appearance. Replace any cloudy windows or windows with broken seals. For energy savings, recommended is tinting the sloped overhead windows into Fizz or replacing them with a solid material. - ------------------------- ----------- ----------------------------------------------------------------------- Lighting Competitive Provide new accent lighting such as concealed up-lighting from landscape beds, and replace the existing building mounted sconces with new sconces incorporated into the new cornice work. Install 2 additional lamps on each parking lot fixture that currently has 2 existing lamps for a total of 4 per fixture. - ------------------------- ----------- ----------------------------------------------------------------------- Walkways Condition Repair and resurface sidewalks where lifting, sinking, stained or damaged. Provide new topical surface treatment to return sidewalks to like new condition. Ensure consistent finish throughout project. - ------------------------- ----------- ----------------------------------------------------------------------- Flag poles Standards Provide additional nighttime illumination per standards. - ------------------------- ----------- ----------------------------------------------------------------------- Kitchen/Delivery Screen Competitive Pressure wash existing delivery bay area concrete apron and maintain to an acceptable clean condition. Install a delivery gate to screen off the area from public view. Exposed chain link fencing is not permitted. - ------------------------- ----------- ----------------------------------------------------------------------- News paper stands at entrance Competitive Upgrade the overall appearance of the news stands with an enclosure that compliments the new Porte Cochere design. - ------------------------- ----------- ----------------------------------------------------------------------- Trash cans Condition Replace and upgrade trash can and relocate in appropriate locations. - ------------------------- ----------- ----------------------------------------------------------------------- SERVICE/ OUT BUILDINGS - ------------------------- ----------- ----------------------------------------------------------------------- Recommended is putting a service building on the site to eliminate clutter from laundry and other areas. Architecture finishes and feature should coordinate with the new facade finishes. - ------------------------- ----------- ----------------------------------------------------------------------- - ------------------------- ----------- ----------------------------------------------------------------------- RENTAL UNIT (GST. RM.) BUILDINGS - ------------------------- ----------- -----------------------------------------------------------------------

6 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 - ------------------------- ----------- ----------------------------------------------------------------------- Building roof line/arch. Competitive Upgrade the existing flat, linear roof line. Introduce elevation finishes & features changes and vertical design elements, such as a decorative parapet or peak roof structure to break up the long horizontal runs. These new architectural enhancements must be repeated in a reoccurring pattern around the structure. Ensure a continuity of design between the rental building, commercial building and the Porte Cochere. Submit new plans to Bass Hotels & Resorts for review. Provide new false pilasters, over existing CMU's, along the existing exterior walls. Ensure continuity of design with the Porte Cochere and commercial building improvements. Conceal all drainage pipes and exposed conduits into the new stucco facade. - ------------------------- ----------- ----------------------------------------------------------------------- Color scheme Condition Provide new stucco finish color scheme to update and freshen the Competitive exterior appearance of the Porte Cochere. commercial and rental buildings. Consider horizontal or vertical earth tone contrasting colors or shading to add interest. - ------------------------- ----------- ----------------------------------------------------------------------- Auxiliary entrance doors Competitive Provide new permanent building mounted roof structures with roofline to coordinate with new rental building improvements. - ------------------------- ----------- ----------------------------------------------------------------------- Storefront windows/frames Condition The existing spandrel and glazing systems on the guest room building Competitive are worn, dated and energy inefficient. As such, they will require replacement and upgrading. Remove the entire existing exterior guest room bay storefront system, including door and frame. Construct a new metal stud wall with an exterior skin assembly of sheathing and synthetic stucco (drywall finish on the interior). Provide new insulated window units (with integral mullions), correctly proportioned to the exterior facade, along with a new full blade louvers painted to match the stucco color. Provide new metal insulated guest room exterior entry doors. Window frames must utilize an accent color. bronze is not acceptable. - ------------------------- ----------- ----------------------------------------------------------------------- Windows/Frames Condition Clean oxidation and repaint if necessary to achieve like new appearance. Replace any cloudy windows or windows with broken seals. - ------------------------- ----------- ----------------------------------------------------------------------- HVAC/Grilles Competitive Provide new architectural louvers for all through wall HVAC units. Paint to match new accent color. - ------------------------- ----------- ----------------------------------------------------------------------- Recessed fire extinguishers Competitive Recess fire extinguisher cabinets into walls and columns to eliminate protrusion into the walkway traffic areas. - ------------------------- ----------- ----------------------------------------------------------------------- Walkways Condition Repair and resurface sidewalks where lifting, sinking, stained or damaged. Provide new topical surface treatment to return sidewalks to like new condition. Ensure consistent finish throughout project. - ------------------------- ----------- -----------------------------------------------------------------------

7 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 - ------------------------- ----------- ----------------------------------------------------------------------- PARKING - ------------------------- ----------- ----------------------------------------------------------------------- Asphalt Parking Condition Repair any cracked and damaged parking lot surfaces to like new condition. Ensure low spots are corrected to eliminate/avoid ponding water. - ------------------------- ----------- ----------------------------------------------------------------------- Wheelchair accessible parking Condition Include blue striped access aisles, signage and proper curb cuts per spaces. ADA requirements. - ------------------------- ----------- ----------------------------------------------------------------------- Lighting Standards Increase lighting in all parking areas to meet I-foot candle minimum per the standards by installing 2 additional lamps to the fixtures that currently have 2 existing lamps. - ------------------------- ----------- ----------------------------------------------------------------------- Curbing Condition Repair all cracked and broken curbing. Remove all painted curbs, unless required by local code. - ------------------------- ----------- ----------------------------------------------------------------------- Transformers Condition Seek permission from the proper authorities to install an upgraded enclosure around the transformer - ------------------------- ----------- ----------------------------------------------------------------------- - ------------------------- ----------- ----------------------------------------------------------------------- LANDSCAPING - ------------------------- ----------- ----------------------------------------------------------------------- Rental Units Install additional shrubs and hedges along the guest room building. Include fresh plantings with seasonal foliage to increase overall appearance. - ------------------------- ----------- ----------------------------------------------------------------------- - ------------------------- ----------- ----------------------------------------------------------------------- EXTERIOR SWIMMING POOL - ------------------------- ----------- ----------------------------------------------------------------------- Deck Finish Condition Provide a new topical deck surface treatment, such as Sundeck. Submit product specifications to Bass Hotels and Resorts for approval. - ------------------------- ----------- ----------------------------------------------------------------------- Pool furnishings Condition Replace and upgrade existing pool deck furniture. Plastic resin Competitive furniture is not acceptable. Provide new high quality, commercial grade chairs, tables and chaise lounges. Furnish ample number of shade umbrellas for guest comfort. - ------------------------- ----------- ----------------------------------------------------------------------- Whirlpool Standards Provide 15-minute timer and emergency cut-off switch per standards. - ------------------------- ----------- ----------------------------------------------------------------------- Drainage(2drains req.)(vortex) Standards Provide two anti-vortex drains per Holiday Inn standards. - ------------------------- ----------- -----------------------------------------------------------------------

8 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 LOBBY/ENTRANCE/FRONT DESK GENERAL DESCRIPTION: The lobby and entry vestibule will require moderate renovations to furnishings, fixtures and equipment update the appearance and address conditional issues. Professional design assistance is required. All plans, color renderings and specifications are to reviewed by Holiday inn for approval prior to any renovation and installation. ADA compliance certification letters are required at the time of plan review.
BASIS FOR REQUIRED AREAS REQUIRE ACTION ACTION CURE/REMEDY - ------------------------- ----------- ----------------------------------------------------------------------- LOBBY One of the guest's first impressions of a Holiday Inn(R) hotel occurs in the lobby. The lobby, therefore, must be a welcome, attractive, uncluttered space reflecting the overall decor of the hotel and maintaining comfortable, residential ambiance. The lobby must offer inviting, comfortable seating and appropriate lighting. - ------------------------- ----------- ----------------------------------------------------------------------- Vestibule Doors/Frames Condition Recondition to like new. Recommend installing power actuated (2 sets within a vestibule) doors for guest convenience. - ------------------------- ----------- ----------------------------------------------------------------------- Vestibule Floor Condition Replace and upgrade the existing floor tiles with new marble tiles with a minimum static coefficient of 0.6 per ASTM 1028. Install recessed walk-off mat. Surface mats are not permitted. - ------------------------- ----------- ----------------------------------------------------------------------- Vestibule Walls Condition Replace and upgrade existing wall finishes to coordinate with new lobby wall finishes. - ------------------------- ----------- ----------------------------------------------------------------------- Vestibule Ceiling Condition Replace existing ceiling system. - ------------------------- ----------- ----------------------------------------------------------------------- Vestibule Lighting Competitive Replace and upgrade lighting fixtures. - ------------------------- ----------- ----------------------------------------------------------------------- Luggage Carts Standards Provide minimum 2 luggage carts per standards addendum. Carts must be stored in an appropriate area when not in use. - ------------------------- ----------- ----------------------------------------------------------------------- Directional Signage Condition Install a full coordinated directional signage package throughout the Competitive entire lobby, commercial and guest room areas. All signage must be ADA compliant. - ------------------------- ----------- ----------------------------------------------------------------------- Lobby Ceiling Condition Replace and upgrade lobby ceiling with new recessed edge, 2'x2' Competitive architectural ceiling tiles with updated surface texture. Provide new decorative ceiling elements, such as coffer and beams, or tray ceiling with concealed cove lighting to add interest. - ------------------------- ----------- ----------------------------------------------------------------------- Lobby Walls Replace existing wall vinyl with new 20 oz. wall vinyl. - ------------------------- ----------- ----------------------------------------------------------------------- Lobby Floors Replace and upgrade the existing floor tiles with new marble tiles with a minimum static coefficient of 0.6 per ASTM 1028. Install recessed walk-off mat. Surface mats are not permitted. - ------------------------- ----------- ----------------------------------------------------------------------- Windows Condition Paint, clad or replace existing worn aluminum window frames. Replace any windows with broken seals. - ------------------------- ----------- ----------------------------------------------------------------------- Window Treatments condition Install window treatments. Install new sheers with appropriate side panels and valance to soften the seating areas. - ------------------------- ----------- -----------------------------------------------------------------------
9 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 - ------------------------- ----------- ----------------------------------------------------------------------- Lobby Feature Standards Provide a lobby feature or an architectural point of interest per standards, such as a focal table with large flower arrangement to give visual interest. - ------------------------- ----------- ----------------------------------------------------------------------- Furnishings Condition Replace and upgrade furnishings with new updated seating group and occasional tables. Provide a mixture of colors, textures and fabrics for visual interest. - ------------------------- ----------- ----------------------------------------------------------------------- Ceiling Lighting Competitive Provide a central chandelier to coordinate with the new lobby feature. - ------------------------- ----------- ----------------------------------------------------------------------- Decor Competitive Provide a complete art and accessories package to include framed original artwork, table top accessory items, well scaled lamps, plants and other similar items to create a residential environment. Coordinate the existing brochures into the new decor. - ------------------------- ----------- ----------------------------------------------------------------------- Area Lighting Competitive Provide for all seating arrangements. - ------------------------- ----------- ----------------------------------------------------------------------- Public Telephone Standards Install new privacy partitions, counter, and appropriate seating for Condition the public telephones that compliment the new lobby finishes. Ensure at least one phone is ADA compatible. Provide power outlet at the wheelchair accessible telephone and a sign indicating that a TDD is available for use at the front desk. - ------------------------- ----------- ----------------------------------------------------------------------- Drinking Fountain Standards Provide a "high/low" unit for guests in wheelchairs and guests that stand. - ------------------------- ----------- ----------------------------------------------------------------------- Ash/ waste receptacles Replace and upgrade receptacles. - ------------------------- ----------- ----------------------------------------------------------------------- GM office Condition Replace and upgrade carpet. Install wall vinyl. Provide artwork to walls. Replace sled base chairs and round tables. Relocate Xerox machine from entrance: reduce clutter. Repaint doors and frames. Electrostatically paint existing filing cabinets. - ------------------------- ----------- ----------------------------------------------------------------------- Accounting Office Condition Eliminate clutter from the office. Conceal all exposed wiring in an appropriate chase or enclosure. - ------------------------- ----------- ----------------------------------------------------------------------- REGISTRATION DESK The registration desk must be modified to comply with ADA requirements. Specifically, a 3' wide section located 3' above the finished floor must be provided for guests who use wheelchairs or guests that wish to register sitting down. - ------------------------- ----------- ----------------------------------------------------------------------- Registration desk top & face Condition Reconfigure front desk design as needed to eliminate the ability to Competitive view behind the front desk to observe transactions. Replace and upgrade the dated front desk facing to coordinate with other new upgraded lobby finishes. Incorporate new design elements into the facing, such as vertical and horizontal trim pieces, reveals, etc. Provide new hard surface desk top, such as marble. Plans to be reviewed by Holiday Inn for approval. - ------------------------- ----------- ----------------------------------------------------------------------- Work Area Exposed Competitive Conceal all equipment and work areas from guest view. Eliminate all clutter from the area. - ------------------------- ----------- -----------------------------------------------------------------------

10 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 - ------------------------- ----------- ----------------------------------------------------------------------- Ceiling Competitive Install a new bulkhead with soffit lighting above the registration counter. - ------------------------- ----------- ----------------------------------------------------------------------- Walls Remove mirrors and wall sconces. - ------------------------- ----------- ----------------------------------------------------------------------- Artwork Competitive Provide original art piece on wall behind the front desk. Art piece must be well scaled, decoratively framed, and should reflect locale of hotel. - ------------------------- ----------- ----------------------------------------------------------------------- Floor Condition Replace and upgrade to match new lobby carpet. - ------------------------- ----------- ----------------------------------------------------------------------- Lighting Competitive Install new upgraded lighting above the registration counter. Existing lighting is not bright enough. - ------------------------- ----------- ----------------------------------------------------------------------- Signage Standards Provide appropriate Manager on Duty and Owner/Operator signage. See Holiday Inn standards for proper wording. - ------------------------- ----------- ----------------------------------------------------------------------- Safety Deposit Boxes Standards Replace plastic laminate top and front surfaces. - ------------------------- ----------- ----------------------------------------------------------------------- Fax machine Standards Provide for guest convenience. - ------------------------- ----------- -----------------------------------------------------------------------

11 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 PUBLIC RESTROOMS GENERAL DESCRIPTION: The public restrooms will require moderate renovations to furnishings, fixtures and equipment update the appearance and address conditional issues. Professional design assistance is required. All plans, color renderings and specifications are to reviewed by Holiday Inn for approval prior to any renovation and installation. ADA compliance certification letters are required at the time of plan review.
BASIS FOR REQUIRED AREAS REQUIRE ACTION ACTION CURE/REMEDY - ------------------------- ----------- ----------------------------------------------------------------------- RESTROOM - ------------------------- ----------- ----------------------------------------------------------------------- Accessible Standards Ensure that all public restrooms meet the Americans with Disabilities Act. - ------------------------- ----------- ----------------------------------------------------------------------- Signage Condition Install signage to coordinate with overall directional Competitive signage package. Room signage needs to meet ADA. - ------------------------- ----------- ----------------------------------------------------------------------- Entry/Door Frame(self Condition Repair, and refinish doors and frames to like new condition. Install closing) new door hardware including handles, pulls and kick plates. - ------------------------- ----------- ----------------------------------------------------------------------- Ceiling Condition Replace existing ceiling system with new 2x2 recessed architectural ceiling system. - ------------------------- ----------- ----------------------------------------------------------------------- Walls (4'wainscot @ Condition Replace existing wall finishes. Provide a new 4' tile wainscot at all plumbing wall) fixture walls and new Type II, 20 oz. wall vinyl at all remaining walls. - ------------------------- ----------- ----------------------------------------------------------------------- Floor/cove base Condition Replace and upgrade the existing 1x1 green floor tiles. Replacement Competitive tiles must be a minimum 8" x 8" in a neutral tone. Provide a coordinating tile cove base and threshold. - ------------------------- ----------- ----------------------------------------------------------------------- Lighting Competitive Lighting must remain on continuously at all times; install Standards keyed switch or motion sensor. - ------------------------- ----------- ----------------------------------------------------------------------- Vanity Condition Replace all vanities with new upgraded solid surface tops and fronts. Provide new under mounted sink bowls, hardware, soap dispensers and tissue dispensers. Conceal all under counter plumbing, pipes, etc. from guest view. - ------------------------- ----------- ----------------------------------------------------------------------- Vanity Lighting Competitive Provide new boxed soffit lighting over the full width of the vanity. Install upgraded parabolic light diffuser. - ------------------------- ----------- ----------------------------------------------------------------------- Vanity hardware Competitive Replace and upgrade to single lever handles. - ------------------------- ----------- ----------------------------------------------------------------------- Mirrors Condition Replace and upgrade worn, delivered mirrors. Ensure mirrors are full width over the vanities. - ------------------------- ----------- ----------------------------------------------------------------------- Soap Dispensers Competitive Integrate the soap dispensers into the "new" vanity top. - ------------------------- ----------- ----------------------------------------------------------------------- Towel/waste receptacles Provide new recessed or semi-recessed paper towel/trash receptacles. Remove any free standing trash units. - ------------------------- ----------- ----------------------------------------------------------------------- Urinals/hardware Install a lowered urinal per the ADA. - ------------------------- ----------- -----------------------------------------------------------------------
12 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999
- ------------------------- ----------- ----------------------------------------------------------------------- Toilet Partitions Condition Replace with new upgraded plastic laminate partitions that compliment the new restroom decor. Ensure ADA requirements are meet. Provide matching urinal screens in the men's room. - ------------------------- ----------- ----------------------------------------------------------------------- Reserve Toilet Tissue Standards Provide in each stall per standards. Dispenser - ------------------------- ----------- ----------------------------------------------------------------------- HVAC Condition Replace and upgrade the existing HVAC vent covers. - ------------------------- ----------- ----------------------------------------------------------------------- Baby Changing Stations Standards Provide a baby changing station in one men's and one women's restroom. - ------------------------- ----------- -----------------------------------------------------------------------
13 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 FOOD SERVICE FACILITIES GENERAL DESCRIPTION: The restaurant is currently located on a raised area of the atrium and will require a ramp that meets the ADA guidelines. Strongly recommended is relocating the restaurant into the Fizz lounge. Professional design assistance is required. All plans, color renderings and specifications are to reviewed by Holiday Inn for approval prior to any renovation and installation. ADA compliance certification letters are required at the time of plan review. Ensure restaurant complies with the Best-4-Breakfast program.
BASIS FOR REQUIRED AREAS REQUIRE ACTION ACTION CURE/REMEDY - ------------------------- ----------- ----------------------------------------------------------------------- FACILITIES - ------------------------- ----------- ----------------------------------------------------------------------- Signage Condition Replace and upgrade signage due to worn / dated condition. Coordinate Competitive with new signage package throughout the hotel. - ------------------------- ----------- ----------------------------------------------------------------------- Owner/Operator Sign Standards Provide per standards. See standards manual for proper wording. - ------------------------- ----------- ----------------------------------------------------------------------- Walls Condition Replace and upgrade the existing worn wall vinyl. Replacement vinyl must be a Type II, 20 oz. material. - ------------------------- ----------- ----------------------------------------------------------------------- Floor Condition Replace and upgrade worn carpet and pad. Replace existing floor tile. Provide new coordinating carpet, wood or low profile vinyl base. - ------------------------- ----------- ----------------------------------------------------------------------- Steps Standards Install adequate step lighting leading to raised seating areas. Ensure adequate handrails are provided to meet standards. - ------------------------- ----------- ----------------------------------------------------------------------- Host/Cashier Station Standards Remove all storage from behind station. Condition - ------------------------- ----------- ----------------------------------------------------------------------- Tables Condition Replace. Provide new to coordinate with decor theme. - ------------------------- ----------- ----------------------------------------------------------------------- Chairs Condition Replace and upgrade all chairs. Provide an updated style chair to compliment the overall decor scheme of the room. Select a chair with a fabric upholstered seat and back. - ------------------------- ----------- ----------------------------------------------------------------------- Kitchen Access Condition - ------------------------- ----------- ----------------------------------------------------------------------- Buffet Condition Replace the skirted tables being used as a buffet with a new permanent built-in buffet unit which will provide proper heating and cooling for food items. Provide sneeze guards. Relocate out of the atrium area and into the restaurant. - ------------------------- ----------- ----------------------------------------------------------------------- Planting Competitive Provide container plants to soften room and enhance visual interest and atmosphere. - ------------------------- ----------- ----------------------------------------------------------------------- Grab & Go Standards Provide a permanent area to accommodate the Grab & Go concept. - ------------------------- ----------- -----------------------------------------------------------------------
14 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 LOUNGE FACILITIES GENERAL DESCRIPTION: The lounge will require moderate renovations to furnishings, fixtures and equipment update the appearance and address conditional issues. Professional design assistance is required. All plans, color renderings and specifications are to reviewed by Holiday Inn for approval prior to any renovation and installation. ADA compliance certification letters are required at the time of plan review
- ------------------------- ----------- ----------------------------------------------------------------------- BASIS FOR REQUIRED AREAS REQUIRE ACTION ACTION CURE/REMEDY - ------------------------- ----------- ----------------------------------------------------------------------- - ------------------------- ----------- ----------------------------------------------------------------------- FACILITIES - ------------------------- ----------- ----------------------------------------------------------------------- Entrance Condition Replace the wall vinyl and globe lighting fixture with an upgraded lighting fixture. - ------------------------- ----------- ----------------------------------------------------------------------- Signage Condition Replace and upgrade signage due to worn / dated condition Competitive Coordinate with new signage package throughout the hotel. - ------------------------- ----------- ----------------------------------------------------------------------- Owner/Operator Sign Standards Provide per standards. See standards manual for proper wording. - ------------------------- ----------- ----------------------------------------------------------------------- Ceiling Replace the existing ceiling system. - ------------------------- ----------- ----------------------------------------------------------------------- Walls Replace the existing wall vinyl. - ------------------------- ----------- ----------------------------------------------------------------------- Floor condition Replace and upgrade the existing worn carpet and coordinate with new decor theme. Refinish existing wood dance floor to like new condition or replace or remove. Replace |x| tile around the bar with new approved flooring. - ------------------------- ----------- ----------------------------------------------------------------------- Window Treatments Condition Provide new upgraded fabric window treatments. Blinds are not permitted. - ------------------------- ----------- ----------------------------------------------------------------------- Lighting Condition Provide adequate lighting for seating areas and task lighting Standards for servers. - ------------------------- ----------- ----------------------------------------------------------------------- Lighting/Dimmer Control Condition Replace lighting fixtures with new upgraded fixtures with provide Competitive adequate illumination. Provide decorative wall mounted and ceiling hung fixtures. - ------------------------- ----------- ----------------------------------------------------------------------- Decor Competitive Provide a new upscale decor theme to enliven the lounge. If the photos are to be part of the new decor theme then they should be professional mounted and framed and coordinated into the new concept. - ------------------------- ----------- ----------------------------------------------------------------------- Tables Competitive Replace all tables. - ------------------------- ----------- ----------------------------------------------------------------------- Chairs Condition Replace and upgrade all seating, including bar stools and soft seating. Ensure all new seating features fully fabric upholstered seats and backs. - ------------------------- ----------- ----------------------------------------------------------------------- Booths Condition Replace and upgrade the booths due to worn condition. Seat backs must be a fabric upholstered material. - ------------------------- ----------- ----------------------------------------------------------------------- Bar glass rack Competitive The existing rack is dated in appearance and I recommend removing the rack and designing an alternative method of storing glasses. - ------------------------- ----------- -----------------------------------------------------------------------
15 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 - ------------------------- ----------- ----------------------------------------------------------------------- Bar Top/Rail/Facing Condition Replace bar top and facing with new finishes that compliment new lounge design/decor theme. - ------------------------- ----------- ----------------------------------------------------------------------- Back Bar Condition Replace back bar finishes to compliment new lounge decor. Eliminate all clutter. Position point-of-sale system out of guest view by appropriately screening or recessing. - ------------------------- ----------- ----------------------------------------------------------------------- Television Enclosures Competitive Provide for all televisions. Conceal all cables and wiring from guest view. - ------------------------- ----------- ----------------------------------------------------------------------- Popcorn/Vending Machines Competitive Remove or relocate machines to an appropriate location. - ------------------------- ----------- -----------------------------------------------------------------------

16 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 MEETING / BANQUET ROOMS GENERAL DESCRIPTION; The pre-function and meeting areas will require moderate renovations to furnishings, fixtures and equipment update the appearance and address conditional issues. Professional design assistance is required. All plans, color renderings and specifications are to reviewed by Holiday Inn for approval prior to any renovation and installation. ADA compliance certification letters are required at the time of plan review.
BASIS FOR REQUIRED AREAS REQUIRE ACTION ACTION CURE/REMEDY - ------------------------- ----------- ----------------------------------------------------------------------- MEETING-BANQUET FACILITIES - ------------------------- ----------- ----------------------------------------------------------------------- Prefunction Area Condition Replace the existing ceiling tiles. - ------------------------- ----------- ----------------------------------------------------------------------- Door Hardware/Frames Condition Replace the pink doors and sand the frames. Coordinate with new decor theme. - ------------------------- ----------- ----------------------------------------------------------------------- Door Signage Competitive Replace and upgrade signage due to worn / dated condition. Coordinate with new signage package throughout the hotel. - ------------------------- ----------- ----------------------------------------------------------------------- Door Viewer Standards Provide door viewers per the standards at 48 inches above the finish floor. - ------------------------- ----------- ----------------------------------------------------------------------- Ceiling Standards Replace the existing ceiling system with a new 2x2 recessed ceiling Competitive tile system. - ------------------------- ----------- ----------------------------------------------------------------------- Walls Competitive Install new type II wall vinyl on all walls. Refinish all wood trim, base and chair rails. - ------------------------- ----------- ----------------------------------------------------------------------- Partitions (50 STC Min.) Condition Install new type II wall vinyl on all partitions. - ------------------------- ----------- ----------------------------------------------------------------------- Floor Condition Replace the carpet. - ------------------------- ----------- ----------------------------------------------------------------------- Tables Condition Replace and upgrade any worn tables. - ------------------------- ----------- -----------------------------------------------------------------------
17 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 ATRIUMS/POOL ENCLOSURES GENERAL DESCRIPTION: The fitness room will require moderate renovations to furnishings, fixtures and equipment update the appearance and address conditional issues. Professional design assistance is required. All plans, color renderings and specifications are to reviewed by Holiday Inn for approval prior to any renovation and installation. ADA compliance certification letters are required at the time of plan review
BASIS FOR REQUIRED AREAS REQUIRE ACTION ACTION CURE/REMEDY - ------------------------- ----------- ----------------------------------------------------------------------- STRUCTURE BUILDING Competitive The existing atrium space is drab, dark and uninviting. Create a more Condition enlivened atmosphere, one that is bright and bold. Bring the facing guest rooms into the new vibrant interior make these guests want to keep their drapes open. Design in liberal amounts of accent decor items. such as colorful accent walls, ceiling banners, flags, hanging light fixtures, umbrellas, contemporary furniture and like items. Add pavilions, trellises and other structures to bring down the level of the space. Brighten up the area with new light fixtures utilizing a variety of lighting techniques. Round out the design with upgraded hardscape and generous amounts of exotic landscaping. Professional design assistance is required. Submit all plans to Bass Hotels & Resorts for review. - ------------------------- ----------- ----------------------------------------------------------------------- Ceiling Replace the existing ceiling tile. Ensure skylights are not leaking. - ------------------------- ----------- ----------------------------------------------------------------------- Walls Where the exterior and interior block walls are seen together; continue the stucco finishes into the interior CMU's walls. On the remaining blocks walls not covered in stucco; stain the block to match the new color. - ------------------------- ----------- ----------------------------------------------------------------------- Floor Replace the existing floor tiles. - ------------------------- ----------- ----------------------------------------------------------------------- FITNESS ROOM Furnish per the Holiday Inn "Fitness Center Guidelines/Standards" manual. - ------------------------- ----------- ----------------------------------------------------------------------- Entrance Condition Provide a new entrance from the pool side of the fitness center. - ------------------------- ----------- ----------------------------------------------------------------------- Restroom Condition Either make the restroom wheelchair accessible or consider removing it. Maybe provide a sink and vanity only. - ------------------------- ----------- ----------------------------------------------------------------------- Ceiling Standards Minimum 8' high 10' recommended. - ------------------------- ----------- ----------------------------------------------------------------------- Walls Standards Provide one fully mirrored wall. - ------------------------- ----------- ----------------------------------------------------------------------- Floor Standards Provide a minimum 28 oz. carpet per Fitness Center standards. - ------------------------- ----------- ----------------------------------------------------------------------- Door/Frame (elec. Lock) Standards Provide with electronic lock. - ------------------------- ----------- ----------------------------------------------------------------------- Visual access Standards Provide a glass door, door viewer or window with a minimum of 144 sq. in, of continuous viewing space. - ------------------------- ----------- -----------------------------------------------------------------------
18 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 HVAC Standards Provide to maintain a constant 68-72 degrees Fahrenheit temperature. - ------------------------- ----------- ----------------------------------------------------------------------- Exercise Equipment Standards 3 pieces of brand name exercise equipment are required, such as (minimum 3, depending on Lifecycle. Stairmaster and Nordic-track. Minimum 2 treadmills and 1 size of hotel) upright bike required. Include equipment instructions. - ------------------------- ----------- ----------------------------------------------------------------------- House Telephone Standards Provide a house phone that rings directly to the switchboard. - ------------------------- ----------- ----------------------------------------------------------------------- Magazine Rack Competitive Recommended to provide. - ------------------------- ----------- ----------------------------------------------------------------------- Drinking Water Standards Provide a chilled drinking water fountain or chilled bottled water cooler per standards. - ------------------------- ----------- ----------------------------------------------------------------------- Towels and towel racks Standards Provide per the Holiday Inn Fitness Center Guidelines/Standards. - ------------------------- ----------- ----------------------------------------------------------------------- Area map Standards Provide a detailed map of the area around the hotel showing streets, landmarks a distances, including 1, 3 and 6 mile routes. - ------------------------- ----------- ----------------------------------------------------------------------- Clock Standards A wall mounted minimum size 14" diameter clock is required. - ------------------------- ----------- ----------------------------------------------------------------------- TV Standards Provide a 25" minimum size T.V. - ------------------------- ----------- ----------------------------------------------------------------------- Artwork Competitive Provide colorful graphics with a sports theme - ------------------------- ----------- ----------------------------------------------------------------------- Scale Standards Provide per standards. - ------------------------- ----------- ----------------------------------------------------------------------- Lighting Standards Provide 50-60 foot-candles of ambient neutral color temperature fluorescent lighting per standards. - ------------------------- ----------- ----------------------------------------------------------------------- - ------------------------- ----------- ----------------------------------------------------------------------- INTERIOR POOL/ SAUNA/WHIRLPOOL - ------------------------- ----------- ----------------------------------------------------------------------- Pool furnishings Condition Replace and upgrade existing pool deck furniture. Provide new high quality, commercial grade chairs, tables and chaise lounges. Furnish ample number of shade umbrellas for guest comfort. - ------------------------- ----------- ----------------------------------------------------------------------- Whirlpool (15timer&Kill Ensure that the 15 timer and kill switch is in proper working switch?) condition. - ------------------------- ----------- ----------------------------------------------------------------------- Drainage(2drains req.) Install an anti vortex drain. (vortex) - ------------------------- ----------- ----------------------------------------------------------------------- Fence Standard Pool must be secured with appropriately designed, decorative 4'0" minimum height fence with a self-closing and latching gate. - ------------------------- ----------- -----------------------------------------------------------------------

19 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 KITCHEN GENERAL DESCRIPTION
- ------------------------- ----------- ----------------------------------------------------------------------- BASIS FOR REQUIRED AREAS REQUIRE ACTION ACTION CURE/REMEDY - ------------------------- ----------- ----------------------------------------------------------------------- FACILITIES - ------------------------- ----------- ----------------------------------------------------------------------- Ceiling (Washable) Replace damage ceiling title. - ------------------------- ----------- ----------------------------------------------------------------------- Equipment Install a metal shield between the grease fryer and the open flame grille. - ------------------------- ----------- ----------------------------------------------------------------------- Walk-ins Replace seals on all walk-ins. - ------------------------- ----------- -----------------------------------------------------------------------
20 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 INTERIOR CORRIDORS GENERAL DESCRIPTION: The interior corridors will require moderate renovations to furnishings, fixtures and equipment update the appearance and address conditional issues. Professional design assistance is required. All plans, color renderings and specifications are to reviewed by Holiday Inn for approval prior to any renovation and installation. ADA compliance certification letters are required at the time of plan review
- ------------------------- ----------- ----------------------------------------------------------------------- BASIS FOR REQUIRED AREAS REQUIRE ACTION ACTION CURE/REMEDY - ------------------------- ----------- ----------------------------------------------------------------------- CORRIDOR - ------------------------- ----------- ----------------------------------------------------------------------- Doors Condition Repaint all door frames in conjunction with the guest room improvements. - ------------------------- ----------- ----------------------------------------------------------------------- Signage Condition Replace all signage, including door numbers, vending, and directional, Standards with new upgraded signage package. All non-smoking rooms must have Competitive designated signage. All signage must be ADA compliant, and be consistent throughout the hotel. Return doors to like new condition where old signage was removed from the doors. - ------------------------- ----------- ----------------------------------------------------------------------- Walls Condition Replace and upgrade existing wall vinyl with new Type II wall vinyl. Replace and upgrade chair rail with new architectural millwork. Remove ash urns from walls. Provide an architectural millwork package to further enhance improvements. - ------------------------- ----------- ----------------------------------------------------------------------- Misc. Doors Repair any damaged or worn doors and frames. - ------------------------- ----------- ----------------------------------------------------------------------- Floor Replace carpet on the 3rd floor. Remove the 12 inch base and replace with a 4 - 6 inch carpet base. - ------------------------- ----------- ----------------------------------------------------------------------- Lighting Replace the existing wall sconces with new light sconces that do not protrude more than 4 inches from the wall. Install 4 additional sconces in each corridor. Center between existing locations. Corridors must have 20 foot candles of light per the standards. Replace the under sized fluorescent fixtures at the guest room bulk heads with fixtures that span the full length of the bulk head. - ------------------------- ----------- ----------------------------------------------------------------------- Window Treatments Install window treatments at the window ends of all corridors. - ------------------------- ----------- ----------------------------------------------------------------------- Misc. vents & grills Condition Replace any damaged miscellaneous vents and grills. - ------------------------- ----------- ----------------------------------------------------------------------- - ------------------------- ----------- ----------------------------------------------------------------------- VENDING - ------------------------- ----------- ----------------------------------------------------------------------- Alcoves Standards Relocate all vending machines to appropriate vending alcoves. Vending alcoves must include full height wing walls, Type II wallcovering or acrylic knockdown wall finish, appropriate lighting and fully grounded electrical outlets (GFIC). - ------------------------- ----------- -----------------------------------------------------------------------
21 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 - ------------ --------- ----------------------------------------------------- Walls Condition Replace with new upgraded wall finishes to match the corridor. - ------------ --------- ----------------------------------------------------- ELEVATORS Ensure elevators meet ADA - ------------ --------- ----------------------------------------------------- Door Finish Condition Paint elevator doors and frames to coordinate with finishes - ------------ --------- ----------------------------------------------------- Ceiling Replace existing ceiling with new ceiling system. - ------------ --------- ----------------------------------------------------- Walls Replace existing plastic laminate with new upgraded design. - ------------ --------- ----------------------------------------------------- Floor Finish Condition Replace and upgrade to match and/or coordinate with lobby and corridor floor finishes. - ------------ --------- ----------------------------------------------------- Lighting Condition Provide additional lighting to increase illumination. - ------------ --------- -----------------------------------------------------

22 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 GUEST ROOMS GENERAL DESCRIPTION: The guest rooms will require moderate renovations to furnishings, fixtures and equipment update the appearance and address conditional issues. A total of 8 wheelchair accessible are required 2 of which shall have a roll in shower. Professional design assistance is required. All plans, color renderings and specifications are to reviewed by Holiday Inn for approval prior to any renovation and installation. ADA compliance certification letters are required at the time of plan review
BASIS FOR REQUIRED AREAS REQUIRE ACTION ACTION CURE/REMEDY - --------------------------- ----------------- --------------------------------------------------------------- STRUCTURE BASE BUILDING - --------------------------- ----------------- --------------------------------------------------------------- Doors/Hardware - --------------------------- ----------------- --------------------------------------------------------------- Door Numbers Standards Provide new ADA compliant guest room door number plaques Plaques must have raised numbers and Braille inscription. Mount plaques 60" above the finished floor on the wall adjacent to the latch side of the door. - --------------------------- ----------------- --------------------------------------------------------------- Self-Closing Standards Ensure all self-closing devices are properly adjusted and fully operational. - --------------------------- ----------------- --------------------------------------------------------------- Closet walls Install new wall finish to coordinate with guest room wall finish. - --------------------------- ----------------- --------------------------------------------------------------- Soundproofing Standards Provide sound gasket at connecting room doors per standards. - --------------------------- ----------------- --------------------------------------------------------------- Electrical Outlets Standards Ensure an electrical outlet and data port are conveniently located near all work surface areas. Eliminate excessive cord visibility by installing addition outlets as required to service the equipment. - --------------------------- ----------------- --------------------------------------------------------------- Service vanity Replace all black plastic laminate on service vanities. - --------------------------- ----------------- --------------------------------------------------------------- INTERIOR BUILDING FINISHES/LIGHTING - --------------------------- ----------------- --------------------------------------------------------------- Ceiling Condition Repaint ceilings to like new condition. Repair any irregularities prior to painting. - --------------------------- ----------------- --------------------------------------------------------------- Walls Condition Replace and upgrade existing wall finishes. Provide new Holiday Inn standardized room decor wall vinyl or color integrated acrylic knockdown wall finish per specifications. All existing wall finishes must be removed, and walls appropriately prepared prior to receipt of new wall finish. - --------------------------- ----------------- --------------------------------------------------------------- Floor Condition Replace and upgrade worn carpet and pad. Provide a new Holiday Inn standardized room decor carpet. Provide a coordinating carpet base or 2-1/2" straight vinyl base. Prepare floor surfaces prior to installation of new floor finishes. - --------------------------- ----------------- --------------------------------------------------------------- Entry Light Competitive Replace and upgrade with decorative wall sconce. - --------------------------- ----------------- ---------------------------------------------------------------
23 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 - --------------------------- ------------------- --------------------------------------------------------------- Lighting Condition Replace and upgrade existing worn guest room lighting package to include new table and floor lamps with new Holiday Inn standardized room decor lighting. Wall mounted lamps will not be acceptable. Coordinate all lamps and shades. All bulbs must provide a minimum of 100 watts of light. Provide touch sensitive fixtures in ADA accessible rooms. Provide smart lamps at work areas. Replace and upgrade ceiling mounted entry lights. - --------------------------- ------------------- --------------------------------------------------------------- SOFT GOODS All new soft goods must comply with the new Holiday Inn standardized room decor program. - --------------------------- ------------------- --------------------------------------------------------------- Window Treatment Condition Standards Replace all drapes with new upgraded window treatments that comply with the new Holiday Inn standardized room decor program. These include sheers and over-drapes with blackout lining. - --------------------------- ------------------- --------------------------------------------------------------- Lines Condition Replace all worn linens. Ensure new linens meet Holiday Inn minimum weight standards. - --------------------------- ------------------- --------------------------------------------------------------- Bedspreads Condition Standards Replace bedspreads with new bedspreads and optional dust ruffles that comply with the new Holiday Inn standardized room decor program. - --------------------------- ------------------- --------------------------------------------------------------- CASE GOODS Replace all Americans of Martinsville casegoods, including all headboards, night stands, desks, activity tables, credenzas and credenza mirrors, occasional tables, and luggage benches by Jan. 1, 2003. Refinish any existing damaged casegoods to like new condition in conjuction with this renovation. Ensure all rooms are furnished per Holiday Inn standards. All new room furnishings must comply with the new Holiday Inn standardized guest room decor program. - --------------------------- ------------------- --------------------------------------------------------------- Credenza Standards Replace existing credenzas with new armoires per the standardized guest room decor program. - --------------------------- ------------------- --------------------------------------------------------------- Activity Chair Condition Reupholster with the SRD approved fabric. - --------------------------- ------------------- --------------------------------------------------------------- Desk Chair Condition Replace with new ergonomic chair per standardized guest room decor program with Krypton fabric. - --------------------------- ------------------- --------------------------------------------------------------- Sofa Condition Replace any worn sofa fabric and coordinate with the SRD upon replacement. Replace all sofas by Jan 1, 2002. - --------------------------- ------------------- --------------------------------------------------------------- Artwork Condition Replace all artwork to meet the Holiday Inn standardized room decor program. - --------------------------- ------------------- --------------------------------------------------------------- Mattresses Condition Replace any worn, sagging mattresses. - --------------------------- ------------------- --------------------------------------------------------------- Bed Frame Standards Open bed frames are required in wheelchair accessible guest rooms. - --------------------------- ------------------- ---------------------------------------------------------------

24 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 - --------------------------- ------------------- --------------------------------------------------------------- EQUIPMENT - --------------------------- ------------------- --------------------------------------------------------------- Televisions (25") Standards Replace all existing undersized television with new 25" units. - --------------------------- ------------------- --------------------------------------------------------------- Refrigerator/Microwave Competitive Provide a new piece of furniture to match new case goods to house the refrigerator and microwave units. - --------------------------- ------------------- --------------------------------------------------------------- Coffee Makers Standards Install in all rooms per standards. - --------------------------- ------------------- --------------------------------------------------------------- MOT Standards Comply with all Moment of Truth Standards as deadline dates become affective. - --------------------------- ------------------- ---------------------------------------------------------------

25 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 GUEST ROOM BATHS GENERAL DESCRIPTION: The guest bath rooms will require moderate renovations to furnishings, fixtures and equipment update the appearance and address conditional issues. Professional design assistance is required. All plans, color renderings and specifications are to reviewed by Holiday Inn for approval prior to any renovation and installation. ADA compliance certification letters are required at the time of plan review
BASIS FOR REQUIRED AREAS REQUIRE ACTION ACTION CURE/REMEDY - --------------------------- ------------------ --------------------------------------------------------------- FACILITIES - --------------------------- ------------------ --------------------------------------------------------------- Entry Doors/frames Condition Repair, paint and restore doors and frames to like new condition. Replace any corroded door hardware. - --------------------------- ------------------ --------------------------------------------------------------- Walls Condition Replace any worn wall vinyl. - --------------------------- ------------------ --------------------------------------------------------------- Floors Condition Regrout floor tiles to like new condition. - --------------------------- ------------------ --------------------------------------------------------------- Ceiling Paint any stained ceilings. - --------------------------- ------------------ --------------------------------------------------------------- Vanities Condition Replace and upgrade vanities with new cultured marble, natural stone or other solid surface material in the 120 guest rooms with the old orange vanities. - --------------------------- ------------------ --------------------------------------------------------------- SINKS Condition Install under-mounted sinks and new single lever sink hardware in conjunction with vanity top replacement in the 120 guest rooms. - --------------------------- ------------------ --------------------------------------------------------------- Vanity Hardware Replace and upgrade to single lever handles. - --------------------------- ------------------ --------------------------------------------------------------- Vanity Mirrors Condition Replace and any de-silvered mirrors. Recommend wood frame for upgrade appearance. - --------------------------- ------------------ --------------------------------------------------------------- Bathtubs Condition Recondition to like new or replace. - --------------------------- ------------------ --------------------------------------------------------------- Bathtub Hardware Condition Replace tarnished and scratched tub hardware. - --------------------------- ------------------ --------------------------------------------------------------- Mechanical Exhaust Condition Replace any damaged or worn exhaust vents. - --------------------------- ------------------ ---------------------------------------------------------------
26 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 BACK OF HOUSE GENERAL DESCRIPTION:
BASIS FOR REQUIRED AREAS REQUIRE ACTION ACTION CURE/REMEDY - --------------------------- ------------------------- --------------------------------------------------------------- SERVICE AREAS/ROOMS - --------------------------- ------------------------- --------------------------------------------------------------- Service Corridors Pressure wash service corridor to Dumpster. - --------------------------- ------------------------- --------------------------------------------------------------- MAINTENANCE SHOP - --------------------------- ------------------------- --------------------------------------------------------------- Other Paint walls and floors. - --------------------------- ------------------------- --------------------------------------------------------------- LAUNDRY/HOUSEKEEPING - --------------------------- ------------------------- --------------------------------------------------------------- Walls Replace damaged walls. - --------------------------- ------------------------- --------------------------------------------------------------- Floors Replace floor tiles. - --------------------------- ------------------------- ---------------------------------------------------------------
27 EXHIBIT H GROUND LESSOR ESTOPPELS Exhibit H ACKNOWLEDGEMENT, ESTOPPEL CERTIFICATE AND AGREEMENT (HOLIDAY INN, SHEFFIELD, ALABAMA) THIS ACKNOWLEDGMENT, ESTOPPEL CERTIFICATE AND AGREEMENT ("Agreement") is executed and delivered as of the ____day of ____, 2002, among THE CITY OF SHEFFIELD ("Landlord"), MERRILL LYNCH MORTGAGE LENDING, INC., its successors and/or assigns ("Lender"), and SHEFFIELD MOTEL ENTERPRISES, INC. ("Tenant"). WHEREAS, Landlord has heretofore leased certain lands described on Exhibit "A" attached hereto (hereinafter the "Premises") to Tenant pursuant to an agreement of lease dated February 6, 1981, which lease was recorded February 16, 1981, in Deed Book 391, page 79 in the Office of the Judge of Probate of Colbert County, Alabama (such lease, as amended, and as it may be further amended and assigned from time to time, hereinafter the "Lease"); WHEREAS, Tenant is desirous of obtaining from Lender a loan (the "Loan") secured by a first leasehold mortgage upon Tenant's interest as tenant in the Lease. WHEREAS, Lender is unwilling to make the Loan unless Landlord reaffirms to Lender that the provisions of the Lease respecting Leasehold mortgages are restated and confirmed for Lender's benefit; NOW THEREFORE, Landlord hereby certifies to Lender as follows: 1. Without implying that Landlord's acknowledgment or consent may be required under the Lease, Landlord does hereby acknowledge (a) the granting by Tenant of a leasehold mortgage ("Leasehold Mortgage") to Lender on Tenant's interests in the Premises, (b) the pledge of the ownership interests in the Tenant by the holder or holders of all ownership interests in Tenant (i.e. the mezzanine borrower) to the applicable Merrill Lynch mezzanine lending entity (together with its successors and assigns, the "Mezzanine Lender") as security for a mezzanine loan (the "Mezzanine Loan") and the right of Mezzanine Lender to foreclose on such ownership interests in the event of a default under the Mezzanine Loan and (c) the address for delivery of notices to Lender and Mezzanine Lender as set forth below. Upon the mortgaging of the Premises, the pledge of the ownership interests in Tenant pursuant to the Mezzanine Loan and the execution of this Agreement, Landlord acknowledges and agrees that both Lender and Mezzanine Lender shall be deemed to be, and shall have all of the rights and protections granted to a "mortgagee" or "Leasehold Mortgagee" or to the "Servicer" under the Lease. 2. Landlord hereby agrees that the execution of this Agreement shall satisfy the notice requirement set forth in Section 5 of the 1995 Amendment of the Lease. 3. All of the leasehold mortgage protection provisions contained in the Lease, including but not limited to Sections 11.01 and 12.01 of the Lease and Sections 3, 4, 5 and 7 of the 1995 Amendment, and all other provisions inuring to the benefit of Leasehold Mortgagees or their successors and assigns are hereby incorporated into this agreement by reference and restated and confirmed by Landlord for the benefit of Lender, Mezzanine Lender, their successors and assigns. 4. Unless otherwise notified by Lender or Mezzanine Lender, copies of any notices to Lender or Mezzanine Lender, as the case may be, shall be sent to the following address: If to Lender: Merrill Lynch Mortgage Lending, Inc. c/o Merrill Lynch & Co. Global Principal Investments 4 World Financial Center New York, NY 10080 Attn: Steve Glassman (Facsimile: 212-738-1013) Attn: John Gluszak (Facsimile: 212-738-2053) with a copy to: Sidley Austin Brown & Wood, LLP 787 Seventh Avenue New York, NY 10019 Attn: Alan S. Weil, Esq. Facsimile: (212) 839-5599 If to Mezzanine Lender: Merrill Lynch Mortgage Lending, Inc. c/o Merrill Lynch & Co. Global Principal Investments 4 World Financial Center New York, NY 10080 Attn: Steve Glassman (Facsimile: 212-738-1013) Attn: John Katz (Facsimile: 212-738-8094) with a copy to: Sidley Austin Brown & Wood, LLP 787 Seventh Avenue New York, NY 10019 Attn: Alan S. Weil, Esq. Facsimile: (212) 839-5599 5. Landlord hereby agrees that for so long as any sums in respect of the Loan remain outstanding, it shall not, without the prior written consent of both Lender and Mezzanine Lender: (a) notwithstanding any provisions of the Lease to the contrary, accept, consent to or join in the execution of any instrument purporting to (i) effect the termination, prior to November 30, 2077, of the Lease by Tenant, or (ii) amend or modify the Lease; (b) permit or accept the 2 exercise by Tenant of any right it may have to purchase the Premises without having first obtained Lender's written consent thereto. To the extent Lender shall have approved any such exercise by Tenant of such right, the conveyance instrument executed in connection therewith shall expressly provide for the preservation of the leasehold under the Lease, and for the non-merger of the fee and leasehold estates in the Premises. 6. Landlord hereby confirms with respect to the new lease referred to in Section 5 of the 1995 Amendment that should Lender or Mezzanine Lender become the tenant under a new lease pursuant to Section 5 of the Amendment title to all improvements including the Building, as defined in the Lease, situate on the Land, as defined in the Lease, shaft automatically vest in Lender or Mezzanine Lender, pursuant to Section 5 of the 1995 Amendment. 7. Landlord acknowledges that as between Landlord and Lender, its nominee, or a purchaser at a foreclosure or other sale, the Lease shall not be deemed to be terminated, notwithstanding the rejection of the Lease by the Tenant thereunder or its representative in any proceeding under the Bankruptcy Code (11 U.S.C. Section 101 et seq. ) (the "Bankruptcy Code") or any other insolvency law. Lender shall be deemed to have satisfied its obligation to commence foreclosure proceedings by asserting a claim in a proceeding under the Bankruptcy Code or other insolvency proceeding, and Lender shall not be deemed to have failed to satisfy such obligation if Lender is unable to do so as a result of the provisions of Section 362 of the Bankruptcy Code or similar provisions of any other insolvency law. 8. Landlord acknowledges that Lender shall have the right to act on behalf of Tenant in any proceeding commenced by or against Landlord under the Bankruptcy Code. 9. Landlord acknowledges that Lender and Mezzanine Lender have requested that Landlord execute this Agreement in connection with the Loan and the Mezzanine Loan, and that Lender has agreed to make the Loan and Mezzanine Lender has agreed to make the Mezzanine Loan in reliance on the matters set forth herein. 10. Landlord hereby confirms that pursuant to Section 1 of the 1995 Amendment, any mortgage placed by Landlord on the fee estate of the Premises shall be subject to and subordinate to the terms of this Lease and the Leasehold Mortgage. 11. Landlord hereby certifies as follows: (a) Landlord is the owner of the fee simple estate in the Premises subject to covenants, easements and restrictions of record, and is the Landlord under the Lease, (b) Landlord has not mortgaged the fee simple estate in the Premises and there are currently no fee simple mortgages, deeds of trust or other security interests encumbering the fee estate in the Premises. (c) The Lease is in full force and effect in accordance with its terms and has not been further assigned, supplemented, modified or otherwise amended accept as set forth herein. 3 (d) To the best of Landlord's knowledge, each of the obligations on Tenant's part to be performed to date under the Lease have been performed. (e) To the best of Landlord's knowledge, there are no offsets, counterclaims, defenses, deductions or credits whatsoever with respect to the Lease. (f) There are, with respect to the Lease, no options to renew or extend, and no security deposits or prepaid rent or liens. (g) Except for the Amendment of Lease dated January 24, 1995 (the "1995 Amendment") and Second Amendment of Lease dated June 16, 1997 (the "1997 Amendment"), there are no agreements (including Subordination, Non-Disturbance and Attornment Agreements) concerning the Premises, whether oral or written between Landlord and Tenant under the Lease (or its predecessors or successors). (h) As of the date hereof, basic rent is $100 per year, payable on or before December 1st of each year. Basic rent due under the Lease has been paid through _____, 20___. (i) The term commencement date of the Lease was February 6, 1981, and the current term of the lease shall expire on November 30, 2077. 12. The parties agree that the protections and rights granted to the Lender and Mezzanine Lender by this Agreement shall also apply to any other prospective mortgagee of Tenant's interest in the Lease or any other prospective pledgee of the ownership interests in Tenant, provided that the name and address of such lender is provided in writing to Landlord, and such other lender shall be deemed the "Servicer" or the "Leasehold Mortgagee" for the purposes of this Agreement and for the purposes of the Lease. 13. Except as amended hereby, the Lease and all the terms, covenants and conditions thereof remain unchanged and in full force and effect, and the Lease, as amended hereby, is hereby ratified and confirmed in all respects. 14. This Agreement may be executed in counterparts, and each such counterpart shall constitute an original. This Agreement shall be binding upon, and may be relied upon by, the parties, their successors and assigns, and the terms hereof shall inure to the benefit of the parties, their successors and assigns. [SIGNATURE PAGES FOLLOW] 4 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date and year first above written. LANDLORD: CITY OF SHEFFIELD, ALABAMA By:___________________________________ Name: Title: TENANT: SHEFFIELD MOTEL ENTERPRISES, INC. By:__________________________________ Name: Title: [NO FURTHER SIGNATURES ON THIS PAGE] 5 LENDER: MERRILL LYNCH MORTGAGE LENDING, INC. By:__________________________________ Name: Title: MEZZANINE LENDER: MERRILL LYNCH MORTGAGE LENDING, INC. By:__________________________________ Name: Title: [ACKNOWLEDGEMENTS ON FOLLOWING PAGES] A-1 ACKNOWLEDGMENT, ESTOPPEL CERTIFICATE AND AGREEMENT (Holiday Inn - East Hartford, Connecticut) THIS ACKNOWLEDGMENT, ESTOPPEL CERTIFICATE AND AGREEMENT ("Agreement") is executed and delivered as of the ___ day of _____, 2002, among H.W. STEANE COMPANY, INC., formerly known as The Poly Choke Company, Inc. ("Lessor"), and MERRILL LYNCH MORTGAGE LENDING, INC., as Administrative Agent, its successors and/or assigns ("Lender"), and AMI OPERATING PARTNERS, L.P., a Delaware limited partnership ("Lessee"). RECITALS A. Lessor is the lessor under the ground lease described on Exhibit "A" hereto between. Lessor, as lessor, and Lessee, as lessee, affecting the real property ("Land") and improvements ("Improvements") known as and located at 363 Roberts Street, East Hartford, Connecticut 06108, more particularly described on Exhibit "B" hereto (the Land and Improvements, collectively, the "Leased Premises"; such lease, as so amended and assigned, and as it may be further amended and assigned from time to time, the "Lease"); B. Lessee has transferred controlling interest in its partnership to [_____], a [___] corporation, and Lessee is now in the process of obtaining from Lender a refinancing loan (the "Loan") to be secured by, among other things, a leasehold mortgage (the "Mortgage") on and collateral assignment of all of Lessee's interests under the Lease; C. Lender is unwilling to make the Loan unless Lessor reaffirms to Lender that the provisions of the Lease are confirmed and restated for Lender's benefit. NOW, THEREFORE , in consideration of the sum of Ten Dollars ($10.00), and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, Lessor agrees as follows: 1. Without implying that Lessor's acknowledgment or consent may be required under the Lease, Lessor does hereby acknowledge the granting by Lessee of the Mortgage to Lender on Lessee's interests in the Leased Premises, (b) the pledge of the ownership interests in the Lessee by the holder or holders of all ownership interests in Lessee (i.e. the mezzanine borrower) to the applicable Merrill Lynch mezzanine lending entity (together with its successors and assigns, the "Mezzanine Lender") as security for a mezzanine loan (the "Mezzanine Loan") and the right of Mezzanine Loan and (c) the address for delivery of notices to Lender and Mezzanine Lender as set forth below. Upon the mortgaging of the Leased Premises, the pledge of the ownership interests in Lessee pursuant to the Mezzanine Loan and the execution of this Agreement, Lessor acknowledges and agrees that both Lender and Mezzanine Lender shall be deemed to be, and shall have all of the rights and protections granted to a "mortgagee" or "Leasehold Mortgagee" or to the "Servicer" under the Lease. 2. Lessor and Lessee hereby certify to Lender that: (a) Lessor is the current owner of (i) the fee interest in the Leased Premises, and (ii) all of the rights and benefits of "Lessor" under the Lease; (b) all rents and other sums due and owing under the Lease as of the date hereof are current and not in arrears; (c) there exists no uncured default under the Lease by Lessor or Lessee; (d) the Lease is in full force and effect, (e) the current term of the Lease expires on April 30, 2007, the extended term of the Lease expires on April 30, 2022, and Lessee has remaining two (2) 15-year options to renew the term; (f) all of the material obligations under the Lease which have accrued prior to the date of this Agreement have been fully performed; and (g) Exhibit "A" lists the only instruments governing Lessor's and Lessee's rights and obligations with respect to the Leased Premises. 3. The "Net Basic Rental" for the current period (5/01/02 through 4/30/07) is payable $9,398.19 per month. Net Basic Rental shall next be adjusted in 2007 to be effective for the 5-year period beginning 05/01/07. Rent is due in advance on the 1st day of each month. Rent is paid through October 31, 2002, and the next rent payment is due on _____, 2002. 4. There is no parking lot lease, either oral or written, currently in effect. 5. Unless otherwise notified by Lender or Mezzanine Lender, copies of any notices to Lender or Mezzanine Lender, as the case may be, shall be sent to the following address: If to Lender: Merrill Lynch Mortgage Lending, Inc. c/o Merrill Lynch & Co. Global Principal Investments 4 World Financial Center New York, NY 10080 Attn: Steve Glassman Facsimile: (212) 738-1013 Attn: John Gluszak Facsimile: (212) 738-2053 with a copy to: Sidley Austin Brown & Wood, LLP 787 Seventh Avenue New York, NY 10019 Attn: Alan S. Weil, Esq. Facsimile: (212) 839-5599 If to Mezzanine Lender: 2 Merrill Lynch Mortgage Lending, Inc. c/o Merrill Lynch & Co. 4 World Financial Center New York, NY 10080 Attn: Steve Glassman Facsimile: (212) 738-1013 Attn: John Katz Facsimile: (212) 738-8094 with a copy to: Sidley Austin Brown & Wood, LLP 787 Seventh Avenue New York, NY 10019 Attn: Alan S. Weil, Esq. Facsimile: (212) 839-5599 6. In the event Lender shall acquire, assume or succeed to Lessee's interest under the Lease, then in such event, so long as Lender is not in default in the performance of any of the terms, covenants or conditions of the Lease on Lessee's part to be performed and has cured all prior defaults, Lender's possession under the Lease and Lender's rights and privileges thereunder, or under any extensions thereof which may be effected in accordance with any option therefor contained in the Lease, shall not be diminished or interfered with by Lessor, and Lender's occupancy shall not be disturbed by Lessor during the term of the Lease or any such extensions or renewals thereof. 7. Lender understands and agrees that Lessor is neither a party to the Loan nor are Lessor's fee title and Lessor's interest in the Lease subordinate to the security interest of the Mortgage on the lessee's interest in the Lease. 8. Lessor hereby agrees that either Lender or Mezzanine Lender shall have the right, pursuant to the terms of the Lease, to exercise either of the remaining two (2) options to renew the term of the Lease, if the Lessee shall fail to do so, whether or not an event of default under the Mortgage shall have occurred, provided that Lender or Mezzanine Lender shall do so strictly in accordance with the Lease. In the event Lender or Mezzanine Lender does so exercise any option to renew, Lender or Mezzanine Lender shall become obligated with the Lessee for the performance of the obligations set forth in the Lease. 9. Lessor hereby agrees that for so long as any sums in respect of the Loan remain outstanding, it shall not, without the prior written consent of both Lender and Mezzanine Lender: (a) notwithstanding any provisions of the Lease to the contrary, accept, consent to or join in the execution of any instrument purporting to (i) effect the termination, prior to April 30, 2022, of the Lease by Lessee, or (ii) amend or modify the Lease; (b) permit or accept the exercise by Lessee of any right it may have to purchase the Leased Premises without having first obtained Lender's written consent thereto. To the extent Lender shall have approved any such exercise by Lessee of such right, the conveyance instrument executed in connection therewith 3 shall expressly provide for the preservation of the leasehold under the Lease, and for the non-merger of the fee and leasehold estates in the Leased Premises. 10. Lessor's fee simple interest in the Leased Premises and the Lessor's interest under the Lease are not encumbered. 11. Lessor acknowledges that as between Lessor and Lender, its nominee, or a purchaser at a foreclosure or other sale, the Lease shall not be deemed to be terminated, notwithstanding the rejection of the Lease by the Lessee thereunder or its representative in any proceeding under the Bankruptcy Code (11 U.S.C. Section 101 et seq. ) (the "Bankruptcy Code") or any other insolvency law. Lender shall be deemed to have satisfied its obligation to commence foreclosure proceedings by asserting a claim in a proceeding under the Bankruptcy Code or other insolvency proceeding, and Lender shall not be deemed to have failed to satisfy such obligation if Lender is unable to do so as a result of the provisions of Section 362 of the Bankruptcy Code or similar provisions of any other insolvency law. 12. Lessor acknowledges that Lender shall have the right to act on behalf of Lessee in any proceeding commenced by or against Lessor under the Bankruptcy Code. 13. Lessor acknowledges that Lender and Mezzanine Lender have requested that Lessor execute this Agreement in connection with the Loan and the Mezzanine Loan, and that Lender has agreed to make the Loan and Mezzanine Lender has agreed to make the Mezzanine Loan in reliance on the matters set forth herein. 14. Lessor hereby agrees that for so long as any sums in respect of the Loan remain outstanding, notwithstanding any provisions of the Lease to the contrary, in the event of a casualty to or condemnation affecting the Leased Premises, Lender shall be entitled to receive all insurance proceeds and condemnation awards and apply the same in accordance with the terms of the loan documents entered into between Lessee and Lender in connection with the Loan, and shall have the right, but not the obligation, to restore the Leased Premises 15. This Agreement may be executed in counterparts, and each such counterpart shall constitute an original. 16. Except as amended hereby, the Lease and all the terms, covenants and conditions thereof remain unchanged and in full force and effect, and the Lease, as amended hereby, is hereby ratified and confirmed in all respects. 17. The parties agree that the protections and rights granted to the Lender and Mezzanine Lender by this Agreement shall also apply to any other prospective mortgages of Lessee's interest in the Lease or any other prospective pledgee of the ownership interests in Lessee, provided that the name and address of such lender is provided in writing to Lessor, and such other lender shall be deemed the "Servicer" or the "Leasehold Mortgagee" for the purposes of this Agreement and for the purposes of the Lease. 18. This Agreement shall be binding upon, and may be relied upon by, the parties, their successors and assigns, and the terms hereof shall inure to the benefit of the parties, their successors and assigns. 4 IN WITNESS WHEREOF, Lessor has executed this Agreement as of the date and year first above written. LESSOR: H.W. STEANE COMPANY, INC., a Connecticut corporation, formerly known as The Poly Choke Company, Inc. By: _____________________________________ Name: Title: [NO FURTHER SIGNATURES ON THIS PAGE] 5 LESSEE: AMI OPERATING PARTNERS; L.P., a Delaware limited partnership, acting by and through its sole general partner, to wit: AMIOP ACQUISITION CORP., a Delaware corporation, By: _____________________________________ Name: Title: [NO FURTHER SIGNATURES ON THIS PAGE] LENDER: MERRILL LYNCH MORTGAGE LENDING, INC., as Administrative Agent By: _____________________________________ Name: Title: [NO FURTHER SIGNATURES ON THIS PAGE] MEZZANINE LENDER: MERRILL LYNCH MORTGAGE LENDING, INC. By: _____________________________________ Name: _______________________________ Title: ______________________________ [NO FURTHER SIGNATURES ON THIS PAGE] ACKNOWLEDGMENT STATE OF NEW YORK ) )ss: COUNTY OF NEW YORK ) On this ___day of _____,2002, before me personally appeared _____, to me known, who, being by me duly sworn, did depose and say that he/she is _____of MERRILL LYNCH MORTGAGE LENDING, INC. as Administrative Agent, described in and which executed the foregoing instrument; and that he/she signed his/her name thereto by authority of the Board of Directors of the corporation. _____________________________________________ Notary Public, State of New York At Large Print Name: [Notarizations continued on following page.] ACKNOWLEDGMENT STATE OF NEW YORK ) )ss: COUNTY OF NEW YORK ) On this ___day of _____,2002, before me personally appeared _____, to me known, who, being by me duly sworn, did depose and say that he/she is _____of MERRILL LYNCH MORTGAGE LENDING, INC. as Administrative Agent, described in and which executed the foregoing instrument; and that he/she signed his/her name thereto by authority of the Board of Directors of the corporation. _____________________________________________ Notary Public, State of New York At Large Print Name: [Notarizations continued on following page.] STATE OF ______) )ss: COUNTY OF _____) The foregoing instrument was acknowledged before me this ___day of _____,2002 by _____, as _____, of H. W. STEANE COMPANY, INC., a Connecticut corporation, on behalf of said corporation. Personally Known _____OR Produced Identification _____ Type of Identification Produced: _____________________ _____________________________________________ Print or Stamp Name: Notary Public, State of ____________ At Large Commission No: ______________________________ My Commission Expires: ______________________ [Notarizations continued on following page.] STATE OF _____ ) )ss: COUNTY OF_____ ) The foregoing instrument was acknowledged before me this _____day of _____,2002 by _____, as _____of AMI Operating Partners, L.P., a Delaware limited partnership, acting by and through its sole general partner, AMIOP Acquisition Corp., a Delaware corporation. Personally Known _____ OR Produced Identification _____ Type of Identification Produced: ______________________ _____________________________________________ Notary Public, State of ____________ At Large Commission No.: _____________________________ My Commission Expires: ______________________ This Document Was Prepared By, Record and Return To: Alan S. Weil, Esq., Sidley Austin Brown & Wood LLP, 787 Seventh Avenue, New York, New York 10019. CONSENT, CERTIFICATE AND AGREEMENT OF LESSOR THIS CONSENT, CERTIFICATE AND AGREEMENT OF LESSOR is executed and delivered as of this _____ day of _____,2002, by the City of Cedar Rapids, lowa (the "City"). RECITALS: A. The City is the lessor under that certain Lease of Air Rights dated October 14, 1976, by and between the City, as lessor, and Five Seasons Inn, Inc. ("Five Seasons"), as lessee, relating to "air space", "footings and support columns" and the "stairway and elevator" more particularly described in Exhibit "A" thereto (the "Hotel Leased Premises"), which lease was recorded in Volume 1733, at Page 1 of the Records of Linn County, Iowa, as amended pursuant to that certain Agreement to Correct Legal Description dated January 4, 1978, a true and correct copy of which is attached hereto as Exhibit "A" . (Such lease, as so amended and as assigned and as it may be further amended and assigned from tome to time is hereinafter referred to as the "Hotel Air Rights Lease"). The lessee's interests in the Hotel Air Rights Lease were subsequently assigned to and assumed by C.R.I. Hotel Associates, L.P. ("CRI") by that certain Assignment and Assumption of Lease of Air Rights between AETNA Life Insurance Company ("AETNA") (as successor in interest to Five Seasons), as assignor, and CRI, as assignee, recorded in Liber 2877, at Page 344, of the Records of Linn County, Iowa. B. The City is the lessor under that certain unrecorded Lease dated May 23, 1979, by and between the City, as lessor, and Five Seasons, as lessee, relating to an enclosed overhead pedestrian passage in the airspace over a portion of the alley in Block 16, Original Town, Cedar Rapids, Iowa, more particularly described therein (the "Pedestrian Passage"), as amended by that certain Amendment to Lease Originally Executed May 23, 1979, executed by and between the City and Five Seasons as of January 3, 1984 and that certain Amendment to Lease Originally Executed May 23, 1979, executed by and between the City and Five Seasons as of may 22, 1985, true and correct copies of which are attached hereto as Exhibits "B-1", "B-2" and "B-3". (Such lease, as so amended and assigned, and as it may be further amended and assigned from time to time, is hereinafter referred to as the "Block 16 Air Rights Lease"). The lessee's interest in the foregoing Lease were subsequently assigned to and assumed by CRI, by Assignment and Assumption of Lease between AETNA (as successor in interest to Five Seasons), as assignor, and CRI, as assignee. C. The City is the lessor under that certain Ballroom Rental Agreement dated October 26, 1977, by and between the City and Five Seasons, relating to the use of a ballroom (the "Ballroom") located on the second floor of the City's Community Center, which agreement was recorded in Volume 1733, at Page 32, of the Records of Linn County, Iowa, as modified by that certain unrecorded Proposed Amendment to Ballroom Rental Agreement, dated October 26, 1977, by and between the City and CRI (as assignee of AETNA, as successor in interest to Five Seasons), dated February 17, 1993 (a true and correct copy of which unrecorded amendment is attached hereto as Exhibit "C" (such agreement, as to amended and assigned, and as it may be further amended and assigned from time to time, is hereinafter referred to as the "Ballroom Agreement"). D. The City is a party to that certain unrecorded Parking Space Agreement dated May 18, 1977, by and between the City and Five Seasons, relating to the use of City parking facilities by the holder of the lessee's interests in the Hotel Air Rights Lease, a true and correct copy of which is attached hereto as Exhibit "D" (such agreement, as assigned as it may further be amended and assigned form time to time, is hereinafter referred to as the "Parking Agreement"). E. The City is the owner of that certain pedestrian skywalk (the "Garage Skywalk") extending easterly from Block 23, Original Town of Cedar Rapids, lowa, across Fourth Street N.E. to the parking garage owned by the City and referred to in the Parking Agreement. F. CRI has sold, transferred, conveyed and assigned to Servico Cedar Rapids, Inc., an Iowa corporation ("Servico") all of its rights, title and interests in and to the Hotel Air Rights Lease, Block 16 Air Rights Lease, Ballroom Agreement, Parking Agreement (collectively, the "Lease Agreements") and any rights of CRI in and to the Garage Skywalk (collectively, the "Assigned Interests"), by Special Warranty Deed dated May 28, 1997, recorded in Book 3494, at Page 693, of the Records of Linn County, Iowa and Assignment and Assumption of Leases dated May 28, 1997, recorded in Book 3494, at page 684 of the Records of Linn County, Iowa. G. In accordance with the provisions of the Lease Agreements, and in connection with Merrill Lynch Mortgage Lending, Inc. (in its capacity as lender and mezzanine lender, together with its respective successors and assigns and any subsequent holder of mortgages or security interests in the Assigned Interests) (collectively, the "Lender") making a loan to Servico, or any refinancing of such loan, the City has agreed to execute this Agreement. AGREEMENT In consideration of the sum of Ten Dollars ($10.00) and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the City hereby confirms and agrees as follows: 1. The Recitals contained hereinabove are true and correct. 2. The City hereby represents and warrants that it is the current owner, in fee simple, of the Hotel Leased Premises, the Pedestrian Passage and the Ballroom (collectively, the "Lease Agreements Premises"), the Garage Skywalk and the "Five Seasons Parkade" (the garage facility to which the Garage Skywalk is connected). The City is the current owner and holder of all of the rights and benefits of the "lessor" under the Lease Agreements. 2 3. The Lease Agreements are all of the documents pertaining to the Assigned Interests to which the City is a party, such Lease Agreements have not been modified or amended except as described in the Recitals, and the Lease Agreements are in full force and effect. 4. To the City's knowledge, after due inquiry, Servico is not in material default under any of the Lease Agreements, and all rents and other charges payable thereunder are current. 5. With respect to the Hotel Air Rights Lease, the City hereby waives its right of first refusal (as set forth in Section 14 of the Hotel Air Rights Lease) as it applies to the conveyance of the lessee's interests in the Lease Agreements from Servico to Lender (or any designee of Lender) pursuant to a foreclosure upon Lender's security interests in the Assigned Interests, or a conveyance in lieu thereof. 6. With respect to the Block 16 Air Rights Lease, the City confirms and agrees to the following: (a) The current rental rate is $1.00 per year, (b) The date upon which the last structural inspection certificate required under the Block 16 Air Rights Lease was filed with the City is _____; and (c) The City reaffirms the provisions of the Block 16 Air Rights Lease, and confirms that its records reflect that such lease has heretofore been assigned to Servico. 7. With respect to the Ballroom Agreement, the City agrees as follows: (a) In clarification of the provisions of Section 4 of the Ballroom Agreement, the rental payable under such Ballroom Agreement is currently the greater of $50,000.00 per year or the percentage rent described in Section 4 of the Ballroom Rental Agreement. Rental payable for the year 2002 is _____; and (b) The Ballroom Agreement has been executed pursuant to Section 11 of the Hotel Air Rights Lease, and the City agrees that the lessee under the Hotel Air Rights Lease shall have the exclusive use of the Ballroom throughout the term of the Hotel Air Rights Lease; provided, however, that the Ballroom Agreement may be amended from time to time with respect to the rental payments required thereunder. Accordingly, prior to the expiration of the Ballroom Agreement, City agrees that it shall execute an amendment, renewal or extension thereof, extending the term of the Ballroom Agreement on terms reasonably acceptable to City and the then holder of the lessee's interests under the Hotel Air Rights Lease. 8. With respect to the Parking Agreement, the City agrees that the applicable parking rate has been negotiated by and between the City and the holder of the 3 lessee's interest in the Lease Agreements consistent with Iowa law and the Lease Agreements. The current applicable parking rate is ______. 9. The Garage Skywalk is public property, and Servico and all subsequent holders of lessee's interests in the Hotel Air Rights Lease, their officers, employees, licensees and invitees shall have the right to use the Garage Skywalk for pedestrian access between the Hotel Leased Premises and the Five Seasons Parkade during the term of the Hotel Air Rights Lease. 10. The City hereby consents to the granting of liens in Servico's interests in the Assigned Interests in favor of Lender (without implying herein that the City's consent may be required under any or all of the Lease Agreements). Neither the foregoing consent nor any other provision of this Agreement shall be deemed or interpreted as a subordination by the City of its interests in the Lease Agreements or any of the property relating thereto. 11. The City hereby agrees that in the event of any casualty to the Hotel Leased Premises or the Pedestrian Passage, Servico (and any subsequent holder of the lessee's interests in the Hotel Air Rights Lease) shall be entitled to all insurance proceeds payable with respect to such casualty under insurance policies obtained, maintained and whose premiums are paid by the holder of such lessee's interests, and the City shall have no claim to such proceeds. 12. Unless otherwise notified by Lender, copies of any notices to the lessee under the Lease Agreements shall be sent to Lender at the following address: Merrill Lynch Mortgage Lending, Inc. 4 World Financial Center New York, NY 10080 Attn: Steven Glassman Facsimile: (212) 738-1013 With Copy to: Sidley Austin Brown & Wood LLP 787 Seventh Avenue New York, NY 10019 Attn: Alan S. Weil, Esq. Facsimile: (212) 839-5599 The City shall accept the cure, by Lender, of any default under the Lease Agreements with the same force and effect as if such cure had been made by the lease under the Lease Agreements. 13. In the event Lender shall acquire, assume or succeed to Servico's interests under any of the Lease Agreements, then in such event, so long as Lender is not in default in the performance of any of the terms, conditions or covenants of the Lease Agreements to be performed by the lessees thereunder, Lender's possession of the Lease Agreements Premises under the Lease Agreements and Lender's rights and privileges thereunder, or under 4 any extension or renewals thereof which may be effected in connection with any option therefor contained in the Lease Agreements, shall not be diminished or interfered with by City, and Lender's occupancy shall not be disturbed by the City during the term of the Lease Agreements or any such extension or renewals thereof and Lender shall be entitled to the benefit of this Agreement. 14. City hereby agrees that for so long as the Loan shall not have been satisfied, notwithstanding any provisions of the Lease Agreements to the contrary, City shall not accept, consent to or join in the execution of any instrument purporting to effect the termination, prior to April 30, 2020, of the Hotel Air Rights Lease without the prior written consent of Lender unless a material default shall have occurred under the Hotel Air Rights Lease and shall not have been waived by resolution of the City Council or cured within any applicable grace or cure period. 15. City hereby acknowledges that it has not given Servico any right to purchase or acquire the Lease Agreements Premises and the City agrees that it shall not permit Servico or any subsequent lessee under the Hotel Air Rights Lease to purchase the Hotel Leased Premises at any time prior to the satisfaction of the Loan without first having obtained Lender's written consent thereto. 16. City acknowledges that, as between City and the Lender, its nominee or a purchaser at a foreclosure or other sale, the Lease Agreements shall not be deemed to be terminated notwithstanding the rejection of the Lease Agreements by the lessee thereunder or its representative in any proceeding under the Bankruptcy Code (11 U.S.C. Section 101 et. seq.) (the "Bankruptcy Code") or any other insolvency law provided Lender shall, from and after the date it acquires the lessee's interests in the Assigned Interests, comply with the lessee's obligations under the Lease Agreements. CITY OF CEDAR RAPIDS, IOWA By: _____________________________ Mayor Attest:____________________________ its Clerk 5 STATE OF IOWA ) )ss: COUNTY OF LINN ) On this _____ day of _____, 2002, before me, the undersigned, a Notary Public in and for the State of Iowa, personally appeared _____ and _____, to me personally known, who being by me duly sworn, did say that they are the Mayor and City Clerk, respectively, of the City of Cedar Rapids, Iowa; a municipal corporation; that the seal affixed to the foregoing instrument is the corporate seal on behalf of the corporation, by authority of its City Council, as contained in Resolution No. _____ passed by the City Council on the _____ day of _____, 2002; and _____ and _____ acknowledged the execution of the instrument to be their voluntary act and deed and the voluntary act and deed of the corporation, by it voluntarily executed. _____________________________________________ NOTARY PUBLIC - STATE OF IOWA The following parties have executed this Agreement for the purpose of acknowledging and consenting to the matters referred to herein. SERVICO CEDAR RAPIDS, INC., an Iowa corporation By: _________________________________ Name: Title: STATE OF IOWA ) )ss: COUNTY OF LINN ) On this _____ day of _____, 2002, before me, the undersigned, a Notary Public in and for the State of _____, personally appeared _____, to me personally known, who being by me duly sworn, he is the _____ of Servico Cedar Rapids, Inc. an Iowa corporation; that the seal affixed to the foregoing instrument is the corporate seal of the corporation and that the instrument was signed and sealed on behalf of the corporation, by authority of its Board of Directors; and _____ acknowledged the execution of the instrument to be his voluntary act and deed and the voluntary act and deed of the corporation, by it voluntarily executed. _____________________________________________ NOTARY PUBLIC - STATE OF IOWA HARRY G. PAPPAS & SONS, LLC 5504 KEMPER ROAD BALTIMORE, MD 21210 November 20, 2002 VIA REGULAR MAIL & FACSIMILE (212-738-1013) Merrill Lynch Mortgage Lending, Inc. c/o Merrill Lynch & Co. Global Principal Investments 4 World Financial Center New York, New York 10080 VIA REGULAR MAIL & FACSIMILE (404-364-0088) Lodgian AMI, Inc. c/o Servico, Inc. 3445 Peachtree Road N.E. Atlanta, Georgia 30326 RE: LEASE, DECEMBER 31, 1962, HARRY G. PAPPAS & SONS, LLC TO LODGIAN AMI, INC. HOLIDAY INN - INNER HARBOR, BALTIMORE, MARYLAND 301 WEST LOMBARD STREET, BALTIMORE, MARYLAND Dear Ladies and Gentlemen: Harry G. Pappas & Sons, LLC, the "Lessor" in connection with the above-referenced lease, as amended, (the "Lease"), hereby confirms to you in connection with the granting of a leasehold mortgage from Lodgian AMI, Inc. ("Lessee") to Merrill Lynch Mortgage Lending, Inc. and its successors and assigns ("Lender") with respect to the Lease that: (a) to the best of Lessor's knowledge, information and belief, without investigation or inquiry, all rents and other sums due and owing under the Lease as of the date hereof are current and not in arrears; (b) the current term of the Lease expires on December 31, 2037, and there is one (1) remaining twenty (20) year option to extend the term; Merrill Lynch Mortgage Lending, Inc. Lodgian, Inc. November 15, 2002 (c) the "basic rental" and "additional rental" (as those terms are used in the Lease Agreement dated December 31, 1962) for the current period (1/1/98 through 12/31/02) is $32,146.29 per month. Rent is due in advance on the 1st day of each month, is paid through November 1, 2002, and the next rent payment is due on December 1, 2002. Basic and Additional Rent shall next be adjusted in 2003, to be effective for the five-year period beginning January 1, 2003; and (d) Lessor hereby agrees that the Lease may be assigned by Lender, its successors and assigns, in foreclosure or by a purchaser without Lessor's consent, and upon that assignee's written acknowledgment and assumption of all of Lessee's obligations under the Lease, Lender shall have no further liability to perform any of the obligations, conditions or covenants contained in the Lease. The Lessor understands that, in consideration for Lessor's provision of this confirmation and agreement and Lessor's related inconvenience and expense, (a) Lessee shall compensate Landlord in the amount of Ten Thousand Dollars ($10,000), to be paid and delivered to Lessee within ten days from the date of this letter, and (b) Lender and Lessee shall notify the Lessor at the above stated address (with a copy to Steven A. Thomas. Esq., Thomas & Libowitz, P.A., 100 Light Street, Suite 1100, Baltimore, MD 21202) of any material default by Lessee with respect to Lessee's obligations in connection with the aforementioned leasehold mortgage. Harry G. Pappas & Sons, LLC By: /s/ Harry P.Pappas --------------------------------- Harry P. Pappas, Managing Member cc: Peter W. Taliaferro, Esq. Robert McDonough, Esq. Chrystic Dooley, Esq. ACKNOWLEDGMENT, ESTOPPEL CERTIFICATE AND AGREEMENT (Baltimore-International Airport) THIS ACKNOWLEDGEMENT, ESTOPPEL CERTIFICATE AND AGREEMENT ("Agreement") is executed and delivered as of this _____day of _____,2002, among HARRY W. RODGERS, III, WILLIAM A. RODGERS and W. DALE HESS, as partners trading as D.R.H. INVESTMENT COMPANY (as to a 90% undivided interest), and BALTIMORE-WASHINGTON SCIENCE AND INDUSTRY CENTER, L.P., a Maryland limited partnership (as to a 10% undivided interest) (collectively, "lessor "); MERRILL LYNCH MORTGAGE LENDING, INC., in its capacity as mortgage lender and mezzanine lender (together with its respective successors and/or assigns, collectively, "Lender "); and LODGIAN AMI, INC. a Maryland corporation ( "Lessee "). RECITALS A. Lessor is the lessor under the ground lease described on Exhibit "A" hereto between Lessor, as lessor, and Lessee, as lessee, affecting the real property ("Land") and improvements ("Improvements") known as located at BWI International Airport, 890 Elkridge Landing Road, Linthicum Heights, Maryland 21090, more particularly described on Exhibit "B" hereto (the Land and Improvements, collectively, the "Leased Premises"; such lease, as so amended and assigned, and as it may be further amended and assigned from time to time, the "Lease"); B. Lessee is now in the process of obtaining from Lender a refinancing loan (the "Loan") to be secured by, among other things, a leasehold mortgage and collateral assignment of all interests under the Lease; C. In order to facilitate the transactions described herein, Lessor has agreed to enter into this Agreement, without which Lender would not make the Loan. NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00), and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, Lessor agrees as follows: 1. Without implying that Lessor's acknowledgement or consent may be required under the Lease, Lessor does hereby acknowledge and consent to (a) the granting by Lessee of a leasehold mortgage ("Leasehold Mortgage") to Lender on Lessee's interests in the Leased Premises, (b) the pledge of the ownership interests in the Lessee by the holder or holders of all ownership interests in Lessee (i.e. the mezzanine borrower) to the applicable Merrill Lynch mezzanine lending entity (together with its successors and assigns, the "Mezzanine Lender") as security for a mezzanine loan (the "Mezzanine Loan") and the right of Mezzanine Lender to foreclose on such ownership interests in the event of a default under the Mezzanine Loan and (c) the address for delivery of notices to Lender and Mezzanine Lender as set forth below. Upon the mortgaging of the Leased Premises, the pledge of the ownership interests in Lessee pursuant to the Mezzanine Loan and the execution of this Agreement, Lessor acknowledges and agrees that both Lender and Mezzanine Lender shall be deemed to be, and shall have all of the rights and protections granted to a "mortgagee" or "Leasehold Mortgagee" or to the "Servicer" under the Lease. 2. Lessee hereby gives notice of and Lessor hereby accepts Lessee's election to extend the term of the Lease for an additional 10-year term, to September 11, 2023. 3. Lessor and Lessee hereby certify to Lender that: (a) Lessor is the current owner of (i) the fee interest in the Leased Premises, and (ii) all of the rights and benefits of "Lessor" under the Lease; (b) to the best of Lessor's knowledge, all rents and other sums due and owing under the Lease as of the date hereof are current and not in arrears; (c) to the best of Lessor's knowledge, there exists no uncured default under the Lease by Lessor or Lessee; (d) the Lease is in full force and effect; (e) the current term of the Lease expires on September 11, 2003, the first extended term expires on September 11, 2013, the second extended term expires on September 11, 2023 and Lessee has remaining three (3) 10-year options to extend the term; (f) to the best of Lessor's knowledge, all of the material obligations under the Lease which have accrued prior to the date of this Agreement have been fully performed; (g) Exhibit "A" lists the only instruments governing Lessor's and Lessee's rights and obligations with respect to the Leased Premises; and (h) to the best of Lessor's knowledge, the Option to purchase the Leased Premises granted by Lessor in favor of Lessee expired on June 30, 2002. 4. The "Fixed Rent" for the current period (1/1/02 through 12/31/02) is $51,712.68 per month. Fixed Rent shall remain at this same rate throughout the Initial Term and any Extended Terms. Fixed Rent is due in advance on the 1st day of each month, is paid through November 1, 2002, and the next rent payment is due on December 1, 2002. 5. Unless otherwise notified by Lender, copies of any notices to Lender shall be sent to the following address: If to Lender: Merrill Lynch Mortgage Lending, Inc. c/o Merrill Lynch & Co. Global Principal Investments 4 World Financial Center New York, NY 10080 Attention: Steven Glassman Facsimile: (212) 738-1013 Attention: John Gluszak Facsimile: (212) 738-2053 Attention: John Katz Facsimile: (212) 449-8094 with a copy to: Sidley Austin Brown & Wood, LLP 787 Seventh Avenue New York, NY 10019 Attn: Alan S. Weil, Esq. Facsimile: (212) 839-5599 6. Lender understands and agrees that Lessor is neither a party to the Loan nor are Lessor's fee title and Lessor's interest in the Lease subordinate to the security interest of the Leasehold Mortgage on the lessee's interest in the Lease. 7. Lessor's fee simple interest in the Leased Premises and the Lessor's interest under the Lease are encumbered by the liens described on Exhibit "C" attached hereto and made a part hereof, in the approximate current principal balance(s) shown on Exhibit "C." 8. Lessor acknowledges that Lender has requested that Lessor execute this Agreement in connection with the Loan, and that Lender has agreed to make the Loan in reliance on the matters set forth herein. 9. This Agreement may be executed in counterparts, and each such counterpart shall constitute an original. 10. Except as amended hereby, the Lease and all the terms, covenants and conditions thereof remain unchanged and in full force and effect, and the Lease, as amended hereby, is hereby ratified and confirmed in all respects. 11. The parties agree that the protections and rights granted to the Lender by this Agreement shall also apply to any other prospective mortgagee of Lessee's interest in the Lease or any other prospective pledgee of the ownership interests in Lessee, provided that the name and address of such lender is provided in writing to Lessor, and such other lender shall be deemed the "Servicer" or the "Leasehold Mortgagee" for the purposes of this Agreement and for the purposes of the Lease. 12. This Agreement shall be binding upon, and may be relied upon by, the parties, their successors and assigns, and the terms hereof shall inure to the benefit of the parties, their successors and assigns. [SIGNATURES ON FOLLOWING PAGE] IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date and year first above written. LESSEE: LESSOR: LODGIAN AMI, INC., a D.R.H. INVESTMENT COMPANY (as to a Maryland Corporation 90% undivided interest) By: Harry W. Rodgers, III, as its general partner By:____________________________ /s/ Harry W.Rodgers. Name: Title: [SIGNATURES CONTINUE ON FOLLOWING PAGE] and BALTIMORE-WASHINGTON SCIENCE AND INDUSTRY CENTER, L.P., a Maryland limited partnership (as to a 10% undivided interest) By: Rodgers/BWSIC, LLC, as its general partner By: Harry W. Rodgers, III Family Number 2, L.P., Member By: H.W.R., III Family Number 2, LLC, as its general partner By: /s/ Harry W. Rodgers. ------------------------------------- Harry W. Rodgers, III, Manager [SIGNATURES CONTINUE ON FOLLOWING PAGE] LENDER: MERRILL LYNCH MORTGAGE LENDING, INC. By: _____________________________________ Name: Title: [ACKNOWLEDGEMENTS ON FOLLOWING PAGE] STATE OF____ ) )ss: COUNTY OF___ ) On this _____ day of _____, 2002, before me personally appeared _____, to me known, who, being by me duly sworn, did depose and say that he is the _____ of Merrill Lynch Mortgage Lending, Inc., a Delaware corporation, described in and which executed the foregoing instrument; and that he/she signed his/her name thereto by authority of the Board of Directors of the corporation. _______________________________________ Notary Public Print Name: ___________________________ STATE OF ) )ss: COUNTY OF ) On this _____ day of _____, 2002, before me personally appeared _____, to me known, who, being by me duly sworn, did depose and say that he is the _____ of _____ described in and which executed the foregoing instrument; and that he/she signed his/her name thereto by authority of the Board of Directors of _____. ________________________________________ Notary Public Print Name: ____________________________ STATE OF: [ILLEGIBLE] ) )ss: COUNTY OF [ILLEGIBLE] ) On this 20 day of November, 2002, before me personally appeared Harry W. Rodgers, III, to me known, who, being by me duly sworn, did depose and say that he executed the foregoing instrument; and that he signed his name thereto in his individual capacity and in the capacity as set forth above in the signature block for Lessor: [ILLEGIBLE] ----------------------------------------- Notary Public Print Name: SANDRA H JUSTIS ----------------------------- Expires - 5/1/05 EXHIBIT "A" Lease dated August 24, 1971, among Samuel H. Heffner, Edward H. Dickinson, Harry W. Rodgers, III, William Rodgers and W. Dale Hess, co-partners, trading as D.R.H. Investment Co. ("DRH Investment Co."), Landlord ("Lessor"), and American Motor Inns, Incorporated, Tenant ("Original Lessee"). (a) Lease dated August 24, 1971, (recorded in Liber 3883, at Folio 284, Land Records of Anne Arundel Country, Maryland). (b) Agreement to Construct and Lease dated August 24, 1971, between D.R.H. Investment Co., Landlord, and American Motor Inns, Incorporated, Tenant. (c) Option dated August 24, 1971, between D.R.H. Investment Co., Owners, and American Motor Inns, Incorporated, Lessee (recorded in Liber MSH No. 2467, at Folio 798, of the Land Records of Anne Arundel County, Maryland). (d) First Amendment to Agreement to Construct and Lease dated May 18, 1972, among D.R.H. Investment Co., Landlord, and American Motor Inns, Incorporated, Tenant. (e) Agreement dated May 18, 1972, among D.R.H. Investment Co., Landlord, and American Motor Inns, Incorporated, Tenant (recorded in Liber 2490, at Page 581, of the Land Records of Anne Arundel County, Maryland). (f) Subordination Agreement dated May 18, 1972, American Motor Inns, Incorporated, Robert J. Schultze and Charles J. Fleury, Trustees, and Loyola Federal Savings & Loan Association (recorded in Liber 2490, at Page 585, of the Land Records of Anne Arundel County, Maryland); and Non-Disturbance and Attornment Agreement dated September 8, 1986, between Loyola Federal Savings and Loan and American Motor Inns, Inc. (recorded in Liber 4212, at Page 211, Land Records of Anne Arundel County, Maryland). (g) Consolidated Amendatory Agreement dated May 7, 1984 between D.R.H. Investment Co. (which now has only 3 partners - Rodgers III, Rodgers and Hess) and American Motor Inns, Incorporated (recorded in Liber EAC No. 3883, at Folio 325, Land Records of Anne Arundel County, Maryland). (h) Notification of Election to Extend Term dated May 9, 1985 (election to extend term to September 11, 2013. (i) Amendment to Lease, dated December 1, 1985, between D.R.H. Investment Co., Landlord, and American Motor Inns, Incorporated, Tenant (recorded in Liber 4009, at Page 445, Land Records of Anne Arundel County, Maryland). (j) Amendment of Lease Agreement dated December 31, 1985, between D.R.H. Investment Co., Landlord, and American Motor Inns, Incorporated, Tenant. (k) Amendment to Lease Agreement dated December 20, 1986, between D.R.H. Investment Co., Lessor, and American Motor Inns, Incorporated, Lessee (recorded in Liber 4223, at Folio 64, of the Land Records of Anne Arundel County, Maryland). (l) Assignment of Lease and Indemnification Agreement, dated December 23, 1986, between American Motor Inns, Incorporated, Assignor, and AMI Operating Partners, L.P., Assignee (recorded in Liber 4223, at Folio 70, of the Land Records of Anne Arundel County, Maryland). (m) Assignment of Option Agreement dated December 23, 1986, from American Motor Inns, Incorporated, to AMI Operating Partners, L.P. (recorded in Liber 4223, folio 75, on the Land Records of Anne Arundel County, Maryland). (n) Subordination, Non-Disturbance and Attornment Agreement dated July 26, 1995 between AMI Operating Partners, L.P., DRH Investment Company and American Enterprise Life Insurance Company. EXHIBIT "B" LEASED PREMISES EXHIBIT "C" ENCUMBRANCES OF LESSOR'S INTEREST IN THE FEE AND THE LEASE Approximate Principal Balance Lien/Encumbrance As of the Date hereof [PRIME HOSPITALITY CORP. LOGO] DOUGLAS W. VICAR) Senior Vice President - & Chief Financial Officer OID (973) 808-7776 FAX (973) 882-7689 Email: dwv@primehospitality.com November 21, 2002 Merrill Lynch Mortgage Lending, Inc., In its capacity as mortgage lender and mezzanine lender (together with its respective successors and assigns, collectively, "Merrill") c/o Merrill Lynch & Co. 4 World Financial Center New York, New York 10080 Re: Holiday Inn, Glen Burnie, MD Dear Sir/Madam: Prime has been requested by our tenant to provide you with information concerning our lease of the hotel premises described on Schedule A to his letter. 1. The lease consists of an agreement dated May 10, 1968 by and between David H. Greenberg and Janice C. Greenberg and A.O. Krisch, Joel Krisch and Rosalie K. Shaftman, as amended by Amendment to Lease dated February 24, 1971, Second Amendment to Lease dated August 22, 1975, and Amendment to Lease dated as of December 20, 1986, all attached to this letter. 2. The present monthly rental is $2,000 and rent has been paid through November 30, 2002. 3. There is no notice of default outstanding and uncured. Prime is not aware of the occurrence of any event of default that is uncured. 4. Prime will forward to Merrill Lynch Mortgage Lending, Inc. ("Merrill") a copy of any notice sent to tenant, to the extent that the Lease requires a copy of such notice to be sent to the "Servicer," as defined in the Lease. The failure of Prime to forward to Merrill a copy of any other notice or communication to tenant shall not limit Prime's rights under the Lease nor create any liability or obligation to Merrill, the tenant, or another party. Required notices will be sent to the following addresses unless Prime is otherwise notified by Merrill in writings; -2- Merrill Lynch Mortgage Lending, Inc., in its capacity as mortgage lender and mezzanine lender (together with its respective successors and assigns, collectively "Merrill") c/o Merrill Lynch & Co. 4 World Financial Center New York, New York 10080 Attention: Steve Glassman Facsimile: 212-738-1013 Attention: John Gluszak Facsimile: 212-738-2053 Attention: John Katz Facsimile: 212-449-8094 With a copy to: Sidley Austin Brown & Wood, LLP 787 Seventh Avenue New York, New York 10019 Attention: Alan S. Well, Esq. Facsimile: 212-839-5599 5. Notices to Prime will be addressed to Prime Hospitality Corp., 700 Route 46 East, Fairfield, New Jersey 07004, Attention: Douglas Vicari, with a copy to the same address, Law Department, Merrill will provide Prime with a copy of any notice of default sent to tenant. 6. Prime agrees that the Lease may be assigned by Merrill, its successors and assigns, in foreclosure or by a purchaser at foreclosure without Prime's consent and upon that assignee's written acknowledgement and assumption of tenant's obligations under the lease, Merrill shall have no further liability to perform any of the obligations, conditions or covenants contained in the Lease. 7. Merrill acknowledge that this letter is provided as an accommodation to Prime's tenant. Merrill's acceptance of this letter will evidence its agreement to all of the terms of this letter. -3- This letter is given based on the actual knowledge of its signatory without independent inquiry. However, the statements contained in this letter are statements of Prime ("Prime") and no liability will accrue to the signatory. Prime will be estopped from later claiming any state of facts contrary to the statements contained in this letter only if the statements made in this letter were actually known to be false by the signatory at the time made. Very truly yours, PRIME HOSPITALITY CORP. /s/ Douglas Vicari ---------------------------------------- Douglas Vicari Senior Vice President and Chief Financial Officer DV:jm CONSENT, ESTOPPEL CERTIFICATE AND AGREEMENT (Crowne Plaza, Albany, New York) This CONSENT, ESTOPPEL CERTIFICATE AND AGREEMENT is executed and delivered as of this 15 day of November, 2002, among UDC-TEN EYCK DEVELOPMENT CORPORATION-III ("Hotel Lessor'), UDC-TEN EYCK DEVELOPMENT CORPORATION-II ("Garage Lessor"), each a wholly-owned subsidiary of New York Urban Development Corporation, a corporate governmental agency of the State of New York constituting a political subdivision and a public benefit corporation having an address at c/o New York State Urban Development Corporation, 633 Third Avenue, New York, New York 10017 (Hotel Lessor and Garage Lessor, collectively, "Lessor"), ALBANY HOTEL, INC., a Florida corporation ("Lessee") and MERRILL LYNCH MORTGAGE LENDING, INC., as Administrative Agent, its permitted successors and/or assigns as set forth in paragraph 4 hereof, 4 World Financial Center, New York, New York 10080 ("Lender" as that term is defined below). WITNESSETH: WHEREAS, (a) Hotel Lessor is the lessor under a certain Agreement of Lease dated as of December 20, 1979, with Ten Eyck Hotel Associates, a New York limited partnership ("Ten Eyck"), as lessee, affecting the real property described on Exhibit A hereto (the "Hotel Premises"), which Lease was recorded January 4, 1980 in Liber 2181 of Deeds, Page 1000 in the Office of the Albany County Clerk; which Lease was subsequently amended and restated in its entirety by Restatement of Agreement of Lease dated as of December 20, 1979 between Hotel Lessor, as lessor, and Ten Eyck, as lessee, recorded December 17, 1981 in Liber 2216 at page 135 in the Office of the Albany County Clerk; the lessee's interests in which Lease were subsequently assigned to Albany Motel Enterprises, Inc., pursuant to Bargain and Sale Deed dated November 11, 1992 and recorded January 21, 1993 in Liber 2476 at page 871 in the Office of the Albany County Clerk with respect to which a corrective instrument naming Albany Hotel, Inc., a Florida corporation, as lessee, dated May 5, 1995 was recorded August 15, 1995 in Liber 2593 at page 703 in the Office of Albany County Clerk (such Lease, as so amended and assigned, and as it may be further amended and assigned from time to time, the "Hotel Lease"); and (b) Garage Lessor is the lessor under a certain Agreement of Lease dated as of December 20, 1979, with Ten Eyck, as lessee, affecting the real property described on Exhibit B hereto (the "Garage Premises"; the Hotel Premises and the Garage Premises, collectively, the "Leased Premises"), which Lease was recorded January 4, 1980 in Liber 2181 of Deeds, Page 845 in the Office of the Albany County Clerk; which Lease was subsequently amended and restated in its entirety by Restatement of Agreement of Lease dated as of December 20, 1979 between Garage Lessor, as lessor, and Ten Eyck, as lessee, recorded December 17, 1981 in Liber 2216 at page 135 in the Office of Albany County Clerk; the lessee's interests in which Lease were subsequently assigned to Albany Motel Enterprises, Inc., pursuant to Bargain and Sale Deed dated November 11, 1992 and recorded January 21, 1993 in Liber 2476 at page 871 in the Office of the Albany County Clerk with respect to which a corrective instrument naming Lessee, as lessee, dated May 5, 1995 was recorded August 15, 1995 in Liber 2593 at page 703 in the Office of the Albany County Clerk (such Lease, as so amended and assigned, and as it may be further amended and assigned from time to time, the "Garage Lease"; the Hotel Lease and the Garage Lease, collectively, the "Lease"); WHEREAS, Lessee has requested that Merrill Lynch Mortgage Lending, Inc., in its capacity as mortgage lender and mezzanine lender (together with its respective successors and assigns, collectively, "Lender") make a loan to Lessee to be secured by, among other things, a first mortgage lien on Lessee's interest in the Leased Premises (such loan, the "Loan"); and WHEREAS, Lender requires that Lessor enter into this Agreement, without which Lender would not make the Loan; NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00), and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, Lessor agrees as follows; 1. Without implying that Lessor's acknowledgment or consent may be required under the Lease, Lessor does hereby acknowledge and consent to (a) the granting by Lessee of a leasehold mortgage in the principal amount of [$15,500,000] to Lender on Lessee's interests in the Leased Premises ("Leasehold Mortgage") and (b) the address for delivery of notices to Lender as set forth below. Lessor acknowledges and agrees that Lender shall be deemed to be, and shall have all of the rights and protections granted to a "mortgagee," "Leasehold Mortgagee," "Institutional Lender" or "Servicer" under the Lease. 2. Lessor does hereby certify to Lender that: (a) Lessor is the current owner of (i) the fee estate in the Leased Premises, and (ii) all of the rights and benefits of "Lessor" under the Lease; (b) except as qualified herein, Base Rent and other sums due and owing under the Lease as of the date hereof are current and not in arrears; (c) there exist no Events of Default under the Lease by Lessor or Lessee; (d) the Lease is in full force and effect; (e) the Lease has not been amended or modified; and (f) to the best of Lessor's knowledge, there are no offsets, counterclaims, defenses, deductions or credits whatsoever with respect to the Lease, or any amounts owing under any other agreement. Notwithstanding anything else herein to the contrary, Lessor makes no representations as to whether any portion of the Base Rent is due and owing nor whether Additional Base Rent is due and owing. 3. Lessor does hereby agree that: (a) Lender shall be deemed to be an "Institutional Lender" (as such term is defined in the Lease) for all purposes under the Lease; and (b) the mortgage on the Leased Premises securing the Loan shall be deemed to be a "Permanent Mortgage" (as such term is defined in the Lease) for all purposes under the Lease. 4. Lessor acknowledges that Lender may assign its interests as referred to in paragraph I hereof to any of the following: (a) an Institutional Lender (as referred to in the Lease), and (b) an Institutional Lender acting as trustee, and Lessor hereby approves any such assignment. 5. Unless otherwise notified by Lender, copies of any notices to Lessee shall be sent to Lender at the following address: 2 Merrill Lynch Mortgage Lending, Inc. c/o Merrill Lynch & Co. Global Principal Investments 4 World Financial Center New York, NY 10080 Attention: Steven Glassman Facsimile: (212) 738-1013 Attention: John Gluszak Facsimile: (212) 738-2053 Attention: John Katz Facsimile: (212) 449-8094 with a copy to: Sidley Austin Brown & Wood LLP 787 Seventh Avenue New York, NY 10019 Attn: Alan S. Weil, Esq. Facsimile: (212) 839-5599 6. In the event Lender shall acquire, assume or succeed to Lessee's interest under the Lease, then in such event, so long as there exists no uncured Event of Default under the Lease on Lessee's part to be performed, Lender's possession under the Lease and Lender's rights and privileges thereunder, or under any extensions or renewals thereof which may be effected in accordance with any option therefor contained in the Lease, shall not be diminished or interfered with by Lessor, and Lender's occupancy shall not be disturbed by Lessor during the term of the Lease or any such extensions or renewals thereof. 7. Lessor hereby agrees that for so long as any sums in respect of the Loan remain outstanding, Lessor shall not mortgage its fee interest in the Leased Premises unless such mortgage shall expressly provide for the preservation of the leasehold under the Lease, and for the non-merger of the fee and leasehold estates in the Leased Premises. 8. Lessor hereby agrees that for so long as any sums in respect of the Loan remain outstanding, notwithstanding any provisions of the Lease to the contrary, in the absence of an uncured default, it shall not accept, consent to or join in the execution of any instrument purporting to effect the early cancellation or termination of the Lease by Lessee, or a modification or amendment thereof without the prior written consent of Lender. Lessee hereby agrees that for so long as any sums in respect of the Loan remain outstanding, notwithstanding any provisions of the Lease to the contrary, Lessee will not exercise any right it may have to purchase the Leased Premises without the prior written consent of Lender. 9. Lessor acknowledges that as between Lessor and Lender, its nominee or a purchaser at a foreclosure or other sale, the Lease shall not be deemed to be terminated notwithstanding the rejection of the Lease by the lessee thereunder or its representative in any proceeding under the Bankruptcy Code (11 U.S.C., Section 101 et seq.) (the "Bankruptcy Code") or any other insolvency law provided Lender cures any and all defaults susceptible to cure by Lender, 3 including any monetary defaults. Leader shall be deemed to have satisfied its obligation to commence foreclosure proceedings by asserting a claim in a proceeding under the Bankruptcy Code or other insolvency proceeding, and Lender shall not be deemed to have failed to satisfy such obligation if Lender is unable to do so as a result of the provisions of Section 362 of the Bankruptcy Code or similar provisions of any other insolvency law. 10. Lessor acknowledges that Lender has requested that Lessor execute this Agreement in connection with the Loan, and that Lender has agreed to make the Loan in reliance on the matters set forth herein. 11. This Agreement shall be binding upon, and may be relied upon by, the parties, their successors and assigns, and the terms hereof shall inure to the benefit of the parties, their successors and assigns. [NO FURTHER TEXT ON THIS PAGE] 4 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year first above written. LESSOR: UDC-TEN EYCK DEVELOPMENT CORPORATION-II By: [ILLEGIBLE] ------------------------------- Name: Title : V P UDC-TEN EYCK DEVELOPMENT CORPORATION-III By: [ILLEGIBLE] ------------------------------ Name: Title: V P LESSEE: ALBANY HOTEL, INC. By: __________________________________ Name: Title: [SIGNATURES CONTINUE ON FOLLOWING PAGE] IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year first above written. LENDER: MERRILL LYNCH MORTGAGE LENDING, INC., as Administrative Agent By: __________________________ Name: Title: 6 STATE OF NEW YORK ) )ss: COUNTY OF NEW YORK ) The foregoing instrument was acknowledged before me this 15 day of Nov, 2002, by Harris Rosenthal who resides at WEST ORANGE N.J. as V.P. of UDC-TEN EYCK DEVELOPMENT CORPORATION-II, on behalf of said corporation. He/she is personally known to me or who has produced a driver's license as identification and who did take an oath. /s/ STEVEN J. MATLIN _________________________________ Print or Stamp Name: Notary Public STATE OF NEW YORK ) STEVEN J. MATLIN )ss: NOTARY PUBLIC OF NEW YORK COUNTY OF NEW YORK ) Qualified in New York County Reg# 02MA6063225 My Commission Expires August 27, 2005 The foregoing instrument was acknowledg$ed before me this 15 day of Nov, 2002, by Harris Rosenthal who resides at WEST ORANGE N.J. as V.P. of UDC-TEN EYCK DEVELOPMENT CORPORATION-III, on behalf of said corporation. He/she is personally known to me or who has produced a driver's license as identification and who did take an oath. /s/ STEVEN J. MATLIN _________________________________ Print or Stamp Name: Notary Public STATE OF ) STEVEN J. MATLIN )ss: NOTARY PUBLIC OF NEW YORK COUNTY OF ____) Qualified in New York County Reg# 02MA6063225 My Commission Expires August 27, 2005 The foregoing instrument was acknowledged before me this _____ day of _____, 2002, by _____, who resides at _____, as _____ of ALBANY HOTEL, INC., on behalf of said corporation. He/she is personally known to me or who has produced a driver's license as identification and who did take an oath. _________________________________ Print or Stamp Name: Notary Public STATE OF ____) )ss: COUNTY OF ___) The foregoing instrument was acknowledged before me this _____ day of _____, 2002, by _____ who resides at _____, as _____ of MERRILL LYNCH MORTGAGE LENDING, INC., on behalf of said corporation. He/she is personally known to me or who has produced a driver's license as identification and who did take an oath. _____________________ Print or Stamp Name: Notary Public EXHIBIT A Legal Description - Hotel EXHIBIT A ALL that certain parcel of land in the City and County of Albany, State of New York, comprising Parcel D on a certain map filed April 29, 1976 in the Albany County Clerk's Office as Map No. 5197, filed in Drawer No. 168, said parcel being more particularly bounded and described as follows: BEGINNING at the point where the division line between Parcels A and D on said map intersects the Northeasterly line of State Street and which point is 128.68 feet Northwesterly on a course of North 52 degrees 43 minutes 30 seconds West as measured along the Northeast line of North State Street from its intersection with the Northwest line of North Pearl Street; RUNNING THENCE along the Northeast line of State Street, the following courses and distances: North 52 degrees 43 minutes 30 seconds West 44.77 feet; North 51 degrees 30 minutes 20 seconds West 47.68 feet, and North 55 degrees 53 minutes West 134.61 feet to the East line of Lodge Street; as per deed to the City of Albany recorded November 17, 1976 in Book 2123 of deeds page 120. THENCE along the said East line of Lodge Street, the following courses and distances; North 26 degrees 53 minutes 30 seconds East 159.95 feet, and North 25 degrees 47 minutes 00 seconds East 83.31 feet to the division line between Parcel D and Parcel C on said map; THENCE along said division line, South 17 degrees 38 minutes 30 seconds East 45.58 feet; (CONTINUED) THENCE continuing along said division line and the division line between Parcel D and Parcel E, South 62 degrees 38 minutes 30 seconds East 206.09 feet to a point in the division line between Parcel D and Parcel E on said map; THENCE along said division line, the following courses and distances: South 27 degrees 21 minutes 30 seconds West 154.84 feet, and South 17 degrees 38 minutes 30 seconds East 19.72 feet to the division line between Parcel D and Parcel A on said map; THENCE along same, South 72 degrees 21 minutes 30 seconds West 34.11 feet, and South 27 degrees 21 minutes 30 seconds West 50.85 feet to the point of BEGINNING. EASEMENT D-1 TOGETHER with an easement for the footings of the building constructed upon Parcel D to project beyond the division line between Parcel D and Parcel E, said footings to be constructed as shown on the Construction Contract except as modified, changed, altered or redesigned to meet existing conditions. EASEMENT D-2 TOGETHER with an easement for signs erected within the area (Level 51) of the building constructed upon Parcel D to project beyond the division line between Parcel D and Parcel E. The signs so erected shall meet the approval of UDC. EASEMENT D-7 SUBJECT to an easement for the footings of the building constructed upon Parcel C, to project beyond the parcel limits of Parcel C into Parcel D, near the southwest corner of Parcel C. -2- EASEMENT D-3 TOGETHER with an easement for exit onto a portion of Parcel E designated in the Construction Contracts as the "East Plaza" an easement for ingress and egress across said "East Plaza". EASEMENT D-4 TOGETHER with an easement for roof projections of the building constructed upon Parcel D to project beyond the division line between Parcel D and Parcel E. EASEMENT D-5 TOGETHER with an easement for the footings of the buildings to be constructed upon Parcel D to project beyond the Parcel limits of Parcel D into State Street and Lodge Street. EASEMENT D-6 TOGETHER with an easement for the construction, operation, maintenance, repair and replacement of an electric vault within the limits of Lodge Street and/or State Street adjacent to Parcel D if such vault is required and approved by UDC. TOGETHER with the right to erect and maintain within the air space covered by Easement C-1, mentioned in Exhibit "A" to that certain Restatement of Agreement of Lease between UDC - Ten Eyck Development Corporation-II and Ten Eyck Hotel Associates dated as of December 20, 1979, a portion of the Buildings constructed upon the aforesaid Parcel D pursuant to the Lease. - 3 - EXHIBIT B Legal Description - Garage Description of Land ALL that certain parcel of land in the City and County of Albany, State of New York, comprising Parcel C on a certain map filed April 29, 1976 in the Albany County Clerk's Office as Map No. 5197, filed in Drawer No. 168, said parcel being more particularly bounded and described as follows: BEGINNING at a point in the east line of Lodge Street at the northwest corner of Parcel D on said map; THENCE North 17 degrees 38 minutes 30 seconds West, along the East line of Lodge Street, 2.92 feet; THENCE North 27 degrees 21 minutes 30 seconds East, along the East line of Lodge Street, 32.37 feet; THENCE South 62 degrees 38 minutes 30 seconds East, along the East line of Lodge Street, 1.11 feet; THENCE North 25 degrees 47 minutes 00 seconds East, along the East line of Lodge Street, 120.40 feet to a point in the South line of Pine Street; THENCE South 64 degrees 44 minutes East, along the South line of Pine Street, 129.35 feet; THENCE South 79 degrees 36 minutes 30 seconds East, along the South line of Pine Street, 9.25 feet to the division line between Parcels C and E on said map; THENCE along said division line South 27 degrees 21 minutes 30 seconds West, 194.44 feet to the division line between Parcels C and D on said map; THENCE North 62 degrees 38 minutes 30 seconds West, along said division line 101.62 feet; THENCE Continuing along said division line North 17 degrees 38 minutes 30 seconds West, 45.58 feet to the point and place of BEGINNING. EASEMENT C-1 TOGETHER with the right to have that volume of air-space over Parcel D above an elevation of 104 feet 0 inches above Mean Sea Level (U. S. C. G. S.-1929 Datum) retained free of structures or other encumbrances to the free movement of air and light within the following limits: BEGINNING at a point in the south line of Parcel C hereinbefore described, said point of beginning being more EXHIBIT "A" PAGE 1 OF 7 particularly described as follows: beginning at the point of intersection of the north line of State Street with the west line of North Pearl Street; thence N. 52 degrees 43' 30" W., along the north line of State Street, 173.45 feet; thence N. 51 degrees 30' 20" W., along the north line of State Street, 47.68 feet; thence N. 55 degrees 53' W., along the north line of State Street, 134.61 feet to a point in the east line of Lodge Street; thence N. 26 degrees 53' 30" E., along the east line of Lodge Street, 159.95 feet; thence N. 25 degrees 47' 00" E., along the east line of Lodge Street, 83.31 feet; thence S. 17 degrees 38' 30" E., 45.58 feet to the first mentioned point of beginning which point is the point of beginning of the parcel herein described: THENCE S. 27 degrees 21' 30" W., 10.0 feet; thence S. 62 degrees 38' 30" E., 183.87 feet; thence N. 27 degrees 21' 30" E., 10.0 feet to a point in the north line of Parcel D, thence N. 62 degrees 38' 30" W., along the north line of Parcel D, 183.87 feet to the point and place of beginning. OCCUPYING on a horizontal plane at an elevation of 104 feet 0 inches above Mean Sea Level (U.S.C.G.S. - 1929 Datum) an area of 1838.7 square feet (.04221 Acre). EASEMENT C-2 TOGETHER with all rights to that volume of airspace over Parcel E above an elevation of 67 feet 0 inches above Mean Sea Level (U.S.C.G.S.-1929 Datum) having the following limits: BEGINNING at the southeast corner of Parcel C herein-before described, said point of beginning being more particularly described as follows: beginning at the point of intersection of the north EXHIBIT "A" PAGE 2 OF 7 line of State Street with the west line of North Pearl Street; thence N. 52 degrees 43' 30" W., along the north line of State Street, 173.45 feet; thence N. 51 degrees 30' 20" W., along the north line of State Street, 47.68 feet; thence N. 55 degrees 53' W., along the north line of State Street, 134.61 feet to the east line of Lodge Street; thence N. 26 degrees 53' 30" E., along the east line of Lodge Street, 159.95 feet; thence N. 25 degrees 47' 00" E., along the east line of Lodge Street, 83.31 feet; thence S. 17 degrees 38' 30" E., 45.58 feet; thence S. 62 degrees 38' 30" E., 101.62 feet to the first mentioned point of beginning which point is the point of beginning of the parcel herein described: THENCE N. 27 degrees 21' 30" E., 194.44 feet to a point in the south line of Pine Street; thence S. 79 degrees 36' 30" E., along the south line of Pine Street, 40.95 feet; thence S. 63 degrees 31' E., along the south line of Pine Street, 25.92 feet; thence S. 27 degrees 21' 30" W., 170.63 feet; thence S. 17 degrees 38' 30" E., 10.13 feet; thence S. 27 degrees 21' 30" W., 29.0 feet; thence N. 62 degrees 38' 30" W., 72.25 feet to the point and place of beginning. OCCUPYING on a horizontal plane at an elevation of 67 feet 0 inches above Mean Sea Level (U.S.C.G.S.-1929 Datum) an area of 13, 438 square feet (0.30849 Acre). EASEMENT C-3 TOGETHER with the right to have that volume of airspace over Parcel E above an elevation of 85 feet 0 inches above Mean Sea Level (U.S.C.G.S.-1929 Datum) retained free of structures of other encumbrances to the free movement of air and light within the following limits: EXHIBIT "A" PAGE 3 OF 7 BEGINNING, at the southeast corner of Easement C-2 hereinbefore described; said point of beginning being more particularly described as follows: beginning at the point of intersection of the north line of State Street with the west line of North Pearl Street; thence N. 52 degrees 43' 30" W., along the north line of State Street, 173.45 feet; thence N. 51 degrees 30' 20" W., along the north line of State Street, 47.68 feet; thence N. 55 degrees 53' W., along the north line of State Street, 134.61 feet to the east line of Lodge Street; thence N. 26 degrees 53' 30" E., along the east line of Lodge Street, 159.95 feet; thence N. 25 degrees 47' 00" E., along the east line of Lodge Street, 83.31 feet; thence S. 17 degrees 38' 30" E., 45.58 feet; thence S. 62 degrees 38' 30" E., 173.87 feet to the first mentioned point of beginning which point is the point of beginning of the parcel herein described: THENCE N. 27 degrees 21' 30" E., 29.0 feet; thence N. 17 degrees 38' 30" W., 10.13 feet; thence N. 27 degrees 21' 30" E., 170.63 feet to a point in the south line of Pine Street; thence S. 63 degrees 31' E., along the south line of Pine Street, 10.00 feet; thence S. 27 degrees 21' 30" W., 166.64 feet; thence S. 17 degrees 38' 30" E., 10.13 feet; thence S. 27 degrees 21' 30" W., 33.14 feet; thence N. 62 degrees 38' 30" W., 10.00 feet to the point and place of beginning. EXHIBIT "A" PAGE 4 OF 7 OCCUPYING on a horizontal plane at an elevation of 85 feet 0 inches above Mean Sea Level (U.S.C.G.S.-1929 Datum) an area of 2098 square feet (0.04816 Acre). EASEMENT C-4 TOGETHER with the right to construct, operate, maintain or repair or replace a stairway and elevator within that volume of space within Parcel E below an elevation of 67 feet 0 inches above Mean Sea Level (U.S.C.G.S.-1929 Datum) having the following limits: BEGINNING at the southeast corner of Easement C-2 hereinbefore described, said point of beginning being more particularly described as follows: beginning at the point of intersection of the north line of State Street with the west line of North Pearl Street; thence N. 52 degrees 43' 30" W., along the north line of State Street, 173.45 feet; thence N. 51 degrees 30' 20" W., along the north line of State Street, 47.68 feet; thence N. 55 degrees 53' W., along the north line of State Street, 134.61 feet to the east line of Lodge Street; thence N. 26 degrees 53' 30" E., along the east line of Lodge Street, 159.95 feet; thence N. 25 degrees 47' 00" E., along the east line of Lodge Street, 83.31 feet; thence S. 17 degrees 38' 30" E., 45.58 feet; thence S. 62 degrees 38' 30" E., 173.87 feet to the first mentioned point of beginning which point is the point of beginning of the parcel herein described: THENCE N. 27 degrees 21' 30" E., 29.0 feet; thence N. 62 degrees 38' 30" W., 8.83 feet; thence S. 27 degrees 21' 30" W., 29.0 feet; thence S. 62 degrees 38' 30" E., 8.83 feet to the point and place of beginning. OCCUPYING on a horizontal plane at an elevation of 67 feet 0 inches above Mean Sea Level (U.S.C.G.S.-1929 Datum) an area of 256 square feet (0.00588 Acre). EXHIBIT "A" PAGE 5 OF 7 EASEMENT C-5 TOGETHER with the right to construct, repair, replace and maintain columns and other structural elements for the proposed parking structure to be erected upon Parcel C hereinbefore described within that volume of space within Parcel C below an elevation of 67 feet 0 inches above Mean Sea Level (U.S.C.G.S.-1929 Datum) having the following limits: BEGINNING at the southeast corner of Parcel C hereinbefore described, said point of beginning being more particularly described as follows: beginning at the intersection of the north line of State Street with the west line of North Pearl Street; thence N. 52 degrees 43' 30" W., along the north line of State Street, 173.45 feet; thence N. 51 degrees 30' 20" W., along the north line of State Street, 47.68 feet; thence N. 55 degrees 53' W., along the north line of State Street, 134.61 feet to the east line of Lodge Street; thence N. 26 degrees 53' 30" E., along the east line of Lodge Street, 159.95 feet; thence N. 25 degrees 47' 00" E., along the east line of Lodge Street, 83.31 feet; thence S. 17 degrees 38' 30" E., 45.58 feet; thence S. 52 degrees 38' 30" E., 101.62 feet to the first mentioned point of beginning which point is the point of beginning of the parcel herein described: THENCE N. 27 degrees 21' 30" E., 183.50 feet; thence S. 62 degrees 38' 30" E., 7.5 feet; thence S. 27 degrees 21' 30" W., 57.0 feet; thence N. 62 degrees 38' 30" W., 6.0 feet; thence S. 27 degrees 21' 30" W., 126.5 feet; thence N. 62 degrees 38' 30" W., 1.5 feet to the point and place of beginning. EXHIBIT "A" PAGE 6 OF 7 OCCUPYING on a horizontal plane at an elevation of 67 feet 0 inches above Mean Sea Level (U.S.C.G.S.-1929 Datum) an area of 617.25 square feet (0.01417 Acre). EASEMENT C-6 TOGETHER with an easement for the footings of the building constructed upon Parcel C to project beyond the parcel limits of Parcel C into Pine Street and Lodge Street. TOGETHER with an easement in favor of the Equitable Life Assurance Society of the United States and The Equitable Life Mortgage and Realty Investors, their successors and assigns, as set forth in Easement and Seven Party Agreement dated December 20, 1979 and duly recorded in the office of the Clerk of the County of Albany on January 4, 1980, in Liber 2181 of Deeds, at page 775. SUBJECT to the right of Tenant, as the tenant under a certain Restatement of Lease Agreement ("Ground Lease") dated as of December 20, 1979 between UDC-Ten Eyck Development Corporation-III, as Landlord, and Ten Eyck Hotel Associates, as Tenant, to be recorded simultaneously herewith to erect and maintain within the airspace covered by the foregoing Easement C-1 a portion of the Buildings to be constructed pursuant to the Ground Lease as located upon completion thereof. EXHIBIT "A" PAGE 7 OF 7 ACKNOWLEDGMENT, ESTOPPEL CERTIFICATE AND AGREEMENT (Lancaster, PA - East) THIS ACKNOWLEDGMENT, ESTOPPEL CERTIFICATE AND AGREEMENT ("Agreement") is executed and delivered as of this 14th day of November, 2002, among JOYCE A. BRISTOW, as Personal Representative of the estate of Dorothy H. Herr, ("Lessor"); MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation ("Lender") and AMI OPERATING PARTNERS, L.P., a Delaware limited partnership ("Lessee"). RECITALS A. Lessor is the lessor under the ground lease described on Exhibit "A" hereto between Lessor, as lessor, and Lessee, as lessee, affecting the real property ("Land") and improvements ("improvements") known as and located at 521 Greenfield Road, Lancaster, Pennsylvania 17601 more particularly described on Exhibit "B" hereto (the Land and Improvements, collectively, the "Leased Premises"; such lease, as so amended and assigned, and as it may be further amended and assigned from time to time, the "Lease"); B. Lessee is now in the process of obtaining from Lender a refinancing loan (the "Loan ") to be secured by, among other things, a mortgage and collateral assignment of all of Lessee's interests under the Lease; C. In order to facilitate the transactions described herein, Lessor has agreed to enter into this Agreement, without which Lender would not make the Loan. NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00), and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, Lessor agrees as follows: 1. Without implying herein that Lessor's acknowledgment or consent may be required under the Lease, Lessor does hereby acknowledge (a) the granting by Lessee of a leasehold mortgage ("Leasehold Mortgage") to Lender on Lessee's interests in the Leased Premises (b) the pledge of the ownership interests in the Lessee by the holder or holders of all ownership interests in Lessee (i.e. the mezzanine borrower) to the applicable Merrill Lynch mezzanine lending entity (together with its successors and assigns, the "Mezzanine Lender") as security for a mezzanine loan (the "Mezzanine Loan") and the right of Mezzanine Lender to foreclose on such ownership interests in the event of a default under the Mezzanine Loan and (c) the address for delivery of notices to Lender and Mezzanine Lender as set forth below. Upon the mortgaging of the Leased Premises, the pledge of the ownership interests in Lessee pursuant to the Mezzanine Loan and the execution of this Agreement, Lessor acknowledges and agrees that both Lender and Mezzanine Lender shall be deemed to be, and shall have all of the rights and protections granted to the "Servicer" under the Lease. 2. Lessor and Lessee hereby certify to Lender that: (a) Lessor is the current owner of (i) the fee interest in the Leased Premises, and (ii) all of the rights and benefits of "Lessor" under the Lease; (b) all rents and other sums due and owing under the Lease as of the date hereof are current and not in arrears; (c) there exists no uncured default under the Lease by Lessor or Lessee; (d) the Lease is in full force and effect; (e) the current renewal term of the Lease expires June 30, 2024, and Lessee has remaining two (2) 20-year options to renew the term; (f) all of the material obligations under the Lease which have accrued prior to the date of this Agreement have been fully performed; and (g) Exhibit "A" lists the only instruments governing Lessor's and Lessee's rights and obligations with respect to the Leased Premises. 3. The annual rental for the current period (08/01/99 through 07/30/04) is $67,456, payable $5,621,34 per month. Annual rental shall next be adjusted in August, 2004, to be effective for the 5-year period beginning 08/01/04. Rent is due in advance on the 1st day of each month. Rent is paid through November, 2002 and the next rent payment is due on December 1, 2002. 4. Lessor confirms that, notwithstanding any provisions of the Lease to the contrary, in the event of casualty to the Improvements on the Leased Premises, insurance proceeds in respect of such casualty shall be paid to and held by Lender for Lender's disbursement to Lessee for repair and/or reconstruction of the Improvements. 5. In accordance with the provisions of Section 13 of the Lease, Lessor has at all times complied with the covenants regarding non-competition contained therein. 6. Unless otherwise notified by Lender or Mezzanine Lender, copies of any notices to Lender or Mezzanine Lender, as the case may be, shall be sent to the following addresses: If to Lender: Merrill Lynch Mortgage Lending, Inc. c/o Merrill Lynch & Co. Global Principal Investments 4 World Financial Center New York, New York 10080 Attn: Steve Glassman Facsimile: (212) 738-1013 Attn: John Gluszak Facsimile: (212) 738-2053 With a copy to: Sidley Austin Brown & Wood, LLP 787 Seventh Avenue New York, New York 10019 Attn: Alan S. Weil, Esq. Facsimile: (212) 839-5599 If to Mezzanine Lender: Merrill Lynch Mortgage Lending, Inc. c/o Merrill Lynch & Co. Global Principal Investments 4 World Financial Center New York, New York 10080 Attn: Steven Glassman Facsimile: (212) 738-1013 Attn: John Katz Facsimile: (212) 738-8094 With a copy to: Sidley Austin Brown & Wood, LLP 787 Seventh Avenue New York, New York 10019 Attn: Alan S. Weil, Esq. Facsimile: (212) 839-5599 7. In the event Lender shall acquire, assume or succeed to Lessee's interest under the Lease, then in such event, so long as Lender is not in default in the performance of any of the terms, covenants or conditions of the Lease on Lessee's part to be performed, Lender's possession under the Lease and Lender's rights and privileges thereunder, or under any extensions or renewals thereof which may be effected in accordance with any option therefor contained in the Lease, shall not be diminished or interfered with by Lessor, and Lender's occupancy shall not be disturbed by Lessor during the term of the Lease or any such extensions or renewals thereof. 8. Lender understands and agrees that Lessor is neither a party to the Loan nor are Lessor's fee title and Lessor's interest in the Lease subordinate to the security interest of the Leasehold Mortgage on the lessee's interest in the Lease. 9. Lessor's Encumbrances. Lessor's fee simple interest in the Leased Premises and the Lessor's interest under the Lease are not encumbered. 10. Lessor hereby agrees that either Lender or Mezzanine Lender shall have the right, pursuant to the terms of the Lease, to exercise the remaining two (2) options to renew the term of the Lease, if the Lessee shall fail to do so, whether or not an event of default under the Leasehold Mortgage shall have occurred, provided that Lender or Mezzanine Lender shall do so strictly in accordance with the Lease. In the event Lender or Mezzanine Lender does so exercise any option to renew, Lender or Mezzanine Lender shall become obligated with the Lessee for the performance of the obligations set forth in the Lease. 11. Lessor hereby agrees that for so long as any sums in respect of the Loan remain outstanding, it shall not, without the prior written consent of both Lender and Mezzanine Lender: (a) notwithstanding any provisions of the Lease to the contrary, accept, consent to or join in the execution of any instrument purporting to (i) effect the termination, prior to June 30, 2024, of the Lease by Lessee, or (ii) amend or modify the Lease with respect to the term, amounts payable by the Lessee thereunder, the protections afforded to Lender as a leasehold mortgagee thereunder or other material non-monetary modifications and shall give Lender written notice of any other proposed modification thirty (30) days prior to the effective date; (b) permit or accept the exercise by Lessee of any right it may have to purchase the Leased Premises without having first obtained Lender's written consent thereto. To the extent Lender shall have approved any such exercise by Lessee of such right, the conveyance instrument executed in connection therewith shall expressly provide for the preservation of the leasehold under the Lease, and for the non-merger of the fee and leasehold estates in the Leased Premises. 12. Lessor acknowledges that as between Lessor and Lender, its nominee or a purchaser at a foreclosure or other sale, the Lease shall not be deemed to be terminated notwithstanding the rejection of the Lease by the Lessee thereunder or its representative in any proceeding under the Bankruptcy Code (11 U. S. C. Section 101 et seq.) (the "Bankruptcy Code") or any other insolvency law. Lender shall be deemed to have satisfied its obligation to commence foreclosure proceedings by asserting a claim in a proceeding under the Bankruptcy Code or other insolvency proceeding, and Lender shall not be deemed to have failed to satisfy such obligation if Lender is unable to do so as a result of the provisions of Section 362 of the Bankruptcy Code or similar provisions of any other insolvency law, provided all arrearages and rents are paid within ninety (90) days of the institution of the bankruptcy proceeding. 13. Lessor acknowledges that Lender and Mezzanine Lender have requested that Lessor execute this Agreement in connection with the Loan and the Mezzanine Loan, and that Lender has agreed to make the Loan and Mezzanine Lender has agreed to make the Mezzanine Loan in reliance on the matters set forth herein. 14. This Agreement may be executed in counterparts, and each such counterpart shall constitute an original. 15. Except as amended hereby, the Lease and all the terms, covenants and conditions thereof remain unchanged and in full force and effect, and the Lease, as amended hereby, is hereby ratified and confirmed in all respects. 16. The parties agree that the protections and rights granted to the Lender and Mezzanine Lender by this Agreement shall also apply to any other prospective mortgagee of Lessee's interest in the Lease or any other prospective pledgee of the ownership interests in Lessee, provided that the name and address of such lender is provided in writing to Lessor, and such other lender shall be deemed the "Servicer" or the "Leasehold Mortgagee" for the purposes of this Agreement and for the purposes of the Lease. 17. This Agreement shall be binding upon, and may be relied upon by, the parties, their successors and assigns, and the terms hereof shall inure to the benefit of the parties, their successors and assigns. IN WITNESS WHEREOF, the parties hereto have executed Agreement as of the date and year first above written. LENDER: LESSOR MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation Joyce A. Bristow By:_______________________________ ---------------------------------------- Name: Joyce A. Bristow, as Personal Title: Representative of the estate of Dorothy H. Herr MEZZANINE LENDER: LESSEE: MERRILL LYNCH MORTGAGE AMI OPERATING PARTNERS, L.P., LENDING, INC., a Delaware limited partnership a Delaware corporation By:_______________________________ By:_____________________________________ Name: Name: Title: Title: [Notarizations commence on following page] CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT - -------------------------------------------------------------------------------- State of California ) ) ss. County of Solano ) On Nov 14, 2002, before me, Linda Bergen ----------- ----------------------------------------------- Date Name and Title of Officer (e.g., "Jans Dee. Notary Public") personally appeared Joyce A. Bristow ------------------------------------------------------- Name(s) of Signer(s) [ ] personally known to me [X] proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that she [SEAL OF LINDA BERGEN] executed the same in her authorized capacity, and that by her signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. /s/ Linda Bergen ---------------------------------------- Place Notary Seal Above Signature of Notary Public OPTIONAL Though the information below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document. DESCRIPTION OF ATTACHED DOCUMENT Title or Type of Document: Acknowledgment, Estoppel Cert & agreement ------------------------------------------------------ Document Date: Nov 14, 2002 Number of Pages: 7 Signer(s) Other Than Named Above: /s/ [ILLEGIBLE] ----------------------------------------------- CAPACITY(IES) CLAIMED BY SIGNER Signer's Name:___________________________________________ RIGHT THUMBPRINT [X] Individual OF SIGNER [ ] Corporate Officer -- Title(s):_________________________ Top of thumb here [ ] Partner -- [ ] Limited [ ] General [ ] Attorney in Fact [ ] Trustee [ ] Guardian or Conservator [ ] Other:_______________________________________________ Signer is Representing:__________________________________ STATE OF ________ ) )ss: COUNTY OF ___________ ) On this_____day of_____, 2002, before me personally appeared_____to me known, who, being by me duly sworn, did depose and say that he is the_____of Merrill Lynch Mortgage Lending, Inc., a Delaware corporation, described in and which executed the foregoing instrument; and that he/she signed his/her name thereto by authority of the Board of Directors of the corporation. ________________________________________ Notary Public, State of_____at Large Print Name:_____________________________ STATE OF ________ ) )ss: COUNTY OF ___________ ) On this_____day of_____, 2002, before me personally appeared_____to me known, who, being by me duly sworn, did depose and say that he is the_____of Merrill Lynch Mortgage Lending, Inc., a Delaware corporation, described in and which executed the foregoing instrument; and that he/she signed his/her name thereto by authority of the Board of Directors of the corporation. ________________________________________ Notary Public, State of_____at Large Print Name:_____________________________ [Notarizations continued on following page] STATE OF _______________) )ss: COUNTY OF ______________) The foregoing instrument was acknowledged before me this ___ day of _____, 2002 by Joyce A. Bristow, as Personal Representative of the estate of Dorothy H. Herr. Personally Known _____ OR Produced Identification _____ Type of Identification Produced ________________________________________________ ________________________________________ Print or Stamp Name: Notary Public, State of _____ at Large Commission No.: Commission Expires: STATE OF _______________) )ss: COUNTY OF_______________) On this ___ day of _____, 2002, before me personally appeared _____ to me known, who being by me duly sworn, did depose and say that he is the _____ of AMI Operating Partners, L.P., described in and which executed the foregoing instrument; and that he/she signed his/her name thereto by authority of the Board of Directors of _____ ________________________________________ Notary Public, State of ___ at Large Print Name: ____________________________ EXHIBIT "A" LEASE a. Lease Agreement, dated January 30, 1969, between Paul A. Herr and Dorothy H. Herr, as lessor, Republic Motor Inns, Inc., as lessee, and American Motor Inns, Inc., as guarantor, recorded with the Recorder of Deeds, Lancaster, PA in Record Book W59, Page 755, b. Addendum dated January 16, 1971 and recorded with the Recorder of Deeds, Lancaster, PA in Record Book R60, Page 233, c. Amendment dated March 15, 1985 and recorded with the Recorder of Deeds, Lancaster, PA in Record Book W91, Page 434, d. Amendment to Lease dated December 20, 1986 and recorded with the Recorder of Deeds, Lancaster, PA in Record Book Y96, Page 660. e. Assignment of Lease and Indemnification Agreement, December 23, 1986, between Republic Motor Inns, Inc. and AMI Operating Partners, LP, recorded with the Recorder of Deeds, Lancaster, PA in Record Book Y96, Page 669, f. Assignment and Assumption of Lessee's Interest in Ground Lease, dated November 24, 1998, between AMI Operating Partners, LP and Lodgian AMI Inc., recorded with the Recorder of Deeds, Lancaster, PA in Record Book 604, Page 638, and g. Acknowledgment, Estoppel Certificate and Agreement, dated November 24, 1998, between Dorothy H. Herr and AMI Operating Partners LP, recorded with the Recorder of Deeds, Lancaster, PA in Record Book 6045, Page 1. EXHIBIT "B" LEASED PREMISES GROUND LESSOR ESTOPPEL (MEMPHIS FRENCH QUARTER HOTEL) WHEREAS, BILL SUTTON and MARTHA SUTTON, having an address at 1405 Yucca, McAllen, Texas 78504 (hereinafter "Landlord"), are the holders of the landlord's interest and IMPAC HOTELS I, LLC, a Georgia limited liability company, having an address at Two Live Oak Center, 3445 Peachtree Road, Suite 700, Atlanta, Georgia 30326 (hereinafter "Tenant") is the holder of the tenant's interest, respectively, in, to and under that certain lease and amendments thereto and assignments thereof (the "Lease") described on Exhibit A annexed hereto and made a part hereof, which Lease covers the land and improvements therein described (the "Premises"), WHEREAS, Tenant is desirous of obtaining from Merrill Lynch Mortgage Lending, Inc., in its capacity as mortgage lender and mezzanine lender (together with its respective successors and assigns, collectively, "Lender"), having an office at 4 World Financial Center, New York, New York, 10080, a loan (the "Loan") secured by, among other things, a first leasehold mortgage upon Tenant's interest as tenant in the Lease (the "Leasehold Mortgage"); WHEREAS, Lender is unwilling to make the Loan unless Landlord executes an estoppel certificate as required under the Lease; NOW THEREFORE, Landlord hereby certifies to Lender as follows: 1. Landlord is the Landlord under the Lease. 2. The Lease constitutes the entire agreement between the Landlord and the Tenant thereunder and has not been further modified or amended. 3. The Lease is in full force and effect. 4. As of the dare hereof, no basic rent or additional rent is due and payable from Tenant under the lease. The amount of the monthly basic rent is $1,600.00 and there is no additional rent. The rent due for the period _____ through _____ in the amount of $ _____ has been paid by Tenant. 5. The commencement date for the Lease was April 26, 1972 and the expiration date for the current lease term is September 30, 2038. 6. To Landlord's knowledge, the Tenant under the Lease is not in default thereunder. 7. Unless otherwise notified by Lender, copies of any notices to Lender shall be sent to the following address: Merrill Lynch Mortgage Lending, Inc. c/o Merrill Lynch & Co. Global Principal Investments 4 World Financial Center New York, NY 10030 Attention: Steven Glassman Facsimile: (212) 738-1013 Attention: John Gluszak Facsimile: (212) 738-2053 Attention: John Katz Facsimile: (212) 738-8094 with a copy to: Sidley Austin Brown & Wood, LLP 787 Seventh Avenue New York, NY 10019 Attn: Alan S. Weil, Esq. Facsimile: (212) 839-5599 8. Landlord acknowledges that Lender has requested that Landlord execute this Agreement in connection with the Loan, and that Lender has agreed to make the Loan in reliance on the matters set forth herein. This certificate and the representations made herein shall inure to the benefit of Lender, its successors and assigns and shall be binding on the Landlord, its successors and assigns. Executed this 11 day of November 2002. LANDLORD: By: /s/ Bill Sutton ---------------------------------------- Bill Sutton By: /s/ Martha Surton ---------------------------------------- Martha Sutton [Acknowledgement on Following Page] State of Texas County of Hidalgo On this 11 day of Nov, 2002, personally appeared the above named Bill Sutton and Martha Sutton, and they each acknowledged the foregoing instrument to be their free act and deed. Before me, /s/ [ILLEGIBLE] ---------------------------------- Notary Public [ SEAL OF KRISTINA K. MION ] EXHIBIT A That certain Lease dated April 26, 1972 between J. Murry Davis and wife, Mary Alice Davis as Lessor and W. H. Welch, Jr., Meredith L. McCullar, Fred Don Alfonso and Emie Barrasso, as Lessee, recorded as Instrument No. H3 3366 in the Register's Office of Shelby County, Tennessee (the "Register's Office"); as amended by Agreement Assigning, Modifying and Extending Lease and Granting Certain Rights, dated as of February 29, 1976 between J. Murry Davis as Lessor and Waymon H. Welch, Jr. and Waymon H. Welch, Sr. as Existing Lessee and The Group, Inc. as New Lessee, recorded in said Register's Office as Instrument No. L1 8178; as amended by Agreement Modifying and Extending Lease dated January 19, 1983 between Bill Sutton and Martha Sutton as Lessor and J. Garnett Murphy as Lessee, recorded in said Register's Office as Instrument No. U6 8978; as amended by Lease Modification Agreement dated June 4, 1983 by Bill Sutton and Martha Sutton as Lessor and J. Garnett Murphy as Lessee, recorded in said Register's Office as Instrument No. U3 3420; as amended by Lease Modification and Extension Agreement dated October 6, 1983 between Martha Sutton as Lessor and M. K. Partners, a partnership composed of J. Garnett Murphy and Ronald L. Kirkpatrick as Lessee, recorded in said Register's Office as Instrument No. U6 8978; as amended by Warranty Deed dated November 29, 1983 by M.K. Partners to French Quarter Inn of Memphis, recorded in said Register's Office as Instrument No. U8 0878; as amended by Assignment of Ground Leases dated January 15, 1991 by Middlesex Development Corporation, a California corporation d/b/a "French Quarter Inn of Memphis", as Assignor and Memphis Lodging Associates, Inc., a Florida corporation as Assignee, recorded in said Register's Office as Instrument No. CA 3996; as assigned by Assignment of Ground Leases dated March 12, 1997 by Memphis Lodging Associates, Inc., a Florida corporation, as Assignor to Impac Hotels, I, LLC, a Georgia limited liability company, as Assignee, recorded in said Register's Office as Instrument No. GM 0294; and further amended by Amendment of Ground Lease dated September 17, 1997, by Bill Sutton and Martha Sutton, as Landlord and Impac Hotels I, LLC, a Georgia limited liability company, as Tenant, recorded in said Register's Office as Instrument No. HC 9439. GROUND LESSOR ESTOPPEL (MEMPHIS FRENCH QUARTER HOTEL) WHEREAS, HORACE PROCTOR and ANN PROCTOR, having an address at 6555 Brunswick Road, Arlington, Tennessee 38802 (hereinafter "Landlord"), are the holders of the landlord's interest and IMPAC HOTELS I, LLC, a Georgia limited liability company, having an address at Two Live Oak Center, 3445 Pea chtree Road, Suite 700, Atlanta, Georgia 30326 (hereinafter "Tenant") is the holder of the tenant's interest, respectively, in, to and under that certain lease and amendments thereto and assignments thereof (the "Lease") described on Exhibit A annexed hereto and made a part hereof, which Lease covers the land and improvements therein described (the "Premises"). WHEREAS, Tenant is desirous of obtaining from Mcrrill Lynch Mortgage Lending, Inc., in its capacity as mortgage lender and mezzanine lender (together with its respective successors and assigns, collectively, "Lender"), having an office at 4 World Financial Center, New York, New York, 10080, a loan (the "Loan") secured by, among other things, a first leasehold mortgage upon Tenant's interest as tenant in the Lease (the "Leasehold Mortgage"); WHEREAS, Lender is unwilling to make the Loan unless Landlord executes an estoppel certificate as required under the Lease; NOW THEREFORE, Landlord hereby certifies to Lender as follows: 1. Landlord is the owner of the fee simple estate in the Premises, subject to covenants, easements and restrictions of record, and is the Landlord under the Lease. 2. The Lease constitutes the entire agreement between the Landlord and the Tenant thereunder and has not been further modified or amended. 3. The Lease is in full force and effect. 4. The Tenant has taken possession of the ground on a rent-paying basis. 5. As of the date hereof, no basic rent or additional rent is due and payable from Tenant under the lease. The amount of the monthly basic rent is $1,000.00 and there is no additional rent. The rent due for the period_____through_____in the amount of $_____has been paid by Tenant. 6. The commencement date for the Lease was August 24, 1972 and the expiration date for the current lease term is September 30, 2038. 7. To the best of Landlord's knowledge, all material obligations under the Lease which have accrued prior to the date hereof have been fully performed. 8. To the best of Landlord's knowledge, neither the Landlord nor the Tenant under the Lease is in default under any of the terms, covenants or provisions of the Lease and the Landlord knows of no event which, but for the passage of time or the giving of notice, or both, would constitute an event of default under the Lease by the Landlord or the Tenant thereunder. 9. Upon the Recording of the Leasehold Mortgage, Landlord hereby recognizes Lender as a Leasehold Mortgagee as defined in Section 2(h) of the September 24, 1997 Amendment of Ground Lease, for all purposes under the Lease. 10. All of the Leasehold Mortgage provisions contained in the Lease, including but not limited to those contained in the September 24, 1997 Amendment of Ground Lease, and all other provisions inuring to the benefit of Leasehold Mortgagees or their successors and assigns are hereby incorporated into this estoppel by reference and restated and confirmed by Landlord for the benefit of Lender, its successors and assigns. 11. Unless otherwise notified by Lender, copies of any notices to Lender shall be sent to the following address: Merrill Lynch Mortgage Lending, Inc. c/o Merrill Lynch & Co. Global Principal Investments 4 World Financial Center New York, NY 10080 Attention: Steven Glassman Facsimile: (212) 738-1013 Attention: John Gluszak Facsimile: (212) 738-2053 Attention: John Katz Facsimile: (212) 738-8094 with a copy to: Sidley Austin Brown & Wood, LLP 787 Seventh Avenue New York, NY 10019 Attn: Alan S. Weil, Esq. Facsimile: (212) 839-5599 12. Landlord acknowledges that Lender has requested that Landlord execute this Agreement in connection with the Loan, and that Lender has agreed to make the Loan in reliance on the matters set forth herein. 13. To the best of Landlord's knowledge, neither the Landlord nor the Tenant has commenced any action or given or received any notice for the purpose of terminating the Lease. 14. To the best of Landlord's knowledge, there are no offsets or defenses to the payment of the rent or other sums payable under the Lease. This certificate and the representations made herein shall inure to the benefit of Lender, its successors and assigns and shall be binding on the Landlord, its successors and assigns. [Signatures On Following Page] Executed this ___ day of _____, 2002. LANDLORD: By:________________________ Horace Proctor By:________________________ Ann Proctor [Acknowledgement on Following Page] State of Tennessee County of Shelby On this _____ day of _____________, 2002, personally appeared the above named Horace Proctor and Ann Proctor, and they each acknowledged the foregoing instrument to be their free act and deed. Before me, _________________ Notary Public EXHIBIT I ACCEPTABLE FRANCHISORS Exhibit I EXHIBIT I Acceptable Franchisors & Franchise Names
- ----------------------------------------- ------------------------------------ -------------------------------------- TIER 1 TIER 2 (WITH FOOD AND BEVERAGE) TIER 3 (WITHOUT FOOD AND BEVERAGE) - ----------------------------------------- ------------------------------------ -------------------------------------- Six Continents Crowne Plaza Six Continents Holiday Inn Six Continents Holiday Inn Express Hilton Hotels Corp. Hilton Six Continents Holiday Inn Hilton Hotels Corp. Hampton Inn Select Hilton Hotels Corp. Doubletree Six Continents Holiday Inn Marriott Fairfield SunSpree International, Inc. Resort Hilton Hotels Corp. Homewood Suites Hilton Hotels Corp. Hilton Choice Hotels Comfort Inn Garden Inn International Starwood Hotels & Westin Choice Hotels Clarion Choice Hotels Comfort Suites Resorts International International Starwood Hotels & Sheraton Best Western Best Western Resorts International, Inc. Starwood Hotels & W Cendant Corporation Ramada Resorts US Franchise Systems, Hawthorn Starwood Hotels & Four Points Inc. Resorts Marriott International, Marriott Choice Hotels Quality Inc. International Marriott International, Renaissance Wyndham International Wyndham Inc. Gardens Marriott International, Courtyard Inc. Marriott International, Residence Inn Inc. Wyndham International Wyndham Hotel Carlson Hotels Worldwide Radisson
I-1 EXHIBIT J [RESERVED] Exhibit J EXHIBIT K [RESERVED] Exhibit K EXHIBIT L [RESERVED] Exhibit L EXHIBIT M PROPERTY CONDITION REPORTS Exhibit M LODGIAN ENGINEERING REPORTS
- ------------------------------------------------------------------------------------------------------ REPORT CHAIN/NAME CITY ST - ------------------------------------------------------------------------------------------------------ EMG: Property Condition Report of Hampton Inn Dothan AL - ------------------------------------------------------------------------------------------------------ EMG: Property Condition Report of Holiday Inn West Dothan AL - ------------------------------------------------------------------------------------------------------ EMG: Property Condition Report of Holiday Inn Express Gadsden AL - ------------------------------------------------------------------------------------------------------ EMG: Property Condition Report of Holiday Inn Sheffield AL - ------------------------------------------------------------------------------------------------------ EMG: Property Condition Report of Courtyard by Marriott Bentonville AR - ------------------------------------------------------------------------------------------------------ EMG: Property Condition Report of Residence Inn Little Rock AR - ------------------------------------------------------------------------------------------------------ EMG: Property Condition Report of Holiday Inn East Hartford CT - ------------------------------------------------------------------------------------------------------ EMG: Property Condition Report of Hampton Inn Pensacola FL - ------------------------------------------------------------------------------------------------------ EMG: Property Condition Report of Holiday Inn Express Pensacola FL - ------------------------------------------------------------------------------------------------------ EMG: Property Condition Report of Holiday Inn Pensacola (University Mall) FL - ------------------------------------------------------------------------------------------------------ EMG: Property Condition Report of Crowne Plaza West Palm Beach FL - ------------------------------------------------------------------------------------------------------ EMG: Property Condition Report of Holiday Inn Winter Haven FL - ------------------------------------------------------------------------------------------------------ EMG: Property Condition Report of Courtyard by Marriott Atlanta GA - ------------------------------------------------------------------------------------------------------ EMG: Property Condition Report of Holiday Inn Brunswick GA - ------------------------------------------------------------------------------------------------------ EMG: Property Condition Report of Holiday Inn Marietta (hotel & suites) GA - ------------------------------------------------------------------------------------------------------ EMG: Property Condition Report of Fairfield Inn Valdosta GA - ------------------------------------------------------------------------------------------------------ EMG: Property Condition Report of Holiday Inn Valdosta GA - ------------------------------------------------------------------------------------------------------ EMG: Property Condition Report of Crowne Plaza Cedar Rapids IA - ------------------------------------------------------------------------------------------------------ EMG: Property Condition Report of Holiday Inn Rolling Meacows IL - ------------------------------------------------------------------------------------------------------ EMG: Property Condition Report of Courtyard by Marriott Florence KY - ------------------------------------------------------------------------------------------------------ EMG: Property Condition Report of Hurstbourne Hotel Louisville KY - ------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------- EMG PROJECT REPORT ADDRESS CITY/ST/ZIP DATED NUMBER - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 3071 Ross Clark Circle Dothan, AL 36301 August 15, 2002 94678 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 3053 Ross Clark Dothan, AL 36301 August 15, 2002 94680 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 801 Cleveland Ave. Gadsden, AL 35954 August 15, 2002 94682 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 4900 Hatch Blvd. Sheffield, AL 35660 August 15, 2002 94684 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 1001 McClain Rd. Bentonville, AR 72712 August 15, 2002 94686 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 1401 S. Shackleford Rd. Little Rock, AR 72211 August 15, 2002 94689 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 363 Roberts St. E. Hartford, CT 06108 August 15, 2002 94692 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 7330 Plantation Rd. Pensacola, FL 32504 August 15, 2002 94698 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 6501 Pensacola Blvd. Pensacola, FL 32505 August 15, 2002 94700 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 7200 Plantation Rd. Pensacola, FL 32504 August 15, 2002 94702 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 1601 Belvedere Rd. West Pam Beach, FL 33406 August 15, 2002 94705 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 1150 3rd St., SW Winter Haven, FL 33880 August 15, 2002 94707 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 3332 Peachtree Rd. Atlanta, GA 30326 August 15, 2002 94709 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 5252 New Jesup Hwy Brunswick, GA 31525 August 15, 2002 94715 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 2265 Kingston Ct. Marietta, GA 30067 August 15, 2002 94719 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 1311 St. Augustine Rd. Valdosta, GA 31601 August 15, 2002 94723 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 1309 St. Augustine Rd. Valdosta, GA 31601 August 15, 2002 94731 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 350 1st Ave, NE Cedar Rapids, IA 52401 August 15, 2002 94725 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 3405 Algonquin Rd. Rolling Meadows, IL 60008 August 15, 2002 94729 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 46 Cavalier Blvd. Florence KY 41042 August 15, 2002 94731 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 9700 Blue Grass Parkway Louisville, KY 40299 August 15, 2002 94737 - -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Courtyard by Marriott Paducah KY - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Quality Hotel Metairie LA - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Residence Inn Dedham MA - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Holiday Inn Baltimore - BWI Airport MD - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Holiday Inn Baltimore West (Belmont) MD - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Holiday Inn Baltimore, Inn Harbor MD - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Hilton Columbia MD - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Holiday Inn Frederick MD - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Holiday Inn Glen Burnie MD - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Holiday Inn Silver Spring MD - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Holiday Inn Towson (Cromwell MD Bridge) - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Holiday Inn Lansing MI - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Hilton Troy (Northfield) MI - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Holiday Inn Arden Hills/St. Paul MN - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Holiday Inn St. Louis North MO - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Crowne Plaza Albany NY - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Holiday Inn Grand Island NY - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Holiday Inn Jamestown NY - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Four Points Niagara Falls NY - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Holiday Inn Select Niagara Falls NY - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Holiday Inn Select Strongsville OH - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Holiday Inn Greentree PA - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Holiday Inn Lancaster PA - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Doubletree Club Philadelphia PA - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Holiday Inn Pittsburgh (Pkwy East) PA - --------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 3835 Technology Dr. Paducah, KY 42001 August 15, 2002 94740 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 2261 N. Causeway Blvd. Metairie, LA 70001 August 15, 2002 94742 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 259 Elm St. Dedham, MA 02026 August 15, 2002 94747 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 890 Elkridge Landing Rd. Linthicum Heights, MD 21090 August 15, 2002 94749 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 1800 Belmont Ave. Baltimore, MD 21244 August 15, 2002 94751 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 301 W. Lombard St. Baltimore, MD 21201 August 15, 2002 94753 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 5485 Twin Knolls Rd. Columbia, MD 21045 August 15, 2002 94757 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 999 W. Patrick St. Frederick, MD 21702 August 15, 2002 94760 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 6323 Governor Ritchie Hwy Glen Burnie, MD 21061 August 15, 2002 94762 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 8777 Georgia Ave. Silver Spring, MD 20910 August 15, 2002 94764 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 1100 Cromwell Bridge Rd. Towson, MD 21286 August 15, 2002 94766 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 7501 W. Saginaw Hwy Lansing, MI 48917 August 15, 2002 94768 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 5500 Crooks Rd. Troy, MI 48098 August 15, 2002 94771 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 1201 West Country Rd. E St. Paul, MN 55112 August 15, 2002 94773 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 4545 N. Lindbergh Blvd. St. Louis, MO 63044 August 15, 2002 94775 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Ten Eyck Plaza Albany, NY 12207 August 15, 2002 94777 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 100 Whitehaven Rd. Grand Island, NY 14072 August 15, 2002 94779 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 150 W. 4th St. Jamestown, NY 14701 August 15, 2002 94782 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 114 Buffalo Ave. Niagara Falls, NY 14303 August 15, 2002 94786 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 300 Third St. Niagara Falls, NY 14303 August 15, 2002 94784 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 15471 Royalton Rd. Strongsville, OH 44136 August 15, 2002 94788 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 401 Holiday Drive Pittsburgh, PA 15220 August 15, 2002 94792 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 521 Greenfield Rd. Lancaster, PA 17601 August 15, 2002 94794 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 9461 Roosevelt Blvd. Philadelphia, PA 19114 August 15, 2002 94796 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 915 Brinton Rd. Pittsburgh, PA 15221 August 15, 2002 94798 - -------------------------------------------------------------------------------------------------------------------------------

- -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Holiday Inn York PA - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Clarion North Charleston SC - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Holiday Inn SunSpree Myrtle Beach SC - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of French Quarter Memphis TN - -------------------------------------------------------------------------------------------------------- EMG: Seismic Risk Assessment French Quarter Suites Memphis TN - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Courtyard by Marriott Abilene TX - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Holiday Inn Austin TX - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Holiday Inn Select Dallas (DFW Airport) TX - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Holiday Inn Dallas (Mkt Center) TX - -------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of Crowne Plaza Houston TX - --------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 334 Arsenal Rd. York, PA 17402 August 15, 2002 94800 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 7401 Northwoods Blvd. Charleston, SC 29406 August 15, 2002 94802 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 1601 N. Ocean Blvd. Surfside Beach, SC 29575 August 15, 2002 94804 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 2144 Madison Ave. Memphis, TN 38104 August 14, 2002 94810 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Seismic Risk Assessment 2144 Madison Ave. Memphis, TN 38104 August 15, 2002 94811 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 4350 Ridgemont Dr. Abilene, TX 79606 August 15, 2002 94813 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 3401 South 1-35 Austin, TX 78741 August 15, 2002 94815 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 4441 Hwy 114 & Esters Blvd. Irving, TX 75063 August 15, 2002 94818 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 1955 Market Center Blvd. Dallas, TX 75207 August 15, 2002 94823 - ------------------------------------------------------------------------------------------------------------------------------- EMG: Property Condition Report of 12801 NW Freeway US 290 Houston, TX 77040 August 15, 2002 94825 - -------------------------------------------------------------------------------------------------------------------------------

SCHEDULE 1 BORROWERS ALBANY HOTEL, INC., a Florida corporation, APICO HILLS, INC., a Pennsylvania corporation, APICO INNS OF GREEN TREE, INC., a Pennsylvania corporation, BRUNSWICK MOTEL ENTERPRISES, INC., a Georgia corporation, DOTHAN HOSPITALITY 3053, INC., an Alabama corporation, DOTHAN HOSPITALITY 3071, INC., an Alabama corporation, GADSDEN HOSPITALITY, INC., an Alabama corporation, LODGIAN AMI, INC., a Maryland corporation, MINNEAPOLIS MOTEL ENTERPRISES, INC., a Minnesota corporation, NH MOTEL ENTERPRISES, INC., a Michigan corporation, SERVICO AUSTIN, INC., a Texas corporation, SERVICO CEDAR RAPIDS, INC., an Iowa corporation, SERVICO COLUMBIA, INC., a Maryland corporation, SERVICO GRAND ISLAND, INC., a New York corporation, SERVICO HOUSTON, INC., a Texas corporation, SERVICO JAMESTOWN, INC., a New York corporation, SERVICO LANSING, INC., a Michigan corporation, SERVICO MARKET CENTER, INC., a Texas corporation, SERVICO MARYLAND, INC., a Maryland corporation, SERVICO METAIRIE, INC., a Louisiana corporation, SERVICO NEW YORK, INC., a New York corporation, SERVICO NIAGARA FALLS, INC., a New York corporation, SERVICO NORTHWOODS, INC., a Florida corporation, Schedule 1 SERVICO PENSACOLA 7200, INC., a Delaware corporation, SERVICO PENSACOLA 7330, INC., a Delaware corporation, SERVICO PENSACOLA, INC., a Delaware corporation, SERVICO ROLLING MEADOWS, INC., an Illinois corporation, SERVICO WINTER HAVEN, INC., a Florida corporation, SHEFFIELD MOTEL ENTERPRISES, INC., an Alabama corporation, IMPAC HOTELS I, L.L.C., a Georgia limited liability company, LODGIAN MEMPHIS PROPERTY OWNER, LLC, a Delaware limited liability company, AMI OPERATING PARTNERS, L.P., a Delaware limited partnership DEDHAM LODGING ASSOCIATES I, LIMITED PARTNERSHIP, a Georgia limited partnership LITTLE ROCK LODGING ASSOCIATES I, LIMITED PARTNERSHIP, a Georgia limited partnership SERVICO CENTRE ASSOCIATES, LTD., a Florida limited partnership Schedule 1 SCHEDULE 3.1(A) LIST OF LOAN DOCUMENTS 1. Loan Agreement 2. Note 3. Deeds of Trust 4. Assignments of Leases 5. Assignments of Management Agreement 6. Guaranty 7. Environmental Indemnity 8. Assignment of Rate Cap 9. Financing Statements 10. Cash Management Agreement 11. Post Closing Agreement Schedule 3.1(A) SCHEDULE 4.1(C) ORGANIZATIONAL CHART FOR BORROWER PARTIES Schedule 4.1(C) [LODGIAN STRUCTURE CHART] [LODGIAN STRUCTURE CHART] [LODGIAN STRUCTURE CHART]
PROPERTY OWNER PROPERTY - ------------------------------------------------------------------------------------------------------------------------- ALBANY HOTEL, INC. Crowne Plaza Albany Hotel, Albany, NY - ------------------------------------------------------------------------------------------------------------------------- AMI OPERATING PARTNERS, L.P. Holiday Inn East Hartford, CT Holiday Inn Frederick, MD Holiday Inn Cromwell Bridge, MD Holiday Inn Belmont, MD Holiday Inn York, PA - ------------------------------------------------------------------------------------------------------------------------- APICO HILLS, INC. Holiday Inn, Parkway East, Pittsburgh, PA - ------------------------------------------------------------------------------------------------------------------------- APICO INNS OF GREEN TREE, INC. Holiday Inn Green Tree, Pittsburgh, PA - ------------------------------------------------------------------------------------------------------------------------- BRUNSWICK MOTEL ENTERPRISES, INC. Brunswick Holiday Inn, Brunswick, GA - ------------------------------------------------------------------------------------------------------------------------- DEDHAM LODGING ASSOCIATES I, LIMITED PARTNERSHIP Residence Inn, Dedham, MA - ------------------------------------------------------------------------------------------------------------------------- DOTHAN HOSPITALITY 3053, INC. Holiday Inn West, Dothan, AL - ------------------------------------------------------------------------------------------------------------------------- DOTHAN HOSPITALITY 3071, INC. Hampton Inn, Dothan, AL - ------------------------------------------------------------------------------------------------------------------------- GADSDEN HOSPITALITY, INC. Holiday Inn Express Gadsden-Attalia, AL - ------------------------------------------------------------------------------------------------------------------------- IMPAC HOTELS I, L.L.C. Marriott Courtyard, Buckhead, Atlanta, GA Marriott Courtyard, Abilene, TX Marriott Courtyard, Florence, KY Marriott Courtyard, Bentonville, AR Double Tree Club, Philadelphia, PA The Hurstbourne Hotel, Louisville, KY Fairfield Inn, Valdosta, GA Holiday Inn Select, Dallas/Fort Worth Airport, TX Holiday Inn, North St. Louis, MO Holiday Inn, Surfside Beach, SC Holiday Inn Select, Strongsville, OH Holiday Inn Suites, Marietta, GA Marriott Courtyard, Paducah, KY - ------------------------------------------------------------------------------------------------------------------------- LITTLE ROCK LODGING ASSOCIATES I, LIMITED PARTNERSHIP Residence Inn, Little Rock, AK - ------------------------------------------------------------------------------------------------------------------------- LODGIAN AMI, INC. Holiday Inn, Inner Harbor, MD Holiday Inn, Glen Burnie, MD Holiday Inn, BWI Airport, Baltimore, MD Holiday Inn, Lancaster East, PA - ------------------------------------------------------------------------------------------------------------------------- LODGIAN MEMPHIS PROPERTY OWNER, LLC French Quarter Suites, Memphis, TN - ------------------------------------------------------------------------------------------------------------------------- MINNEAPOLIS MOTEL ENTERPRISES, INC. Holiday Inn St. Paul, St. Paul, MN - ------------------------------------------------------------------------------------------------------------------------- NH MOTEL ENTERPRISES, INC. Hilton Northfield in Troy, MI - ------------------------------------------------------------------------------------------------------------------------- SERVICO AUSTIN, INC. Holiday Inn, Austin South, TX - ------------------------------------------------------------------------------------------------------------------------- SERVICO CEDAR RAPIDS, INC. Crowne Plaza Five Seasons Hotel, Cedar Rapids, IA - ------------------------------------------------------------------------------------------------------------------------- SERVICO CENTRE ASSOCIATES, LTD. Crowne Plaza and Separate Office Space, West Palm Beach, FL - ------------------------------------------------------------------------------------------------------------------------- SERVICO COLUMBIA, INC. Hilton Columbia, MD - ------------------------------------------------------------------------------------------------------------------------- SERVICO GRAND ISLAND, INC. Holiday Inn Grand Island, Grand Island, NY - ------------------------------------------------------------------------------------------------------------------------- SERVICO HOUSTON, INC. Crowne Plaza Houston, Houston, Texas - ------------------------------------------------------------------------------------------------------------------------- SERVICO JAMESTOWN, INC. Holiday Inn Jamestown, NY - ------------------------------------------------------------------------------------------------------------------------- SERVICO LANSING, INC. Holiday Inn Lansing, MI - ------------------------------------------------------------------------------------------------------------------------- SERVICO MARKET CENTER, INC. Holiday Inn Market Center, Dallas, TX - ------------------------------------------------------------------------------------------------------------------------- SERVICO MARYLAND, INC. Holiday Inn, Silver Springs, MD - ------------------------------------------------------------------------------------------------------------------------- SERVICO METAIRIE, INC. Quality Hotel, Metairie, LA - ------------------------------------------------------------------------------------------------------------------------- SERVICO NEW YORK, INC. Holiday Inn Select Niagara Falls, Niagara Falls, NY - ------------------------------------------------------------------------------------------------------------------------- SERVICO NIAGARA FALLS, INC. Four Points Sheraton Niagara Falls, Niagara Falls, NY - ------------------------------------------------------------------------------------------------------------------------- SERVICO NORTHWOODS, INC. Clarion Charleston International Airport, North Charleston, SC - ------------------------------------------------------------------------------------------------------------------------- SERVICO PENSACOLA 7200, INC. Holiday Inn University Mall - Pensacola, FL - ------------------------------------------------------------------------------------------------------------------------- SERVICO PENSACOLA 7330, INC. Hampton Inn Pensacola, Pensacola, FL - -------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------- SERVICO PENSACOLA, INC. Holiday Inn Express, Pensacola, FL - ------------------------------------------------------------------------------------------------------------------------- SERVICO ROLLING MEADOWS, INC. Holiday Inn Rolling Meadows - Rolling Meadows, IL - ------------------------------------------------------------------------------------------------------------------------- SERVICO WINTER HAVEN, INC. Holiday Inn, Winter Haven, FL - ------------------------------------------------------------------------------------------------------------------------- SHEFFIELD MOTEL ENTERPRISES, INC. Holiday Inn, Sheffield, AL - -------------------------------------------------------------------------------------------------------------------------

2 SCHEDULE 4.2 CONSENTS None Schedule 4.2 SCHEDULE 4.4 CONTINGENT OBLIGATIONS None Schedule 4.4 SCHEDULE 4.5 CONDEMNATION PROCEEDINGS City of St. Louis, Missouri versus BNS Lodging Associates I et. al. filed May 14, 2002 in the County of St. Louis, Missouri, under Cause No. 02CC-001903 - for a temporary easement for construction purposes. Schedule 4.5 SCHEDULE 4.6 ZONING
APPLICABLE LEGAL NON-CONFORMITY NOT PROPERTY REBUILDABILITY PROVISION MEETING CURRENT CODE -------- ------------------------ -------------------- 1. Holiday Inn Express If more than 60% of its replacement (1) Front setback deficient 33.7 ft. Attalla (Gadsden), Alabama cost is destroyed, must comply with (2) Parking spaces must be screened. current code. (3) 21 parking spaces located within Right of Way of Cleveland Avenue. 2. Holiday Inn East If more than 50% of its replacement Special use permit required for hotels. East Hartford, Connecticut cost is destroyed, must comply with current code. 3. Crowne Plaza Must comply with current code. Parking deficient 87 spaces. West Palm Beach, Florida 4. Hurstbourne Hotel A building which is legal Parking deficient 923 spaces. Louisville, Kentucky non-conforming due to inadequate parking may be altered if the additional spaces required by Off-Street Parking Requirements are provided; voluntary demolition of non-conforming structure nullifies its non-conforming rights; if building is involuntarily removed or destroyed, it retains non-conforming rights for 1 year. 5. Quality Hotel If more than 75% is destroyed, must (1) Maximum building height exceeded Metairie, Louisiana comply with current code. If less by at least 78 ft. than 75% is destroyed, may be (2) Minimum landscaped area deficient by at restored provided permit is obtained least 7%. within 1 year following date of (3) Parking deficient 99 spaces. destruction. 6. Residence Inn Can rebuild subject to the following: (1) Hotel/motel requires a Special Dedham, Massachusetts (1) no non-conforming use shall be Use Permit. increased in area (2) if foundation (2) Maximum FAR exceeded by 0.20. is rebuilt, such foundation shall be placed and building reconstructed so as to conform to certain zoning requirements (set back distance, side yard width); if compliance is not possible, reconstruction shall be in manner authorized by Board of Appeals and (3) reconstruction must be completed within 2 years of fire or casualty. 7. Hilton Hotel If destroyed by more than 60% of its (1) Minimum 200 unit criteria Troy, Michigan replacement cost, exclusive of the deficient 9 units. foundation at the time of (2) Minimum 250 persons scating area destruction, must comply with current deficient 160 seats. code. (3) Parking deficient 261 spaces.

APPLICABLE LEGAL NON-CONFORMITY NOT PROPERTY REBUILDABILITY PROVISION MEETING CURRENT CODE -------- ------------------------ -------------------- 8. Holiday Inn North - St. Louis If 60% or more of its replacement (1) Parking area encroaches 50 foot Bridgeton, Missouri value is destroyed, must comply with landscaped buffer. current code; restoration must be (2) Maximum impervious surface area exceeded started within 1 year. by 4%. 9. Crowne Plaza If damage is more than 50% of Maximum height exceeded by 85 ft. Albany, New York replacement cost, must comply with current code. 10. Holiday Inn If non-conforming building is damaged Maximum height exceeded by 22.5 ft. Grand Island, New York or destroyed, other than deliberately by the owner, may be rebuilt on the same footprint. 11. Holiday Inn Select If destroyed by 50% or more of its (1) Maximum height exceeded by 19 ft. Strongsville, Ohio restoration cost, must comply with (2) Parking deficient 189 spaces. current code. 12. Holiday Inn - Parkway East Can rebuild if reconstruct within 20 (1) Maximum height exceeded by 67 ft. Pittsburgh, Pennsylvania months of casualty if permitted as a (2) Front setback encroaches 10.6 ft. special exception by the Zoning from Brinton Road. Hearing Board, and if restored structure has no greater coverage and contains no greater cubic content than before such casualty.
2 SCHEDULE 4.7(B) RENT ROLL Schedule 4.7(B) MATERIAL LEASES
- ------------------------------------------------------------------------------------------------ PROPERTY STATE PROPERTY LEASES LANDLORD TENANT AREA (SF) - ------------------------------------------------------------------------------------------------ MD Holiday Inn a) Parking a) Lodgian a) PMS a) 193 parking spaces Inner Harbor License AMI, Inc. Parking,Inc. Baltimore Agreement b)parking space b) Lodgian b) Mayor and for maximum of 20 b) Parking AMI, Inc. City Council vehicles of Baltimore - ------------------------------------------------------------------------------------------------ MI Holiday Inn Management Rado-Mat TGI Friday's 8,000 sf West, Agreement Holdings U.S. Inc. 250 parking spaces Lansing Inc. - ------------------------------------------------------------------------------------------------ MI Hilton Hotel, Restaurant NH Motel C.A. Muer 10,000 sf Troy Enterprises, Inc. Corporation - ------------------------------------------------------------------------------------------------ NY Holiday Inn Parking City of Oakdale 125 parking spaces Jamestown Jamestown Corporation 24/7; and 75 parking spaces between 5:00 pm and 7:00 am 7 days a week. - ------------------------------------------------------------------------------------------------ NY Holiday Inn Post Office Servico New United States 4,409 sf Select York, Inc. Postal Service Niagara Falls - ------------------------------------------------------------------------------------------------

- ----------------------------------------------------------------------------------- BASE RENT AND PERCENTAGE RENT, STATE TERM IF ANY - ----------------------------------------------------------------------------------- MD a) Commencing 5/1/2000, a) $11,500 per month expiring 4/30/10 b) 5 year term commencing 12/12/01; Option to renew b)$625 per month one additional period of 5 years. - ----------------------------------------------------------------------------------- MI 10 years from the date the Fridays receives 7% gross sales profit; restaurant opens(Lease is landlord receives 12% gross sales, to dated 5/30/91); Option to extent of gross operating profit; renew for four 5- year remainder of gross operating profit is terms. split equally - ----------------------------------------------------------------------------------- MI 20 years, commencing $8,368.33 per month 9/15/76; Option to renew for 3 additional 5-year terms. 2 renewal options exercised, Lease expires 9/15/06. - ----------------------------------------------------------------------------------- NY 25 years, commencing $1,233.33 per month when Lessee notifies city that it is ready to accept use, which is no later than 30 days after occupancy of the hotel (Lease executed 10/5/77).Option to renew for one additional 25-year period. - ----------------------------------------------------------------------------------- NY Current term expires on $20,000.00 per year, payable in equal 5/31/03; no further option installments at the end of each to renew. calendar month. - -----------------------------------------------------------------------------------
SCHEDULE 4.7 (E) FRANCHISE DEFAULTS AS OF NOVEMBER 8, 2002
PROPERTY NAME STATE FRANCHISOR - ---------------------------------------------------------------------- Doubletree Club Philadelphia, PA PA Hilton Hampton Inn Dothan, AL AL Hilton Hampton Inn Pensacola, FL FL Hilton Hilton Inn Columbia, MD MD Hilton Hilton Inn Northfield, MI MI Hilton Courtyard by Marriott - Paducah,KY KY Marriott Fairfield Inn Valdosta, GA GA Marriott Crowne Plaza Albany, NY NY Six Continents Crowne Plaza Cedar Rapids, IA IA Six Continents Crowne Plaza West Palm Beach, FL FL Six Continents Holiday Inn Arden Hills/St. Paul, MN MN Six Continents Holiday Inn Express Pensacola, FL FL Six Continents
SCHEDULE 4.9 LITIGATION None Schedule 4.9 SCHEDULE 4.14 ERISA PLANS 1. Lodgian, Inc. 401(k) Plan 2. Lodgian, Inc. Employee Health & Welfare Plan 3. Multiemployer Plans covering employees of the following unions Hotel, Motel & Restaurant Employees & Bartenders -- Local 471 (Albany, NY) (pension, welfare) Hotel Employees & Restaurant Employees Local 274 (Philadelphia, PA) (pension, welfare) Hotel Employees & Restaurant Employees Local 4 (Jamestown, NY) (pension only) Hotel Employees & Restaurant Employees Local 17 (St. Paul, MN) (pension, welfare) Hotel Employees & Restaurant Employees Local 24 (Northfield, MI) (pension, welfare) International Union of Operating Engineers -- Local 547 - A,B,C,E,H (Northfield, MI) (pension, welfare) Hotel, Motel, Club, Cafeteria, Restaurant Employees & Bartenders Union -- Local 450 (Rolling Meadows, IL) (welfare only) Schedule 4.14 SCHEDULE 4.20 INSURANCE Schedule 4.20 CURRENT INSURANCE SCHEDULE for: LODGIAN, INC.. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 1 of 14
- ------------------------------------------------------------------------------------------------------------ COVERAGE AMOUNT OR LIMITS TERM COMPANY POLICY NUMBER - ------------------------------------------------------------------------------------------------------------ WORKERS' Statutory Workers' Comp. 09/01/02 Zurich American WC2346989-03 COMPENSATION to Insurance DEDUCTIBLE Employers Liability Limits: 0901/03 Company $1,000,000 Each Accident $1,000,000 Each Employee $1,000,000 Policy Limit Deductibles: Excludes ALAE $250,000 - WC-BI by Accident $250,000 - WC BI by Disease $250,000 - EL BI by Accident $250,000 - EL BI by Disease - ------------------------------------------------------------------------------------------------------------ WORKERS' Statutory WC 09/01/02 Zurich American WC2346990-03 COMPENSATION- Employers Liability: to Insurance RETRO $1,000,000 Each Accident 0901/03 Company (MASSACHUSETTS) $1,000,000 Each Employee $1,000,000 Policy Limit Stop Gap Liability $1,000,000 Each Accident $1,000,000 Each Employee $1,000,000 Policy Limit - ------------------------------------------------------------------------------------------------------------

- -------------------------------------------------------------------------- COVERAGE PREMIUM COMMENTS - -------------------------------------------------------------------------- WORKERS' $990,516 Policy provides medical, disability COMPENSATION Plus $200 and death benefits to injured DEDUCTIBLE (Expense Constant employees pursuant to the WC $93,685 statutory requirement of states (Surcharges) schedule in the policy except Estimated Monopolistic States. premium Includes Executive Officers subject to audit - -------------------------------------------------------------------------- WORKERS' $77,554 Plus Policy provides medical, disability COMPENSATION- $220 Expense and death benefits to injured RETRO Constant & employees pursuant to the WC (MASSACHUSETTS) $3,230 statutory requirements of states Surcharge scheduled in the policy - Executive Estimated Officers are covered premium subject to audit - --------------------------------------------------------------------------
McQUEARY HENRY BOWLES TROY, L.L.P CURRENT INSURANCE SCHEDULE for: LODGIAN, INC.. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 2 of 14
- -------------------------------------------------------------------------------------------------------------- COVERAGE AMOUNT OR LIMITS TERM COMPANY POLICY NUMBER - -------------------------------------------------------------------------------------------------------------- GENERAL $9,750,000 General Aggregate 09/01/02 Zurich American GLO23456985-03 LIABILITY $1,750,000 Products & Completed to Insurance Operations Aggregate 0901/03 Company $1,750,000 Each Occurrence $1,750,000 Personal Injury & Advertising $ $1,750,000 Tenants Legal Liability. N/A Medical Expense 750,000 Employee Benefits Each Claim/Aggregate 750,000 Hospitality Professional Liability Each Occurrence /Aggregate 750,000 Hotel Safe Deposit Legal Liability Each Occurrence/Aggregate Self Insured Retention $250,000 Cov A BI&PD Each Claim $250,000 Cov B-Personal & Adv Injury $250,000 Cov.C.-Medical Payment $250,000 Hotel Safe Deposit/Legal Liab $250,000 Employee Benefit Liability - -------------------------------------------------------------------------------------------------------------- LIQUOR $1,000,000 Liquor Liability Each 09-01- 2002 Zurich American GLO9298953-02 LIABILITY Common Cause Aggregate to Insurance Co. POLICY $250,000 Deductible Each Claim 09-01-2003 - --------------------------------------------------------------------------------------------------------------

- --------------------------------------------------------------------------------- COVERAGE PREMIUM COMMENTS - --------------------------------------------------------------------------------- GENERAL $721,500 Policy provides legal liability LIABILITY Est. Annual coverage for bodily injury and property damage claims from the public Broad Form Named Insured Aggregate Limits per Location Notice of Occurrence Knowledge of Occurrence (Risk Mgt Dept-Dan Ellis) Pesticide or herbicide applicator Coverage Unintentional Errors & Omissions Employee Benefits Liability - (Claims Made Form) Notice of Error in Claims Reporting Policy Covers Specific Managed Properties Extended BI 60 Day NOC Excludes: Asbestos Total Pollution w/hostile fire exception Employment Related Practices Medical Payments Abuse & Molestation - -------------------------------------------------------------------------------- LIQUOR $5,000 Policy provides legal liability LIABILITY Estimated coverage for injury is imposed on insured POLICY premium by reason of the selling, subject to serving or furnishing of any audit alcoholic beverage - --------------------------------------------------------------------------------
McQUEARY HENRY BOWLES TROY, L.L.P CURRENT INSURANCE SCHEDULE for: LODGIAN, INC.. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 3 of 14
- ----------------------------------------------------------------------------------------------------------- POLICY COVERAGE AMOUNT OR LIMITS TERM COMPANY NUMBER - ----------------------------------------------------------------------------------------------------------- BUSINESS AUTO Automobile Liability 09/01/02 Zurich American TAP2346986-03 POLICY (TEXAS) $2,000,000 BI/PD CSL 09/01/03 Insurance Co. $5,000 PIP $1,000,000 UM/UIM Deductible: $250,000 Each Accident Physical Damage: Comprehensive $250,000 deductible Collision $250,000 deductible Garage Keepers Legal Each Location $500,000 less $250,000 Deductible Each Accident excludes ALAE - ----------------------------------------------------------------------------------------------------------- BUSINESS AUTO Automobile Liability 09/01/02 Zurich American BAP2346987-03 POLICY - O/S $2,000,000 BI/PD CSL 09/01/03 Insurance Co. (EXCEPT TX) $5,000 MEDICAL Basic PIP $1,000,000 UM/UIM 500,000 Garage Keepers Deductible: $250,000 Each Accident Exluces ALAE Physical Damage: Comprehensive $250,000 deductible Collision $250,000 deductible - -----------------------------------------------------------------------------------------------------------

- -------------------------------------------------------------------------------- COVERAGE PREMIUM COMMENTS - -------------------------------------------------------------------------------- BUSINESS AUTO $20,106 plus Policy Provides Liability to the POLICY (TEXAS) $9.00 public arising from Owned, Non- Surcharge Auto Liability: (Texas Only) Estimated (Extensions/Endorsements See Annual BAP2346987-03) Premium subject to audit - -------------------------------------------------------------------------------- BUSINESS AUTO $283,718 Policy Provides Liability to the POLICY - O/S Plus $956.83 public arising from Owned, (EXCEPT TX) Surcharge Non-Auto Liability: All states except TX Estimated & MA Annual premium Extensions/Endorsements subjects to Additional Insured audit. Broad Form Insured Drive Other Car - Designated Person Employees as Insureds Fellow Employee Coverage Auto Hired Autos-Specified as Covered Autos owned-Long term leased Auto Unintentional errors & Omissions Knowledge of Occurrence-(Risk Mgt Dept-Dan Ellis) 60 Days Notice of Cancellation Limited Mexico Coverage Waiver of Subrogation- - --------------------------------------------------------------------------------
McQUEARY HENRY BOWLES TROY, L.L.P CURRENT INSURANCE SCHEDULE for: LODGIAN, INC.. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 4 of 14
- ------------------------------------------------------------------------------------------------------------ POLICY COVERAGE AMOUNT OR LIMITS TERM COMPANY NUMBER - ------------------------------------------------------------------------------------------------------------ BUSINESS AUTO Automobile Liability 09-01-02 Zurich American MA2346986-03 POLICY - (MA) $2,000,000 BI/PD CSL 09-01-03 Insurance Co. $5,000 MEDICAL PAYMENT Basic FIP $1,000,000 UM/UIM Deductible: $250,000 Each Accident Physical Damage: Comprehensive $250,000 deductible Collision $250,000 deductible - ------------------------------------------------------------------------------------------------------------ COMMERCIAL $1,000,000 Products & Completed 09-01-02 Zurich American 8830042 GENERAL Operations Aggregate 09-01-03 Insurance Co. LIABILITY $1,000,000 Occurrence CANADA $1,000,000 Personal Injury & Advertising $1,000,000 Liquor Liability Each Common Cause Aggregate $1,000,000 Tenants Legal Liability. $20,000 Medical Expense $1,000,000 Employee Benefits 1,000,000 Hired-Non-Owned Auto Each Claim - ------------------------------------------------------------------------------------------------------------

- -------------------------------------------------------------------------------- COVERAGE PREMIUM COMMENTS - -------------------------------------------------------------------------------- BUSINESS AUTO $11,176 Policy Provides Liability to POLICY - (MA) Estimated the public arising from Owned, Non- Annual Auto Liability: (Massachusetts) premium For Extension/Endorsements-See subject to BAP2646987 audit - -------------------------------------------------------------------------------- COMMERCIAL $10,000 plus Policy provides legal liability GENERAL 826.80 coverage for bodily injury and LIABILITY (Canadian Tax) property damage claims from the CANADA Premium in US public for Canadian Location Only. Dollars Estimated Annual premium subject to audit - --------------------------------------------------------------------------------
McQUEARY HENRY BOWLES TROY, L.L.P CURRENT INSURANCE SCHEDULE for: LODGIAN, INC.. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 5 of 14
- ------------------------------------------------------------------------------------------------------------- COVERAGE AMOUNT OR LIMITS TERM COMPANY POLICY NUMBER - ------------------------------------------------------------------------------------------------------------- EXCESS $25,000,000 Occurrence 09-01-02 Lumbermans 9SX192024-03 LIABILITY $25,000,000 General Aggregate 09-01-03 Mutual Casualty $25,000,000 Products/Completed (Kemper) Operations 10,000 SIR - ------------------------------------------------------------------------------------------------------------ EXCESS $25,000,000 Excess of $25,000,000 09-01-02 GreatAmerican TUU3577779-02 LIABILITY to Insurance Co. 09-01-03 - ------------------------------------------------------------------------------------------------------------

- -------------------------------------------------------------------------- COVERAGE PREMIUM COMMENTS - -------------------------------------------------------------------------- EXCESS $289,000 Policy provides liability limits to the LIABILITY public for injury or property damage in excess of Employers Liability, General Liability & Automobile Liability as shown on Schedule of Underlying Information. Follow Form: Automobile, Employee Benefits; Foreign Operations; Liquor Liability Excludes: ERISA; Nuclear Energy; Asbestos; Pollution; UM/UIM/No Fault; Securities & Financial Interest Employment Related Practices; Abuse of Molestation; Professional Services; Care Custody or Control; Year 2000 Mold Not Subject to Audit - -------------------------------------------------------------------------- EXCESS $ 63,848 Policy provides excess of the LIABILITY underlying limits with respects to Umbrella Policy #9SX192024-03 Exclusions: Asbestos Pollution (Except Named Perils & Time Element) Professional Services Nuclear - --------------------------------------------------------------------------
McQUEARY HENRY BOWLES TROY, L.L.P CURRENT INSURANCE SCHEDULE for: LODGIAN, INC.. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 6 of 14
- ------------------------------------------------------------------------------------------------------------ COVERAGE AMOUNT OR LIMITS TERM COMPANY POLICY NUMBER - ------------------------------------------------------------------------------------------------------------ EXCESS $25,000,000 excess of $50,000,000 09-01-02 Zurich Insurance AEC2921558-03 LIABILITY to Company 09-01-03 - ------------------------------------------------------------------------------------------------------------ EXCESS $25,000,000 excess of $75,000,000 09-01-02 Gul fInsurance GA2857860 LIABILITY to Group 09-01-03 - ------------------------------------------------------------------------------------------------------------

- ---------------------------------------------------------------------------- COVERAGE PREMIUM COMMENTS - ---------------------------------------------------------------------------- EXCESS $50,000 Excess Liability LIABILITY Exclusions: Asbestos Pollution (Except Named Perils & Time Element) Professional Services Nuclear - ---------------------------------------------------------------------------- EXCESS $37,500 Excess Liability LIABILITY Other Endorsements: Aggregate Dropdown Pay on Behalf Of State Amendatory Exclusions: Asbestos; Aircraft; Maritime; EPL; USL&H; Cross Suits; Discrimination: Intellectual Property Temp/Leasing Employee Terrorism; Mold; Absolute Lead Pending/Prior Litigation Designated Premises Professional; Pollution (Except Named Perils & Time Element Nuclear - ----------------------------------------------------------------------------
McQUEARY HENRY BOWLES TROY, L.L.P CURRENT INSURANCE SCHEDULE for: LODGIAN, INC.. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 7 of 14
- ------------------------------------------------------------------------------------------------------------ COVERAGE AMOUNT OR LIMITS TERM COMPANY POLICY NUMBER - ------------------------------------------------------------------------------------------------------------ EXCESS $50,000,000 Excess of $100,000,000 09-01-02 Firemans' Fund XXK00084285352 LIABILITY to Insurance 09-01-03 Company - ------------------------------------------------------------------------------------------------------------

- ----------------------------------------------------------------------- COVERAGE PREMIUM COMMENTS - ----------------------------------------------------------------------- EXCESS $50,000 Excess Liability LIABILITY Exclusions: Asbestos Pollution (Except Named Perils & Time Element Professional Services Nuclear - -----------------------------------------------------------------------
McQUEARY HENRY BOWLES TROY, L.L.P CURRENT INSURANCE SCHEDULE for: LODGIAN, INC.. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 8 of 14
- --------------------------------------------------------------------------------------------------------- POLICY COVERAGE AMOUNT OR LIMITS TERM COMPANY NUMBER - --------------------------------------------------------------------------------------------------------- PROPERTY $5,000,000 Blanket Real & 09-01-02 Crum & Forester 2450017341 Personal Property 09-01-03 (US Fire & $5,000,000 Annual Aggregate-Earth Insurance Movement Company) 5,000,000 Annual Aggregate - Flood 5,000,000 Wind except State of Florida and 1st Tier GA & SC locations. Deductibles: $100,000 Occurrence all perils except Flood excess of Max NFIP in Zone A or V Earthquake 5% of Values at risk at time of loss minimum of $100,000 as respects to California Earthquake Wind 2% of values at risk at time of loss at affected locations with a minimum of $100,000 per occurrence as respects to named Storm at 1st Tierlocations in TX & Louisiana - Wind excluded in the state of Florida & 1st Tier GA & AC - ---------------------------------------------------------------------------------------------------------

- -------------------------------------------------------------------------------- COVERAGE PREMIUM COMMENTS - -------------------------------------------------------------------------------- PROPERTY $1,100,000 Per Schedule of Locations on Includes File (See Attached) Canada ISO Special Property Form, Location Risk of Direct Physical loss or damage including Flood & EQ - Excludes Wind in Florida and 1st Tier Locations of GA & SC Replacement Cost Review Coverage Forms for Additional Coverage & Limits Which are applicable. Policy Excludes Terrorism, Y2K, Mold, Pollution & Boiler & Machinery - --------------------------------------------------------------------------------
McQUEARY HENRY BOWLES TROY, L.L.P CURRENT INSURANCE SCHEDULE for: LODGIAN, INC.. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 9 of 14
- --------------------------------------------------------------------------------------------------------- POLICY COVERAGE AMOUNT OR LIMITS TERM COMPANY NUMBER - --------------------------------------------------------------------------------------------------------- EXCESS $20,000,000 Each Occurrence 9-1-02/03 Sheffield EAF101029 PROPERTY and in the annual aggregate for Insurance flood & earthquake P/O. Limits; Corporation $20,000,000 per occurrence and in annual aggregate on flood and earthquake Deductible Excess of $5,000,000 Primary plus primary deductibles. - --------------------------------------------------------------------------------------------------------- EXCESS PROPERTY $500,000,000 per occurrence excess of 9-1-02/03 Royal Indemnity RHD329335 $ 25,000,000 per occurrence which Company in turn, excess of Underlying Deductible - --------------------------------------------------------------------------------------------------------- WINDSTORM $5,000,000 Primary for Florida and 9-01-02/03 First Specialty CAT000036 1st Tier GA & SC Insurance Co. Per schedule on file with Co. Deductible 2% each occurrence per site Replacement Cost- Actual Loss Sustained for BI if Applicable - ---------------------------------------------------------------------------------------------------------

- ----------------------------------------------------------------------------- COVERAGE PREMIUM COMMENTS - ----------------------------------------------------------------------------- EXCESS $400,000 Special Form Covering Building, PROPERTY Plus $16,000 Personal Property, BI/EE, including GA Surplus Flood & Earthquake but excluding CA Lines Tax Earthquake Valuation: Replacement Cost/BI Actual Loss Exclusion: Fungus, Terrorism, Cyber - ----------------------------------------------------------------------------- EXCESS 95,000 Valuation:Replacement cost except PROPERTY Actual Loss sustained as respects to BI - ----------------------------------------------------------------------------- WINDSTORM $465,000 Primary Wind in Florida and Plus scheduled locations in SC & GA. $16,035 GA Surplus Lines Tax - -----------------------------------------------------------------------------
McQUEARY HENRY BOWLES TROY, L.L.P CURRENT INSURANCE SCHEDULE for: LODGIAN, INC.. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 10 of 14
- ------------------------------------------------------------------------------------------------------------- POLICY COVERAGE AMOUNT OR LIMITS TERM COMPANY NUMBER - ------------------------------------------------------------------------------------------------------------- EXCESS DIC $4,030,000 Each occurrence not to 9-01-02/03 Ins. Co of the XHO185154101 CALIFORNIA EQ exceed West 4,030,000 in any one policy year separately as respects to Flood & EQ part of 4,030,000 Per Occurrence not to exceed 4,030,000 in any one policy year separately as respects Flood and EQ excess of 5,000,000 Each Occurrence which in turn excess of Underlying Deductibles 5,000,000 in any one policy year separately as respect Flood and EQ which in turn excess of Underlying Deductible. - ------------------------------------------------------------------------------------------------------------- PROPERTY $25,000,000 Each and Every 9-1-02/03 Price Forbes L2PX114 TERRORISM Occurrence and in the Aggregate only Limited (Lloyds to pay the excess of the $150,000 Each Underwriters) and Every Occurrence in respect of property damage/7 days waiting period each and every occurrence in respects of business interruption - ------------------------------------------------------------------------------------------------------------- EXCESS $10,000,000 each and every 9-1-02/03 Price Forbes L2PX131 PROPERTY occurrence and In the Aggregate Limited TERRORISM only to pay the excess of the (Lloyds $25,000,000 each and every Underwriters) occurrence and in the Aggregate - -------------------------------------------------------------------------------------------------------------

- ----------------------------------------------------------------------------- COVERAGE PREMIUM COMMENTS - ----------------------------------------------------------------------------- EXCESS DIC 10,000 DIC Including Flood & Earthquake CALIFORNIA EQ At Location: TIV $9,030,000 74675 Hwy 111, Palm Desert, CA 92260 - ----------------------------------------------------------------------------- PROPERTY $243,170 Building & Business Interruption- TERRORISM $9,726.80 Tax all as more fully defined in the Underlying Policy Wording. Insureds locations in US & Canada TIV $1,296,905,888 or to be agreed by insurers. - ----------------------------------------------------------------------------- EXCESS $60,000 PROPERTY $2,400 Tax TERRORISM - -----------------------------------------------------------------------------
McQUEARY HENRY BOWLES TROY, L.L.P CURRENT INSURANCE SCHEDULE for: LODGIAN, INC.. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 11 of 14
- ------------------------------------------------------------------------------------------------------------- POLICY COVERAGE AMOUNT OR LIMITS TERM COMPANY NUMBER - ------------------------------------------------------------------------------------------------------------- BOILER & Equipment Breakdown 09-01-02 to Travelers BMG302D6931TI MACHINERY $100,000,000 Property Damage, BI, EE 09-01-03 Property & L-02 250,000 Off Premises Service Casualty Interruption 250,000 Spoilage 100,000 Media 250,000 Ammonia Contamination 250,000 Water Damage 500,000 Demolition & ICC 250,000 Expediting Expense 250,000 Hazardous Substances 100,000 Ordinance of Law 1,000,000 Error in Design 1,000,000 Newly Acquired Locations Deductible: 25,000 Damage to covered property 24 Hours BI & EE 24 Hours Service Interruption - -------------------------------------------------------------------------------------------------------------

- ----------------------------------------------------------------------- COVERAGE PREMIUM COMMENTS - ----------------------------------------------------------------------- BOILER & $80,479 Policy provides Comprehensive MACHINERY Equipment Coverage including production machines Direct damage & BI caused by sudden & accidental breakdown of Pressure vessel & refrigeration systems, mechanical objects and electrical objects. 60 Days Notice of Cancellation - -----------------------------------------------------------------------
McQUEARY HENRY BOWLES TROY, L.L.P CURRENT INSURANCE SCHEDULE for: LODGIAN, INC.. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 12 of 14
- ------------------------------------------------------------------------------------------------------------------ POLICY COVERAGE AMOUNT OR LIMITS TERM COMPANY NUMBER - ------------------------------------------------------------------------------------------------------------------ FIDUCIARY Limit of Liability: $2,000,000 09-01-02 Chubb Insurance 8158 25 39B DAL LIABILITY Defense outside the Limit of Liability 09-01-03 Group - Federal Deductible: $25,000 Insurance Co - ------------------------------------------------------------------------------------------------------------------ CRIME $1,000,000 Employee Theft 12-15-01 (American 008747810 $1,000,000 Premises Coverage 12-15-02 International) $1,000,000 Depositors Forgery National Union $1,000,000 Funds Transfer Fraud Fire Insurance Co. $50,000 Deductible - ------------------------------------------------------------------------------------------------------------------

- -------------------------------------------------------------------------------- COVERAGE PREMIUM COMMENTS - -------------------------------------------------------------------------------- FIDUCIARY $8,316 Claims Made Policy LIABILITY Provides coverage for claims arising from breach of Fiduciary Duty while acting as trustee for named employee pension and welfare plans. Extended Reporting Period (1 Year for 75% of Annual Premium) Prior and Pending Date - 8-5-92 Continuity Date 3-5-92 - -------------------------------------------------------------------------------- CRIME 11,918 Crime Employee Theft: (Applicable only to employees at the corporate office 3445 Peachtree Rd., Atlanta, GA) - --------------------------------------------------------------------------------
McQUEARY HENRY BOWLES TROY, L.L.P CURRENT INSURANCE SCHEDULE for: LODGIAN, INC.. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 13 of 14
- ----------------------------------------------------------------------------------------------------------------- POLICY COVERAGE AMOUNT OR LIMITS TERM COMPANY NUMBER - ----------------------------------------------------------------------------------------------------------------- D&O (Claims Made) $20,000,000 Each Loss 12-11-01- XL Specialty DO 71000999 Management $20,000,000 Each Policy Year 12-11/02 Insurance Liability Retention: $200,000 Company - ----------------------------------------------------------------------------------------------------------------- Excess D&O (Claims $10,000,000 Each Loss Excess of 12-11-01/ RLI Insurance EPG 0002582 Made) $20,000,000 Each Loss/$10,000,000 12-11-02 Company each policy year excess of $20,000,000 each policy year. - ----------------------------------------------------------------------------------------------------------------- Excess D&O -Claims $15,000,000 12-11-01/ AIG-National 008574889 Made (Run Off) 12-11-02 Union Fire Insurance Co of PA - ----------------------------------------------------------------------------------------------------------------- Excess D&O -Claims $15,000,000 excess of $15,000,000 12-11-01/ Chubb-Federal 81582583 Made -(Run Off) 12-11-02 Insurance Company - ----------------------------------------------------------------------------------------------------------------- Excess D&O -Claims $10,000,000 excess of $30,000,000 12-11-01/ Gulf Insurance GA0431469 Made (Run Off) 12-11-02 Company - -----------------------------------------------------------------------------------------------------------------

- -------------------------------------------------------------------------------- COVERAGE PREMIUM COMMENTS - -------------------------------------------------------------------------------- D&O (Claims Made) $430,000 Straight Retention for Securities Management (90% Minimum Claims Liability Earned) Prior Acts Exclusion (12-11-01) General E&O Exclusion (excludes services for other for a fee) One Year Run Off Change in Condition Prior & Pending Litigation Exclusion date: 12-11-01 - -------------------------------------------------------------------------------- Excess D&O (Claims $170,000 Prior & Pending Litigation Made) Exclusion Date: 12-11-01 Subject to: No bankruptcy prior to 12-11-01 - -------------------------------------------------------------------------------- Excess D&O -Claims $136,689 One Year Discovery Made (Run Off) Limit is part of and not in addition to limit of liability under 12-11-98 to 12-11-01 policy period. - -------------------------------------------------------------------------------- Excess D&O -Claims $ 70,500 One Year Discovery Made -(Run Off) Limit is part of and not in addition to limit of liability under 12-11-98 to 12-11-01 policy period. - -------------------------------------------------------------------------------- Excess D&O -Claims 24,000 One Year Discovery Made (Run Off) Limit is part of and not in addition to limit of liability under 12-11-98 to 12-11-01 policy period. - --------------------------------------------------------------------------------
McQUEARY HENRY BOWLES TROY, L.L.P CURRENT INSURANCE SCHEDULE for: LODGIAN, INC.. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 14 of 14
- ------------------------------------------------------------------------------------ POLICY COVERAGE AMOUNT OR LIMITS TERM COMPANY NUMBER - ------------------------------------------------------------------------------------

- -------------------------------------------------------- COVERAGE PREMIUM COMMENTS - --------------------------------------------------------
We present this schedule so you may get an overall picture of your insurance protection. For details of coverage please refer to your policies or contact McQueary Henry Bowles Troy, L.L.P. Please examine this schedule with particular reference to the amount or limits of your insurance. Today's property values and liability judgments are higher and insurance should be adjusted to cover. Homedir/CSR4/United Schedule McQUEARY HENRY BOWLES TROY, L.L.P SCHEDULE 4.28 COLLECTIVE BARGAINING AGREEMENTS Schedule 4.28 Schedule 4.28 Collective Bargining Agreements
Hotel Borrower Union ----- -------- ----- Holiday Inn - Rolling Meadows, IL Servico Rolling Meadows, Hotel, Motel, Club, Cafeteria, Restaurant Employees & Bartenders Inc. Union, Local 450 Hilton - Northfield, MI NH Motel Enterprises, Hotel Employees and Restaurant Employees Union Local 24 Inc. Hilton - Northfield, MI NH Motel Enterprises, The International Union of Operating Engineers, Local 547 Inc. Holiday Inn - Niagara Falls, NY Servico New York, Inc. Hotel Employees and Restaurant Employees Union Local 4 Holiday Inn - Jamestown, NY Servico Jamestown, Inc. Hotel Employees and Restaurant Employees Union, Local 4 Doubletree Hotel - Philadelphia, Impac Hotels 1, LLC Hotel Employees and Restaurant Employees Union, Local 274 PA Crowne Plaza - Abany, NY Albany Hotel, Inc. Hotel, Motel & Restaurant Employees & Bartenders Union, Local 471 Holiday Inn - St. Paul, IL Minneapolis Motel Hotel Employees and Restaurant Employees, Local 17 Enterprises, Inc.

Hotel Date of Agreement ----- ----------------- Holiday Inn - Rolling Meadows, IL 1/1/2002 Hilton - Northfield, MI 8/1/2002 Hilton - Northfield, MI 10/1/2000 Holiday Inn - Niagara Falls, NY 2/10/1999 Holiday Inn - Jamestown, NY 5/1/2000 Doubletree Hotel - Philadelphia,PA 10/1/2000 Crowne Plaza - Abany, NY 2/1/2000 Holiday Inn - St. Paul, IL 1/1/2002
SCHEDULE 4.29 MORTGAGED CONDOMINIUM PROPERTY DOCUMENTS 1. Declaration for Silver Spring Plaza Condominium, dated as of April 21, 2000, by Servico Maryland, Inc. 2. Articles of Incorporation for Council of Unit Owners of Silver Spring Plaza Condominium, Inc., dated as of June 22, 2000. 3. By-Laws of Council of Unit Owners of Silver Spring Plaza Condominium. 4. Silver Spring Plaza Condominium, Unanimous Written Consent of the Board of Directors in Lieu of the Annual Meeting, scheduled to be held on May 4, 2000. 5. Resignation and Appointment of Directors of the Counsel of Unit Owners of Silver Spring Plaza Condominium, effective as of May 4, 2000. Schedule 4.29 SCHEDULE 4.30 GROUND LEASES Schedule 4.30 SCHEDULE OF GROUND LEASES 1. ALBANY HOTEL, INC. CROWNE PLAZA, LOCATED AT TEN EYCK PLAZA, ALBANY, NY Agreement of Lease, dated as of December 20, 1979, between UDC-Ten Eyck Development Corporation-III, as lessor, and Ten Eyck Hotel Associates, a New York limited partnership ("Ten Eyck"), as lessee, recorded January 4, 1980 in Liber 2181 of Deeds, Page 1000 in the Office of the Albany County Clerk, as amended and restated by that certain Restatement of Agreement of Lease, dated as of December 20, 1979, recorded December 17, 1981 in Liber 2216, Page 1 in the Office of the Albany County Clerk, as assigned by that certain Bargain and Sale Deed, dated November 11, 1992, with Ten Eyck, as assignor, and Albany Motel Enterprises, Inc., as assignee, and recorded January 21, 1993 in Liber 2476, Page 871 in the Office of the Albany County Clerk, as corrected by that certain corrective instrument naming Albany Hotel, Inc., a Florida corporation, as lessee, dated May 5, 1995 and recorded August 15, 1995 in Liber 2593 at page 703 in the Office of Albany County Clerk. Agreement of Lease, dated as of December 20, 1979, between UDC-Ten Eyck Development Corporation-II, as lessor, and Ten Eyck, as lessee, recorded January 4, 1980 in Liber 2181 of Deeds, Page 845 in the Office of the Albany County Clerk, as amended and restated by that certain Restatement of Agreement of Lease, dated as of December 20, 1979, recorded December 17, 1981 in Liber 2216, Page 135 in the Office of Albany County Clerk, as assigned by that certain Bargain and Sale Deed, dated November 11, 1992, with Albany Motel Enterprises, Inc., as assignee, recorded January 21, 1993 in Liber 2476, Page 871 in the Office of the Albany County Clerk, as corrected by that certain corrective instrument naming Albany Hotel, Inc., a Florida corporation, as lessee, dated May 5, 1995 and recorded August 15, 1995 in Liber 2593, Page 703 in the Office of the Albany County Clerk. 2. AMI OPERATING PARTNERS, LIMITED PARTNERSHIP HOLIDAY INN, LOCATED AT 363 EAST ROBERTS STREET, EAST HARTFORD, CT Lease, dated March 11, 1970, between The Poly Choke Company, Incorporated, as lessor, and Hartford Motor Inns, Inc., as lessee, a Notice of which is dated April 20, 1977 and recorded in Volume 626, Page 107 of the East Hartford Land Records, as amended by that certain unrecorded Amendatory Agreement dated September 27, 1971, as further amended by that certain unrecorded Second Amendatory Agreement dated July 5, 1972, as further amended by that certain unrecorded Third Amendatory Agreement dated March 15, 1972, as further amended by that certain unrecorded Fourth Amendatory Agreement dated May 4, 1973, as further amended by that certain Agreement dated May 4, 1973 and recorded in Volume 511, Page 238 of the East Hartford Land Records, as further amended by that certain unrecorded Fifth Amendatory Agreement dated September 11, 1978, as further amended by that certain Agreement recorded on May 10, 1985 in Volume 911, Page 96 of the East Hartford Land Records, as further amended by that certain Agreement dated December 20, 1986 and recorded on December 24, 1986 in Volume 1019, Page 59 of the East Hartford Land Records, as assigned by that certain instrument, dated December 25, 1986, to AMI Operating Partners Limited Partnership a/k/a AMI Operating Partners, L.P., recorded on December 24, 1986 in Volume 1019, Page 69 of the East Hartford Land Records. 3. LODGIAN AMI, INC. HOLIDAY INN, LOCATED AT 301 WEST LOMBARD STREET, BALTIMORE, MD Lease between Kalliope Pappas, Helen P. Thomas and Basil A. Thomas, husband & wife, George H. Pappas & Louisa N. Pappas, husband & wife, Alexander H. Pappas & Chrysanthe A. Pappas, husband & wife, and Harry P. Pappas and Anna Pappas, husband & wife, as lessor, and Coliseum Motor Inns, Inc., as lessee, dated December 31, 1962 and recorded among the Land Records of Baltimore City in Liber JFC No. 1447. Folio 1, as affected by that certain unrecorded Memorandum of Amendment to Lease, dated February 11, 1963, between Kalliope Pappas, widow, Helen P. Thomas and Basil A. Thomas, her husband, George H. Pappas and Louisa N. Pappas, his wife, Alexander H. Pappas and Chrysanthe A. Pappas, his wife, Harry P. Pappas and Anna Pappas, his wife, collectively, as lessor, Coliseum Motor Inns, Inc., as lessee, and Motels of Maryland, Inc., as guarantor, as further affected by that certain Agreement of Modification and Extension, dated September 10, 1964, between Harry G. Pappas & Sons, a Maryland general partnership, by its general partners, Basil A. Thomas, George H. Pappas, Alexander H. Pappas, Harry P. Pappas, Helen P. Thomas, Louisa N. Pappas, Chrysanthe A. Pappas, Anna Z. Pappas, Kalliope H. Pappas, as lessor, and Coliseum Motor Inns, Inc., as lessee, and Motels of Maryland, Inc., and American Motor Inns, Inc., as guarantors, recorded in the Land Records of Baltimore City, in Liber 1757, Page 403, as amended by that certain Amendment to Lease, dated January 26, 1966, between Basil A. Thomas, Kalliope Pappas, Helen P. Thomas, Louisa Pappas, Chrysanthe Pappas, Anna Pappas, George H. Pappas, Alexander A. Pappas, Harry P. Pappas, as lessor, and Coliseum Motor Inns, Inc., as lessee, recorded among the Land Records of Baltimore City in Liber JFC No. 2069, Folio 524, as further amended by that certain unrecorded Amendment to Lease Agreement dated March 15, 1985, between Basil A. Thomas, Steven A. Thomas, George H. Pappas, Louisa Pappas, Alexander Pappas, Chrysanthe Pappas, Harry P. Pappas, Anna Pappas and Coliseum Motors Inns, Inc., et al, as further affected by that certain unrecorded Notice of Intent to Extend Contract, dated May 9, 1985, as further amended by that certain Lease Agreement between said parties December 20, 1986 and recorded in Liber SEB No. 1117, Folio 50 and that certain Addendum to Amendment of Lease between said parties dated December 20, 1986 and recorded among the aforesaid Land Records in Liber 1117, Folio 62, as assigned by that certain Assignment of Lease and Indemnification Agreement, dated December 23, 1986, between Coliseum Motor Inns, Inc., as assignor, and AMI Operating Partners, L.P., as assignee, recorded among the Land Records of Baltimore City in Liber SEB No. 1117, Folio 069, as further amended by that certain unrecorded Amendment to Lease dated December 31, 1997, by AMI Operating Partners, L.P. in favor of Harry G. Pappas & Sons, LLC, as further assigned by that certain Assignment and Assumption of Lessee's Interest in Ground Lease, dated December 8, 1998, between AMI Operating Partners, L.P. and Lodgian AMI, Inc., recorded among the Land Records of Baltimore City in Liber FMC 8033, Folio 295 (providing constructive notice of all unrecorded documents noted above), as further affected by that certain unrecorded Notice of Extension to the Lease, dated November 8, 2002. 4. LODGIAN AMI, INC. HOLIDAY INN, LOCATED AT 6323 GOVERNOR RITCHIE HWY., GLEN BURNIE, MD Unrecorded Lease Agreement, dated May 10, 1968, between David H. Greenberg and Janice C. Greenberg and A.O. Krisch, Joel Krisch and Rosalie K. Shaftman, as assigned by that certain unrecorded Assignment of Lease, dated January 18, 1971, from A.O. Krisch, Joel Krisch and Rosalie K. Shaftman to American Motor Inns, Inc., as further assigned by that certain unrecorded Assignment of Lease, dated January 18, 1971, from American Motors Inns, Inc. to Connecticut Motor Inns, Inc., as amended by that certain Amendment to Lease, dated February 24, 1971, from David H. Greenberg and Janice C. Greenberg, his wife, as lessors, to Connecticut Motor Ins, Inc. et al, as lessees, recorded among the Land Records of Anne Arundel County in Liber 2395, Folio 270, as further amended by that certain unrecorded Second Amendment to Lease, dated August 22, 1975, between David H. Greenberg and Janice C. Greenberg, as lessors, and Connecticut Motor Inns, Inc., as lessee, and American Motor Inns, Inc., as further amended by that certain Amendment to Lease Agreement, dated December 20, 1986, between General Motor Inns, Inc. and Connecticut Motor Inns, Inc. and American Motor Inns, Inc., recorded among the Land Records of Anne Arundel County, Maryland in Liber 4223, Folio 137, as further assigned by that certain Assignment of Lease and Indemnification Agreement, dated December 23, 1986, between Connecticut Motor Inns, Inc. and AMI Operating Partners, L.P., recorded among the Land Records of Anne Arundel County, Maryland in Liber 4223, Folio 145, as further assigned by that certain Assignment and Assumption of Lessee's Interest in Ground Lease, dated December 8, 1998, between AMI Operating Partners, L.P. and Lodgian AMI, Inc., recorded among the Land Records of Anne Arundel County, Maryland in Liber 8904, Folio 94 (providing constructive notice of all unrecorded documents noted above). 10. LODGIAN AMI, INC. HOLIDAY INN, LOCATED AT 890 ELKRIDGE LANDING ROAD, LINTHICUM, MD Lease, dated August 24, 1971, from D.R.H. Investment Company, as lessor, to American Motor Inns, Inc., as lessee, recorded among the Land Records of Anne Arundel County, Maryland in Liber 3883, Folio 284, as affected by that certain Option Agreement, recorded among the aforesaid land records in Liber MSH No. 2467, Folio 798, as amended by that certain unrecorded First Amendment to Agreement to Construct and Lease, dated May 18, 1972, among D.R.H. Investment Co., as landlord, and American Motor Inns, Incorporated, as tenant, as further amended by that certain agreement between Samuel M. Heffner, et al, and American Motor Inns, Incorporated, dated May 18, 1972 and recorded among the aforesaid land records in Liber MSH No. 2490, Folio 581, as further affected by that certain Subordination Agreement, dated May 18, 1972, between American Motor Inns, Incorporated and Trustees for Loyola Federal Savings & Loan Association, recorded among the aforesaid land records in Liber 2490, Folio 585, as further affected by that certain Nondisturbance and Attornment Agreement, dated September 8, 1986, between Loyola Federal Savings & Loan Association and American Motor Inns, Inc., recorded among the aforesaid land records in Liber 4212, Folio 211, as further amended by that certain Consolidated Amendatory Agreement, dated May 7, 1984, between Harry W. Rogers, III, et al, and American Motor Inns, Incorporated, recorded among the aforesaid land records in Liber EAC No. 3883, Folio 325, as further affected by that certain unrecorded Notification of Election to Extend Term, dated May 9, 1985, as further amended by that certain Amendment to Lease, dated December 1, 1985, between D.R.H. Investment Co., as landlord, and American Motor Inns, Incorporated, as tenant, recorded among the aforesaid land records in Liber 4009, Folio 445, as further amended by that certain unrecorded Amendment of Lease Agreement, dated December 31, 1985, between D.R.H. Investment Co., as landlord, and American Motor Inns, Incorporated, as tenant, as further amended by that certain Amendment to Lease Agreement, dated December 20, 1986, between Harry W. Rodgers, III, et al, and American Motor Inns, Incorporated, recorded among the aforesaid land records in Liber 4223, Folio 64, as assigned by that certain Assignment of Lease and Indemnification Agreement, dated December 23, 1986, between American Motor Inns, Incorporated and AMI Operating Partners, L.P., recorded among the aforesaid land records in Liber 4223, Folio 70, as further affected by that certain Assignment of Option Agreement, dated December 23, 1986, from American Motors Inns, Incorporated to AMI Operating Partners, L.P., recorded among the aforesaid land records in Liber 4223, Folio 75, as further affected by that certain unrecorded Subordination, Non-Disturbance and Attornment Agreement, dated July 26, 1995, between AMI Operating Partners, L.P., DRH Investment Company and American Enterprise Life Insurance Company, as further affected by that certain agreement, dated May 18, 1972, between D.R.H. Investment Company and Anne Arundel County, Maryland, recorded among the aforesaid land records in Liber M.S.H. No. 2491, Folio 80 (as to water and sewer lines and water connection to the insured property), as further affected by that certain agreement, dated October 10, 1972, between D.R.H. Investment Company and Anne Arundel County, Maryland, recorded among the aforesaid land records in Liber M.S.H. No. 2529, Folio 187 (as to water and sewer lines and water connection to the insured property). 6. LODGIAN AMI, INC. HOLIDAY INN, LOCATED AT 521 GREENFIELD ROAD, LANCASTER, PA Lease Agreement, dated January 30, 1969, between Paul A. Herr and Dorothy H. Herr, as lessor, Republic Motor Inns, Inc., as lessee, and American Motor Inns, Inc., as guarantor, recorded with the Recorder of Deeds, Lancaster, PA in Record Book W59, Page 755, as affected by that certain Addendum dated January 16, 1971 and recorded with the Recorder of Deeds, Lancaster, PA in Record Book R60, Page 233, as amended by that certain Amendment dated March 15, 1985 and recorded with the Recorder of Deeds, Lancaster, PA in Record Book W91, Page 434, as further amended by that certain Amendment to Lease dated December 20, 1986 and recorded with the Recorder of Deeds, Lancaster, PA in Record Book Y96, Page 660, as assigned by that certain Assignment of Lease and Indemnification Agreement, December 23, 1986, between Republic Motor Inns, Inc. and AMI Operating Partners, LP., recorded with the Recorder of Deeds, Lancaster, PA in Record Book Y96, Page 669, as further assigned by that certain Assignment and Assumption of Lessee's Interest in Ground Lease, dated November 24, 1998, between AMI Operating Partners, LP and Lodgian AMI Inc., recorded with the Recorder of Deeds, Lancaster, PA in Record Book 604, Page 638, as further affected by that certain Acknowledgment, Estoppel Certificate and Agreement, dated November 24, 1998, between Dorothy H. Herr and AMI Operating Partners LP, recorded with the Recorder of Deeds, Lancaster, PA in Record Book 6045, Page 1. 7. LODGIAN MEMPHIS PROPERTY OWNER, LLC FRENCH QUARTER SUITES, LOCATED AT 2144 MADISON AVENUE, MEMPHIS, TN Lease, dated April 26, 1972, between J. Murry Davis and wife, Mary Alice Davis, as lessor, and W. H. Welch, Jr., Meredith L. McCullar, Fred Don Alfonso and Ernie Barrasso, as lessee, recorded as Instrument No. H3 3366 in the Register's Office of Shelby County, Tennessee, as amended and assigned by that certain Agreement Assigning, Modifying and Extending Lease and Granting Certain Rights, dated as of February 29, 1976, between J. Murry Davis, as lessor, and Waymon H. Welch, Jr. and Waymon H. Welch, Sr., as existing lessee, and The Group, Inc., as new lessee, recorded in said Register's Office as Instrument No. L1 8178, as further amended by that certain Agreement Modifying and Extending Lease, dated January 19, 1983, between Bill Sutton and Martha Sutton, as lessor, and J. Garnett Murphy, as lessee, recorded in said Register's Office as Instrument No. U6 8978, as further amended by that certain Lease Modification Agreement, dated June 4, 1983, by Bill Sutton and Martha Sutton, as lessor, and J. Garnett Murphy, as lessee, recorded in said Register's Office as Instrument No. U3 3420, as further amended by that certain Lease Modification and Extension Agreement, dated October 6, 1983, between Martha Sutton, as lessor, and M.K. Partners, a partnership composed of J. Garnett Murphy and Ronald L. Kirkpatrick as lessee, recorded in said Register's Office as Instrument No. U6 8978, as further amended by that certain Warranty Deed, dated November 29, 1983, by M.K. Partners to French Quarter Inn of Memphis, recorded in said Register's Office as Instrument No. U8 0878, as further assigned by that certain Assignment of Ground Leases, dated January 15, 1991, by Middlesex Development Corporation, a California corporation d/b/a "French Quarter Inn of Memphis," as assignor, and Memphis Lodging Associates, Inc., a Florida corporation, as assignee, recorded in said Register's Office as Instrument No. CA 3996, as further assigned by that certain Assignment of Ground Lease, dated March 12, 1997, by Memphis Lodging Associates, Inc., a Florida corporation, as assignor, to Impac Hotels, I, LLC, a Georgia limited liability company, as assignee, recorded in said Register's Office as Instrument No. GM 0294, as further amended by that certain Amendment of Ground Lease, dated September 17, 1997, by Bill Sutton and Martha Sutton, as landlord, and Impac Hotels, I, LLC, a Georgia limited liability company, as tenant, recorded in said Register's Office as Instrument No. HC 9439. 8. LODGIAN MEMPHIS PROPERTY OWNER, LLC FRENCH QUARTER SUITES, LOCATED AT 2144 MADISON AVENUE, MEMPHIS, TN Lease, dated August 24, 1972, between Horace Proctor and Ann Proctor, as lessor, and W. H. Welch, Jr., Meredith L. McCullar, Fred Don Alfonso and Ernie Barrasso, as lessee, recorded as Instrument No. H2 3640 in the Register's Office of Shelby County, Tennessee, as amended and assigned by that certain Agreement Assigning, Modifying and Extending Lease and Granting Certain Rights, dated as of February 29, 1976, between Horace Proctor and Ann Proctor, as lessor, Waymon H. Welch, Jr. and Waymon H. Welch, Sr., as existing lessee, and The Group, Inc., as new lessee, recorded as Instrument No. L1 8176 3640 in said Register's Office, as further amended by that certain Agreement Modifying and Extending Lease, dated December 30, 1982, between Horace Proctor and Ann Proctor, as lessor, and J. Garnett Murphy, as lessee, recorded as Instrument No. U6 8504 3640 in said Register's Office, as further amended by that certain Lease Modification Agreement, dated June 2, 1983, by Horace Proctor and Ann Proctor, as lessor, and J. Garnett Murphy, as lessee, recorded as Instrument No. U3 3419 3640 in said Register's Office, as further amended by that certain Lease Modification and Extension Agreement, dated October 7, 1983, between Horace Proctor and Ann Proctor, as lessor, and M. K. Partners, a partnership composed of J. Garnett Murphy and Ronald L. Kirkpatrick, as lessee, recorded as Instrument No. U6 8504 3640 in said Register's Office, as further amended by that certain Warranty Deed, dated November 29, 1983, between M. K. Partners, as grantor, and French Quarter Inn of Memphis, as grantee, recorded as Instrument No. U8 0878 3640 in said Register's Office, as further assigned by that certain Assignment of Ground Leases, dated January 15, 1991, by Middlesex Development Corporation, a California corporation d/b/a "French Quarter Inn of Memphis," as assignor, and Memphis Lodging Associates, Inc., a Florida corporation, as assignee, recorded as Instrument No. CA 3996 3640 in said Register's Office, as further assigned by that certain Assignment of Ground Leases, dated March 12, 1997, by Memphis Lodging Associates, Inc., a Florida corporation, as assignor, to Impac Hotels, I, LLC, a Georgia limited liability company, as assignee, recorded as Instrument No. GM 0294 3640 in said Register's Office, as further amended by that certain Amendment of Ground Lease, dated September 24, 1997, by Horace Proctor and Ann Proctor, as landlord, and Impac Hotels I, LLC, a Georgia limited liability company, as tenant, recorded as Instrument No. HC 9438 3640 in said Register's Office. 9. SHEFFIELD MOTEL ENTERPRISES, INC. HOLIDAY INN, LOCATED AT 4900 HATCH BLVD., SHEFFIELD, AL Lease, dated as of February 6, 1981, between City of Sheffield, Alabama, as lessor, and Sheffield Motel Enterprises, Inc., as lessee, recorded on February 6, 2002 in Book 391, Page 079-122, among the land records for Colbert County, Alabama, as amended by that certain Amendment of Lease, dated January 24, 1995 and recorded in Book 9714, Page 786, among the aforesaid land records, as further amended by that certain Second Amendment of Lease dated June 16, 1997 and recorded in Book 9714, Page 790, among the aforesaid land records. 10. SERVICO CEDAR RAPIDS, INC. CROWNE PLAZA, LOCATED AT 350 1ST AVENUE, NE, CEDAR RAPIDS, IA (a) Lease of Air Rights originally executed October 14, 1976 by and between the City of Cedar Rapids, as Lessor, and Five Seasons Inn, Inc., as Lessee, recorded in Volume 1733, at Page I of the Records of Linn County, Iowa as amended pursuant to that certain Agreement to Correct Legal Description dated January 4, 1978 and recorded May 29, 1997 in Book 3494 at Page 655 of the Records of Linn County, Iowa and subsequently amended pursuant to that certain Proposed Amendment to Air Rights Lease dated June 28, 1995 referred to in instrument recorded May 29, 1997 in Book 3494 at page 684; (b) Lease of Air Rights originally executed May 23, 1979 by and between the City of Cedar Rapids, as Lessor, and Five Seasons, as Lessee, as amended pursuant to that certain Amendment to Lease Originally Executed May 23, 1979 by and between the City and Five Seasons dated as of January 3, 1984 and subsequently amended pursuant to that certain Amendment to Lease originally executed May 23, 1979 by and between the City and Five Seasons dated as of May 22, 1985 and further supplemented or otherwise affected by that certain Memorandum of Understanding dated June 30, 1995 between the City of Cedar Rapids, acting through the Five Seasons Center Commission, and C.R.I. Hotel Associates, L.P.; (c) Leasehold and other agreement based use rights of Servico Cedar Rapids, Inc. including but not limited to (a) that certain Ballroom Rental Agreement dated October 26, 1977 by and between Five Seasons Inn, Inc. and the City of Cedar Rapids, Iowa, as amended by Proposed Amendment to Ballroom Rental Agreement dated February 17, 1993 by and between C.R.I. Hotel Associates, L.P. and the City of Cedar Rapids, Iowa and further supplemented or otherwise affected by that certain Memorandum of Understanding dated June 30, 1995 between the City of Cedar Rapids, acting through the Five Seasons Center Commission, and C.R.I. Hotel Associates, L.P. (b) that certain Skyway Agreement dated April 11, 1979 and (c) that certain Parking Space Agreement dated May 18, 1977 by and between Five Seasons Inn, Inc. and the City of Cedar Rapids, Iowa, each of the above referenced agreements as disclosed by that certain Consent, Certificate and Agreement of Lessor dated as of April 23, 1997 by and between Servico Cedar Rapids, Inc., City of Cedar Rapids, Iowa, and C.R.I. Hotel Associates, L,P. and recorded May 29, 1997 in Book 3494 at Page 620. SCHEDULE 5.1(D) CAPEX/FF&E BUDGET Schedule 5.1(D) Lodgian Merrill Lynch Schedule 5.1(0) Portfolio 2002 Exit Financing Budget 56 Hotels
Income Statement Jul-02 Aug-02 Sep-02 Oct-02 ------------ ------------ ------------ ------------ Rooms Available 339,977 339,977 329,010 339,977 Rooms Rented 229,429 216,927 202,961 229,196 Occupancy % 67.5% 63.8% 85.3% 67.4% A.D.R $ 78.58 $ 78.08 $ 75.95 $ 76.29 REVPAR $ 53.02 $ 49.82 $ 45.85 $ 50.75 Department Revenue Rooms $ 18,023,962 $ 16,937,031 $ 15,413,984 $ 17,255,121 Food 3,911,588 3,348,713 3,450,841 1,189,892 Beverage 665,010 710,285 715,014 759,574 Telephone 905,976 302,013 283,145 325,041 Other Operating Income 523,634 519,477 497,914 530,098 ------------ ------------ ------------ ------------ Total Revenue 22,830,371 21,817,518 20,360,678 21,059,724 Dept Costs & Expenses Rooms 4,702,779 4,449,841 4,304,288 1,400,058 Food 2,708,155 2,717,648 2,796,410 3,100,520 Beverage 334,967 350,785 354,509 349,404 Telephone 202,917 197,889 191,229 214,527 Other Operating Expenses 337,681 324,324 316,073 333,960 ------------ ------------ ------------ ------------ Total Dept. Expenses 8,286,499 8,040,488 7,964,507 4,398,467 ------------ ------------ ------------ ------------ Gross Contribution 14,543,872 13,777,392 12,396,171 11,661,256 G&U Expenses General & Administrative 1,185,784 1,175,050 1,196,441 1,176,045 Advertising & Promotion 877,191 873,584 955,795 922,389 Franchise Expenses 1,564,362 1,500,189 1,341,015 1,518,451 Repairs & Maintenance 1,074,763 1,054,872 1,030,140 1,176,046 Utilities 1,209,841 1,196,189 1,141,473 1,060,747 ------------ ------------ ------------ ------------ Total G&U Expenses 5,911,821 5,799,884 5,858,864 5,853,679 ------------ ------------ ------------ ------------ House Profit 8,631,950 7,977,445 8,729,307 8,807,578 House Profit % 37.8% 35.6% 33.2% 38.2% Other Operating Expenses Management Fees 913,215 872,701 814,427 922,389 Equipment Rentals 123,257 123,354 124,402 125,358 Insurance 302,279 302,279 366,312 390,814 Property & Other Taxes 928,312 928,312 928,312 1,023,297 Other Expenses(Income) 45,000 45,000 45,000 45,000 Ground Rent 202,917 202,917 202,917 202,917 ------------ ------------ ------------ ------------ Total Other Operating Expenses 2,514,980 2,474,563 2,471,370 2,709,575 ------------ ------------ ------------ ------------ EBITDA $ 5,116,970 $ 5,502,885 $ 4,267,917 $ 4,698,000 ============ ============ ============ ============ Cumulative $ 6,118,970 $ 11,619,855 $ 15,877,793 $ 21,975,798 Old EBITDA 6,422,152 5,886,193 4,810,110 4,705,153 $ 6,422,152 $ 12,418,351 $ 17,228,461 $ 23,933,614 Differences (Monthly) -4.75% -8.23% -11.48% -9.05% Differences (Cumulative) -4.75% -6.43% -7.84% -8.18% 2002 Actual (Jan-June) 27,297,869 27,297,669 (Jul-Dec) Old Budget 29,093,700 26,415,729 ------------ ------------ Total EBITDA 56,391,569 53,716,588 Less FF&E 9,930,948 9,930,948 ------------ ------------ NCP 48,480,621 43,785,650

Income Statement Nov-02 Dec-02 3rd Quarter 2002 4th Quarter 2002 ------------ ------------ ---------------- ---------------- Rooms Available 329,010 309,977 1,008,964 1,008,964 Rooms Rented 188,962 152,578 649,317 568,738 Occupancy % 56.8% 44.9% 64.4% 66.4% A.D.R $ 72.57 $ 189.03 $ 77.58 $ 72.79 REVPAR $ 41.24 $ 30.98 $ 49.83 $ 40.96 Department Revenue Rooms $ 13,567,021 $ 10,533,207 $ 50,374,957 $ 41,355,357 Food 3,377,945 3,538,951 10,550,943 11,106,789 Beverage 655,661 824,938 2,090,308 2,940,439 Telephone 267,402 208,950 691,194 801,394 Other Operating Income 454,734 373,734 1,541,225 1,356,563 ------------ ------------ ------------ ------------ Total Revenue 18,322,971 85,579,839 86,008,567 56,962,541 Dept Costs & Expenses Rooms 4,002,271 3,468,359 13,458,906 11,898,688 Food 2,680,571 2,851,161 8,222,112 8,850,258 Beverage 321,375 397,749 1,040,261 1,055,528 Telephone 197,871 162,981 591,835 575,388 Other Operating Expenses 309,211 242,927 960,078 886,108 ------------ ------------ ------------ ------------ Total Dept. Expenses 7,469,321 7,135,176 24,291,192 23,028,988 ------------ ------------ ------------ ------------ Gross Contribution 10,823,654 8,448,863 40,717,375 33,933,575 G&U Expenses General & Administrative 1,090,217 1,204,325 3,558,255 3,467,591 Advertising & Promotion 824,534 878,572 2,706,570 2,625,495 Franchise Expenses 1,207,461 906,389 4,405,568 3,642,385 Repairs & Maintenance 961,954 959,211 3,159,776 3,057,213 Utilities 1,007,784 1,059,429 3,547,503 3,127,840 ------------ ------------ ------------ ------------ Total G&U Expenses 5,091,931 4,974,929 17,378,889 15,920,544 ------------ ------------ ------------ ------------ House Profit 5,731,719 3,413,734 23,338,706 18,013,031 House Profit % 31.3% 22.3% 35.9% 31.6% Other Operating Expenses Management Fees 732,911 623,194 2,600,343 2,278,502 Equipment Rentals 121,702 122,693 371,012 369,753 Insurance 357,884 356,685 960,870 1,106,183 Property & Other Taxes 1,023,297 928,312 2,784,937 2,974,906 Other Expenses(Income) 45,000 45,000 135,000 135,000 Ground Rent 202,917 202,917 808,751 808,751 ------------ ------------ ------------ ------------ Total Other Operating 2,483,719 2,228,801 7,450,973 7,472,094 Expenses ------------ ------------ ------------ ------------ EXITDA $ 3,243,000 $ 1,164,334 $ 15,877,793 $ 10,540,936 ============ ============ ============ ============ Cumulative $ 25,223,795 $ 26,418,729 Old EBITDA 3,806,354 1,553,732 17,223,461 $ 1,355,239 $ 17,228,461 $ 23,933,614 $ 27,539,958 $ 29,093,700 Differences (Monthly) -9.94% -23.09% Differences (Cumulative) -8.41% -9.19% 2002 Actual (Jan-June) (Jul-Dec) Old Budget Total EBITDA Less FF&E NCP
Schedule 6.1 (D) Capital Expenditures Budget For the Period November 2002 through December 2003 (in $000's)
ALPHA PROPERTY TOTAL abl Courtyard by Marriott - Abilene, TX $ 262 alb Crowne Plaza Albany, NY 4 aus Holiday Inn Austin, TX 600 bel Holiday Inn Belmont, MD 164 ben Courtyard by Marriott - Bentonville, AR 235 bkh Courtyard by Marriott - Atlanta, GA 512 brw Holiday Inn Brunawick, GA 458 bwi Holiday Inn BWI Airport, MD 6 ced Crowne Plaza Cedar Rapids, IA 1,085 cha Clarion Charleston, SC 100 col Hilton Inn Columbia, MD 2,067 crb Holiday Inn Cromwell Bridge, MD 7 dal Holiday Inn Market Center Dallas, TX 120 ded Residence Inn Dedham, MA 95 dfw Holiday Inn Select DFW Airport, TX 340 dha Hampton Inn Dothan, AL 280 dhi Holiday INN DOTHAN, AL 236 ehc Holiday INN EAST HARTFORD, CT 72 flo Courtyard by Marriott - Florence, KY 254 fre Holiday INN FREDERICK, MD 49 gad Holiday Inn Express Gadeden, AL 365 gil Holiday Inn Grand Island, NY 4 gln Holiday Inn Glen Burnie North, MD 54 gtr Holiday Inn Greentree, PA 10 har Holiday Inn Inner Harbor, MD 53 hou Crowne Plaza Houston, TX 0 jam Holiday Inn Jamestown, NY 20 lan Holiday Inn West Lansing, MI 80 lne Holiday Inn Lancaster, PA 97 lrk Residence Inn Little Rock, AR 0 lvl Hurstbourne Hotel, Louisville, KY 1,144 mar Holiday Inn Hotel & Suites Marietta, GA 215 mem French Quarter Suites Memphis, TN 267 met Quality Hotel Metairie, LA 408 myr Holiday Inn Sunspree Myrtle Beach, SC 615 nfa Four Points Niagara Falls, NY 0 nia Holiday Inn Select Niagara Falls, NY 158 nrf Hilton Inn Northfield, MI 3,800 pdk Courtyard by Marriott - Paducah, KY 297 pex Holiday Inn Express Pansacola, FL 30 phl Doubletree Club Philadelphia, PA 1,413 pns Hampton Inn Pansacola, FL 280 prk Holiday Inn Parkway East, PA 98 rlm Holiday Inn Rolling Meadows, IL 420 shf Holiday Inn Sheffield, AL 1,570 sln Holiday Inn St. Louis North, MO 480 ssp Holiday Inn Silver Spring, MO 126 stg Holiday Inn Select Strongsville, OH 489 stp Holiday Inn Arden Hills/St. Paul, MN 404 uma Holiday Inn University Mall, FL 596 vfi Fairfield Inn Valdosta, GA 338 vhi Holiday Inn Valdosta, GA 238 wnh Holiday Inn Winter Haven, FL 324 wpb Crowne Plaza West Palm Beach, FL 750 yor Holiday Inn York, PA 0 SUBTOTAL-HOTEL PROJECTS 22,086 Capitalized IT Equipment 2,100 Emergency/Contingency 4,185 TOTAL $ 28,371
Notes: [1]- The budget includes expenditures reflected on the immediate Needs and Year 1 schedule at Exhibit A. [2]- The budget reflects management's estimate of expenditures which may be incurred at the properties during this period. SCHEDULE 5.7 O&M PLANS Schedule 5.7 LODGIAN PROPERTIES REQUIRING ASBESTOS O&M PLANS
YEAR CHAIN/NAME CITY ST BUILT ADDRESS CITY/ST/ZIP - ------------------------------------------------------------------------------------------------------------------------------------ Hampton Inn Dothan AL 1989 3071 Ross Clark Circle Dothan, AL 36301 - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn West Dothan AL 1961 3053 Ross Clark Dothan, AL 36301 - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Express Gadsden AL 1962 601 Cleveland Ave. Gadsden, AL 35954 - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Sheffield AL 1981 4900 Hatch Blvd. Sheffield, AL 35660 - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn East Hartford CT 1974 363 Roberts St. E. Hartford, CT 06106 - ------------------------------------------------------------------------------------------------------------------------------------ Hampton Inn Pensacola FL 1985 7330 Plantation Rd. Pensacola, FL 32504 - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Express Pensacola FL 1962 6501 Pensacola Blvd. Pensacola, FL 32505 - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Pensacola FL 1981 7200 Plantation Rd. Pensacola, FL 32504 (University - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Winter Haven FL 1967 1150 3rd St., SW Winter Haven, FL 33880 - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Marietta (hotel GA 1973 2265 Kingston Ct. Marietta, GA 30067 & suites) - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ Fairfield Inn Valdosta GA 1963 1311 St. Augustine Rd. Valdosta, GA 31601 - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Valdosta GA 1963 1309 St. Augustine Rd. Valdosta, GA 31601 - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Rolling IL 1963 3405 Algonquin Rd. Rolling Meadows, IL 60008 Meadows - ------------------------------------------------------------------------------------------------------------------------------------ Hurstbourne Hotel Louisville KY 1971 9700 Blue Grass Parkway Louisville, KY 40299 - ------------------------------------------------------------------------------------------------------------------------------------ Quality Hotel Metalrie LA 1985 2261 N. Causeway Blvd. Metalrie, LA 70001 - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Baltimore - BWI MD 1973 890 Elkridge Landing Rd. Linthicum Heights, MD 21090 Airport - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Baltimore West MD 1972 1800 Belmont Ave. Baltimore, MD 21244 (Belmont) - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Baltimore, Inn MD 1964 301 W. Lombard St. Baltimore, MD 21201 Harbor - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Frederick MD 1963 999 W. Patrick St. Frederick, MD 21702 - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Glen Burnie MD 1973 6323 Governor Ritchie Hwy Glen Burnie, MD 21061 - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Silver Spring MD 1973 8777 Georgia Ave. Silver Spring, MD 20910 - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Towson MD 1972 1100 Cromwell Bridge Rd. Towson, MD 21286 (Cromwell - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Lansing MI 1975 7501 W. Saginaw Hwy Lansing, MI 48917 - ------------------------------------------------------------------------------------------------------------------------------------ Hilton Troy MI 1976 5500 Crooks Rd. Troy, MI 48098 (Northfield) - ------------------------------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Arden Hills/St. MN 1973 1201 West Country Rd. E St. Paul, MN 55112 Paul - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn St. Louis North MO 1956 4545 N. Lindbergh Blvd. St. Louis, MO 63044 - ------------------------------------------------------------------------------------------------------------------------------------ Crowne Plaza Albany NY 1960 Ten Eyck Plaza Albany, NY 12207 - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Grand Island NY 1972 100 Whitehaven Rd. Grand Island, NY 14072 - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Jamestown NY 1979 150 W. 4th St. Jamestown, NY 14701 - ------------------------------------------------------------------------------------------------------------------------------------ Four Points Niagara Falls NY 1965 114 Buffalo Ave. Niagara Falls, NY 14303 - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Select Niagara Falls NY 1974 300 Third St. Niagara Falls, NY 14303 - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Select Strongsville OH 1972 15471 Royalton Rd. Strongsville, OH 44136 - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Greentree PA 1972 401 Holiday Drive Pittsburgh, PA 15220 - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Lancaster PA 1971 521 Greenfield Rd. Lancaster, PA 17601 - ------------------------------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Pittsburgh PA 1975 915 Brinton Rd. Pittsburgh, PA 15221 (Pkwy East) - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn York PA 1970 334 Arsenal Rd. York, PA 17402 - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn SunSpree Myrtle Beach SC 1978 1601 N. Ocean Blvd. Surfside Beach, SC 29575 - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Austin TX 1984 3401 South I-35 Austin, TX 78741 - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Select Dallas (DFW TX 1974 4441 Hwy 114 & Esters Blvd. Irving, TX 75063 Airport) - ------------------------------------------------------------------------------------------------------------------------------------ Holiday Inn Dallas (Mkt TX 1971 1955 Market Center Blvd. Dallas, TX 75207 Center) - ------------------------------------------------------------------------------------------------------------------------------------

LODGIAN: MOLD O&M Plan REQUIRED LOCATIONS: French Quarter Suites, 2144 Madison Avenue, Memphis, TN 38104 Quality Hotel, 2251 North Causeway Boulevard, Metairie, LA 70001 Clarion Hotel, 7401 Northwoods Boulevard, North Charleston, SC 29406 Holiday Inn Express, 801 Cleveland Avenue, Atalla (Gadsden), AL 35954 Schedule 5.14 Material Agreements
- -------------------------------------------------------------------------------------------------------------------- BORROWER/GUARANTOR VENDOR AGREEMENT TYPE REASON FOR MATERIALITY Lodgian, Inc. IDC Construction LLC General Contractor/Renovation Payment in excess of $1 million of Philadelphia Hotel - -------------------------------------------------------------------------------------------------------------------- Lodgian, Inc. Harbor Linen Linen Requirements Agreement Payment in excess of $ 1 million - --------------------------------------------------------------------------------------------------------------------
SCHEDULE 6.6 ENVIRONMENTAL WORK Schedule 6.6 SCHEDULE 6.6
APPROXIMATE INDIVIDUAL YEAR LOAN AMOUNTS OF TOTAL GPI PROP # CHAIN/NAME CITY ST ROOMS BUILT LOAN ADDRESS - -------------------------------------------------------------------------------------------------------------------- 3 0240 Holiday Inn Gadsden AL 141 1962 0.6% 801 Cleveland Ave. Express 24 1502 Quality Hotel Metalife LA 205 1985 0.8% 2261 N. Causeway Blvd. 50 4021 Clarion Charlesto SC 197 1981 0.4% 7401 Northwoods Blvd. 52 4215 French Quarter Memphis TN 105 1980 0.7% 2144 Madison Ave. Suites

TOTAL REMEDIATION CITY/ST/ZIP COST COST DETAIL - ------------------------------------------------------------------------------------------------------- Gadsden, AL 35954 $ 37,500 Remediate water/mold damaged building materials ($ 30,000). HVAC evaluation ($7,500) Metalife, LA 70001 $ 413,250 Remediation of vinyl covering from guest room walls ($71,750), windows repair ($120,000), application of moisture-resistant paint finish to brick veneer ($195,500), remediate water damaged wallboard and building materials ($1,000), door repair ($20,000), remediate water/mold damage to dining room ceiling areas ($5,000). Charleston, SC 29406 $ 115,000 Remediate water/mold damaged building materials ($25,000), on-site small/medium scale remediation ($90,000) Memphis, TN 38104 $ 266,000 Remediate wallpaper and ceiling tile ($261,000), consultation remediation of exhaust ventilation system ($5,000) Total remediation cost $ 831,750 Reserve amount $ 1,039,688
SCHEDULE 6.7 RESERVE FUNDING CONDITIONS 1. The Borrowers shall have submitted to Lender a written request for disbursement at least five (5) days prior to the date on which the Borrowers request such disbursement be made, specifying the specific Environmental Work or Capital Improvements for which the disbursement is requested and such other information (such as the price of materials and the cost of contracted labor or other services) as Lender may reasonably require, which request must be on a form specified or approved by Lender; 2. On the date such request is received by Lender and on the date such payment is to be made, no Event of Default shall exist and remain uncured; 3. Lender shall have received a certificate from the Borrowers stating that all Environmental Work or Capital Improvements at the Property to be funded by the requested disbursement have been completed in a good and workmanlike manner and in accordance with any plans and specifications approved by Lender and all legal requirements of any Governmental Authority having jurisdiction over the Property, such certificate to be accompanied, in either case, by a copy of any license, permit or other approval by any Governmental Authority required to commence (only for the first advance with respect to each distinct item of work) and/or complete (only for the final advance with respect to each distinct item of work) such Environmental Work or Capital Improvements; 4. Lender shall have received a certificate from the Borrowers stating that each Person that supplied materials or labor in connection with the Environmental Work to be funded by the requested disbursement has been paid in full or will be paid in full upon such disbursement, such certificate to be accompanied by copies of invoices for all items or materials purchased and all contracted labor or services provided, and, with respect to Environmental Work relating to mold, a certificate of a Certified Industrial Hygienist that the such Work has been completed in conformity with applicable mold clean-up procedures promulgated by the applicable Governmental Authority within the state in which the applicable Property is located, or, if no such procedures exist, in conformity with the New York City Department of Health or the United States Environmental Protection guidelines for mold related clean-up work; 5. Lender shall have received appropriate lien waivers (including final lien waivers) from each contractor, supplier, materialman, mechanic or subcontractor who receives payment in an amount equal to or greater than $10,000 for completion of its work or delivery of its materials, which lien waivers shall conform to the requirements of applicable law and shall cover all work performed and materials supplied (including equipment and fixtures) for a Property by that contractor, supplier, subcontractor, mechanic or materialman through the date covered by the current disbursement request; and 6. At Lender's option, Lender shall have received a title search for the Property effective to the date of the disbursement, which search shows that no mechanic's or materialmen's liens or other Liens of any nature have been placed against the Property since the Schedule 6.7 date of recordation of the applicable Deed of Trust and that title to the Property is free and clear of all Liens (other than the Permitted Encumbrances). Schedule 6.7 EX-10.2.2 11 g87458exv10w2w2.txt EX-10.2.2 PROMISSORY NOTE EXHIBIT 10.2.2 PROMISSORY NOTE $224,036,325.00 NOVEMBER 25, 2002 FOR VALUE RECEIVED, the undersigned, each having an address c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326 (each, a "BORROWER", and collectively, "BORROWERS"), jointly and severally, promise to pay to the order of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (together with its successors and assigns, "LENDER"), at 4 World Financial Center, New York, New York 10080, or such other place as Lender may designate in writing, the principal sum of TWO HUNDRED TWENTY FOUR MILLION THIRTY SIX THOUSAND THREE HUNDRED TWENTY FIVE AND NO/100 DOLLARS ($224,036,325.00), with interest on the unpaid principal balance from the date of this Note, until paid, at the Interest Rate in effect from time to time hereunder. This Promissory Note may be referred to herein as the "NOTE," and the loan evidenced hereby may be referred to herein as the "LOAN." Capitalized terms used but not otherwise defined herein shall have the respective meanings given thereto in the Loan Agreement (hereinafter defined). PAYMENTS OF PRINCIPAL AND INTEREST. Borrowers shall make payments of principal and interest on the outstanding principal balance of this Note in accordance with the terms and provisions of Section 2.4 of the Loan Agreement. The entire outstanding principal balance of the Loan, all accrued and unpaid interest thereon (including interest through the end of the Interest Accrual Period then in effect) and all other amounts due hereunder and under the other Loan Documents (collectively, the "DEBT") if not sooner paid (and unless Borrowers shall extend the term of the Loan for the First Extension Term, the Second Extension Term, or all Extension Terms) shall be due and payable on November 30, 2004 (the "SCHEDULED MATURITY DATE"). Subject to the terms and conditions of Section 2.5(B) of the Loan Agreement, Borrowers may extend the term of the Loan for the Extension Terms. The Scheduled Maturity Date, as the same may be extended for the First Extension Term, the Second Extension Term, or the Third Extension Term (subject to the terms and conditions of Section 2.5(B) of the Loan Agreement), or such other date on which the final payment of the Debt becomes due hereunder or under the Loan Agreement or the other Loan Documents, whether at such stated maturity date, by acceleration, or otherwise, shall be referred to herein as the "MATURITY DATE". Interest on the principal sum of this Note shall be calculated on the basis of a 360 day year, and shall be charged for the actual number of days elapsed during any month or other accrual period. SECURITY; LOAN DOCUMENTS. This Note is being executed and delivered pursuant to that certain Loan and Security Agreement, dated as of the date hereof (as amended, modified or restated from time to time, the "LOAN AGREEMENT"), among Borrowers and Lender, to which reference is hereby made for the terms and conditions governing this Note, including the terms and conditions under which this Note may be prepaid or its maturity accelerated. This Note is secured by, among other things, those certain Mortgages/Deeds of Trust/Deeds to Secure Debt, Assignments of Leases and Rents and Security Agreements, dated as of the date hereof (as Promissory Note amended, modified or restated from time to time, collectively, the "INSTRUMENT"), executed by the Borrower named therein, encumbering such Borrower's fee simple or leasehold interest in and to certain real property as more particularly described therein (collectively, the "PROPERTY"). This Note, the Loan Agreement, the Instrument, and all other documents or instruments given by Borrowers or any one of them or any guarantor and accepted by Lender for purposes of evidencing, securing, perfecting, or guaranteeing the indebtedness evidenced by this Note may be referred to as the "LOAN DOCUMENTS." PREPAYMENT; PREPAYMENT CONSIDERATION. Borrowers shall have no right to prepay the Loan in whole or in part except as expressly provided in Section 2.6 of the Loan Agreement. EVENTS OF DEFAULT; ACCELERATION. Upon the occurrence and during the continuance of any Event of Default, at the option of Lender and without notice, the entire principal amount and all interest accrued and outstanding hereunder and all other amounts outstanding under any of the Loan Documents shall at once become due and payable, and Lender may exercise any and all of its rights and remedies under any of the Loan Documents or pursuant to applicable law. Lender may so accelerate such obligations and exercise such remedies at any time after the occurrence of any Event of Default, regardless of any prior forbearance. LATE CHARGES; DEFAULT INTEREST. If an Event of Default relating to non-payment of any principal, interest or other sums due under this Note or under any of the other Loan Documents shall occur, then Borrowers shall pay to Lender, in addition to all sums otherwise due and payable, a late charge in an amount equal to five percent (5.0%) of such principal, interest or other sums due hereunder or under any other Loan Document (or, in the case of a partial payment, the unpaid portion thereof), such late charge to be immediately due and payable without demand by Lender. Upon the occurrence and during the continuance of an Event of Default and in any event from and after the Maturity Date of the Loan, the outstanding principal balance of this Note and all other Obligations shall bear interest until paid in full at a rate per annum (the "DEFAULT RATE") equal to the sum of (i) five percent (5.0%) and (ii) the Interest Rate otherwise applicable under this Note. Borrowers agree that such late charge and Default Rate of interest are reasonable and do not constitute a penalty. INTEREST LAWS. Notwithstanding any provision to the contrary contained in this Note, the Loan Agreement or the other Loan Documents, Borrowers shall not be required to pay, and Lender shall not be permitted to collect, any amount of interest in excess of the maximum amount of interest permitted by law ("EXCESS INTEREST"). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Note, the Loan Agreement or in any of the other Loan Documents, then in such event: (i) the provisions of this subsection shall govern and control; (ii) Borrowers shall not be obligated to pay any Excess Interest; (iii) any Excess Interest that Lender may have received hereunder shall be, at Lender's option, (a) applied as a credit against either or both of the outstanding principal balance of the Loan or accrued and unpaid interest thereunder (not to exceed the maximum amount permitted 2 Promissory Note by law), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (iv) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "MAXIMUM RATE"), and this Note, the Loan Agreement and the other Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (v) Borrowers shall not have any action against Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Obligation is calculated at the Maximum Rate rather than the applicable rate under this Note, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Obligations shall, to the extent permitted by law, remain at the Maximum Rate until Lender shall have received or accrued the amount of interest which Lender would have received or accrued during such period on Obligations had the rate of interest not been limited to the Maximum Rate during such period. If the Default Rate shall be finally determined to be unlawful, then the Interest Rate shall be applicable during any time when the Default Rate would have been applicable hereunder, provided however that if the Maximum Rate is greater or lesser than the Interest Rate, then the foregoing provisions of this paragraph shall apply. CERTAIN RIGHTS AND WAIVERS. From time to time, without affecting the obligation of Borrowers or their successors or assigns to pay the outstanding principal balance of this Note, interest thereon and other amounts due hereunder and to observe the covenants contained herein, in the Loan Agreement, the Instrument or in any other Loan Document, without affecting the guaranty of any person or entity for payment of the outstanding principal balance of this Note, without giving notice to or obtaining the consent of any Borrower or its successors or assigns or any guarantors or indemnitor, and without liability on the part of Lender, Lender may, at its option, extend the time for payment of the outstanding principal balance of this Note or any part thereof, reduce the payments thereon, release anyone liable for payment of all or a portion of said indebtedness, accept a renewal of this Note, modify the terms and time of payment of said outstanding principal balance, join in any extension or subordination agreement, release any security given herefor, take or release other or additional security, and agree in writing with the undersigned to modify the rate of interest or period of amortization of this Note or change the amount of the monthly installments payable hereunder. Presentment, notice of dishonor, and protest are hereby waived by Borrowers and all makers, sureties, guarantors and endorsers hereof. This Note shall be binding upon Borrowers and their successors and assigns. EACH BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THIS NOTE, THE INSTRUMENT, ANY OTHER LOAN DOCUMENT, ANY OTHER AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. ASSIGNMENT AND TRANSFER OF NOTE. Lender shall have the right to assign or transfer, in whole or in part (including the right to grant participation interests in) any or all of its obligations under this Note, the Loan Agreement, the Instrument and any or all of the other Loan 3 Promissory Note Documents, subject to the terms of the Loan Agreement. Lender shall be released of any obligations accruing after the date of such assignment or transfer to the extent that the same are so assigned or transferred, and the rights and obligations of "LENDER" hereunder shall become the rights and obligations of the transferee holder. Lender agrees to provide Borrowers with notice of any such assignment; provided, however, that no Borrower's consent shall be required in connection with any such assignment and no failure or delay by Lender in delivering such notice shall limit the effectiveness of such assignment. LIMITATION ON RECOURSE. The obligations of Borrowers hereunder are subject to limitations on recourse as provided in Article XII of the Loan Agreement. ATTORNEYS' FEES, COSTS OF COLLECTION. Borrowers shall pay to Lender on demand all reasonable out-of-pocket costs and expenses, including reasonable attorneys' fees and expenses, incurred by Lender in collecting the indebtedness arising hereunder or under any other Loan Documents or secured thereby or otherwise exercising any rights or remedies of Lender hereunder or thereunder or at law or in equity or enforcing the obligations of any parties hereto or thereto, or as a consequence of any breach or default by any Borrower or any guarantor hereunder or thereunder, or otherwise as a consequence of any right evidenced or secured by this Note or the Loan Documents. Without limitation, such costs and expenses to be reimbursed by Borrowers shall include reasonable attorneys' fees and expenses incurred in any bankruptcy case or proceeding and in any appeal. APPLICABLE LAW. This Note shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and performed in the State of New York and any applicable laws of the United States of America. TIME OF ESSENCE. Subject to the terms of the Loan Agreement, time shall be of the essence as to all of the terms, covenants and conditions of this Note. If the due date of any payment due hereunder or under any of the other Loan Documents shall fall on a day other than a Business Day, Borrowers shall be required to make such payment on the next succeeding Business Day. [NO ADDITIONAL TEXT ON THIS PAGE] 4 Promissory Note IN WITNESS WHEREOF, the undersigned Borrowers have executed this Promissory Note as of the date first written above. ALBANY HOTEL, INC., a Florida corporation, APICO HILLS, INC., a Pennsylvania corporation, APICO INNS OF GREEN TREE, INC., a Pennsylvania corporation, BRUNSWICK MOTEL ENTERPRISES, INC., a Georgia corporation, DOTHAN HOSPITALITY 3053, INC., an Alabama corporation, DOTHAN HOSPITALITY 3071, INC., an Alabama corporation, GADSDEN HOSPITALITY, INC., an Alabama corporation, LODGIAN AMI, INC., a Maryland corporation, MINNEAPOLIS MOTEL ENTERPRISES, INC., a Minnesota corporation, NH MOTEL ENTERPRISES, INC., a Michigan corporation, SERVICO AUSTIN, INC., a Texas corporation, SERVICO CEDAR RAPIDS, INC., an Iowa corporation, SERVICO COLUMBIA, INC., a Maryland corporation, SERVICO GRAND ISLAND, INC., a New York corporation, SERVICO HOUSTON, INC., a Texas corporation, SERVICO JAMESTOWN, INC., a New York corporation, SERVICO LANSING, INC., a Michigan corporation, Promissory Note SERVICO MARKET CENTER, INC., a Texas corporation, SERVICO MARYLAND, INC., a Maryland corporation, SERVICO METAIRIE, INC., a Louisiana corporation, SERVICO NEW YORK, INC., a New York corporation, SERVICO NIAGARA FALLS, INC., a New York corporation, SERVICO NORTHWOODS, INC., a Florida corporation, SERVICO PENSACOLA 7200, INC., a Delaware corporation, SERVICO PENSACOLA 7330, INC., a Delaware corporation, SERVICO PENSACOLA, INC., a Delaware corporation, SERVICO ROLLING MEADOWS, INC., an Illinois corporation, SERVICO WINTER HAVEN, INC., a Florida corporation, SHEFFIELD MOTEL ENTERPRISES, INC., an Alabama corporation, IMPAC HOTELS I, L.L.C., a Georgia limited liability company, and LODGIAN MEMPHIS PROPERTY OWNER, LLC, a Delaware limited liability company By: /s/ Daniel E. Ellis --------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary or authorized signatory of the above entities Promissory Note LIMITED PARTNERSHIPS: AMI OPERATING PARTNERS, L.P., a Delaware limited partnership By: AMIOP ACQUISITION GENERAL PARTNER SPE CORP., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis --------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary DEDHAM LODGING ASSOCIATES I, LIMITED PARTNERSHIP, a Georgia limited partnership By: DEDHAM LODGING SPE, INC., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis --------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary LITTLE ROCK LODGING ASSOCIATES I, LIMITED PARTNERSHIP, a Georgia limited partnership By: LODGIAN LITTLE ROCK SPE, INC., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis --------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary SERVICO CENTRE ASSOCIATES, LTD., a Florida limited partnership By: SERVICO PALM BEACH GENERAL PARTNER SPE, INC., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis --------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary Promissory Note EX-10.2.3 12 g87458exv10w2w3.txt EX-10.2.3 MODIFICATION OF LOAN AGREEMENT EXHIBIT 10.2.3 MODIFICATION OF LOAN AGREEMENT AND OTHER LOAN DOCUMENTS by and between THE BORROWER OR BORROWERS LISTED ON SCHEDULE 1 HERETO and MERRILL LYNCH MORTGAGE LENDING, INC. as Lender Dated as of March 31, 2003 Modification Agreement (Mortgage) THIS MODIFICATION OF LOAN AGREEMENT AND OTHER LOAN DOCUMENTS (this "AGREEMENT"), is made as of March 31, 2003, by the undersigned, each having an address c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326 (each, a "BORROWER" and collectively, " BORROWERS"), in favor of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (together with its successors and assigns, "LENDER"), having an address at 4 World Financial Center, New York, New York 10080. RECITALS: WHEREAS, Lender previously made a loan in the principal sum of $224,036,325 (the "ORIGINAL LOAN") to the Borrowers, which Original Loan (i) is evidenced by and advanced pursuant to the terms and provisions of that certain Note dated as of November 25, 2002, made by the Borrowers to Lender (the "ORIGINAL NOTE") and the Loan and Security Agreement dated as of November 25, 2002, among the Borrowers and Lender (the "LOAN AGREEMENT") and (ii) is secured by, among other things, the Loan Documents (hereinafter defined); WHEREAS, Lender previously made a loan in the principal sum of $78,671,201 (the "ORIGINAL MEZZANINE LOAN") to the Mezzanine Borrowers (as defined in the Loan Agreement), which Original Mezzanine Loan is evidenced by and advanced pursuant to the terms and provisions of that certain Mezzanine Note dated as of November 25, 2002, made by the Mezzanine Borrowers to Mezzanine Lender (as defined in the Loan Agreement) (the "ORIGINAL MEZZANINE NOTE") and the Loan and Security Agreement dated as of November 25, 2002, among the Mezzanine Borrowers and Mezzanine Lender; WHEREAS, in connection with the Original Loan, Guarantor (as defined in the Loan Agreement) guaranteed to Lender repayment of the Original Loan and certain recourse obligations pursuant to and to the extent as described in the terms and provisions of the Guaranty (as defined in the Loan Agreement); WHEREAS, in connection with the Original Loan, Guarantor agreed to indemnify and hold Lender harmless from and against certain claims and obligations pursuant to and as described in the provisions the Environmental Indemnity (as defined in the Loan Agreement); WHEREAS, at the time of origination of the Original Mezzanine Loan and the Original Loan, each of the Mezzanine Borrowers and the Borrowers agreed, in consideration of making the Mezzanine Loan and the Original Loan prior to the final determination of sizing of the Original Mezzanine Loan and the Original Loan, that prior to a Securitization the principal balance of the Original Loan and the Original Mezzanine Loan may be adjusted in the sole discretion of Lender and Mezzanine Lender (the "RESIZING"), subject to certain limitations with respect to, among other things, (i) changes in the weighted average interest rate and aggregate debt service payable on the Original Mezzanine Loan and the Original Loan, and (ii) material changes to the rights or obligations of the Mezzanine Borrowers and the Borrowers under the Mezzanine Loan Documents and the Loan Documents; WHEREAS, Lender and Mezzanine Lender have elected to cause the Resizing to be effectuated pursuant to the terms hereof, and pursuant to certain additional documents executed Modification Agreement (Mortgage) and delivered by the Mezzanine Borrowers, the Borrowers, Mezzanine Lender and Lender, as applicable; WHEREAS, in connection with the Resizing, pursuant to the terms of that certain Note Severance Agreement dated as of the date hereof among the Borrowers and Lender, the Original Note has been severed into two notes in the respective amounts of $218,127,000 (the "RESTATED NOTE"), and $5,539,275 (the "ASSUMED NOTE"); WHEREAS, in connection with the Resizing, the Mezzanine Borrowers have assumed the repayment obligations under and pursuant to the terms of the Assumed Note; WHEREAS, in connection with the Resizing, Lender has assigned all of its right, title and interest in and to the Assumed Note, but not the Amended and Restated Promissory Note A, to Mezzanine Lender and Mezzanine Lender has succeeded to all right, title and interest in and to the Assumed Note; WHEREAS, Lender is now the owner and holder of (i) those certain Mortgages/Deeds of Trust/Deeds to Secure Debt, Assignments of Leases and Rents, and Security Agreement, dated as of November 25, 2002 (as amended, modified or restated from time to time, (collectively, the "SECURITY INSTRUMENTS") executed by the Borrower named therein encumbering such Borrower's fee simple or leasehold interest in and to certain real property as more particularly described therein, and (ii) the Restated Note; and WHEREAS, the Borrowers and Lender have agreed in the manner hereinafter set forth to modify the terms and provisions of the Loan Agreement, the Security Instruments, that certain Cash Management Agreement (the "CASH MANAGEMENT AGREEMENT") dated as of November 25, 2002, among the Borrowers, Lender and Wachovia Bank, National Association, and such other documents as are set forth on SCHEDULE 1 (such other documents, together with the Cash Management Agreement, collectively, the "OTHER LOAN DOCUMENTS", and together with the Loan Agreement, the Restated Note, and the Security Instrument, collectively, the "LOAN DOCUMENTS") in the manner hereinafter set forth. NOW THEREFORE, in pursuance of said agreement and in consideration of ten dollars and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the Borrowers and Lender hereby agree as follows: A. The Recitals are hereby incorporated herein by this reference. B. The Loan Agreement shall be deemed modified and amended in the following respects: (i) The term "NOTE" as used in the Loan Agreement shall refer to the Restated Note. (ii) The term "LOAN" as used in the Loan Agreement shall refer to a loan in the original principal amount of $218,127,000 as the same may be decreased from time to time. 2 (iii) The definition of "APPLICABLE SPREAD" set forth in Section 1.1 of the Loan Agreement shall be deemed deleted in its entirety and replaced with the following: "APPLICABLE SPREAD" means 2.3600%. (iv) The definition of "MEZZANINE LENDER'S PERCENTAGE" set forth in Section 1.1 of the Loan Agreement shall be deemed deleted in its entirety and replaced with the following: "MEZZANINE LENDER'S PERCENTAGE" shall mean, at the time of determination, the ratio, expressed as a percentage, that the then outstanding principal balance of the Mezzanine Loan bears to the Aggregate Outstanding Principal Balance. As of the date hereof Mezzanine Lender's Percentage is 27.82%. (v) The definition of "MEZZANINE LOAN" set forth in Section 1.1 of the Loan Agreement shall be deemed deleted in its entirety and replaced with the following: "MEZZANINE LOAN" means that certain loan in the amount of $84,080,526 from Mezzanine Lender to the Mezzanine Borrowers. (vi) The definition of "MORTGAGE LENDER'S PERCENTAGE" set forth in Section 1.1 of the Loan Agreement shall be deemed deleted in its entirety and replaced with the following: "MORTGAGE LENDER'S PERCENTAGE" shall mean, at the time of determination, the ratio, expressed as a percentage, that the outstanding principal balance of the Loan bears to the Aggregate Outstanding Principal Balance. As of the date hereof, Mortgage Lender's Percentage is 72.18%. (vii) The definition of "SCHEDULED MEZZANINE PRINCIPAL PAYMENTS" set forth in Section 1.1 of the Loan Agreement shall be deemed deleted in its entirety and replaced with the following: "SCHEDULED MEZZANINE PRINCIPAL PAYMENTS" shall mean (x) $69,550 through and including the Payment Date in November 2003, (y) $104,325 following the Payment Date in November 2003, through and including the Payment Date in November 2004, and (z) $139,100 thereafter through the Maturity Date. (viii) The definition of "SCHEDULED MORTGAGE PRINCIPAL PAYMENTS" set forth in Section 1.1 of the Loan Agreement shall be deemed deleted in its entirety and replaced with the following: "SCHEDULED MORTGAGE PRINCIPAL PAYMENTS" shall mean (x) $180,450 through and including the Payment Date in November 2003, (y) $ 270,675 3 following the Payment Date in November 2003, through and including the Payment Date in November 2004, and (z) $360,900 thereafter through the Maturity Date. (ix) Section 2.1(A) and (B) of the Loan Agreement shall be deemed modified and amended by replacing all references therein to the figure "$224,036,325" with the figure "$218,127,000." (x) Section 2.6(B) of the Loan Agreement shall be deemed modified and amended by deleting the final sentence thereof and inserting the following: "PREPAYMENT CONSIDERATION" shall mean an amount equal to (i) prior to the Payment Date in December 2003, three percent (3%) of the amount prepaid, and (ii) on and after the Payment Date in December 2003, but prior to the Payment Date in May 2004, two percent (2%) of the amount prepaid, and (iii) thereafter through the Scheduled Maturity Date one percent (1%) of the amount prepaid. (xi) EXHIBIT A captioned "Allocated Loan Amount/Aggregate Allocated Loan Amount" of the Loan Agreement shall be deemed deleted in its entirety and replaced with EXHIBIT A annexed hereto and made a part hereof. C. The Other Loan Documents shall each be deemed modified and amended in the following respects: (i) The terms "NOTE" and "MORTGAGE NOTE" as used in the Other Loan Documents shall be deemed to refer to the Restated Note. (ii) The terms "LOAN" and "MORTGAGE LOAN" as used in the Other Loan Documents shall be deemed to refer to a loan in the original principal amount of $218,127,000 as the same may be decreased from time to time. (iii) All references in the Other Loan Documents to the figure "$78,671,526" shall be deemed to refer to the figure "$84,080,526". (iv) All references in the Other Loan Documents to the figure "$224,036,325" shall be deemed to refer to the figure "$218,127,000". D. The Cash Management Agreement shall be deemed further modified and amended in the following respects: (i) The definition of "MONTHLY FF&E PAYMENT" set forth in Article I of the Cash Management Agreement shall be deemed deleted in its entirety and replaced with the following: "MONTHLY FF&E PAYMENT" shall mean the monthly deposit required to be made to the FF&E Reserve pursuant to Section 6.4 of the Loan Agreement; provided that if at the time of determination thereof the actual 4 Operating Revenues utilized in calculating the Monthly FF&E Payment have not been determined for the applicable month, such calculation shall be based upon the Operating Revenues set forth for such month in the applicable Operating Budget, and, upon determination of the actual Operating Revenues for such month, any deficit or excess deposits with respect to the FF&E Reserve shall be adjusted within five (5) Business Days of such determination, with any deficit being satisfied, and any excess being allocated and deposited, in accordance with Section 3.3(a) hereof. (ii) The definition of "MONTHLY OPERATING EXPENSE BUDGET AMOUNT" set forth in Article I of the Cash Management Agreement shall be deemed deleted in its entirety and replaced with the following: "MONTHLY OPERATING EXPENSE BUDGET AMOUNT" shall mean, with respect to each month, an amount equal to the Operating Expenses plus estimated sales and similar taxes relating to the Properties (excluding therefrom Impositions, Insurance Premiums, FF&E expenditures, and management fees payable to any Manager that is an Affiliate of the Borrowers) set forth in the Approved Operating Budget for the applicable month of determination. (iii) Section 2.1(f) of the Cash Management Agreement shall be deemed modified and amended by replacing all references therein to "Section 3.3(a)(vii)" with the reference to "Section 3.3(a)(vi)". (iv) Section 3.3(a) of the Cash Management Agreement shall be deemed deleted in its entirety and replaced with the following: (a) At any time other than after the occurrence and during the continuance of an Event of Default, Agent shall allocate and distribute, as applicable, all available funds on deposit in the Lock Box Account on each Business Day of each calendar month (or such other period of time as set forth below) in the following amounts and order of priority: (i) First, to the Impositions and Insurance Reserve Sub-Account, the Monthly Impositions and Insurance Amount for the next Monthly Payment Date; (ii) Second, to the Debt Service Sub-Account, that portion of the Monthly Debt Service Payment Amount constituting interest only due under the Note and the Loan Agreement for the next Monthly Payment Date; (iii) Third, for so long as the Mezzanine Loan is outstanding, to the Mezzanine Loan Debt Service Sub-Account, an amount equal to that portion of the Monthly Mezzanine Debt 5 Service Payment Amount constituting interest only due under the Mezzanine Loan Agreement for the next Monthly Payment Date; (iv) Fourth, on the Monthly Payment Date in November 2003 and on each Monthly Payment Date thereafter, to the Debt Service Sub-Account, that portion of the Monthly Debt Service Payment Amount constituting principal only due under the Note and the Loan Agreement for the next Monthly Payment Date; (v) Fifth, on the Monthly Payment Date in November 2003 and on each Monthly Payment Date thereafter, for so long as the Mezzanine Loan is outstanding, to the Mezzanine Loan Debt Service Sub-Account, an amount equal to that portion of the Monthly Mezzanine Debt Service Payment Amount constituting principal only due under the Mezzanine Loan Agreement; (vi) Sixth, to the FF&E Reserve Account, the Monthly FF&E Payment for the next Monthly Payment Date; (vii) Seventh, to the Operating Expense Sub-Account, funds sufficient to pay the Monthly Operating Expense Budget Amount for the next calendar Month; (viii) Eighth, to the Operating Expense Sub-Account, funds in an amount necessary to pay Extraordinary Expenses approved by Lender and Mezzanine Lender, if any; (ix) Ninth, to the Operating Expense Sub-Account, subject to the terms and conditions of the Assignment of Management Agreement, any management fees due and owing to Manager which have not previously been paid to Manager, together with any fees payable to Manager for the next calendar month pursuant to the Management Agreement not otherwise paid pursuant to (vii) above; (x) Tenth, to the Debt Service Sub-Account, Mortgage Lender's Percentage of each of (a) the Excess Cash Flow Amortization Payment and (b) the Excess Cash Flow Supplemental Payment, together with that portion of the Monthly Debt Service Payment Amount constituting late payment charges, default interest, and any other amounts (other than interest and principal paid pursuant to (ii) and (iv) above) then due and owing under the Loan Agreement 6 due for the next Monthly Payment Date under the Loan Agreement; (xi) Eleventh, for so long as the Mezzanine Loan is outstanding, to the Mezzanine Loan Debt Service Sub-Account, Mezzanine Lender's Percentage of each of (a) the Excess Cash Flow Amortization Payment and (b) the Excess Cash Flow Supplemental Payment, together with that portion of the Monthly Mezzanine Debt Service Payment Amount constituting late payment charges, default interest, and any other amounts (other than interest and principal paid pursuant to (iii) and (v) above) due for the next Monthly Payment Date under the Mezzanine Loan Agreement; (xii) Twelfth, if a Cash Trap Event shall have occurred and is continuing, any amounts remaining in the Lock Box Account after deposits for items (i) through (xi) above shall be deposited into the Cash Trap Reserve Sub-Account; and (xiii) Thirteenth, if no Cash Trap Event shall have occurred and is continuing, any amounts remaining in the Lock Box Account after deposits for items (i) through (xi) above shall be paid to, or as directed by, the Borrowers. (v) Sections 3.3(c) and 3.3(d) of the Cash Management Agreement shall be deemed deleted in their entirety and replaced with the following: (c) The Borrowers shall use, or caused to be used, all disbursements made to it under Sections 3.3(a)(vii) and (viii) solely to pay Operating Expenses in accordance with the Approved Operating Budget and to pay Extraordinary Expenses for which Lender has approved disbursements under Section 3.3(a)(viii) above. (d) Notwithstanding anything to the contrary contained herein, Lender shall not be obligated to make any disbursement from the Lock Box Account (under Sections 3.3(a)(vii) and (viii) or otherwise) to pay for any costs or expenses (including legal fees) in connection with any dispute or defense of the Borrowers under any of the Loan Documents. (vi) Section 3.4 of the Cash Management Agreement shall be deemed deleted in its entirety and replaced with the following: SECTION 3.4 DISBURSEMENTS FOR OPERATING EXPENSE AMOUNTS. The Borrowers shall provide on a monthly basis (a) a reasonably detailed explanation of any variances of ten percent (10%) or more between budgeted (as set forth in the Approved Operating Budget) and actual Operating Expense amounts for any month in the aggregate, and (b) with 7 respect to any individual item with a cost of $10,000 or more and not otherwise covered by the Approved Operating Budget, all invoices or other backup requested by Lender to substantiate the amount disbursed to the Borrowers pursuant to Section 3.3(a)(vii) and (viii). (vii) Section 4.1(c) of the Cash Management Agreement shall be deemed deleted in its entirety and replaced with the following: (c) Operating Expense Sub-Account. Funds deposited into the Operating Expense Sub-Account pursuant to Sections 3.3(a)(vii) through (ix) shall be distributed to the Borrowers on each Business Day. (viii) Section 8.4 of the Cash Management Agreement shall be deemed modified and amended by inserting as the first sentence thereof the following: Agent shall deduct from the Lock Box Account for its own account the monthly Servicing Fee for which the Borrowers are responsible pursuant to Section 2.11 of the Loan Agreement prior to making any disbursements pursuant to Section 3.3(a)(ii) hereof, and, for so long as the Mezzanine Loan is outstanding, Agent shall deduct from the Lock Box Account the monthly Servicing Fee (as such term is defined in the Mezzanine Loan Agreement) for which the Mezzanine Borrowers are responsible pursuant to Section 2.11 of the Mezzanine Loan Agreement to be remitted to the Servicer (as such term is defined in the Mezzanine Loan Agreement) prior to making any disbursements pursuant to Section 3.3(a)(iii) hereof. E. The Borrowers and Lender acknowledge and agree that Lender has waived any amortization payment required pursuant to Section 2.4(A) of the Loan Agreement for the Payment Date in March 2003 only. Notwithstanding the foregoing to the contrary, the Borrowers acknowledge and agree that the aggregate amount of the Scheduled Principal Payments (with the Scheduled Principal Payment for the Payment Date in March 2003 being deemed to be $185,025) through the Payment Date in March 2003 is $740,100, and further acknowledge and agree that the aggregate of all principal payments made by the Borrowers through the Payment Date in March 2003 is $370,050, and therefore the aggregate Amortization Deficiency through the Payment Date in March 2003 shall be deemed to be $370,050. Further, the Borrowers shall retain any Excess Cash Flow accruing during the month of March 2003, which amounts shall be (i) included in calculating Excess Cash Flow for the month of April 2003 for all intents and purposes under the Loan Documents, and (ii) applied (together with any Excess Cash Flow accruing during the month of April 2003) in accordance with Section 2.4(A) of the Loan Agreement. F. The Borrowers acknowledge and agree that the Loan shall continue to be evidenced by and payable in accordance with the provisions of the Restated Note and the Loan Agreement, as hereby confirmed, modified and amended. The Borrowers hereby agree to perform all of the terms, covenants and provisions contained in the Restated Note and the Loan Agreement, as hereby confirmed, modified and amended. 8 G. The Borrowers represent and warrant that as of the date hereof, to their Knowledge there are no Events of Default under any of the terms, covenants or provisions of the Loan Documents and the Borrowers know of no event which, but for the passage of time or the giving of notice or both, would constitute an Event of Default under the Loan Documents. H. The Borrowers represent, warrant and covenant that to their Knowledge there are no offsets, counterclaims or defenses to the Obligations, this Agreement, or the Loan Documents and that the Borrowers (and the undersigned representatives of the Borrowers) have full power, authority and legal right to execute this Agreement and keep and observe all of the terms of this Agreement on the Borrowers' part to be observed or performed. I. Except as expressly modified pursuant to this Agreement, all of the terms, covenants and provisions of the Loan Documents shall continue in full force and effect. In the event of any conflict between any of the terms, covenants and provisions of this Agreement and those of the Loan Documents, the terms, covenants and provisions of this Agreement shall control. J. No amendment or waiver of any term, covenant or provision of this Agreement nor consent to any departure by the Borrowers from the terms, covenants or provisions of this Agreement shall be effective unless the same shall be in writing and signed by Lender and, in the case of an amendment, the Borrowers and any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. K. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. L. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart. M. All capitalized terms not otherwise defined herein shall have the meaning set forth in the Loan Agreement. N. THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW YORK AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. [NO ADDITIONAL TEXT ON THIS PAGE] 9 IN WITNESS WHEREOF, the undersigned Borrowers and Lender have executed this Agreement as of the day and year first written above. ALBANY HOTEL, INC., a Florida corporation, APICO HILLS, INC., a Pennsylvania corporation, APICO INNS OF GREEN TREE, INC., a Pennsylvania corporation, BRUNSWICK MOTEL ENTERPRISES, INC., a Georgia corporation, DOTHAN HOSPITALITY 3053, INC., an Alabama corporation, DOTHAN HOSPITALITY 3071, INC., an Alabama corporation, GADSDEN HOSPITALITY, INC., an Alabama corporation, LODGIAN AMI, INC., a Maryland corporation, MINNEAPOLIS MOTEL ENTERPRISES, INC., a Minnesota corporation, NH MOTEL ENTERPRISES, INC., a Michigan corporation, SERVICO AUSTIN, INC., a Texas corporation, SERVICO CEDAR RAPIDS, INC., an Iowa corporation, SERVICO COLUMBIA, INC., a Maryland corporation, SERVICO GRAND ISLAND, INC., a New York corporation, SERVICO HOUSTON, INC., a Texas corporation, SERVICO JAMESTOWN, INC., a New York corporation, SERVICO LANSING, INC., a Michigan corporation, SERVICO MARKET CENTER, INC., a Texas corporation, SERVICO MARYLAND, INC., a Maryland corporation, SERVICO METAIRIE, INC., a Louisiana corporation, SERVICO NEW YORK, INC., a New York corporation, SERVICO NIAGARA FALLS, INC., a New York corporation, SERVICO NORTHWOODS, INC., a Florida corporation, SERVICO PENSACOLA 7200, INC., a Delaware corporation, SERVICO PENSACOLA 7330, INC., a Delaware corporation, SERVICO PENSACOLA, INC., a Delaware corporation, SERVICO ROLLING MEADOWS, INC., an Illinois corporation, SERVICO WINTER HAVEN, INC., a Florida corporation, SHEFFIELD MOTEL ENTERPRISES, INC., an Alabama corporation, IMPAC HOTELS I, L.L.C., a Georgia limited liability company, and LODGIAN MEMPHIS PROPERTY OWNER, LLC, a Delaware limited liability company By: /s/ Daniel E. Ellis -------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary or authorized signatory of the above entities AMI OPERATING PARTNERS, L.P., a Delaware limited partnership By: AMIOP ACQUISITION GENERAL PARTNER SPE CORP., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis --------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary DEDHAM LODGING ASSOCIATES I, LIMITED PARTNERSHIP, a Georgia limited partnership By: DEDHAM LODGING SPE, INC., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis --------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary LITTLE ROCK LODGING ASSOCIATES I, LIMITED PARTNERSHIP, a Georgia limited partnership By: LODGIAN LITTLE ROCK SPE, INC., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis --------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary SERVICO CENTRE ASSOCIATES, LTD., a Florida limited partnership By: SERVICO PALM BEACH GENERAL PARTNER SPE, INC., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis --------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary LENDER: MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation By: /s/ Steven Glassman --------------------------- Name: Steven Glassman Title: Authorized Signatory CONSENT OF GUARANTOR The undersigned has executed this Agreement in order to signify its consent to the execution and delivery of this Agreement and the Restated Note by the Borrowers and its agreement to be bound by the terms hereof to the extent applicable. The undersigned hereby ratifies and confirms the Guaranty and the Environmental Indemnity, as each have been amended and modified by this Agreement, and acknowledges that to its Knowledge there are no offsets, counterclaims or defenses of any nature whatsoever to its obligations and liabilities under either of the Guaranty or the Environmental Indemnity, as each have been amended and modified by this Agreement. Dated: March 31, 2003 GUARANTOR: LODGIAN, INC. a Delaware corporation By: /s/ Daniel E. Ellis --------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary CONSENT OF AGENT The undersigned has executed this Agreement in order to signify its agreement to be bound by the terms hereof to the extent applicable with respect to the Cash Management Agreement, and for no other purpose. Dated: March 31, 2003 AGENT: WACHOVIA BANK, NATIONAL ASSOCIATION By: /s/ David F. Sisom -------------------------------------- Name: David F. Sisom Title: Vice President ACKNOWLEDGEMENT OF MANAGER The undersigned has executed this Agreement in order to signify its agreement to be bound by the terms hereof to the extent applicable with respect to the Cash Management Agreement, the Assignments of Management Agreements, and any of the other Loan Documents to which Manager is a party. Dated: March 31, 2003 MANAGER: LODGIAN MANAGEMENT CORP. By: /s/ Daniel E. Ellis --------------------------- Name: Daniel E. Ellis Title: Vice President SCHEDULE 1 BORROWERS (LIST OF BORROWERS) ALBANY HOTEL, INC., a Florida corporation, APICO HILLS, INC., a Pennsylvania corporation, APICO INNS OF GREEN TREE, INC., a Pennsylvania corporation, BRUNSWICK MOTEL ENTERPRISES, INC., a Georgia corporation, DOTHAN HOSPITALITY 3053, INC., an Alabama corporation, DOTHAN HOSPITALITY 3071, INC., an Alabama corporation, GADSDEN HOSPITALITY, INC., an Alabama corporation, LODGIAN AMI, INC., a Maryland corporation, MINNEAPOLIS MOTEL ENTERPRISES, INC., a Minnesota corporation, NH MOTEL ENTERPRISES, INC., a Michigan corporation, SERVICO AUSTIN, INC., a Texas corporation, SERVICO CEDAR RAPIDS, INC., an Iowa corporation, SERVICO COLUMBIA, INC., a Maryland corporation, SERVICO GRAND ISLAND, INC., a New York corporation, SERVICO HOUSTON, INC., a Texas corporation, SERVICO JAMESTOWN, INC., a New York corporation, SERVICO LANSING, INC., a Michigan corporation, SERVICO MARKET CENTER, INC., a Texas corporation, SERVICO MARYLAND, INC., a Maryland corporation, SERVICO METAIRIE, INC., a Louisiana corporation, SERVICO NEW YORK, INC., a New York corporation, SERVICO NIAGARA FALLS, INC., a New York corporation, SERVICO NORTHWOODS, INC., a Florida corporation, SERVICO PENSACOLA 7200, INC., a Delaware corporation, SERVICO PENSACOLA 7330, INC., a Delaware corporation, SERVICO PENSACOLA, INC., a Delaware corporation, SERVICO ROLLING MEADOWS, INC., an Illinois corporation, SERVICO WINTER HAVEN, INC., a Florida corporation, SHEFFIELD MOTEL ENTERPRISES, INC., an Alabama corporation, IMPAC HOTELS I, L.L.C., a Georgia limited liability company, LODGIAN MEMPHIS PROPERTY OWNER, LLC, a Delaware limited liability company, AMI OPERATING PARTNERS, L.P., a Delaware limited partnership DEDHAM LODGING ASSOCIATES I, LIMITED PARTNERSHIP, a Georgia limited partnership LITTLE ROCK LODGING ASSOCIATES I, LIMITED PARTNERSHIP, a Georgia limited partnership SERVICO CENTRE ASSOCIATES, LTD., a Florida limited partnership SCHEDULE 2 OTHER LOAN DOCUMENTS 1. Assignments of Leases 2. Assignments of Management Agreements 3. Guaranty 4. Environmental Indemnity 5. Assignment of Rate Cap 6. Post-Closing Agreement given by the Borrowers EXHIBIT A ALLOCATED LOAN AMOUNT/AGGREGATE ALLOCATED LOAN AMOUNT EX-10.2.4 13 g87458exv10w2w4.txt EX-10.2.4 NOTE SEVERANCE AGREEMENT EXHIBIT 10.2.4 NOTE SEVERANCE AGREEMENT THIS NOTE SEVERANCE AGREEMENT made as of this 31st day of March, 2003, between MERRILL LYNCH MORTGAGE LENDING, INC., having an address at 4 World Financial Center, New York, New York 10080 ("LENDER"), and the undersigned, each having an address c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326, jointly and severally (each, a "BORROWER", and collectively, "BORROWERS"). WITNESSETH: WHEREAS, Lender is now the lawful owner and holder of those certain Mortgages/Deeds of Trust/Deeds to Secure Debt, Assignments of Leases and Rents and Security Agreements dated as of November 25, 2002 (as amended, modified or restated from time to time, collectively, the "ORIGINAL MORTGAGE") executed by the Borrower named therein as more particularly described in Exhibit A attached hereto, which Original Mortgage is a valid first lien encumbering such Borrower's fee simple or leasehold interest in and to certain real property as described therein and the buildings and improvements now or hereafter located thereon (the "PREMISES"); WHEREAS, the Original Mortgage secures an original principal sum of $224,036,325, together with interest and all other sums due thereon, evidenced by that certain promissory note in the original principal sum of $224,036,325 made by Borrowers, as makers, to Lender, as payee, dated as of November 25, 2002 (the "ORIGINAL NOTE"); WHEREAS, Borrowers are the owners of the Premises; and WHEREAS, Lender and Borrowers have agreed to modify the Original Note and sever the indebtedness evidenced thereby into two separate and distinct debts and to execute replacement notes pursuant to said severance to evidence and secure such debts, as so severed. NOW, THEREFORE, in consideration of the mutual agreements herein expressed, the parties hereto covenant and agree as follows: 1. The Original Note evidences a principal indebtedness in the amount of $224,036,325 with interest thereon, without, to Borrower's Knowledge, defense, offset or counterclaim of any kind. Borrowers and Lender hereby agree that the current outstanding principal balance of the Original Note is $223,666,275. From and after the date hereof the outstanding principal indebtedness shall be, and hereby is, severed into two separate and distinct portions as follows: (a) a principal indebtedness of $218,127,000; and (b) a principal indebtedness of $5,539,275. 2. In order to evidence the severance of the principal indebtedness, Borrowers have executed and delivered to Lender two replacement notes in substitution for the Original Note in the respective amounts of $218,127,000 ("AMENDED AND RESTATED PROMISSORY NOTE A"), and $5,539,275 ("PROMISSORY NOTE B") which amounts constitute, in the aggregate, the same principal indebtedness evidenced by the Original Note and outstanding thereunder as of the date hereof, and which Amended and Restated Promissory Note A and Promissory Note B do not create or evidence any new or further indebtedness. 3. Nothing contained in this Agreement or in Amended and Restated Promissory Note or Promissory Note B shall or shall be deemed to (a) be construed as a substitution or novation of the indebtedness, or otherwise extinguish the indebtedness, evidenced by the Original Note or (b) extinguish or release the lien of the Original Mortgage. 4. The terms of this Agreement constitute the entire understanding and agreement of the parties hereto and supersede all prior agreements, understandings and negotiations between Borrowers and Lender with respect to the matters herein set forth. This Agreement, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act on the part of Borrowers or Lender, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. 5. This Agreement may be executed in any number of duplicate originals and each such duplicate original shall be deemed to constitute but one and the same instrument. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart. 6. THIS AGREEMENT WAS NEGOTIATED IN NEW YORK, AND MADE BETWEEN BORROWERS AND LENDER IN THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA. 7. Lender and Borrowers shall execute and deliver all such assurances, confirmations and assignments in connection with this Agreement as either party shall from time to time reasonably require. [NO ADDITIONAL TEXT ON THIS PAGE] 2 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. BORROWERS: ALBANY HOTEL, INC., a Florida corporation, APICO HILLS, INC., a Pennsylvania corporation, APICO INNS OF GREEN TREE, INC., a Pennsylvania corporation, BRUNSWICK MOTEL ENTERPRISES, INC., a Georgia corporation, DOTHAN HOSPITALITY 3053, INC., an Alabama corporation, DOTHAN HOSPITALITY 3071, INC., an Alabama corporation, GADSDEN HOSPITALITY, INC., an Alabama corporation, LODGIAN AMI, INC., a Maryland corporation, MINNEAPOLIS MOTEL ENTERPRISES, INC., a Minnesota corporation, NH MOTEL ENTERPRISES, INC., a Michigan corporation, SERVICO AUSTIN, INC., a Texas corporation, SERVICO CEDAR RAPIDS, INC., an Iowa corporation, SERVICO COLUMBIA, INC., a Maryland corporation, 3 SERVICO GRAND ISLAND, INC., a New York corporation, SERVICO HOUSTON, INC., a Texas corporation, SERVICO JAMESTOWN, INC., a New York corporation, SERVICO LANSING, INC., a Michigan corporation, SERVICO MARKET CENTER, INC., a Texas corporation, SERVICO MARYLAND, INC., a Maryland corporation, SERVICO METAIRIE, INC., a Louisiana corporation, SERVICO NEW YORK, INC., a New York corporation, SERVICO NIAGARA FALLS, INC., a New York corporation, SERVICO NORTHWOODS, INC., a Florida corporation, SERVICO PENSACOLA 7200, INC., a Delaware corporation, SERVICO PENSACOLA 7330, INC., a Delaware corporation, SERVICO PENSACOLA, INC., a Delaware corporation, SERVICO ROLLING MEADOWS, INC., an Illinois corporation, SERVICO WINTER HAVEN, INC., a Florida corporation, 4 SHEFFIELD MOTEL ENTERPRISES, INC., an Alabama corporation, IMPAC HOTELS I, L.L.C., a Georgia limited liability company, and LODGIAN MEMPHIS PROPERTY OWNER, LLC, a Delaware limited liability company By: /s/ Daniel E. Ellis ----------------------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary or authorized signatory of the above entities AMI OPERATING PARTNERS, L.P., a Delaware limited partnership By: AMIOP ACQUISITION GENERAL PARTNER SPE CORP., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis --------------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary DEDHAM LODGING ASSOCIATES I, LIMITED PARTNERSHIP, a Georgia limited partnership By: DEDHAM LODGING SPE, INC., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis --------------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary 5 LITTLE ROCK LODGING ASSOCIATES I, LIMITED PARTNERSHIP, a Georgia limited partnership By: LODGIAN LITTLE ROCK SPE, INC., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis --------------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary SERVICO CENTRE ASSOCIATES, LTD., a Florida limited partnership By: SERVICO PALM BEACH GENERAL PARTNER SPE, INC., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis --------------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary LENDER: MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation By: /s/ Steven Glassman ----------------------------------------------------------- Name: Steven Glassman Title: Authorized Signatory 6 EX-10.2.5 14 g87458exv10w2w5.txt EX-10.2.5 $218,217,000 AMENDED AND RESTATED Exhibit 10.2.5 AMENDED AND RESTATED PROMISSORY NOTE A $218,127,000 MARCH 31, 2003 RECITALS: WHEREAS the Borrowers (hereinafter defined) are indebted to Lender (hereinafter defined) with respect to a loan (the "ORIGINAL LOAN") in the original principal amount of $224,036,325 which is secured by the lien and security interest created, among other things, by those certain Mortgages/Deeds of Trust/Deeds to Secure Debt, Assignments of Leases and Rents and Security Agreements dated as of November 25, 2002 (as same may hereafter be amended, modified or supplemented, the "SECURITY INSTRUMENT") executed by the Borrower named therein, as grantor, in favor and for the benefit of Lender, as beneficiary, as security for the Original Loan; WHEREAS the Original Loan is evidenced by that certain promissory note in the original principal sum of $224,036,325 from the Borrowers to Lender dated as of November 25, 2002 (the "ORIGINAL NOTE"); WHEREAS The current outstanding principal balance due under the Original Loan is $223,666,275; WHEREAS the Borrowers and Lender have severed the Original Note pursuant to the terms of that certain note severance agreement between the Borrowers and Lender dated as of the date hereof (the "SEVERANCE AGREEMENT") into two (2) separate and distinct obligations in substitution for the Original Note, represented by this Amended and Restated Promissory Note A in the amount of $218,127,000 and that certain Promissory Note B in the amount of $5,539,275; and WHEREAS the Borrowers and Lender intend these Recitals to be a material part of this Amended and Restated Note. NOW THEREFORE, FOR VALUE RECEIVED, the undersigned, each having an address c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326 (each, a "BORROWER", and collectively, "BORROWERS"), jointly and severally, promise to pay to the order of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (together with its successors and assigns, "LENDER"), at 4 World Financial Center, New York, New York 10080, or such other place as Lender may designate in writing, the principal sum of TWO HUNDRED EIGHTEEN MILLION ONE HUNDRED TWENTY-SEVEN THOUSAND AND NO/100 DOLLARS ($218,127,000.00), with interest on the unpaid principal balance from the date of this Note, until paid, at the Interest Rate in effect from time to time hereunder. This Amended and Restated Promissory Note A may be referred to herein as the "RESTATED NOTE," and the loan evidenced hereby may be referred to herein as the "LOAN." Capitalized terms used but not otherwise defined herein shall have the respective meanings given thereto in the Loan Agreement (hereinafter defined). PAYMENTS OF PRINCIPAL AND INTEREST. Borrowers shall make payments of principal and interest on the outstanding principal balance of this Restated Note in accordance with the terms and provisions of Section 2.4 of the Loan Agreement. The entire outstanding principal balance of the Loan, all accrued and unpaid interest thereon (including interest through the end of the Interest Accrual Period then in effect) and all other amounts due hereunder and under the other Loan Documents (collectively, the "DEBT") if not sooner paid (and unless Borrowers shall extend the term of the Loan for the First Extension Term, the Second Extension Term, or all Extension Terms) shall be due and payable on November 30, 2004 (the "SCHEDULED MATURITY DATE"). Subject to the terms and conditions of Section 2.5(B) of the Loan Agreement, Borrowers may extend the term of the Loan for the Extension Terms. The Scheduled Maturity Date, as the same may be extended for the First Extension Term, the Second Extension Term, or the Third Extension Term (subject to the terms and conditions of Section 2.5(B) of the Loan Agreement), or such other date on which the final payment of the Debt becomes due hereunder or under the Loan Agreement or the other Loan Documents, whether at such stated maturity date, by acceleration, or otherwise, shall be referred to herein as the "MATURITY DATE". Interest on the principal sum of this Restated Note shall be calculated on the basis of a 360 day year, and shall be charged for the actual number of days elapsed during any month or other accrual period. SECURITY; LOAN DOCUMENTS. This Restated Note is being executed and delivered pursuant to that certain Loan and Security Agreement, dated as of the date hereof (as amended, modified or restated from time to time, the "LOAN AGREEMENT"), among Borrowers and Lender, to which reference is hereby made for the terms and conditions governing this Restated Note, including the terms and conditions under which this Restated Note may be prepaid or its maturity accelerated. This Restated Note is secured by, among other things, those certain Mortgages/Deeds of Trust/Deeds to Secure Debt, Assignments of Leases and Rents and Security Agreements, dated as of the date hereof (as amended, modified or restated from time to time, collectively, the "INSTRUMENT"), executed by the Borrower named therein, encumbering such Borrower's fee simple or leasehold interest in and to certain real property as more particularly described therein (collectively, the "PROPERTY"). This Restated Note, the Loan Agreement, the Instrument, and all other documents or instruments given by Borrowers or any one of them or any guarantor and accepted by Lender for purposes of evidencing, securing, perfecting, or guaranteeing the indebtedness evidenced by this Restated Note may be referred to as the "LOAN DOCUMENTS." PREPAYMENT; PREPAYMENT CONSIDERATION. Borrowers shall have no right to prepay the Loan in whole or in part except as expressly provided in Section 2.6 of the Loan Agreement. EVENTS OF DEFAULT; ACCELERATION. Upon the occurrence and during the continuance of any Event of Default, at the option of Lender and without notice, the entire principal amount and all interest accrued and outstanding hereunder and all other amounts outstanding under any of the Loan Documents shall at once become due and payable, and Lender may exercise any and all of its rights and remedies under any of the Loan Documents or pursuant 2 to applicable law. Lender may so accelerate such obligations and exercise such remedies at any time after the occurrence of any Event of Default, regardless of any prior forbearance. LATE CHARGES; DEFAULT INTEREST. If an Event of Default relating to non-payment of any principal, interest or other sums due under this Restated Note or under any of the other Loan Documents shall occur, then Borrowers shall pay to Lender, in addition to all sums otherwise due and payable, a late charge in an amount equal to five percent (5.0%) of such principal, interest or other sums due hereunder or under any other Loan Document (or, in the case of a partial payment, the unpaid portion thereof), such late charge to be immediately due and payable without demand by Lender. Upon the occurrence and during the continuance of an Event of Default and in any event from and after the Maturity Date of the Loan, the outstanding principal balance of this Restated Note and all other Obligations shall bear interest until paid in full at a rate per annum (the "DEFAULT RATE") equal to the sum of (i) five percent (5.0%) and (ii) the Interest Rate otherwise applicable under this Restated Note. Borrowers agree that such late charge and Default Rate of interest are reasonable and do not constitute a penalty. INTEREST LAWS. Notwithstanding any provision to the contrary contained in this Restated Note, the Loan Agreement or the other Loan Documents, Borrowers shall not be required to pay, and Lender shall not be permitted to collect, any amount of interest in excess of the maximum amount of interest permitted by law ("EXCESS INTEREST"). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Restated Note, the Loan Agreement or in any of the other Loan Documents, then in such event: (i) the provisions of this subsection shall govern and control; (ii) Borrowers shall not be obligated to pay any Excess Interest; (iii) any Excess Interest that Lender may have received hereunder shall be, at Lender's option, (a) applied as a credit against either or both of the outstanding principal balance of the Loan or accrued and unpaid interest thereunder (not to exceed the maximum amount permitted by law), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (iv) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "MAXIMUM RATE"), and this Restated Note, the Loan Agreement and the other Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (v) Borrowers shall not have any action against Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Obligation is calculated at the Maximum Rate rather than the applicable rate under this Restated Note, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Obligations shall, to the extent permitted by law, remain at the Maximum Rate until Lender shall have received or accrued the amount of interest which Lender would have received or accrued during such period on Obligations had the rate of interest not been limited to the Maximum Rate during such period. If the Default Rate shall be finally determined to be unlawful, then the Interest Rate shall be applicable during any time when the Default Rate would have been applicable hereunder, provided however that if the Maximum Rate is greater or lesser than the Interest Rate, then the foregoing provisions of this paragraph shall apply. 3 CERTAIN RIGHTS AND WAIVERS. From time to time, without affecting the obligation of Borrowers or their successors or assigns to pay the outstanding principal balance of this Restated Note, interest thereon and other amounts due hereunder and to observe the covenants contained herein, in the Loan Agreement, the Instrument or in any other Loan Document, without affecting the guaranty of any person or entity for payment of the outstanding principal balance of this Restated Note, without giving notice to or obtaining the consent of any Borrower or its successors or assigns or any guarantors or indemnitor, and without liability on the part of Lender, Lender may, at its option, extend the time for payment of the outstanding principal balance of this Restated Note or any part thereof, reduce the payments thereon, release anyone liable for payment of all or a portion of said indebtedness, accept a renewal of this Restated Note, modify the terms and time of payment of said outstanding principal balance, join in any extension or subordination agreement, release any security given herefor, take or release other or additional security, and agree in writing with the undersigned to modify the rate of interest or period of amortization of this Restated Note or change the amount of the monthly installments payable hereunder. Presentment, notice of dishonor, and protest are hereby waived by Borrowers and all makers, sureties, guarantors and endorsers hereof. This Restated Note shall be binding upon Borrowers and their successors and assigns. EACH BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THIS RESTATED NOTE, THE INSTRUMENT, ANY OTHER LOAN DOCUMENT, ANY OTHER AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. ASSIGNMENT AND TRANSFER OF RESTATED NOTE. Lender shall have the right to assign or transfer, in whole or in part (including the right to grant participation interests in) any or all of its obligations under this Restated Note, the Loan Agreement, the Instrument and any or all of the other Loan Documents, subject to the terms of the Loan Agreement. Lender shall be released of any obligations accruing after the date of such assignment or transfer to the extent that the same are so assigned or transferred, and the rights and obligations of "LENDER" hereunder shall become the rights and obligations of the transferee holder. Lender agrees to provide Borrowers with notice of any such assignment; provided, however, that no Borrower's consent shall be required in connection with any such assignment and no failure or delay by Lender in delivering such notice shall limit the effectiveness of such assignment. LIMITATION ON RECOURSE. The obligations of Borrowers hereunder are subject to limitations on recourse as provided in Article XII of the Loan Agreement. ATTORNEYS' FEES, COSTS OF COLLECTION. Borrowers shall pay to Lender on demand all reasonable out-of-pocket costs and expenses, including reasonable attorneys' fees and expenses, incurred by Lender in collecting the indebtedness arising hereunder or under any other Loan Documents or secured thereby or otherwise exercising any rights or remedies of 4 Lender hereunder or thereunder or at law or in equity or enforcing the obligations of any parties hereto or thereto, or as a consequence of any breach or default by any Borrower or any guarantor hereunder or thereunder, or otherwise as a consequence of any right evidenced or secured by this Restated Note or the Loan Documents. Without limitation, such costs and expenses to be reimbursed by Borrowers shall include reasonable attorneys' fees and expenses incurred in any bankruptcy case or proceeding and in any appeal. APPLICABLE LAW. This Restated Note shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and performed in the State of New York and any applicable laws of the United States of America. TIME OF ESSENCE. Subject to the terms of the Loan Agreement, time shall be of the essence as to all of the terms, covenants and conditions of this Restated Note. If the due date of any payment due hereunder or under any of the other Loan Documents shall fall on a day other than a Business Day, Borrowers shall be required to make such payment on the next succeeding Business Day. REPLACEMENT NOTE. This Restated Note is "Amended and Restated Promissory Note A" executed and delivered pursuant to the Severance Agreement. The principal indebtedness evidenced hereby is a portion of the principal indebtedness evidenced by the Original Note in the original principal sum of $224,036,325 made by the Borrowers to Lender. [NO ADDITIONAL TEXT ON THIS PAGE] 5 IN WITNESS WHEREOF, the undersigned Borrowers have executed this Restated Note as of the date first written above. ALBANY HOTEL, INC., a Florida corporation, APICO HILLS, INC., a Pennsylvania corporation, APICO INNS OF GREEN TREE, INC., a Pennsylvania corporation, BRUNSWICK MOTEL ENTERPRISES, INC., a Georgia corporation, DOTHAN HOSPITALITY 3053, INC., an Alabama corporation, DOTHAN HOSPITALITY 3071, INC., an Alabama corporation, GADSDEN HOSPITALITY, INC., an Alabama corporation, LODGIAN AMI, INC., a Maryland corporation, MINNEAPOLIS MOTEL ENTERPRISES, INC., a Minnesota corporation, NH MOTEL ENTERPRISES, INC., a Michigan corporation, SERVICO AUSTIN, INC., a Texas corporation, SERVICO CEDAR RAPIDS, INC., an Iowa corporation, SERVICO COLUMBIA, INC., a Maryland corporation, SERVICO GRAND ISLAND, INC., a New York corporation, SERVICO HOUSTON, INC., a Texas corporation, SERVICO JAMESTOWN, INC., a New York corporation, SERVICO LANSING, INC., a Michigan corporation, SERVICO MARKET CENTER, INC., a Texas corporation, SERVICO MARYLAND, INC., a Maryland corporation, SERVICO METAIRIE, INC., a Louisiana corporation, SERVICO NEW YORK, INC., a New York corporation, SERVICO NIAGARA FALLS, INC., a New York corporation, SERVICO NORTHWOODS, INC., a Florida corporation, SERVICO PENSACOLA 7200, INC., a Delaware corporation, SERVICO PENSACOLA 7330, INC., a Delaware corporation, SERVICO PENSACOLA, INC., a Delaware corporation, SERVICO ROLLING MEADOWS, INC., an Illinois corporation, SERVICO WINTER HAVEN, INC., a Florida corporation, SHEFFIELD MOTEL ENTERPRISES, INC., an Alabama corporation, IMPAC HOTELS I, L.L.C., a Georgia limited liability company, and LODGIAN MEMPHIS PROPERTY OWNER, LLC, a Delaware limited liability company By: /s/ Daniel E. Ellis ------------------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary or authorized signatory of the above entities AMI OPERATING PARTNERS, L.P., a Delaware limited partnership By: AMIOP ACQUISITION GENERAL PARTNER SPE CORP., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis --------------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary DEDHAM LODGING ASSOCIATES I, LIMITED PARTNERSHIP, a Georgia limited partnership By: DEDHAM LODGING SPE, INC., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis --------------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary LITTLE ROCK LODGING ASSOCIATES I, LIMITED PARTNERSHIP, a Georgia limited partnership By: LODGIAN LITTLE ROCK SPE, INC., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis --------------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary SERVICO CENTRE ASSOCIATES, LTD., a Florida limited partnership By: SERVICO PALM BEACH GENERAL PARTNER SPE, INC., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis --------------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary EX-10.2.6 15 g87458exv10w2w6.txt EX-10.2.6 $5,539,275 PROMISSORY NOTE B Exhibit 10.2.6 PROMISSORY NOTE B $5,539,275 March 31, 2003 New York, New York RECITALS: WHEREAS the Borrowers (hereinafter defined) are indebted to Lender (hereinafter defined) with respect to a loan (the "ORIGINAL LOAN") in the original principal amount of $224,036,325 which is secured by the lien and security interest created, among other things, by those certain Mortgages/Deeds of Trust/Deeds to Secure Debt, Assignments of Leases and Rents and Security Agreements dated as of November 25, 2002 (as same may hereafter be amended, modified or supplemented, the "SECURITY INSTRUMENT") executed by the Borrower named therein, as grantor, in favor and for the benefit of Lender, as beneficiary, as security for the Original Loan; WHEREAS the Original Loan is evidenced by that certain promissory note in the original principal sum of $224,036,325 from the Borrowers to Lender dated as of November 25, 2002 (the "ORIGINAL NOTE"); WHEREAS the current outstanding principal balance due under the Original Loan is $223,666,275; WHEREAS the Borrowers and Lender have severed the Original Note pursuant to the terms of that certain note severance agreement between the Borrowers and Lender dated as of the date hereof (the "SEVERANCE AGREEMENT") into two (2) separate and distinct obligations in substitution for the Original Note, represented by this Note in the amount of $5,539,275 and that certain Amended and Restated Promissory Note A in the amount of $218,127,000; and WHEREAS the Borrowers and Lender intend these Recitals to be a material part of this Note. NOW THEREFORE, FOR VALUE RECEIVED, the undersigned, each having an address c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326 (each, a "BORROWER", and collectively, "BORROWERS"), jointly and severally, hereby promise to pay to MERRILL LYNCH MORTGAGE LENDING, INC. ("LENDER"), at its principal place of business at 4 World Financial Center, New York, New York 10080, or at such other place as the holder of this Note may from time to time designate in writing, the principal sum of FIVE MILLION FIVE HUNDRED THIRTY-NINE THOUSAND TWO HUNDRED SEVENTY-FIVE AND 00/100 DOLLARS ($5,539,275.00), in lawful money of the United States of America and in immediately available funds, on demand, and to pay interest on the unpaid principal amount of this Note, at such office, in like money and funds, for the period commencing on the date of this Note until this Note shall be paid in full, at the rates per annum and on the dates provided in that certain Loan and Security Agreement, dated as of November 25, 2002 among Borrowers and Lender (the "LOAN AGREEMENT"). This Note may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Borrowers or Lender, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. Whenever used, the singular number shall include the plural, the plural the singular, and the words "LENDER" and "BORROWERS" shall include their respective successors, assigns, heirs, executors and administrators. Borrowers and all others who may become liable for the payment of all or any part of the debt evidenced hereby (the "DEBT") do hereby severally waive presentment and demand for payment, notice of dishonor, protest, notice of protest, notice of nonpayment, notice of intent to accelerate the maturity hereof and of acceleration. No release of any security for the Debt or any person liable for payment of the Debt, no extension of time for payment of this Note or any installment hereof, and no alteration, amendment or waiver of any provision of this Note or the Mortgage (hereinafter defined) made by agreement between Lender and any other person or party shall release, modify, amend, waive, extend, change, discharge, terminate or affect the liability of Borrowers, and any other person or party who may become liable hereunder or under the Mortgage, for the payment of all or any part of the Debt. This Note shall be governed and construed in accordance with the laws of the State of New York applicable to agreements executed and to be performed in New York. This Note is "Promissory Note B" executed and delivered pursuant to the Severance Agreement. The principal indebtedness evidenced hereby is a portion of the principal indebtedness evidenced by the Original Note in the original principal sum of $224,036,325 made by the Borrowers to Lender. The liability of the Borrowers under this Note shall be limited as set forth in Article XII of the Loan Agreement. [NO ADDITIONAL TEXT ON THIS PAGE] IN WITNESS WHEREOF, the undersigned Borrowers have executed this Note as of the date first written above. BORROWERS ALBANY HOTEL, INC., a Florida corporation, APICO HILLS, INC., a Pennsylvania corporation, APICO INNS OF GREEN TREE, INC., a Pennsylvania corporation, BRUNSWICK MOTEL ENTERPRISES, INC., a Georgia corporation, DOTHAN HOSPITALITY 3053, INC., an Alabama corporation, DOTHAN HOSPITALITY 3071, INC., an Alabama corporation, GADSDEN HOSPITALITY, INC., an Alabama corporation, LODGIAN AMI, INC., a Maryland corporation, MINNEAPOLIS MOTEL ENTERPRISES, INC., a Minnesota corporation, NH MOTEL ENTERPRISES, INC., a Michigan corporation, SERVICO AUSTIN, INC., a Texas corporation, SERVICO CEDAR RAPIDS, INC., an Iowa corporation, SERVICO COLUMBIA, INC., a Maryland corporation, SERVICO GRAND ISLAND, INC., a New York corporation, SERVICO HOUSTON, INC., a Texas corporation, SERVICO JAMESTOWN, INC., a New York corporation, SERVICO LANSING, INC., a Michigan corporation, SERVICO MARKET CENTER, INC., a Texas corporation, SERVICO MARYLAND, INC., a Maryland corporation, SERVICO METAIRIE, INC., a Louisiana corporation, SERVICO NEW YORK, INC., a New York corporation, SERVICO NIAGARA FALLS, INC., a New York corporation, SERVICO NORTHWOODS, INC., a Florida corporation, SERVICO PENSACOLA 7200, INC., a Delaware corporation, SERVICO PENSACOLA 7330, INC., a Delaware corporation, SERVICO PENSACOLA, INC., a Delaware corporation, SERVICO ROLLING MEADOWS, INC., an Illinois corporation, SERVICO WINTER HAVEN, INC., a Florida corporation, SHEFFIELD MOTEL ENTERPRISES, INC., an Alabama corporation, IMPAC HOTELS I, L.L.C., a Georgia limited liability company, and LODGIAN MEMPHIS PROPERTY OWNER, LLC, a Delaware limited liability company By: /s/ Daniel E. Ellis ---------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary or authorized signatory of the above entities AMI OPERATING PARTNERS, L.P., a Delaware limited partnership By: AMIOP ACQUISITION GENERAL PARTNER SPE CORP., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis ------------------------------------ Name: Daniel E. Ellis Title: Vice President and Secretary DEDHAM LODGING ASSOCIATES I, LIMITED PARTNERSHIP, a Georgia limited partnership By: DEDHAM LODGING SPE, INC., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis ------------------------------------ Name: Daniel E. Ellis Title: Vice President and Secretary LITTLE ROCK LODGING ASSOCIATES I, LIMITED PARTNERSHIP, a Georgia limited partnership By: LODGIAN LITTLE ROCK SPE, INC., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis ------------------------------------ Name: Daniel E. Ellis Title: Vice President and Secretary SERVICO CENTRE ASSOCIATES, LTD., a Florida limited partnership By: SERVICO PALM BEACH GENERAL PARTNER SPE, INC., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis ------------------------------------ Name: Daniel E. Ellis Title: Vice President and Secretary EX-10.3.1 16 g87458exv10w3w1.txt EX-10.3.1 MEZZANINE LOAN AGREEMENT EXHIBIT 10.3.1 ================================================================================ MEZZANINE LOAN AGREEMENT DATED NOVEMBER 25, 2002 BETWEEN IMPAC HOTEL GROUP MEZZANINE, LLC SERVICO OPERATIONS MEZZANINE, LLC LODGIAN FINANCING MEZZANINE, LLC ISLAND MOTEL ENTERPRISES, INC. PENMOCO, INC. AS BORROWERS AND MERRILL LYNCH MORTGAGE LENDING, INC. AS LENDER ------------------------------------ ================================================================================ TABLE OF CONTENTS
PAGE ARTICLE I DEFINITIONS ....................................................................... 1 Section 1.1 Certain Defined Terms ................................................ 1 Section 1.2 Accounting Terms ..................................................... 25 Section 1.3 Other Definitional Provisions ........................................ 25 ARTICLE II TERMS OF THE LOAN ................................................................ 25 Section 2.1 Loan ................................................................. 25 Section 2.2 Interest ............................................................. 26 Section 2.3 Interest Rate Cap Agreement .......................................... 27 Section 2.4 Payments ............................................................. 28 Section 2.5 Maturity ............................................................. 30 Section 2.6 Prepayment ........................................................... 32 Section 2.7 Outstanding Balance .................................................. 33 Section 2.8 Taxes ................................................................ 34 Section 2.9 Reasonableness of Charges ............................................ 34 Section 2.10 Funding Losses/Change in Law Etc ..................................... 34 Section 2.11 Servicing/Special Servicing .......................................... 35 Section 2.12 Mortgage Loan Event of Default ....................................... 36 Section 2.13 Mezzanine Lender Approvals ........................................... 36 ARTICLE III CONDITIONS TO LOAN .............................................................. 37 Section 3.1 Conditions to Funding of the Loan on the Closing Date ................ 37 ARTICLE IV REPRESENTATIONS AND WARRANTIES ................................................... 42 Section 4.1 Organization, Powers, Capitalization, Good Standing, Business ........ 42 Section 4.2 Authorization of Borrowing, etc ...................................... 42 Section 4.3 Financial Statements ................................................. 43 Section 4.4 Indebtedness and Contingent Obligations .............................. 43 Section 4.5 Title to the Properties and Collateral ............................... 43 Section 4.6 Zoning; Compliance with Laws ......................................... 44 Section 4.7 Leases; Agreements ................................................... 44 Section 4.8 Condition of the Jekyll Island Property .............................. 46 Section 4.9 Representations and Warranties of the Mortgage Borrowers ............. 46 Section 4.10 Payment of Taxes ..................................................... 46 Section 4.11 Adverse Contracts .................................................... 47 Section 4.12 Performance of Agreements ............................................ 47 Section 4.13 Governmental Regulation .............................................. 47 Section 4.14 Employee Benefit Plans ............................................... 47 Section 4.15 Broker's Fees ........................................................ 47 Section 4.16 Intentionally Deleted ................................................ 47
i Section 4.17 Solvency ............................................................. 47 Section 4.18 Disclosure ........................................................... 48 Section 4.19 Use of Proceeds and Margin Security .................................. 48 Section 4.20 Insurance ............................................................ 48 Section 4.21 Separate Tax Lots .................................................... 48 Section 4.22 Security Interests ................................................... 48 Section 4.23 Investments .......................................................... 48 Section 4.24 Defaults ............................................................. 48 Section 4.25 No Plan Assets ....................................................... 49 Section 4.26 Governmental Plan .................................................... 49 Section 4.27 Not Foreign Person ................................................... 49 Section 4.28 No Collective Bargaining Agreements .................................. 49 Section 4.29 Pre-Petition Tax Liabilities ......................................... 49 Section 4.30 Jekyll Island Ground Lease ........................................... 49 ARTICLE V COVENANTS OF BORROWER PARTIES ..................................................... 50 Section 5.1 Financial Statements and Other Reports ............................... 50 Section 5.2 Existence; Qualification ............................................. 55 Section 5.3 Payment of Impositions and Claims .................................... 55 Section 5.4 Maintenance of Insurance ............................................. 56 Section 5.5 Operation and Maintenance of the Properties; Casualty ................ 57 Section 5.6 Inspection ........................................................... 59 Section 5.7 O&M Plan ............................................................. 59 Section 5.8 Intentionally Deleted ................................................ 59 Section 5.9 Compliance with Laws and Contractual Obligations ..................... 59 Section 5.10 Further Assurances ................................................... 59 Section 5.11 Performance of Agreements and Leases ................................. 59 Section 5.12 Leases ............................................................... 59 Section 5.13 Management; Franchise Agreement ...................................... 60 Section 5.14 Material Agreements .................................................. 63 Section 5.15 Deposits; Application of Receipts .................................... 63 Section 5.16 Estoppel Certificates ................................................ 63 Section 5.17 Indebtedness ......................................................... 63 Section 5.18 No Liens ............................................................. 64 Section 5.19 Contingent Obligations ............................................... 64 Section 5.20 Restriction on Fundamental Changes ................................... 64 Section 5.21 Transactions with Related Persons .................................... 64 Section 5.22 Bankruptcy, Receivers, Similar Matters ............................... 65 Section 5.23 ERISA ................................................................ 65 Section 5.24 Press Release ........................................................ 66 Section 5.25 Ground Leases ........................................................ 66 Section 5.26 Mortgaged Condominium Property ....................................... 69 Section 5.27 Lender's Expenses .................................................... 71 Section 5.28 Distributions ........................................................ 71 Section 5.29 Completion of Required Capital Improvements .......................... 71 Section 5.30 Compliance with Plan of Reorganization ............................... 71

ii Section 5.31 Cancellation of Indebtedness; Settlement of Claims ................... 71 Section 5.32 Modification of Mortgage Documents ................................... 71 ARTICLE VI RESERVES ........................................................................ 72 Section 6.1 Security Interest in Reserves; Other Matters Pertaining to Reserves .. 72 Section 6.2 Funds Deposited with Lender/Special Jekyll Island Reserves ........... 72 Section 6.3 FF&E Reserve ......................................................... 73 Section 6.4 Capital Improvement Reserve; Required Capital Improvements ........... 74 Section 6.5 Hazardous Materials Remediation Reserve .............................. 75 Section 6.6 Conditions to Disbursements from Hazardous Materials Remediation Reserve, Capital Improvement Reserve and the Jekyll Island Special Reserves; Performance of Work ........................................ 75 Section 6.7 Cash Trap Reserve .................................................... 77 Section 6.8 Substitute Cash Management Agreement ................................. 77 ARTICLE VII LOCK BOX; CASH MANAGEMENT ...................................................... 78 Section 7.1 Establishment of Deposit Account and Lock Box Account ................ 78 Section 7.2 Application of Funds in Lock Box Account ............................. 80 Section 7.3 Application of Funds After Event of Default .......................... 80 Section 7.4 Mortgage Loan Lock Box ............................................... 80 ARTICLE VIII DEFAULT, RIGHTS AND REMEDIES .................................................. 80 Section 8.1 Event of Default ..................................................... 80 Section 8.2 Acceleration and Remedies ............................................ 83 Section 8.3 Performance by Lender ................................................ 85 Section 8.4 Evidence of Compliance ............................................... 86 ARTICLE IX SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS ..... 86 Section 9.1 Applicable to all Borrowers .......................................... 86 Section 9.2 Applicable to the Borrowers and Member ............................... 88 ARTICLE X RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS ................................ 89 Section 10.1 Secondary Market Transactions Generally .............................. 89 Section 10.2 Cooperation; Limitations ............................................. 90 Section 10.3 Information .......................................................... 90 Section 10.4 Additional Provisions ................................................ 92 ARTICLE XI RESTRICTIONS ON LIENS, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES ........... 92 Section 11.1 Restrictions on Transfer and Encumbrance ............................. 92 Section 11.2 Transfers of Beneficial Interests in the Borrowers ................... 92

iii Section 11.3 Assumability ......................................................... 93 Section 11.4 Release of Collateral ................................................ 94 Section 11.5 Release of the Jekyll Island Property ................................ 95 Section 11.6 Sale of Building Equipment ........................................... 97 Section 11.7 Immaterial Transfers and Easements, etc .............................. 97 ARTICLE XII RECOURSE; LIMITATIONS ON RECOURSE .............................................. 97 Section 12.1 Limitations on Recourse .............................................. 97 Section 12.2 Partial Recourse ..................................................... 97 Section 12.3 Miscellaneous ........................................................ 98 ARTICLE XIII WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES ................................ 98 Section 13.1 Waivers .............................................................. 98 ARTICLE XIV MISCELLANEOUS .................................................................. 100 Section 14.1 Expenses and Attorneys' Fees ......................................... 100 Section 14.2 Indemnity ............................................................ 101 Section 14.3 Amendments and Waivers ............................................... 102 Section 14.4 Retention of the Borrowers' Documents ................................ 102 Section 14.5 Notices .............................................................. 102 Section 14.6 Survival of Warranties and Certain Agreements ........................ 103 Section 14.7 Failure of Indulgence Not Waiver; Remedies Cumulative ................ 103 Section 14.8 Marshaling; Payments Set Aside ....................................... 104 Section 14.9 Severability ......................................................... 104 Section 14.10 Headings ............................................................. 104 Section 14.11 APPLICABLE LAW ....................................................... 104 Section 14.12 Successors and Assigns ............................................... 104 Section 14.13 Sophisticated Parties, Reasonable Terms, No Fiduciary Relationship ... 104 Section 14.14 Reasonableness of Determinations ..................................... 105 Section 14.15 Limitation of Liability .............................................. 105 Section 14.16 No Duty .............................................................. 105 Section 14.17 Entire Agreement ..................................................... 105 Section 14.18 Construction; Supremacy of Loan Agreement ............................ 106 Section 14.19 Consent to Jurisdiction .............................................. 106 Section 14.20 Waiver of Jury Trial ................................................. 106 Section 14.21 Counterparts; Effectiveness .......................................... 107 Section 14.22 Servicer ............................................................. 107 Section 14.23 Obligations of Borrower Parties ...................................... 107 Section 14.24 Additional Inspections; Reports ...................................... 107

iv LIST OF EXHIBITS AND SCHEDULES Exhibit A - Allocated Loan Amount/Aggregate Allocated Loan Amount Exhibit B - Management Agreements Exhibit C - Properties Exhibit D - Property Improvement Plan Exhibit E - Ground Lessor Estoppels Exhibit F - Acceptable Franchisors Exhibit G - [Reserved] Exhibit H - Capital Improvement Plan Exhibit I - Franchise Agreements Schedule 3.1 (A) - List of Loan Documents Schedule 4.1 (C) - Organizational Chart for Borrower Parties Schedule 4.2 - Consents Schedule 4.4 - Contingent Obligations Schedule 4.6 - Zoning Schedule 4.7 (B) - Rent Roll Schedule 4.7 (E) - Material Defaults under Jekyll Island Franchise Agreement Schedule 4.9 - Litigation Schedule 4.10 - Pre-Petition Tax Liabilities Schedule 4.20 - Insurance Schedule 4.28 - Collective Bargaining Agreements Schedule 4.30 - Ground Lease Amendments Schedule 5.14 - Material Agreements

List of Schedules MEZZANINE LOAN AGREEMENT This MEZZANINE LOAN AGREEMENT (this "LOAN AGREEMENT") is dated as of November 25, 2002 and entered into by and between IMPAC HOTEL GROUP MEZZANINE, LLC, SERVICO OPERATIONS MEZZANINE, LLC, AND LODGIAN FINANCING MEZZANINE, LLC, ISLAND MOTEL ENTERPRISES, INC. AND PENMOCO, INC. (collectively, "BORROWERS", and individually, each a "BORROWER"), and MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (together with its successors and assigns, "LENDER"). NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the Borrowers and Lender agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 CERTAIN DEFINED TERMS. The terms defined below are used in this Loan Agreement as so defined. Terms defined in the preamble and recitals to this Loan Agreement are used in this Loan Agreement as so defined. All terms not otherwise defined herein shall have the meaning given such terms in the Mortgage Loan Agreement. "ACCEPTABLE FRANCHISOR" and "ACCEPTABLE FRANCHISE NAME" means the franchisors identified on EXHIBIT F. "ACCEPTABLE MANAGER" means Lodgian Management Corp. or any other Affiliate of the Mortgage Borrowers and, upon receipt of a Rating Confirmation, another reputable hotel management company with at least five (5) years experience managing hotel properties similar to the Properties and which at the time of its engagement is managing at least 5,000 hotel rooms (exclusive of the Properties). "ACCEPTABLE REPLACEMENT CAP" has the meaning set forth in Section 2.3. "ACCOUNT COLLATERAL" means all of the Borrowers' right, title and interest in and to the Accounts, the Reserves, all monies and amounts which may from time to time be on deposit therein, all monies, checks, notes, instruments, documents, deposits, and credits from time to time in the possession of Lender representing or evidencing such Accounts and Reserves, if any, and all earnings and investments held therein and proceeds thereof. "ACCOUNTS" means, collectively, the Deposit Account, the Lock Box Account, the Jekyll Island Lock Box Account, all accounts maintained by or for the benefit of Mortgage Lender pursuant to the terms of the Mortgage Loan Documents and any other accounts pledged to Lender pursuant this Loan Agreement or any other Loan Document. "AFFILIATE" means in relation to any Person, any other Person: (i) directly or indirectly controlling, controlled by, or under common control with, the first Person; (ii) directly or indirectly owning or holding fifty percent (50%) or more of any equity interest in the first Person; or (iii) fifty percent (50%) or more of whose voting stock or other equity interest is directly or indirectly owned or held by the first Person. In addition, the Affiliates of each Borrower Party include, without limitation, all other Borrower Parties, irrespective of whether they now or hereafter satisfy the foregoing criteria. For purposes of this definition, "CONTROL" (including with correlative meanings, the terms "CONTROLLING", "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the possession directly or indirectly of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Where expressions such as "[name of party] or any Affiliate" are used, the same shall refer to the named party and any Affiliate of the named party. Further, the Affiliates of any Person that is an entity shall include all natural persons who are officers, agents, directors, members, partners, or employees of the entity Person. "AGGREGATE ALLOCATED LOAN AMOUNT" shall mean the aggregate portion of the Mortgage Loan and the Loan allocated to each Property as set forth on EXHIBIT A". "AGGREGATE OUTSTANDING PRINCIPAL BALANCE" means, at the time of determination, the aggregate outstanding principal balance of the Loan and the Mortgage Loan. "ALLOCATED LOAN AMOUNT" shall mean the portion of the Loan allocated to each Property as set forth on EXHIBIT A. "AMORTIZATION DEFICIENCY" shall mean, as of the date of determination, (x) the aggregate of all monthly Scheduled Mezzanine Principal Payments through the date of determination minus (y) the actual principal payments made to Lender pursuant to Section 2.4(A)(ii) and Section 2.4(A)(iv) of this Loan Agreement through the date immediately preceding the date of determination. "APPLICABLE SPREAD" means 9.0000%; provided, however, if the Borrowers have not made the Reserve Principal Payment prior to the Payment Date in November 2003, the "APPLICABLE SPREAD" shall mean 9.5772% throughout the remainder of the term of the Loan, including any Extension Terms. "APPROVAL PROCEDURES" has the meaning set forth in Section 2.13(A). "APPROVED ACCOUNTING FIRM" means Ernst and Young, PricewaterhouseCoopers, Deloitte & Touche or KPMG Peat Marwick or any successor entity. "ASSIGNMENT OF LEASES" shall mean that certain Assignment of Leases and Rents dated the date hereof given by the Jekyll Island Borrowers to Lender. "ASSIGNMENT OF RATE CAP" means that certain Collateral Assignment of Interest Rate Protection Agreement of even date herewith from the Borrowers to Lender, constituting an assignment of the Cap and proceeds therefrom as Collateral for the Loan, as same may be amended or modified from time to time. "ASSUMPTION" has the meaning set forth in Section 11.3. 2 "BANKRUPTCY CODE" means Title 11 of the United States Code, as amended from time to time, and all rules and regulations promulgated thereunder. "BEVERAGE COMPANY" shall mean any Person (other than the Borrowers and the Mortgage Borrowers) holding, or entitled to any proceeds from, any liquor license or other beverage permit for the sale of alcoholic beverages at any Property and at the Jekyll Island Property. "BOARD OF MANAGERS" means the board of managers, or similar governing entity, established for the governance of the condominium association established pursuant to the terms of the Mortgaged Condominium Property Documents. "BORROWER" and "BORROWERS" have the meanings set forth in the preamble, provided that, following a Release, "BORROWERS" shall mean each of the Borrowers remaining as a party to the Loan Documents, and whose Collateral remain encumbered by the Pledge Agreement (or, with respect to the Jekyll Island Borrowers, whose property remains subject to the Jekyll Island Mortgage) and "BORROWER" shall mean any of such remaining parties. "BORROWER PARTY" and "BORROWER PARTIES" means, individually or collectively, the Borrowers, Member and Guarantor. "BORROWER PARTY SECRETARY" has the meaning set forth in Section 3.1. "BUSINESS DAY" means any day excluding (i) Saturday, (ii) Sunday, (iii) any day which is a legal holiday under the laws of the State of New York, the state or states where the servicing offices of the Servicer, and, if the Loan becomes a "specially serviced loan" pursuant to the terms of any trust and servicing agreement entered into in connection with any Securitization backed in whole or in part by the Loan, the special servicer, are located or the state in which the corporate trust office of the trustee in connection with any such Securitization is located, and (iv) any day on which banking institutions located in such state are generally not open for the conduct of regular business. "CALCULATION DATE means (x) prior to the occurrence of a Cash Trap Event, the last day of each calendar quarter, and (y) during the continuance of a Cash Trap Event, the last day of each calendar month. "CAP" has the meaning set forth in Section 2.3. "CAPEX/FF&E BUDGET" means the expenditures for Replacements and other expenditures for FF&E and Capital Expenditures set forth in an annual budget approved by Lender in writing (such approval not to be unreasonably withheld or delayed as long as the budget is consistent with the form of the CapEx/FF&E Budget provided to Lender prior to Closing), covering the planned FF&E expenditures and Capital Expenditures for the period covered by such budget, as same may be amended pursuant to Section 5.1(D) hereof. "CAPITAL EXPENDITURES" means expenditures for Capital Improvements. 3 "CAPITAL IMPROVEMENTS" means capital improvements, repairs or alterations, furnishings, fixtures, equipment and other capital items (whether paid in cash or property or accrued as liabilities) made by the Mortgage Borrowers or, with respect to the Jekyll Island Property, made by the Jekyll Island Borrowers, that, in conformity with GAAP, would not be included in the Mortgage Borrowers' or the Jekyll Island Borrowers' annual financial statements as an Operating Expense of the Properties. "CAPITAL IMPROVEMENT PLAN" means the Mortgage Borrowers' and the Jekyll Island Borrowers' current plan and budget for certain ongoing multi-phased capital improvements to the respective Properties, including each of the items set forth in the applicable Property Improvement Plan, if any, as more fully described in the Franchisor Letters, all as more particularly described on EXHIBIT H. "CAP PROVIDER" has the meaning set forth in Section 2.3. "CAP RESERVE" has the meaning set forth in Section 2.3. "CAP THRESHOLD RATE" has the meaning set forth in Section 2.3. "CASH MANAGEMENT AGREEMENT" means the Mezzanine Cash Management Agreement of even date herewith among the Borrowers, Lender, Manager, and Lock Box Account Bank. "CATEGORY" means the applicable Tier 1 Hotel, the Tier 2 Hotel or the Tier 3 Hotel category. "CLAIMS" has the meaning set forth in Section 5.3. "CLOSING" means the funding of the Loan and the consummation of the other transactions contemplated by this Loan Agreement. "CLOSING DATE" means the date on which the Closing occurs. " COLLATERAL" means rights, interests, and property of every kind, real and personal, tangible and intangible, which is granted, pledged, liened, or encumbered as security for the Loan or any of the other Obligations under this Loan Agreement, the Pledge Agreement, the Jekyll Island Mortgage, the Cash Management Agreement, the Jekyll Island Cash Management Agreement or the other Loan Documents, including the Account Collateral. "COLLATERAL RELEASE" has the meaning set forth in Section 11.4. "COLLATERAL RELEASE PRICE" has the meaning set forth in Section 11.4. "COMPLIANCE CERTIFICATE" has the meaning set forth in Section 5.1. "CONDOMINIUM MORTGAGE BORROWER" has the meaning set forth in the Mortgage Loan Agreement. "CONDOMINIUM DEFAULT" has the meaning set forth in the Mortgage Loan Agreement. 4 "CONTINGENT OBLIGATION", as applied to any Person, means any direct or indirect liability, contingent or otherwise, of that Person: (A) with respect to any indebtedness, lease, dividend or other obligation of another if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto; (B) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings; (C) under any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement designed to protect against fluctuations in interest rates; or (D) under any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect that Person against fluctuations in currency values. Contingent Obligations shall include (i) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making (other than the Loan), discounting with recourse or sale with recourse by such Person of the obligation of another, (ii) the obligation to make take-or-pay or similar payments if required regardless of nonperformance by any other party or parties to an agreement, and (iii) any liability of such Person for the obligations of another through any agreement to purchase, repurchase or otherwise acquire such obligation or any property constituting security therefor, to provide funds for the payment or discharge of such obligation or to maintain the solvency, financial condition or any balance sheet item or level of income of another. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if not a fixed and determined amount, the maximum amount so guaranteed. "CONTRACTUAL OBLIGATION", as applied to any Person, means any indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject, other than the Loan Documents. "CREDIT CARD COMPANIES" has the meaning set forth in Section 7.1. "CREDIT CARD RECEIVABLES PAYMENT DIRECTION LETTER" has the meaning set forth in Section 7.1. "DEBT SERVICE COVERAGE RATIO" OR "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 Test Rate) that the Borrowers and the Mortgage Borrowers will be required to pay over the succeeding 12 months on the Loan and the Mortgage Loan plus, in the case of any determination after the first anniversary of the Closing Date, principal amortization of the Loan and the Mortgage Loan that would be required in respect of the then outstanding principal amount of the Loan and the Mortgage Loan over the first 12 months of 25-year amortization schedule, calculated using the Test Rate. "DEBT SERVICE SUB-ACCOUNT" has the meaning set forth in Section 7.1. 5 "DEBT YIELD" means, at any time of determination, Net Cash Flow for the trailing 12-month period divided by the then outstanding principal balance of the Loan and the Mortgage Loan. "DEEDS OF TRUST" means, collectively, (i) those certain Fee/Leasehold Deeds of Trust, Assignments of Leases and Security Agreements, (ii) those certain Fee/Leasehold Mortgages, Assignments of Leases and Security Agreements, and (iii) those certain Deeds to Secure Debt, Assignment of Leases and Security. Agreements of even date herewith from the applicable Mortgage Borrowers to Mortgage Lender (or deed trustee on behalf of Mortgage Lender, as applicable), constituting Liens on their respective Properties as collateral for the Mortgage Loan as same may be modified or amended from time to time. "DEFAULT" means any breach or default under any of the Loan Documents, whether or not the same is an Event of Default, and also any condition or event that, after notice or lapse of time or both, would constitute an Event of Default if that condition or event were not cured or removed within any applicable grace or cure period. "DEFAULT RATE" has the meaning set forth in Section 2.2. "DEPOSIT ACCOUNT" has the meaning set forth in Section 7.1. "DEPOSIT ACCOUNT AGREEMENT" has the meaning set forth in Section 7.1. "DEPOSIT BANK" has the meaning set forth in Section 7.1. "DETERMINATION DATE" means the day which is two (2) Eurodollar Business Days prior to the first day of an Interest Accrual Period; provided that the first Determination Date shall be two (2) Eurodollar Business Days prior to the Closing Date or, if such date is not a Eurodollar Business Day, the immediately preceding Eurodollar Business Day. The LIBO Rate set on each Determination Date shall be in effect for the Interest Accrual Period immediately following such Determination Date. "DISCLOSURE DOCUMENTS" has the meaning set forth in Section 10.3. "DISPROPORTIONATE PAYDOWN" has the meaning set forth in Section 2.4(D). "DOLLAR EQUIVALENTS" means (a) commercial paper rated P-1 or better by Moody's or A-1 or better by S&P or similarly rated by any successor to either of such rating services, (b) obligations of the United States government or any agency thereof which are backed by the full faith and credit of the United States, or (c) deposits, including certificates of deposit, in any commercial bank or trust company (i) which is registered to do business in any state of the United States, (ii) which has capital and surplus in excess of $100,000,000 and (iii) the short-term debt of which is rated A-1 or better by S&P or P-1 or better by Moody's or is similarly rated by any successor thereof, provided that each such item of commercial paper, each such obligation, and each such time deposit has a maturity date not later than thirty days after the date of purchase thereof. "DOLLARS" and the sign "$" mean the lawful money of the United States of America. 6 "DOTHAN HOTEL" has the meaning set forth in Section 5.13. "ELIGIBLE ACCOUNT" shall mean a separate and identifiable account from all other funds held by the holding institution, which account is either (i) an account maintained with an Eligible Bank or (ii) a segregated trust account maintained by a corporate trust department of a federal depository institution or a state chartered depository institution subject to regulations regarding fiduciary funds on deposit similar to Title 12 of the Code of Federal Regulations Section 9.10(b), which, in either case, has corporate trust powers and is acting in its fiduciary capacity or is otherwise acceptable to the Rating Agencies. "ELIGIBLE BANK" shall mean a bank that satisfies the Rating Criteria. "EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the meaning of Section 3(3) of ERISA (including any Multiemployer Plan) (i) which is maintained for employees of any Borrower or any ERISA Affiliate, (ii) which has at any time within the preceding six (6) years been maintained for the employees of any Borrower or any current or former ERISA Affiliate or (iii) for which any Borrower or any ERISA Affiliate has any liability, including contingent liability. "ENVIRONMENTAL INDEMNITY" means the Environmental Indemnity of even date herewith from the Borrowers and Guarantor to Lender, as same may be amended or modified from time to time. "ENVIRONMENTAL LAW" shall have the meaning given such term in the Mortgage Loan Agreement. "ENVIRONMENTAL REPORTS" shall mean that certain environmental report of the Jekyll Island Property delivered to Lender prior to the date hereof. "ERISA" means the Employee Retirement Income Security Act of 1974, and all rules and regulations promulgated thereunder. "ERISA AFFILIATE" means, in relation to any Person, any other Person under common control with the first Person, within the meaning of Section 4001(a)(14) of ERISA. "EURODOLLAR BUSINESS DAY" means any day on which banks in the City of London, England are generally open for interbank or foreign exchange transactions and which is also a Business Day. "EVENT OF DEFAULT" has the meaning set forth in Section 8.1. "EXCESS CASH FLOW" has the meaning set forth in the Mortgage Loan Cash Management Agreement. "EXCESS INTEREST" has the meaning set forth in Section 2.2. "EXCULPATED PARTIES" has the meaning set forth in Section 12.2. 7 "EXTENSION CAP THRESHOLD RATE" has the meaning set forth in Section 2.5. "EXTENSION NOTICE" has the meaning set forth in Section 2.5. "EXTENSION TERMS" has the meaning set forth in Section 2.5. "EXTRAORDINARY RECEIPTS SUB-ACCOUNT" has the meaning set forth in the Cash Management Agreement. "FF&E" means all machinery, furniture, furnishings, equipment, fixtures (including, without limitation, all heating, air conditioning, plumbing, lighting, communications and elevator fixtures), inventory and articles of personal property and accessions, renewals and replacements thereof and substitutions therefor (including, without limitation, beds, bureaus, chiffonniers, chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs, carpeting, drapes, draperies, venetian blinds, screens, paintings, hangings, pictures, divans, couches, luggage carts, luggage racks, stool, sofas, chinaware, linens, pillows, blankets, glassware, foodcarts, cookware, dry cleaning facilities, dining room wagons, tools, keys or other entry systems, bars, bar fixtures, liquor and drink dispensers, ice makers, radios, clock radios, television sets, intercom and paging equipment, electric and electronic equipment, dictating equipment, private telephone systems, medical equipment, potted plants, heating, lighting and plumbing fixtures, fire prevention and extinguishing apparatus, cooling and air-conditioning systems, elevators, escalators, fittings, plants, apparatus, stoves, ranges, refrigerators, laundry machines, tools, machinery, engines, dynamos, motors, boilers, incinerators, switchboards, conduits, compressors, vacuum cleaning systems, floor cleaning, waxing and polishing equipment, call systems, brackets, electrical signs, bulbs, bells, fuel, conveyors, cabinets, lockers, shelving, spotlighting equipment, dishwashers, garbage disposals, washer and dryers), other customary hotel equipment and other tangible property of every kind and nature whatsoever owned by the Mortgage Borrowers or the Jekyll Island Borrowers, or in which the Mortgage Borrowers or the Jekyll Island Borrowers have or shall have an interest, now or hereafter located at the Properties, or appurtenant thereto, and useable in connection with the present or future operation and occupancy of the Properties and all building equipment, material and supplies of any nature whatsoever owned by the Mortgage Borrowers or the Jekyll Island Borrowers, or in which Mortgage Borrowers or the Jekyll Island Borrowers have or shall have an interest, now or hereafter located at the Properties, or appurtenant thereto, and useable in connection with the present or future operation, enjoyment and occupancy of the Properties. "FF&E RESERVE" means the reserve established pursuant to Section 6.4 of the Mortgage Loan Agreement. "FINANCIAL STATEMENTS" means statements of operations and retained earnings, statements of cash flow and balance sheets. "FINANCING STATEMENTS" means the Uniform Commercial Code Financing Statements naming the applicable Borrower Parties as debtor, and Lender as secured party, required under applicable state law to perfect the security interests created hereunder or under the other Loan Documents. "FIRST EXTENSION TERM" has the meaning set forth in Section 2.5. 8 "FITCH" means Fitch, Inc. "FORCE MAJEURE" means acts of god, governmental restrictions, stays, judgments, orders, decrees, enemy actions, civil commotion, fire, casualty, strikes or work stoppages which are industry-wide and not aimed at the Borrowers or their Affiliates, or other causes beyond the reasonable control of the Borrowers and/or their Affiliates, but the Borrowers' lack of funds in and of itself shall not be deemed a cause beyond the control of the Borrowers. "FRANCHISE AGREEMENTS" means, collectively, those certain agreements described in EXHIBIT I and any replacement franchise agreement which may hereafter be entered into in accordance with the terms and conditions hereof by any of the Mortgage Borrowers or the Jekyll Island Borrowers, as the case may be, as franchisee, pursuant to which the Mortgage Borrowers or the Jekyll Island Borrowers, as the case may be, have the right to operate the Properties under names and hotel systems controlled by the applicable Franchisor. "FRANCHISOR" means the current hotel franchisor or licensor with respect to any of the Properties or any other successors franchisor or licensor permitted pursuant to Section 5.13. "FRANCHISOR LETTER" shall mean, with respect to each Property, a comfort letter(s), and/or similar instrument(s) from the related Franchisor to Mortgage Lender and Lender acknowledging the Loan and providing certain assurances, reasonably satisfactory to Lender, with respect thereto. "FUNDING LOSSES" has the meaning set forth in Section 2.10. "FUNDING PARTY" means any bank or other entity, if any, which is indirectly or directly funding Lender with respect to the Loan, in whole or in part, including, without limitation, any direct or indirect assignee of, or participant in, the Loan. "GAAP" means generally accepted accounting principles as set forth in Statement on Auditing Standards No. 69 entitled "The Meaning of Presenting Fairly in Conformity with Generally Accepted Accounting Principles in the Independent Auditor's Report" issued by the Auditing Standards Board of the Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board to the extent such principles are applicable to the facts and circumstances as of the date of determination. "GOVERNMENTAL AUTHORITY" means, with respect to any Person, any federal or state government or other political subdivision thereof and any entity, including any regulatory or administrative authority or court, exercising executive, legislative, judicial, regulatory or administrative or quasi-administrative functions of or pertaining to government, and any arbitration board or tribunal in each case having jurisdiction over such applicable Person or such Person's property, and any stock exchange on which shares of capital stock of such Person are listed or admitted for trading. "GROUND LEASE DEFAULT" has the meaning given such term in the Mortgage Loan Agreement, but for purposes of this Loan Agreement, shall include the Jekyll Island Property. 9 "GROUND LEASED PROPERTIES" has the meaning given such term in the Mortgage Loan Agreement. "GROUND LEASES" has the meaning given such term in the Mortgage Loan Agreement, but, for purposes of this Loan Agreement, shall include the Jekyll Island Ground Lease. "GROUND LESSOR" means each of the lessors under the Ground Leases. "GUARANTOR" means Lodgian, Inc., a Delaware corporation. "GUARANTY" means the Guaranty of Recourse Obligations and the Environmental Indemnity, each of even date herewith executed by Guarantor in favor of Lender, as same may be amended or modified from time to time. "HAZARDOUS MATERIALS REMEDIATION RESERVE" means the Reserve established pursuant to Section 6.5 of the Mortgage Loan Agreement. "IMPOSITIONS" means (i) all real estate and personal property taxes, and vault charges and all other taxes, levies, assessments and other similar charges, general and special, ordinary and extraordinary, foreseen and unforeseen, of every kind and nature whatsoever (including any payments in lieu of taxes), which at any time prior to, at or after the execution hereof may be assessed, levied or imposed by, in each case, a governmental authority upon any of the Properties or the rents relating thereto or upon the ownership, use, occupancy or enjoyment thereof, and any interest, cost or penalties imposed by such governmental authority with respect to any of the foregoing and (ii) all rent and other amounts payable by the Mortgage Borrowers or by the Jekyll Island Borrowers under each of the Ground Leases or under the Jekyll Island Ground Lease and under the Mortgaged Condominium Property Documents. Impositions shall not include (x) any sales or use taxes payable by the Mortgage Borrowers or by the Jekyll Island Borrowers, (y) taxes payable by tenants or guests occupying any portions of the Properties, or (z) taxes or other charges payable by any Manager or Franchisor unless such taxes are being paid on behalf of the Mortgage Borrowers or the Jekyll Island Borrowers. "IMPOSITIONS AND INSURANCE RESERVE" means the reserve established pursuant to Section 6.3 of the Mortgage Loan Agreement and the reserve established pursuant to Section 6.2(C) of this Loan Agreement. "IMPROVEMENTS" means all buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements of every kind and nature now or hereafter located on the Properties and on the Jekyll Island Property. "INDEBTEDNESS" or "INDEBTEDNESS", shall mean, for any Person, without duplication: (i) all indebtedness of such Person for borrowed money, for amounts drawn under a letter of credit, or for the deferred purchase price of property for which such Person or its assets is liable, (ii) all unfunded amounts under a loan agreement, letter of credit (unless secured in full by Dollars), or other credit facility for which such Person would be liable if such amounts were advanced thereunder, (iii) all amounts required to be paid by such Person as a guaranteed payment to partners or a preferred or special dividend, including any mandatory redemption of shares or interests but not any preferred return or special dividend paid solely from, and to the extent of, 10 excess cash flow after the payment of all operating expenses, capital improvements and debt service on all Indebtedness, (iv) all obligations under leases that constitute capital leases for which such Person is liable, (v) all obligations of such Person under interest rate swaps, caps, floors, collars and other interest hedge agreements, in each case whether such Person is liable contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person otherwise assures a creditor against loss, and (vi) invoices for goods and services provided to the Mortgage Borrowers and the Jekyll Island Borrowers which are not paid within thirty (30) days of invoice. "INDEMNIFIED LIABILITIES" has the meaning set forth in Section 14.2. "INDEMNITEES" has the meaning set forth in Section 14.2. "INDEPENDENT DIRECTOR" means an individual who shall not have been at the time of such individual's appointment or at any time while serving as a director of Member, the Borrowers, the Mortgage Borrowers or any of their respective Affiliates, and may not have been at any time during the preceding five years (i) a stockholder, director (other than as an independent director/member), officer, employee, partner, attorney or counsel of Member, Guarantor, the Borrowers, the Mortgage Borrowers or any Affiliate of any of them (except that such individual may be an independent director of any other Affiliate of the foregoing), (ii) a customer, supplier or other Person who derives any of its purchases or revenues from its activities with Member, Guarantor, the Borrowers, the Mortgage Borrowers or any Affiliate of any of them (other than a company that provides professional independent directors and which also may provide other ancillary corporate, partnership, company or trust services to Member, the Borrowers, the Mortgage Borrowers or their Affiliates in the ordinary course of business (for example, The Corporation Trust Company)), (iii) a Person or other entity controlling or under common control with any such stockholder, partner, customer, supplier or other Person, or (iv) a member of the immediate family of any such stockholder, director, officer, employee, partner, customer, supplier or other Person. As used in this definition, the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management, policies or activities of a Person, whether through ownership of voting securities, by contract or otherwise. "INITIAL TERM" means the period from the Closing Date to the Scheduled Maturity Date. "INSURANCE POLICIES" has the meaning set forth in Section 5.4. "INSURANCE PREMIUMS" means the annual insurance premiums for the insurance policies required to be maintained by the Mortgage Borrowers and the Jekyll Island Borrowers pursuant to Section 5.4. "INTEREST ACCRUAL PERIOD" means a period commencing on the first Business Day of a calendar month and ending on the day immediately prior to the first Business Day of the next calendar month; provided that the first Interest Accrual Period shall mean the period from and including the Closing Date and including the day immediately prior to the first Business Day of the next calendar month. "INTERESTED PARTIES" has the meaning set forth in Section 10.3. 11 "INTEREST RATE" has the meaning set forth in Section 2.2. "INVOLUNTARY BORROWER BANKRUPTCY" has the meaning set forth in Section 5.22. "IRC" means the Internal Revenue Code of 1986, and any rule or regulation promulgated thereunder from time to time, in each case as amended from time to time. "IRS" means the Internal Revenue Service or any successor thereto. "JEKYLL ISLAND ASSIGNMENT OF LEASES AND RENTS" means that certain assignment of leases and rents given by the Jekyll Island Borrowers to Lender. "JEKYLL ISLAND BORROWERS" means, collectively, Island Motel Enterprises, Inc. and Penmoco, Inc. "JEKYLL ISLAND CAPITAL IMPROVEMENT RESERVE" has the meaning set forth in Section 6.4. "JEKYLL ISLAND CASH MANAGEMENT AGREEMENT" means that certain cash management agreement dated as of the date hereof among the Jekyll Island Borrowers, Lender, the Lock Box Account Bank and Manager. "JEKYLL ISLAND FF&E RESERVE" has the meaning given in Section 6.3(B). "JEKYLL ISLAND GROUND LEASE" means that certain Lease Agreement, dated as of October 23, 1972, made by and between the Jekyll Island-State Park Authority, a body corporate and politic created by the General Assembly of the State of Georgia, as lessor, and Penmoco, Inc., as lessee, as modified, extended and amended by various instruments, including a "Modification Agreement" dated October 8, 1973, a "Modification Agreement" dated October 3, 1974, an "Assignment, Assumption and Agreement" dated October 26, 1976, and a "Modification of Warranty Deed to Secure Debt" dated April 4, 1978. "JEKYLL ISLAND GROUND LEASE DEFAULT" has the meaning given in Section 4.30. "JEKYLL ISLAND GROUND LEASED PROPERTY" means the real property covered by the Jekyll Island Ground Lease. "JEKYLL ISLAND IMPOSITIONS AND INSURANCE RESERVE" has the meaning given in Section 7.1. "JEKYLL ISLAND LOCK BOX ACCOUNT" has the meaning given in Section 7.1. "JEKYLL ISLAND MONTHLY FF&E PAYMENT" has the meaning given in Section 6.3. "JEKYLL ISLAND MORTGAGE" means that certain Leasehold Deed to Secure Debt, Assignment of Leases and Rents and Security Agreement given by the Jekyll Island Borrowers to Lender covering the Jekyll Island Property. "JEKYLL ISLAND PROPERTY" means the Holiday Inn, 200 S, Beachview Drive, Glynn County, Jekyll Island, Georgia. 12 "JEKYLL ISLAND RELEASE" has the meaning given in Section 11.5. "JEKYLL ISLAND RELEASE DATE" has the meaning given in Section 11.5. "JEKYLL ISLAND RELEASE PRICE" has the meaning given in Section 11.5. "JEKYLL ISLAND REQUIRED CAPITAL IMPROVEMENTS" has the meaning given in Section 6.4. "JEKYLL ISLAND RESERVES" means the Jekyll Island Capital Improvement Reserve, the Jekyll Island FF&E Reserve and the Jekyll Island Impositions and Insurance Reserve. "JEKYLL ISLAND SUPPLEMENTAL INSURANCE RESERVE PAYMENT" means $31,957. "KNOWLEDGE": whenever in this Loan Agreement or any of the Loan Documents, or in any document or certificate executed on behalf of any Borrower Party pursuant to this Loan Agreement or any of the Loan Documents, reference is made to the knowledge of the Borrowers or any other Borrower Party (whether by use of the words "knowledge" or "known", or other words of similar meaning, and whether or not the same are capitalized), such shall be deemed to refer to the knowledge (without independent investigation unless otherwise specified) of (i) the individuals who have significant responsibility for any policy making, major decisions or financial affairs of the applicable entity; (ii) the general manager for the applicable Property; (iii) the regional vice president of operations for Guarantor, the president of each Borrower and Member, with respect to operational issues of any of the Mortgage Borrowers, any of the Properties, or any of the Borrowers; (iv) the chief operating officer of Guarantor, with respect to representations regarding Guarantor; and (v) also to the knowledge of the person signing such document or certificate. "LEASE" means any lease, tenancy, license, assignment and/or other rental or occupancy agreement or other agreement or arrangement (including, without limitation, any and all guaranties of any of the foregoing) heretofore or hereafter entered into affecting the use, enjoyment or occupancy of, or the conduct of any activity upon or in, the Properties or any portion thereof, including any extensions, renewals, modifications or amendments thereof. "LENDER" is defined in the preamble. "LENDER'S CONSULTANT" has the meaning set forth in Section 6.6. "LETTER OF CREDIT" shall mean an irrevocable, unconditional, transferable, clean sight draft letter of credit (either an evergreen letter of credit or one which does not expire until at least thirty (30) days after the Maturity Date (the "LC EXPIRATION DATE")), in favor of Lender, entitling Lender to draw thereon in New York, New York based solely on a statement executed by an officer or authorized signatory of Lender, in form and substance reasonably acceptable to Lender and issued by an Eligible Bank. If at any time (a) the institution issuing any such Letter of Credit shall cease to be an Eligible Bank, or (b) if the Letter of Credit is due to expire prior to the LC Expiration Date, Lender shall have the right immediately to draw down the same in full and hold the proceeds thereof in accordance with the provisions of this Loan Agreement, unless the Borrowers shall deliver a replacement Letter of Credit from an Eligible Bank within (i) as to (a) above, twenty (20) days after Lender delivers written notice to the Borrowers that the 13 institution issuing the Letter of Credit has ceased to be an Eligible Bank, or (ii) as to (b) above, within twenty (20) days prior to the expiration date of said Letter of Credit. "LIBO RATE" means the applicable London interbank offered rate (rounded upwards, if necessary, to the nearest one sixteenth (1/16th) of one percent (1%)) expressed as a percentage per annum 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 Accrual Period and having a maturity equal to the duration of such Interest Accrual Period, provided that, (1) if Telerate Page 3750 is not available for any reason, LIBO Rate for the relevant Interest Accrual 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 Accrual Period, and having a remaining term to maturity equal to such Interest Accrual Period, and (2) if no such report is available, LIBO Rate 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 Accrual Period, in the approximate amount of its portion of the relevant loan and having a maturity equal to such Interest Accrual Period. LIBO Rate shall be adjusted for Federal Reserve Board reserve requirements. "LIEN" means any lien, mortgage, pledge, security interest, charge or encumbrance of any kind, whether voluntary or involuntary, (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest). "LLC INTERESTS" has the meaning set forth in the Pledge Agreement. "LOAN" has the meaning set forth in Section 2.1. "LOAN AGREEMENT" means this Mezzanine Loan Agreement, as same may be amended, modified or restated from time to time (including all schedules, exhibits, annexes and appendices hereto). "LOAN DOCUMENTS" means this Loan Agreement, the Note, the Pledge Agreement, the Jekyll Island Mortgage, the Guaranty, the Environmental Indemnity, the Assignment of Rate Cap, the Financing Statements, the Cash Management Agreement, the Jekyll Island Cash Management Agreement, the Jekyll Island Assignment of Leases and Rents and any and all other documents and agreements from any of the Borrowers, Member, Guarantor or Manager and accepted by Lender for the purposes of evidencing and/or securing the Loan, excluding the Mortgage Loan Documents. "LOCK BOX ACCOUNT" and "LOCK BOX ACCOUNT BANK" are defined in Section 7.1. "LP INTERESTS" has the meaning set forth in the Pledge Agreement. "MANAGEMENT AGREEMENTS" means those certain Management Agreements described in EXHIBIT B, between each Mortgage Borrower or the Jekyll Island Borrowers, and the applicable Manager described therein, the Memphis Interim Agreement and any management agreement 14 which may hereafter be entered into in accordance with the terms and conditions hereof, pursuant to which any subsequent Manager may hereafter manage one or more of the Properties. "MANAGEMENT FEE" means the fees earned by all Managers pursuant to the terms of the Management Agreements. "MANAGERS" means the managers described in EXHIBIT B or an Acceptable Manager as may hereafter be charged with management of one or more of the Properties in accordance with the terms and conditions hereof. "MATERIAL ADVERSE EFFECT" means, as determined by Lender in its reasonable discretion, (A) a material adverse effect (which may include economic or political events) upon the business, operations properties, assets or condition (financial or otherwise) of any of the Borrowers, the Mortgage Borrowers or Guarantor, or (B) the impairment of the ability of any of the Borrowers, the Mortgage Borrowers or Guarantor to perform its obligations under any Loan Documents, or (C) the impairment of the ability of Lender to enforce or collect any of the Obligations as such Obligations become due or of Mortgage Lender to enforce or collect any of the obligations under the Mortgage Loan Documents as such obligations become due. In determining whether any individual event would result in a Material Adverse Effect, notwithstanding that such event does not of itself have such effect, a Material Adverse Effect shall be deemed to have occurred if the cumulative effect of such event and all other then occurring events and existing conditions would result in a Material Adverse Effect. "MATERIAL AGREEMENT" means any contract or agreement relating to the ownership, management, development, use, operation, leasing, maintenance, repair or improvement of the Properties under which there is an obligation of the Mortgage Borrowers or the Jekyll Island Borrowers, in the aggregate, to pay, or under which any Mortgage Borrower or the Jekyll Island Borrowers receives in compensation, more than $1,000,000 per annum, other than (i) the Management Agreements, (ii) any Franchise Agreements, and (iii) any agreement under which (x) there is an obligation of the Mortgage Borrowers or the Jekyll Island Borrowers, in the aggregate, to pay, or under which any Mortgage Borrower or the Jekyll Island Borrowers (or all of the Mortgage Borrowers and the Jekyll Island Borrowers, in the aggregate) receives in compensation, not more than $5,000,000 per annum and which (y) is terminable by the Mortgage Borrowers or the Jekyll Island Borrowers on not more than sixty (60) days prior written notice without any fee or penalty. "MATERIAL ALTERATION" means any improvement or alteration to any Property (other than decorative work such as painting, wallpapering and carpeting), the cost of which exceeds the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount of such Property or (y) $250,000, or is not otherwise already approved by Lender as part of the CapEx/FF&E Budget or Capital Improvement Plan then in effect or which otherwise does not constitute Work. "MATERIAL LEASE" means any Lease of space in a Property (other than Leases for space in the office building located at the West Palm Beach Property) or in the Jekyll Island Property which (i) is with an Affiliate of the Mortgage Borrowers or the Jekyll Island Borrowers, (ii)(a) either provides for annual rent or other payments in an amount equal to or greater than $100,000, or has a term (including all extensions and renewals which are unilaterally exercisable by the 15 tenant thereunder) or more than (10) years, and (b) may not be cancelled by either party thereto on thirty (30) days' notice without payment of a termination fee, penalty or other cancellation fee, (iii) demises in excess of 2000 square feet of space, (iv) is for any establishment the primary purpose of which is the service of food and/or beverages or for any use not currently in effect at the Property or the Jekyll Island Property, or (v) obligates the Mortgage Borrowers or the Jekyll Island Borrowers to make any improvements to the Property or the Jekyll Island Property either directly or through cash allowances (including, without limitation, free rent, tenant improvement allowances, or landlord's construction work) to the applicable tenant in excess of $25,000. For purposes of this definition only, in determining the square footage demised under any Lease, all space in the applicable Property or the Jekyll Island Property which may in the future be demised to the tenant under such Lease by reason of such tenant exercising any right or option contained in such Lease shall be included in the calculation of the square footage demised under such Lease. "MATURITY DATE" shall mean the Scheduled Maturity Date, as same may be extended for the First Extension Term, the Second Extension Term, or the Third Extension Term (subject to the terms and conditions of Section 2.5(B)), or such other date on which the final payment of principal of the Note becomes due and payable as herein provided, whether at such stated maturity date, by acceleration, or otherwise. "MAXIMUM RATE" has the meaning set forth in Section 2.2. "MEMBER" shall mean, individually or collectively, any entity (other than the sole member of any Borrower) which is now or hereafter becomes the managing member of any of the Borrowers under such Borrower's limited liability company operating agreement. "MEMBERSHIP CERTIFICATES" has the meaning set forth in the Pledge Agreement. "MEMPHIS INTERIM AGREEMENT" as defined in the Mortgage Loan Agreement. "MERRILL LYNCH" has the meaning set forth in Section 10.3. "MEZZANINE LENDER'S PERCENTAGE" shall mean, if the Mortgage Loan remains outstanding at the time of determination, the ratio, expressed as a percentage, that the then outstanding principal balance of the Mezzanine Loan bears to the Aggregate Outstanding Principal Balance, and following satisfaction of the Mortgage Loan, 100%. As of the date hereof Mezzanine Lender's Percentage is 25.99%. "MINIMUM DEBT YIELD" means (i) prior to the first (1st) anniversary of the Closing Date, 12.75%, (ii) from the first (1st) anniversary of the Closing Date but prior to the second (2nd) anniversary of the Closing Date, 13.25%, (iii) during the First Extension Term, 13.50%, (iv) during the Second Extension Term, 13.75%, and (v) during the Third Extension Term, 14.00%. "MINIMUM DSCR" means 1.20:1.0. "MOODY'S" means Moody's Investors Service. 16 "MORTGAGE BORROWERS" means, collectively, each of the entities identified as owners of Properties set forth on Schedule 4.1(C), provided that, following a Property Release, "MORTGAGE BORROWERS" shall mean each of the Mortgage Borrowers remaining as a party to the Mortgage Loan Agreement and whose Property remains subject to the Deeds of Trust (as defined in the Mortgage Loan Agreement). "MORTGAGE LENDER" means Merrill Lynch Mortgage Lender, Inc., its successors and assigns, as lender under the Mortgage Loan Documents. "MORTGAGE LENDER'S PERCENTAGE" shall mean, at the time of determination, the ratio, expressed as a percentage, that the outstanding principal balance of the Mortgage Loan bears to the Aggregate Outstanding Principal Balance. As of the date hereof, Mortgage Lender's Percentage is 74.01% "MORTGAGE LOAN" means that certain loan in the amount of $224,036,325 from Mortgage Lender to the Mortgage Borrowers. "MORTGAGE LOAN AGREEMENT" means the Loan and Security Agreement between the Mortgage Borrowers and Mortgage Lender. "MORTGAGE LOAN CASH MANAGEMENT AGREEMENT" means the Cash Management Agreement of even date herewith among Mortgage Borrowers, Mortgage Lender, Manager, and Lock Box Account Bank and any replacement thereof entered into with a successor Agent in accordance with the terms thereof. "MORTGAGE LOAN DOCUMENTS" means the documents executed and delivered by the Mortgage Borrowers and certain Affiliates thereof to Mortgage Lender in connection with the Mortgage Loan. "MORTGAGE LOAN LOCK BOX ACCOUNT" means the Lock Box Account established pursuant to the terms of the Mortgage Loan Cash Management Agreement. "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section 3(37) or Section 4001 (a)(3) of ERISA to which any of the Borrowers or any Affiliate is making, or is accruing an obligation to make, contributions or has made, or been obligated to make, contributions within the preceding six (6) years, or for which any of the Borrowers or any Affiliate has any liability, including contingent liability. "NET CASH FLOW" means Net Operating Income for any period less (i) a base management fee equal to the greater of (A) the actual base management fee for such period and (B) 4.0% of Operating Revenues for such period, (ii) a reserve for FF&E equal to 4.0% of Operating Revenues for such period, and (iii) fees due to all Franchisors for such period. "NET OPERATING INCOME" OR "NOI" has the meaning given such term in the Mortgage Loan Agreement, but for purposes of this Loan Agreement, shall include Net Operating Income from the Jekyll Island Property as if the Jekyll Island Property were a "Property" under the Mortgage Loan Agreement. 17 "NON-FLAGGED PROPERTIES" means the Properties located at 9700 Bluegrass Highway, Louisville, Kentucky and 2144 Madison Avenue, Memphis, Tennessee, prior to such Properties becoming subject to a Franchise Agreement. "NOTE" has the meaning set forth in Section 2.1. "OBLIGATIONS" means the Loan and all obligations, liabilities and indebtedness of every nature to be paid or performed by the Borrowers under the Loan Documents, including the principal amount of the Loan, interest accrued thereon and all fees, costs and expenses, and other sums now or hereafter owing, due or payable and whether before or after the filing of a proceeding under the Bankruptcy Code by or against any of the Borrowers, and the performance of all other terms, conditions and covenants under the Loan documents. "OPERATING BUDGET" means, for any period, the Mortgage Borrowers' and the Jekyll Island Borrower's budget setting forth the Mortgage Borrowers' and the Jekyll Island Borrowers' best estimate, after due consideration, of all Operating Revenues and Operating Expenses and any other revenues, costs and expenses for each of the Properties or for the Jekyll Island Property, as the case may be, for such period, which budget has been approved by Lender in accordance herewith, as same may be amended pursuant to Section 5.1(D) hereof. "OPERATING EXPENSES" has the meaning given such term in the Mortgage Loan Agreement, but, for purposes of this Loan Agreement, shall include Operating Expenses from the Jekyll Island Property as if the Jekyll Island Property were a "Property" under the Mortgage Loan Agreement. "OPERATING REVENUES" has the meaning given such term in the Mortgage Loan Agreement, but, for purposes of this Loan Agreement, shall include Operating Revenues from the Jekyll Island Property as if the Jekyll Island Property were a "Property" under the Mortgage Loan Agreement. "OSI DEFAULTS" means defaults under the Crowne Plaza Franchise Agreements resulting from the failure to achieve or maintain an Overall Service Index Level (as such term is defined in the applicable standards manual in effect for the Crowne Plaza Franchise Agreements) of 80, or such other default standard as may be set forth in the applicable standards manual after the Closing Date at the following Properties: (i) the West Palm Beach Property; (ii) 350 1(st) Avenue N.E., Cedar Rapids, Iowa; (iii) 91 State Street, Albany, New York and (iv) 2801 NW Freeway, Houston, Texas. "OWNERSHIP INTERESTS" has the meaning set forth in Section 9.1. "PAYMENT DATE" means the date that is the last day of each calendar month occurring during the term of the Loan (or if such last day is not a Business Day, the immediately preceding Business Day). "PERMITTED ASSUMPTION" has the meaning set forth in Section 11.3. "PERMITTED ENCUMBRANCES" shall have the meaning given such term in the Mortgage Loan Agreement but, for purposes of this Loan Agreement, shall include (i) the Jekyll Island 18 Mortgage and the other Liens of the Loan Documents relating to the Jekyll Island Property in favor of Lender, (ii) the items shown in Schedule B to the Title Policy relating to the Jekyll Island Property as of Closing, (iii) Liens for Impositions relating to the Jekyll Island Property not yet due and payable or Liens arising after the date hereof which are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted in accordance with Section 5.3(D) hereof; (iv) in the case of Liens relating to the Jekyll Island Property arising after the date hereof, statutory Liens of carriers, warehousemen, mechanics, materialmen and other similar Liens arising by operation of law, which are incurred in the ordinary course of business and discharged by the Borrowers by payment, bonding or otherwise within forty-five (45) days after the filing thereof or which are being contested in good faith in accordance with Section 5.3(D) hereof; (v) Liens relating to the Jekyll Island Property arising from reasonable and customary purchase money financing of personal property and equipment leasing to the extent the same are created in the ordinary course of business in accordance with Section 5.17(C) hereof; (vi) all easements, rights-of-way, restrictions and other similar charges or non-monetary encumbrances against the Jekyll Island Property which do not materially adversely affect (A) the ability of the Borrowers to pay any of their obligations to any Person as and when due, (B) the marketability of title to the Jekyll Island Property, (C) the fair market value of the Jekyll Island Property, or (D) the use or operation of the Jekyll Island Property as of the Closing Date and thereafter; (vii) rights of existing and future tenants, as tenants only, pursuant to the Leases relating to the Jekyll Island Property; and (viii) any other Lien to which Lender may expressly consent in writing. "PERMITTED INDEBTEDNESS" has the meaning set forth in Section 5.17. "PERMITTED INVESTMENTS" has the meaning set forth in the Cash Management Agreement. "PERMITTED OWNERSHIP INTEREST TRANSFERS" has the meaning set forth in Section 11.2. "PERMITTED TRANSFEREE" means any Person (provided such Person satisfies the requirements of Article IX hereof) controlled by, and more than 51% of which is owned by, one of the following: (i) a pension fund, pension trust or pension account that (a) has total real estate assets of at least $2.5 Billion and (b) is managed by a Person who controls real estate equity assets (not including the Properties) having a fair market value of at least $1.25 Billion; or (ii) a pension fund advisor who (a) immediately prior to such transfer, controls at least $1 Billion of real estate equity assets and (b) is acting on behalf of one or more pension funds that, in the aggregate, satisfy the requirements of clause (i) of this definition; or (iii) an insurance company which is subject to supervision by the insurance commissioner, or a similar official or agency, of a state or territory of the United States (including the District of Columbia) (a) with a net worth, as of the date immediately prior to the date of the transfer, of at least $1 Billion and (b) who, immediately prior to such transfer, controls real estate equity assets (not including the Properties) having a fair market value of at least $2.5 Billion; or 19 (iv) a corporation organized under the banking laws of the United States or any state or territory of the United States (including the District of Columbia) (a) with a combined capital and surplus of at least $1 Billion and (b) who, immediately prior to such transfer, controls real estate equity assets (not including the Properties) having a fair market value of at least $5 Billion; or (v) any other Person (a) with a long-term unsecured debt rating from the Rating Agencies of at least investment grade and (b) that owns or operates at least 15,000 hotel rooms, (ii) has a net worth, as of the date immediately prior to the date of such transfer, of at least $750 Million and (iii) immediately prior to such transfer, controls real estate equity assets (not including the Properties) having a fair market value of at least $1.5 Billion. "PERSON" means and includes natural persons, corporations, limited liability companies, limited partnerships, general partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof and their respective permitted successors and assigns (or in the case of a governmental Person, the successor functional equivalent of such Person). "PLAN OF REORGANIZATION" means the Joint Plan of Reorganization of Lodgian, Inc., et al., together with the Official Committee of Unsecured Creditors under Chapter 11 of the Bankruptcy Code, as approved pursuant to the terms of the Bankruptcy Code, together with any confirmation and/or amendments thereto entered in accordance with the Bankruptcy Code. "PLEDGE AGREEMENT" means, that certain Pledge and Security Agreement dated as of the date hereof given by the Borrowers (excluding the Jekyll Island Borrowers), as pledgors, in favor of Lender, as secured party, with respect to 100% of the LLC Interests, 100% of the LP Interests (other than those LP Interests in Servico Centre Associates, Ltd. consisting of limited partnership interests that are held by individuals) and 100% of the Stock Interests. "PREPAYMENT CONSIDERATION" has the meaning set forth in Section 2.6. "PRE-PETITION TAX LIABILITIES" means those certain outstanding taxes (together with accrued interest and penalties thereon) in the amounts set forth on SCHEDULE 4.10 which have been deferred and are required to be paid pursuant to the terms of the Plan of Reorganization, less the amount of any such deferred amounts actually paid by the Borrowers in accordance with the Plan of Reorganization after the date hereof. "PROPERTIES" and "PROPERTY" means, collectively or individually, the properties (including land and Improvements) described in EXHIBIT C, together with all Improvements now or hereafter located thereon and all related facilities, amenities and FF&E owned by the applicable Mortgage Borrowers and which shall be encumbered by and are more particularly described in the respective Deeds of Trust; provided that, following a Property Release, "PROPERTIES" and "PROPERTY" shall mean each of the Properties or the Property, as applicable, that remain encumbered by the Deeds of Trust as Collateral for the Mortgage Loan. "PROPERTY CONDITION REPORT" has the meaning set forth in Section 3.1. 20 "PROPERTY IMPROVEMENT PLAN" means, collectively, those certain property improvement plans for the Properties attached as EXHIBIT D and any future Property Improvement Plans required to be implemented by the applicable Franchisor. "PROPERTY RELEASE" has the meaning given such term in the Mortgage Loan Agreement but, as used in this Loan Agreement, shall include a Jekyll Island Release. "RATING AGENCY" shall mean, prior to a securitization, any of S&P, Moody's and Fitch or any other nationally-recognized statistical rating organization designated by Lender in its sole discretion, and, after a Securitization, each Rating Agency which has rated the Securities that are the subject of the Securitization. "RATING CONFIRMATION" with respect to the transaction or matter in question, shall mean: (i) if all or any portion of the Loan, by itself or together with other loans, has been the subject of a Securitization, then each applicable Rating Agency shall have confirmed in writing that such transaction or matter shall not result in a downgrade, qualification, or withdrawal of any rating then in effect for any certificate or other securities issued in connection with such Securitization; and (ii) if all of the Loan has not been the subject of a Securitization, then Lender shall have determined in its reasonable discretion (taking into consideration such factors as Lender may in good faith determine, including the attributes of the loan pool in which the Loan might reasonably be expected to be securitized) that no rating for any certificate or other securities that would be issued in connection with a Securitization of such portion of the Loan will be downgraded, qualified, or withheld by reason of such transaction or matter. "RATING CRITERIA" with respect to any Person, shall mean that (i) the short-term unsecured debt obligations of such Person are rated at least "A-1" by S&P, "P-1" by Moody's and "F-1" by Fitch, if deposits are held by such Person for a period of less than one month, or (ii) the long-term unsecured debt obligations of such Person are rated at least "AA-" by S&P (or "A" if the short-term unsecured debt obligations of such Person are rated at least "A-1"), "Aa2" by Moody's and "A" by Fitch, if deposits are held by such Person for a period of one month or more. "RECEIPTS" shall mean all revenues, receipts and other payments of every kind arising from ownership or operation of the Properties and the Jekyll Island Property, including without limitation, all warrants, stock options, or equity interests in any tenant, licensee or other Person occupying space at, or providing services related to or for the benefit of, the Properties and the Jekyll Island Property, received by the Mortgage Borrowers, the Jekyll Island Borrowers or any Related Person of the Mortgage Borrowers or the Jekyll Island Borrowers in lieu of rent or other payment. "RELATED PERSON" means any Person in which any of the Borrowers or the Guarantor holds greater than a ten percent (10%) equity interest. "RELEASE PRICE" has the meaning given such term in the Mortgage Loan Agreement. "RELEASE PRICE EXCESS" means the amount by which any Release Price exceeds the Aggregate Allocated Loan Amount of the Property being released; provided, however, Property Release Price Excess shall exclude any portion of a Release Price paid in connection with (x) a 21 Property Release necessary to prevent an Uncured Franchise Default, or (y) a Property Release necessary to enable the Mortgage Borrowers and the Jekyll Island Borrowers to comply with the restrictions set forth in Section 5.13(D). "RENT ROLL" has the meaning set forth in Section 3.1. "RENTS" has the meaning set forth in the Granting Clauses of the Deeds of Trust and in the Granting Clauses of the Jekyll Island Mortgage. "REPLACEMENTS" has the meaning set forth in Section 6.3. "RESERVE PRINCIPAL PAYMENT" means $9,000,000. "RESERVE SUB-ACCOUNTS" has the meaning set forth in Section 7.1 of the Mortgage Loan Agreement. "RESERVES" means the reserves established by or on behalf of Mortgage Lender pursuant to the Mortgage Loan Documents including the reserves established pursuant to Section 5.4 and Article VI of the Mortgage Loan Agreement, and the reserves held by or on behalf of Lender pursuant to this Loan Agreement or the other Loan Documents, including the Jekyll Island Reserves. "RESTORATION" has the meaning set forth in the Mortgage Loan Agreement. "REVPAR" means average room revenues per available room per day. "S&P" shall mean Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. "SCHEDULED MATURITY DATE" shall mean November 30, 2004. "SCHEDULED MEZZANINE PRINCIPAL PAYMENTS" shall mean (x) $64,975.00 through and including the Payment Date in November 2003, (y) $97,462.50 following the Payment Date in November 2003, through and including the Payment Date in November 2004, and (z) $129,950.00 thereafter through the Maturity Date. "SCHEDULED MORTGAGE PRINCIPAL PAYMENTS" shall mean (x) $185,025.00 through and including the Payment Date in November 2003, (y) $277,537.50 following the Payment Date in November 2003, through and including the Payment Date in November 2004, and (z) $370,050.00 thereafter through the Maturity Date. "SECOND EXTENSION TERM" has the meaning set forth in Section 2.5(B). "SECONDARY MARKET TRANSACTION" has the meaning set forth in Section 10.1. "SECURITIES" (whether or not capitalized) means any stock, shares, voting trust certificates, bonds, debentures, options, warrants, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments 22 commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "SECURITIZATION" shall mean a rated offering of securities representing direct or indirect interests in the Loan or the right to receive income therefrom. "SERVICER" means a servicer or servicers selected by Lender from time to time in its sole discretion to service the Loan. "SERVICING FEES" has the meaning set forth in Section 2.11. "SPECIFIED APPROVAL" shall mean any request for Lender approval required to be submitted by the Borrower under Section 5.1(D) [Budgets]; Section 5.5(A) [Material Alterations]; Section 5.12 [Leases]; Section 5.13 [Management/Franchise Agreements]; Section 11.1 [Transfers]; or Section 11.3 [Assumptions]. "STOCK INTERESTS" has the meaning set forth in the Pledge Agreement. "SUB-ACCOUNTS" has the meaning set forth in Section 7.1. "SUPPLEMENTAL FINANCIAL INFORMATION" means (i) a comparison of the budgeted income and expenses and the actual income and expenses for the prior calendar year or corresponding calendar quarter for such prior year, (ii) a calculation of the average daily rate, RevPAR and average occupancy statistics for the Properties for the applicable period and (iii) such other financial reports as the subject entity shall routinely and regularly prepare. "SURVEY" has the meaning set forth in Section 3.1. "TAX LIABILITIES" has the meaning set forth in Section 2.9. "TEST RATE" means an interest rate equal to the greater of (x) the then current yield on the 10-year United States Treasury Note plus the Test Rate Spread and (y) the then current LIBO Rate plus the Test Rate Spread. "TEST RATE SPREAD" means 4.0%, provided, however, if the Borrowers have not made the Reserve Principal Payment on or prior to the Payment Date occurring in November 2003, the "TEST RATE SPREAD" shall mean 4.15% throughout the remainder of the term of the Loan, including any Extension Terms. "THIRD EXTENSION TERM" has the meaning set forth in Section 2.5(B). "TIER 1 HOTEL" means any of the Properties or the Jekyll Island Property subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, as applicable, identified in the "Tier 1" category on EXHIBIT F. 23 "TIER 2 HOTEL" means any of the Properties or the Jekyll Island Property subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified in the "Tier 2" category on EXHIBIT F. "TIER 3 HOTEL" means any of the Properties or the Jekyll Island Property subject to a Franchise Agreement with an Acceptable Franchisor, or under a Franchisor brand, identified in the "Tier 3" category on EXHIBIT F. "TITLE COMPANIES" means First American Title Insurance Company, Fidelity National Title Company of New York and such other national title insurance company as may be acceptable to Lender. "TITLE POLICIES" means the Eagle 9 title insurance policy, or similar title insurance policy and the mortgage loan title insurance policy issued by Fidelity National Title Company of New York insuring the Jekyll Island Mortgage, issued by the Title Companies to Lender in connection with the Closing. "TRANSFER" has the meaning set forth in Section 11.2. "TRANSFEREE BORROWER" has the meaning set forth in Section 11.3. "UNCURED FRANCHISE DEFAULT" means (x) the voluntary or involuntary termination of any Franchise Agreement, or (y) the occurrence of one or more breaches or defaults (other than OSI Defaults) which do not result from the failure of the Mortgage Borrowers or the Jekyll Island Borrowers to pay to the Franchisors amounts due under the applicable Franchise Agreement, and the continuance thereof beyond all applicable notice and grace periods, if any, under Franchise Agreements (or such other cure periods as may be provided by Franchisor in writing covering Properties with Aggregate Allocated Loan Amounts of ten percent (10%) or more of the outstanding principal balance of the Loan and the Mortgage Loan; provided, however, no Uncured Franchise Default shall be deemed to have occurred following the voluntary or involuntary termination of any Franchise Agreement if (a) within ten (10) Business Days of the termination of the applicable Franchise Agreement (and at the time of delivery of each report pursuant to Section 5.1(A)(v)) the Borrowers deliver to Lender evidence reasonably satisfactory to Lender that the Mortgage Borrowers or the Jekyll Island Borrowers, as the case may be, are diligently pursuing a Franchise Agreement with an Acceptable Franchisor for the applicable Property and shall thereafter diligently and continuously pursue such Franchise Agreement, (b) at the time of such termination not more than the lesser of (i) four (4) Properties, or (ii) Properties with Aggregate Allocated Loan Amounts of five percent (5%) of the outstanding principal balance of the Loan and the Mortgage Loan, in either case excluding the Non-Flagged Properties, shall be in operation without being subject to Franchise Agreements, and (c) no Property (other than the Non-Flagged Properties) shall be without a Franchise Agreement in place for a period in excess of six (6) months from the termination of the applicable Franchise Agreement. "UNIFORM SYSTEM" means the Uniform System of Accounts for the Lodging Industry promulgated by the American Hotel and Motel Association, as in effect from time to time. "WAIVING PARTY" has the meaning set forth in Section 13.1. 24 "WEST PALM BEACH PROPERTY" means the Property located at 1601 Belvedere Boulevard, West Palm Beach, Florida. "WORK RESERVES" has the meaning set forth in Section 6.7 of the Mortgage Loan Agreement, but, for purposes of this Loan Agreement, shall include the Jekyll Island Capital Improvement Reserve. SECTION 1.2 ACCOUNTING TERMS. For purpose of this Loan Agreement, all accounting terms not otherwise defined herein shall have the meanings assigned to such terms in conformity with GAAP or the Uniform System, as the case may be. SECTION 1.3 OTHER DEFINITIONAL PROVISIONS. References to "ARTICLES", "SECTIONS", "SUBSECTIONS", "EXHIBITS" and "SCHEDULES" shall be to Articles, Sections, Subsections, Exhibits and Schedules, respectively, of this Loan Agreement unless otherwise specifically provide. Any of the terms defined in Section 1.1 may, unless the context otherwise requires, be used in the singular or the plural depending on the reference. In this Loan Agreement, "HEREOF", "HEREIN", "HERETO", "HEREUNDER" and the like mean and refer to this Loan Agreement as a whole and not merely to the specific article, section, subsection, paragraph or clause in which the respective word appears; words importing any gender include the other genders; references to "WRITING" include printing, typing, lithography and other means of reproducing words in a tangible visible form; the words "INCLUDING", "INCLUDES" and "INCLUDE" shall be deemed to be followed by the words "without limitation"; and any reference to any statute or regulation may include any amendments of same and any successor statutes and regulations. Further, (i) any reference to any agreement or other document may include subsequent amendments, assignments, and other modifications thereto, and (ii) any reference to any Person may include such Person's respective permitted successors and assigns or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons. ARTICLE II TERMS OF THE LOAN SECTION 2.1 LOAN. (A) LOAN. Subject to the terms and conditions of this Loan Agreement and in reliance upon the representations and warranties of the Borrowers contained herein, Lender agrees to lend to the Borrowers, and the Borrowers agree to borrow from Lender, a loan in the original principal amount of $78,671,201 (such loan and the obligation of the Borrowers to repay the same together with all interest and other amounts from time to time owing hereunder may be referred to as the "LOAN"). (B) NOTE. On the Closing Date, the Borrowers shall execute and deliver to Lender a Mezzanine Note, dated of even date herewith (as amended, modified or restated, and any replacement or substitute notes therefor, by means of multiple notes or otherwise, collectively, 25 the "NOTE"), made by the Borrowers to the order of Lender, in the original principal amount of $78,671,201. (C) USE OF PROCEEDS. The proceeds of the Loan funded at Closing may be used to (i) refinance existing indebtedness; (ii) pay pre-petition real estate taxes, all recording and filing fees and taxes, title insurance premiums, the reasonable out-of-pocket costs and expenses incurred by Lender and Mortgage Lender, including reasonable legal fees and expenses of counsel to Lender and Mortgage Lender, and other costs and expenses approved by Lender (which approval will not be unreasonably withheld) related to the Loan; (iii) establish the Reserves required hereunder; (iv) fund cash collateral requirements under certain letters of credit; and (v) provide for general corporate purposes including, without limitation, payment of transaction costs and expenses incurred by the Borrowers and capital contributions to the Mortgage Borrowers. The remaining proceeds of the Loan, if any, shall be disbursed to or as otherwise directed by the Borrowers. SECTION 2.2 INTEREST. (A) RATE OF INTEREST. The outstanding principal balance of the Loan shall bear interest at a rate per annum equal to the Interest Rate in effect for each Interest Accrual Period during the term hereof. The "INTEREST RATE" for any Interest Accrual Period shall be the rate of interest per annum equal to the sum of (i) the Applicable Spread plus (ii) the LIBO Rate in effect for such Interest Accrual Period; provided that such interest rate shall be subject to adjustment under the circumstances set forth in Section 2.4(D) of this Loan Agreement. (B) DEFAULT RATE. Notwithstanding the foregoing, upon the occurrence and during the continuance of an Event of Default and in any event from and after the Maturity Date of the Loan and until the Loan and all other Obligations are satisfied in full, the outstanding principal balance of the Loan and all other Obligations shall bear interest until paid in full at a rate per annum that is five percent (5.0%) in excess of the Interest Rate otherwise applicable under this Loan Agreement and the Note (the "DEFAULT Rate"). (C) COMPUTATION OF INTEREST. Interest on the Loan and all other Obligations owing to Lender shall be computed on the basis of a 360-day year, and shall be charged for the actual number of days elapsed during any month or other accrual period. Interest shall be payable in arrears (except with respect to the number of days from the Payment Date in any Interest Accrual Period to the last day of such Interest Accrual Period as to which interest shall be payable in advance). (D) INTEREST LAWS. Notwithstanding any provision to the contrary contained in this Loan Agreement or the other Loan Documents, the Borrowers shall not be required to pay, and Lender shall not be permitted to collect, any amount of interest in excess of the maximum amount of interest permitted by law ("EXCESS INTEREST"). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Loan Agreement or in any of the other Loan Documents, then in such event: (1) the provisions of this subsection shall govern and control; (2) the Borrowers shall not be obligated to pay any Excess Interest; (3) any Excess Interest that Lender may have received hereunder shall be, at Lender's option, (a) applied as a credit against either or both of the outstanding principal balance of the 26 Loan or accrued and unpaid interest thereunder (not to exceed the maximum amount permitted by law), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (4) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "MAXIMUM RATE"), and this Loan Agreement and the other Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (5) the Borrowers shall not have any action against Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Obligation is calculated at the Maximum Rate rather than the applicable rate under this Loan Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Obligations shall, to the extent permitted by law, remain at the Maximum Rate until Lender shall have received or accrued the amount of interest which Lender would have received or accrued during such period on Obligations had the rate of interest not been limited to the Maximum Rate during such period. If the Default Rate shall be finally determined to be unlawful, then the Interest Rate shall be applicable during any time when the Default Rate would have been applicable hereunder, provided however that if the Maximum Rate is greater or lesser than the Interest Rate, then the foregoing provisions of this paragraph shall apply. (E) LATE CHARGES. If an Event of Default regarding non-payment of principal, interest or other sums due hereunder or under any of the other Loan Documents shall occur, then the Borrowers shall pay to Lender, in addition to all sums otherwise due and payable, a late fee in an amount equal to five percent (5.0%) of such principal, interest or other sums due hereunder or under any other Loan Document, such late charge to be immediately due and payable without demand by Lender. SECTION 2.3 INTEREST RATE CAP AGREEMENT. (A) As a condition to Closing, the Borrowers shall purchase and pledge and deliver to Lender an interest rate cap agreement satisfying the criteria set forth below (the "CAP"), and the Borrowers shall maintain such Cap in the possession of Lender, in full force and effect until all Obligations are fully and finally repaid. The Cap (i) shall have a notional amount equal to the outstanding principal balance of the Loan calculated based upon the declining principal balance of the Loan scheduled to be outstanding over the term of such Cap taking into account scheduled principal amortization hereunder, (ii) shall provide that to the extent that the LIBO Rate exceeds six and one half percent (6.5%) per annum (the "CAP THRESHOLD RATE"), then the Cap Provider shall pay to Lender, on behalf of the Borrowers, not less than the amount of interest that would accrue on the Loan at a per annum rate equal to the difference between the LIBO Rate and the Cap Threshold Rate, (iii) shall be in form and substance reasonably satisfactory to Lender, (iv) shall have a term equal to the Initial Term of the Loan (or the applicable Extension Term), and (v) shall be issued by a financial institution (the "CAP PROVIDER") having a financial rating by S&P of at least "AA" (and at least an equivalent rating from each of the other Rating Agencies). (B) If at any time the financial rating assigned to any Cap Provider by S&P shall fall below AA- (or the equivalent rating for any other Rating Agency), the Borrowers shall be required to deliver a replacement Cap in substantially the form of the Cap delivered at Closing issued by a Cap Provider meeting the rating requirements for a Cap Provider under Section 27 2.3(A)(v), providing for a cap "strike price" not greater than the Cap Threshold Rate (a replacement Cap meeting all of the foregoing conditions, an "ACCEPTABLE REPLACEMENT CAP") within twenty (20) Business Days after receipt of notice from Lender or Servicer of such downgrade of the Cap Provider, together with an assignment of such Cap substantially in the form of the Assignment of Rate Cap and such Financing Statements and opinions of in-house or outside counsel to the Cap Provider as Lender may reasonably require each in form and substance acceptable to Lender. Notwithstanding the foregoing to the contrary, under no circumstances shall the Cap be terminated by the Borrowers prior to delivery of an Acceptable Replacement Cap, together with the required documentation with respect thereto, to Lender. If, for any reason, the Borrowers are unable to deliver a replacement Cap when required hereunder, then at or prior to the time when the replacement Cap is due hereunder, the Borrowers shall deliver to Lender cash security (such cash security together with any interest thereon, the "CAP RESERVE") in an amount sufficient to cover the amount of additional interest which Lender reasonably estimates may be incurred during the remaining term of the Loan (or remaining Extension Term then in effect) as a results of the LIBO Rate exceeding the Cap Threshold Rate, which Cap Reserve shall be held by Lender and applied to the Obligations in accordance with Section 6.1. Upon delivery of an Acceptable Replacement Cap reasonably acceptable to Lender, the remaining balance of the Cap Reserve shall be promptly returned to the Borrowers. (C) All payments made by the Cap Provider under the Cap shall be deposited directly by the Cap Provider into the Lock Box Account and applied in accordance with the Cash Management Agreement. SECTION 2.4 PAYMENTS. (A) PAYMENTS OF INTEREST AND PRINCIPAL. The Borrowers shall make payments of interest and principal on the Note as follows: (i) The Borrowers shall make a payment to Lender of interest only on the Closing Date for the first Interest Accrual Period; (ii) On each Payment Date commencing with the Payment Date in December 2002, and on each Payment Date thereafter through but not including the Payment Date in December 2003, the Borrowers shall make a payment of interest on the Loan for the Interest Accrual Period immediately preceding each such Payment Date, and in addition shall make a payment of principal on the Loan in an amount equal to the lesser of (x) the Scheduled Mezzanine Principal Payment or (y) Mezzanine Lender's Percentage of all Excess Cash Flow, provided that the Mezzanine Lender's Percentage of the amount of any Release Price Excess for any Property released during such period shall be deemed applied (without duplication) in reduction of each of the Scheduled Mezzanine Principal Payments next becoming due and payable under this clause (ii) and under clause (iii) of this Section 2.4(A) through the Scheduled Maturity Date (but not beyond) in an amount equal to (x) the Mezzanine Lender's Percentage of such Release Price Excess divided by (y) the number of such Scheduled Mezzanine Principal Payments remaining through the Scheduled Maturity Date; and (iii) On each Payment Date commencing with the Payment Date in December 2003, and on each Payment Date thereafter through the Maturity Date, the Borrowers shall make 28 a payment of interest on the Loan for the Interest Accrual Period immediately preceding each such Payment Date, and in addition shall make a payment of principal on the Loan in an amount equal to the Scheduled Mezzanine Principal Payment; provided that the Mezzanine Lender's Percentage of the amount of any Release Price Excess for any Property released during such period shall be deemed applied (without duplication) in reduction of each of Scheduled Mezzanine Principal Payments next becoming due and payable under this Section 2.4(A)(iii) through the Scheduled Maturity Date (but not beyond), or, if the subject Release occurs during an Extension Term, through the last Scheduled Mezzanine Principal Payment to be made during that Extension Term (but not beyond) in an amount equal to (x) the Mezzanine Lender's Percentage of such Release Price Excess divided by (y) the number of such Scheduled Mezzanine Principal Payments remaining through the current Maturity Date; and (iv) On each Payment Date prior to the Payment Date in November 2003, if the Mezzanine Lender's Percentage of Excess Cash Flow in any month exceeds the Scheduled Mezzanine Principal Payment for such month, the Mezzanine Lender's Percentage of such excess amount shall be paid to Lender and applied to principal on the Loan until the amount of any Amortization Deficiency has been reduced to zero, and any remainder Excess Cash Flow thereafter shall be distributed in accordance with the terms of the Mortgage Loan Cash Management Agreement or the Cash Management Agreement; and (v) At any time the then Aggregate Outstanding Principal Balance is less than $90,812,257,80, the Mezzanine Lender's Percentage of Excess Cash Flow shall be paid to Lender and applied on each Payment Date in reduction of the principal balance of the Loan (which payment shall be made without the imposition of any Prepayment Consideration). (B) DATE AND TIME OF PAYMENT. The Borrowers shall receive credit for payments on the Loan which are transferred to the account of Lender as provided below (i) on the day that such funds are received by Lender if such receipt occurs by 2:00 p.m. (New York time) on such day, or (ii) on the next succeeding Business Day after such funds are received by Lender if such receipt occurs after 2:00 p.m. (New York time). Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, the payment may be made on the next succeeding Business Day. (C) MANNER OF PAYMENT; APPLICATION OF PAYMENTS. The Borrowers promise to pay all of the Obligations relating to the Loan as such amounts become due or are declared due pursuant to the terms of this Loan Agreement. All payments by the Borrowers on the Loan shall be made without deduction, defense, set off or counterclaim and in immediately available funds delivered to Lender by wire transfer to such accounts at such banks as Lender may from time to time designate. Prior to an Event of Default, each payment shall be applied first to pay late charges and the charges and expenses of Lender, Servicer and any special servicer as provided hereunder, second to accrued and unpaid interest, and the balance to principal. Prior to an Event of Default, to the extent sufficient funds are contained in the Lock Box Account, or an Account or a Sub-Account thereof, or the Jekyll Island Lock Box Account, or an Account or Sub-Account thereof, to make the required monthly payments to the applicable Reserves and Sub-Account, if any, on such Payment Date, the Borrowers shall be deemed to have satisfied its obligation to make such payments. Upon the occurrence and during the continuance of an Event of Default, 29 payments shall be applied to the Obligations in such order as Lender shall determine in its sole and absolute discretion. (D) DISPROPORTIONATE PAYDOWNS. Under certain circumstances, payments of principal on the Mortgage Loan and on the Loan that would have been distributed pro-rata to the Mortgage Lender and to Lender under the Mortgage Loan Cash Management Agreement may, at Mortgage Lender's option, be applied only to reduce the outstanding principal balance and other sums due and owing under the Mortgage Loan (such event, a "DISPROPORTIONATE PAYDOWN"). If a Disproportionate Paydown occurs then, notwithstanding anything to the contrary contained herein or in the other Loan Documents, as a consequence of the fact that the interest rate on the Mortgage Loan is lower than the Interest Rate on the Loan, the weighted average interest rate payable by both the Mortgage Borrowers under the Mortgage Loan Documents and by the Borrowers under the Loan Documents on the Aggregate Outstanding Principal Balance, absent agreement to the contrary, would increase. Notwithstanding anything to the contrary herein, Lender agrees that, for the period following any Disproportionate Paydown, the Interest Rate shall be reduced (but not below zero) so that any interest payments on the Loan thereafter shall result in the Borrowers paying an amount of interest that, when added to the interest payments required to be made under the Mortgage Loan, would result in the weighted average interest rate paid by the Mortgage Borrowers and the Borrowers on the Aggregate Outstanding Principal Balance remaining the same as the weighted average interest rate that would have applied had such Disproportionate Paydown not occurred. SECTION 2.5 Maturity. (A) SCHEDULED MATURITY DATE. To the extent not sooner due and payable in accordance with the Loan Documents (and unless the Borrowers shall extend the term of the Loan for the First Extension Term, the Second Extension Term, or the Third Extension Term upon the terms and subject to the conditions of Section 2.5(B) below), the then outstanding principal balance of the Loan, all accrued and unpaid interest thereon (and including interest through the end of the Interest Accrual Period then in effect), and all other sums then owing to Lender hereunder and under the Note, the Pledge Agreement, the Jekyll Island Mortgage and the other Loan Documents, shall be due and payable on (i) the Scheduled Maturity Date or (ii) if the Borrowers shall have extended the term of the Loan for the First Extension Term, the Second Extension Term, or the Third Extension Term, upon the terms and subject to the conditions of Section 2.5(B) below, the applicable Maturity Date. (B) EXTENSION TERMS: The Borrowers may extend the term of the Loan for three extension terms of one year each (each, an "EXTENSION TERM", and, collectively the "EXTENSION TERMS"); (i) the first Extension Term (the "FIRST EXTENSION TERM") commencing on the day immediately following the Scheduled Maturity Date and ending (unless sooner terminated in accordance with the Loan Documents) on the first (1st) anniversary of the Scheduled Maturity Date, (ii) the second Extension Term (the "SECOND EXTENSION TERM") commencing on the day immediately following the last day of the First Extension Term and ending (unless sooner terminated in accordance with the Loan Documents) on the second (2nd) anniversary of the Scheduled Maturity Date and (iii) the third Extension Term (the "THIRD EXTENSION TERM") commencing on the day immediately following the last day of the Second Extension Term and ending (unless sooner terminated in accordance with the Loan Documents) on the third (3rd) 30 anniversary of the Scheduled Maturity Date; subject to the following terms and conditions, provided that subsections (iii) and (iv) shall not be conditions to the exercise of the First Extension Term: (i) The Borrowers shall give Lender notice (an "EXTENSION NOTICE") of their request to extend the term of the Loan for the First Extension Term at any time not later than forty-five (45) days prior to the Scheduled Maturity Date and for the Second Extension Term and the Third Extension Term, at least forty-five (45) days but not more than one hundred twenty (120) days prior to the expiration of the First Extension Term, or expiration of the Second Extension Term, as the case may be; (ii) With respect to the First Extension Term, (x) no Event of Default under Sections 8.1 (A) or (B) shall have occurred and be continuing and (y) all Pre-Petition Tax Liabilities then due and payable have been paid, as of the first (1st) day of the First Extension Term, and, with respect to the Second Extension Term and the Third Extension Term, no Event of Default shall have occurred and be continuing as of the date the Borrowers deliver the applicable Extension Notice or as of the expiration of the First Extension Term, or expiration of the Second Extension Term, as the case may be; (iii) The Debt Service Coverage Ratio for the trailing twelve (12) month period ended on the last day of the immediately preceding calendar quarter prior to the expiration of the First Extension Term, or expiration of the Second Extension Term, as the case may be, is at least equal to the Minimum DSCR, and the Debt Yield for the twelve (12) month period ended the last day of the immediately preceding calendar quarter prior to the expiration of the First Extension Term, or expiration of the Second Extension Term, as the case may be, is not less than 13.25%; provided however, if the Debt Service Coverage Ratio and/or the Debt Yield fail to satisfy such requirements, the Borrowers shall be entitled to make a principal prepayment of a portion of the Aggregate Outstanding Principal Balance (to be applied in accordance with the terms of the Mortgage Loan Cash Management Agreement or the Cash Management Agreement, as applicable), on the then current Maturity Date in an amount, as reasonably determined by Lender, sufficient to cause the Debt Service Coverage Ratio and/or the Debt Yield, as applicable, to satisfy such requirements based upon a recalculation thereof assuming that the prepayment amount were applied to reduce the principal amount of the Loan and the Mortgage Loan as of the last day of the immediately preceding calendar quarter (and provided that the Prepayment Consideration shall be payable in connection with such prepayment); (iv) Prior to the date the applicable Extension Term commences, the Borrowers shall deliver to Lender an extension fee equal to one quarter of one percent (.25%) of the outstanding principal balance of the Loan as of 31 the date the applicable Extension Term commences for each of the Second Extension Term and the Third Extension Term; (v) All of the conditions required to be satisfied for the extension of the Mortgage Loan have been satisfied and the Mortgage Loan will be extended for the applicable Extension Term; (vi) The Borrowers shall execute all such documents and other agreements as Lender shall reasonably request; (vii) The Borrowers shall deliver to Lender an extension of the Cap or a replacement Cap in form substantially the same as the Cap delivered at Closing covering the term of the applicable Extension Term, providing for a cap "strike price" (such "strike price", the "EXTENSION CAP THRESHOLD RATE") not greater than six and one-half percent (6.5%) per annum (it being acknowledged that the Borrowers may purchase an extension or replacement Cap for the applicable Extension Term with an Extension Cap Threshold Rate lower than such rate in order to satisfy the Debt Service Coverage Ratio requirement under Section 2.5(B)(iii) above) and otherwise satisfying the requirments of Section 2.3 together with an assignment of such replacement Cap substantially in the form of the Assignment of Rate Cap and such Financing Statements and opinions of counsel to the Cap Provider as Lender may reasonably require each in form and substance reasonably acceptable to Lender. The Borrowers shall be required to pay any and all reasonable out-of-pocket costs and expenses (including, without limitation, reasonable attorneys' fees and disbursements) incurred by Lender (and by any Servicer and trustee in connection with any Securitization backed in whole or in part by the Loan) in connection with delivery of such extension or replacement Cap and all related documentation and opinions required above; and (viii) The Mortgage Borrowers and the Jekyll Island Borrowers shall be in possession of all material licenses and permits required for the operation of not less than ninety percent (90%) of the hotel rooms located at the Properties in substantially the same manner as operated at Closing. SECTION 2.6 PREPAYMENT. (A) LIMITATION ON PREPAYMENT; PREPAYMENT CONSIDERATION DUE ON ACCELERATION. The Borrowers shall have no right to prepay the Loan in whole or part, except as expressly set forth in this Loan Agreement or the other Loan Documents. The Borrowers may prepay the Loan in whole, or, to the extent expressly provided herein, in part, at any time, provided that (i) the Borrowers shall provide to Lender not less than fifteen (15) days prior written notice of such prepayment, (ii) together with such prepayment the Borrowers also shall pay all accrued and unpaid interest and all other Obligations then due and owing and (iii) if such prepayment occurs on any day other than a Payment Date, then together therewith the Borrowers also shall pay to 32 Lender the amount of interest that would have accrued on the amount being prepaid from and including the date of such prepayment to the end of such Interest Accrual Period. (B) PREPAYMENT CONSIDERATION DUE. If any prepayment of all or any portion of the Loan shall occur on account of acceleration of the Loan (whether or not due to an Event of Default), or otherwise, then except only as expressly provided in this Loan Agreement or the other Loan Documents to the contrary, the Borrowers shall pay the Prepayment Consideration on the amount prepaid to Lender together with such prepayment, as liquidated damages and compensation for costs incurred, and in addition to all other amounts due and owing to Lender. Notwithstanding the foregoing, no Prepayment Consideration will be due as to a prepayment of the Loan in connection with (i) application of insurance or condemnation proceeds required by Lender pursuant to this Agreement in the absence of an Event of Default, (ii) amortization payments made in accordance with Section 2.4(A), (iii) in connection with the first $36,324,903.12 of prepayments made in connection with one or more Property Releases and Collateral Releases (it being agreed that the Prepayment Consideration will be due with respect to all, or any portion of, a prepayment made in connection with a Property Release and Collateral Release after the point that the aggregate amount of all prepayments made in connection with Property Releases and Collateral Releases (other than Collateral Releases effectuated pursuant to Section 5.5(B)) exceeds $36,324,903.12),(iv) in connection with the Reserve Principal Payment, or (v) upon prepayment of the Loan in full, on any date on or after the Payment Date occurring in October 2004, through the Scheduled Maturity Date (provided the amount of interest that would have accrued on the amount being prepaid from and including the date of such prepayment through the following Payment Date shall be payable with such prepayment). The foregoing designation of any amount of Prepayment Consideration in this Agreement shall not create a right to prepay at any time or in any circumstances where this Agreement does not expressly state that such a right exists. "PREPAYMENT CONSIDERATION" shall mean an amount equal to (i) prior to the Payment Date in December 2003, three percent (3%) of the Loan balance at the time of prepayment, and (ii) on and after the Payment Date in December 2003, but prior to the Payment Date in May 2004, two percent (2%) of the Loan balance at the time of prepayment, and (iii) thereafter through the Scheduled Maturity Date one percent (1%) of the Loan balance at the time of prepayment. (C) RESERVE PRINCIPAL PAYMENT. The Borrowers may prepay a portion of the outstanding principal balance of the Loan in an amount not to exceed the Reserve Principal Payment prior to the Payment Date in November 2003, without payment of the Prepayment Consideration, provided, however, any such payment shall be (i) accompanied by the other amounts required to be paid as required in Section 2.6(A) above, and (ii) paid form money of the Borrowers (as opposed to the Mortgage Loan Borrowers). No portion of any release consideration paid to Lender in accordance with Section 11.4 of this Loan Agreement shall be deemed to be a payment of the Reserve Principal Payment. SECTION 2.7 OUTSTANDING BALANCE. The balance on Lender's books and records shall be presumptive evidence (absent manifest error) of the amounts owing to Lender by the Borrowers; provided that any failure to record any transaction affecting such balance or any error in so recording shall not limit or otherwise affect the Borrowers' obligation to pay the Obligations. 33 SECTION 2.8 TAXES. Any and all payments or reimbursements made hereunder or under the Note shall be made free and clear of and without deduction for any and all taxes, withholding taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto arising out of or in connection with the transactions contemplated by the Loan Documents (all such taxes, levies, imposts, deductions, charges or withholdings and all liabilities with respect thereto (excluding taxes imposed on net income in accordance with the following sentence) herein "TAX LIABILITIES"). Notwithstanding the foregoing, the Borrowers shall not be liable for taxes imposed on the net income of Lender by the jurisdiction under the laws of which Lender is organized or doing business or any political subdivision thereof and taxes imposed on its net income by the jurisdiction of Lender's applicable lending office or any political subdivision thereof. If the Borrowers shall be required by law to deduct any such Tax Liabilities (or amounts in estimation or reimbursement for the same) from or in respect of any sum payable hereunder to Lender, then the sum payable hereunder shall be increased as may be necessary so that, after making all required deductions, Lender receives an amount equal to the sum it would have received had no such deductions been made. SECTION 2.9 REASONABLENESS OF CHARGES. The Borrower Parties agree that (i) the actual costs and damages that Lender would suffer by reason of an Event of Default (exclusive of the attorneys' fees and other costs incurred in connection with enforcement of Lender's rights under the Loan Documents) or a prepayment would be difficult and needlessly expensive to calculate and establish, and (ii) the amounts of the Default Rate, the late charges, and the Prepayment Consideration are reasonable, taking into consideration the circumstances known to the parties at this time, and (iii) such Default Rate and late charges and Lender's reasonable attorneys' fees and other costs and expenses incurred in connection with enforcement of Lender's rights under the Loan Documents shall be due and payable as provided herein, and (iv) such interest at the Default Rate, late charges, Prepayment Consideration, and the obligation to pay Lender's reasonable attorneys' fees and other enforcement costs do not, individually or collectively, constitute a penalty. SECTION 2.10 FUNDING LOSSES/CHANGE IN LAW ETC. (A) The Borrowers hereby agree to pay to Lender any amount necessary to compensate Lender and any Funding Party for any losses or costs (including, without limitation, the costs of breaking any "LIBOR" contract, if applicable, or funding losses determined on the basis of Lender's or such Funding Party's reinvestment rate and the interest rate on the Loan) (collectively, "FUNDING LOSSES") sustained by Lender or any Funding Party: (i) if the Note, or any portion thereof, is repaid for any reason whatsoever on any date other than a Payment Date (including, without limitation, from condemnation or insurance proceeds), or (ii) as a consequence of (x) any increased cost of funds that Lender or any Funding Party may sustain in maintaining the borrowing evidenced hereby or (y) the reduction of any amounts received or receivable from the Borrowers, in either case, due to the introduction of, or any change in, law or applicable regulation or treaty adopted after the date hereof (including the administration or interpretation thereof), whether or not having the force of law, or due to the compliance by Lender or the Funding Party, as the case may be, with any directive, whether or not having the force of law, or request from any central bank or domestic or foreign governmental authority, agency or instrumentality having jurisdiction made as of the date hereof, to the extent Lender reasonably determines that such Funding Losses are allocable to the Loan. 34 (B) If Lender or any Funding Party shall have determined that the applicability of any law, rule, regulation or guideline adopted pursuant to or arising out of the July 1988 report of the Basle Committee on Banking Regulations and Supervisory Practices entitled "International Convergence of Capital Measurement and Capital Standards", or the adoption of any other law, rule, regulation or guideline (including but not limited to any United States law, rule, regulation or guideline) regarding capital adequacy, or any change becoming effective in any of the foregoing or in the enforcement or interpretation or administration of any of the foregoing by any court or any domestic or foreign governmental authority, central bank or comparable agency charged with the enforcement or interpretation or administration thereof, or compliance by Lender or its holding company or a Funding Party or its holding company, as the case may be, 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 made after the date hereof, has or would have the effect of reducing the rate of return on the capital of Lender or its holding company, or of the Funding Party's or its holding company, as the case may be, then, upon demand by Lender, the Borrowers shall pay to Lender, from time to time, such additional amount or amounts as will compensate Lender or such Funding Party for any such reduction suffered. (C) Any amount payable by the Borrowers under Section 2.10(A) or 2.10(B) shall be paid to Lender within fifteen (15) Business Days after receipt by the Borrowers of a certificate signed by an officer of Lender setting forth the amount due and the basis for the determination of such amount in reasonable detail and the computations made by Lender to determine the amount due, which statement shall be conclusive and binding upon the Borrowers, absent manifest error Failure on the part of Lender to demand payment from the Borrowers for any such amount attributable to any particular period shall not constitute a waiver of Lender's right to demand payment of such amount for any subsequent or prior period. Lender shall use reasonable efforts to deliver to the Borrowers prompt notice of any event described in Sections 2.10(A) or 2.10(B) above and of the amount to be paid as a result thereof, provided, however, any failure by Lender to so notify the Borrowers shall not affect the Borrowers' obligation to make the payments to be made under this Section as a result thereof. All amounts which may become due and payable by the Borrowers in accordance with the provisions of this Section shall constitute additional interest under the Loan and shall be secured by the Pledge Agreement, the Jekyll Island Mortgage and the other Loan Documents. (D) If Lender or any Funding Party requests compensation for any losses or costs to be reimbursed pursuant to any one or more of the provisions of clause (ii) of Sections 2.10(A) or 2.10(B), then, upon request of the Borrowers, Lender or such Funding Party shall use reasonable efforts in a manner consistent with such institution's practice in connection with loans like the Loan to eliminate, mitigate or reduce amounts that would otherwise be payable by the Borrowers under the foregoing provisions, provided that such action would not be otherwise prejudicial to Lender or such Funding Party, including, without limitation, by designating another of Lender's or such Funding Party's offices, branches or affiliates; the Borrowers hereby agreeing to pay all reasonably incurred costs and expenses incurred by Lender or any Funding Party in connection with any such action. SECTION 2.11 SERVICING/SPECIAL SERVICING. Lender may change the Servicer from time to time without the consent of the Borrowers, on prior written notice to the Borrowers. The Borrowers expressly acknowledge and agree that the Servicer's fees (the "SERVICING FEE"), which shall in 35 no event exceed .05% per annum on the outstanding principal balance of the Loan, payable in monthly installments, and if the Loan becomes a specially serviced loan, any fees of the special servicer, shall be payable by the Borrowers and shall constitute a portion of the Obligations; provided, however, that at no time shall the Borrowers be liable for Servicing Fees or special servicing fees in excess of those fees charged to Lender by the Servicer or any special servicer. SECTION 2.12 MORTGAGE LOAN EVENT OF DEFAULT. Notwithstanding anything to the contrary contained herein or the other Loan Documents, if compliance by Borrower or Mortgage Borrower with the provisions of this Loan Agreement would cause an Event of Default (as such term is defined in the Mortgage Loan Agreement) to occur, after the giving of notice or passage of any grace periods provided for in the Mortgage Loan Agreement, Borrower shall notify the Lender in writing and Borrower shall not be in default hereunder or under the other Loan Documents by reason of its failure to comply with such provisions. Lender reserves the right to modify any such provisions to prevent the occurrence of an Event of Default under the Mortgage Loan Agreement, in which case failure to comply with such modified provisions shall not be excused hereby. Furthermore, Borrower acknowledges and agrees that this Section 2.12 shall in no way relieve Borrower from the obligation to perform any obligation under the Loan Agreement or the other Loan Documents that may be performed by the payment of a sum of money. SECTION 2.13 MEZZANINE LENDER APPROVALS. (A) Lender and Borrowers acknowledge and agree that both Mortgage Lender and Lender have certain approval rights with respect to the operation of the Properties (other than the Jekyll Island Property) and other matters pursuant to the Mortgage Loan Documents and the Loan Documents, including approval of Managers, Franchisors, Leases, alterations and annual budgets. Notwithstanding anything to the contrary contained herein or in the other Loan Documents, until such time as the Mortgage Loan has been satisfied, and to the extent Lender and Mortgage Lender shall have approval rights covering the same matters, the Borrowers shall submit such requests for approval in the following manner and shall be subject to the following procedures (the "APPROVAL PROCEDURES"): (i) the Borrowers shall (x) With respect to any Specified Approval, deliver to Lender only all such requests for any Specified Approval at least fifteen (15) days prior to the date a corresponding request for approval shall be submitted by the Mortgage Borrowers to the Mortgage Lenders under the Mortgage Loan Agreement (it being agreed that the Borrowers shall not permit the Mortgage Borrowers to submit a corresponding request for Approval to the Mortgage Lenders until such 15-day period has expired), and (y) with respect to all other requests for approval, shall deliver such requests simultaneously to both Lender and Mortgage Lender, (ii) following the initial submission requesting any Specified Approval to Lender, the Borrowers shall cooperate with Lender during such 15-day period and respond to any comments or suggested changes recommended by Lender prior to the Mortgage Borrowers submitting a corresponding request for approval to Mortgage Lender, (iii) if the Borrowers or the Mortgage Borrowers intend to submit a request for approval to the Mortgage Lender that differs in any respect from the matters as approved (or disapproved) by Lender, the Borrowers shall, or shall cause the Mortgage Borrowers to, submit to Mortgage Lender with any such request, a copy of all correspondence and materials from Lender relating to Lender's approval or disapproval of the request for the Specified Approval, and (iv) provided the Borrowers comply, and cause the Mortgage Borrowers to comply, with the foregoing, the Borrowers shall be entitled to rely on the approval or 36 requirements given by the Mortgage Lender in accordance with the terms of the Mortgage Loan Documents. (B) Until such time as the Mortgage Loan has been satisfied, if and to the extent the consent or approval of the Mortgage Lender is required in order for the Borrowers to perform their obligations under the Loan Documents without violating the provisions of the Mortgage Loan Documents, the Borrowers shall not be deemed in default hereunder, but shall seek all consents and approvals of the Lender in accordance with the terms and provisions of this Loan Agreement and the other Loan Documents and shall seek all required consents or approvals of the Mortgage Lender under the Mortgage Loan Documents to permit the Borrowers to comply with their obligations under the Loan Documents; and the Borrowers shall not be in default if Mortgage Lender does not grant such approval or consent. ARTICLE III CONDITIONS TO LOAN SECTION 3.1 CONDITIONS TO FUNDING OF THE LOAN ON THE CLOSING DATE. The obligations of Lender to fund the Loan are subject to the prior or concurrent satisfaction or waiver of the conditions set forth below, and to satisfaction of any other conditions specified herein or elsewhere in the Loan Documents. With respect to facts and circumstances actually known to Lender at Closing, by funding the Loan Lender shall be deemed to have acknowledged that each of the conditions set forth below has been satisfied or waived (except as otherwise set forth in any other agreement in writing between the Borrowers and Lender). Where in this Section any documents, instruments or information are to be delivered to Lender, then the condition shall not be satisfied unless (i) the same shall be in form and substance satisfactory to Lender, and (ii) if so required by Lender, the Borrowers shall deliver to Lender a certificate duly executed by the Borrowers stating that the applicable document, instrument or information is true and complete and does not omit to state any information without which the same might reasonably be deemed materially misleading. (A) LOAN DOCUMENTS. On or before the Closing Date, the Borrowers shall execute and deliver and cause to be executed and delivered to Lender all of the Loan Documents specified in SCHEDULE 3.1(A) to which it is a party, together with such other Loan Documents as may be reasonably required by Lender, each, unless otherwise noted, of even date herewith, duly executed, in form and substance satisfactory to Lender and in quantities designated by Lender (except for the Note, of which only one shall be signed), which Loan Documents shall become effective upon the Closing. (B) DEPOSITS. The deposits required pursuant to the terms of the Mortgage Loan Agreement and this Loan Agreement, including without limitation the initial deposits into the Reserves and Accounts, shall have been made (and at the Borrowers' option, the same may be made from the proceeds of the Loan). (C) PERFORMANCE OF AGREEMENTS, TRUTH OF REPRESENTATIONS AND WARRANTIES. Each Borrower and all other Persons executing any agreement on behalf of any Borrower shall have performed in all material respects all agreements which this Loan Agreement provides shall be performed on or before the Closing Date. The representations and warranties contained 37 herein and in the other Loan Documents shall be true, correct and complete in all material respects on and as of the Closing Date. (D) CLOSING CERTIFICATE. On or before the Closing Date, Lender shall have received certificates of even date herewith executed on behalf of each Borrower by the chief financial officer (or similar officer of the applicable Borrower) stating that: (i) on such date, to the Borrowers' Knowledge no Default exists; (ii) no material adverse change in the financial condition or operations of the business of the Borrowers, Mortgage Borrowers or the projected cash flow of either of them or of the Properties has occurred since the delivery to Lender of any financial statements, budgets, proformas, or similar materials (or if there has been any change, specifying such change in detail), and that, to the Borrowers' Knowledge after due inquiry, such financial materials fairly present the financial condition and results of operation of the Borrowers, the Mortgage Borrowers, and the Properties, and all other materials delivered to Lender are complete and accurate in all material respects; and (iii) the representations and warranties set forth in this Loan Agreement are true and correct in all material respects on and as of such date with the same effect as though made on and as of such date (or if any such representations or warranties require qualification, specifying such qualification in detail) and (iv) to the Borrowers' Knowledge after due inquiry, there are no material facts or conditions concerning the Properties or any Borrower Party that have not been disclosed to Lender which could have a Material Adverse Effect. (E) OPINIONS OF COUNSEL. On or before the Closing Date, Lender shall have received from Cadwalader, Wickersham & Taft or other legal counsel for the Borrowers satisfactory to Lender, written legal opinions, each in form and substance acceptable to Lender, as to such matters as Lender shall request, including opinions to the effect that (i) each of the Borrower Parties is duly formed, validly existing, and in good standing in its state of organization, (ii) this Loan Agreement and the Loan Documents have been duly authorized, executed and delivered and are enforceable in accordance with their terms subject to customary qualifications for bankruptcy, general equitable principles, and other customary assumptions and qualifications; (iii) the Cash Management Agreement has been duly authorized, executed and delivered by the Borrowers and is enforceable in accordance with its terms and the security interests in favor of Lender in the Account Collateral have been validly created and perfected; and (iv) none of the Borrowers, nor Member would be consolidated in any bankruptcy proceeding affecting Guarantor or certain other Affiliates of the Borrower Parties specified by Lender. Also on or before the Closing Date, Lender shall have received the following legal opinions, each in form and substance acceptable to Lender: (a) an opinion of the Borrowers' counsel as to the enforceability of, and the creation and perfection of Liens under, the Pledge Agreement and the Jekyll Island Mortgage and such other matters as Lender may reasonably request; (b) an opinion of counsel to the Cap Provider that the Cap has been duly authorized, executed and delivered by the Cap Provider and is enforceable in accordance with its terms and such other matters as Lender may reasonably request; (c) opinions of Richards, Layton & Finger or other Delaware legal counsel, acceptable to Lender, for each Borrower that is a single member limited liability company formed under the laws of the State of Delaware that, among other matters, (1) under Delaware law (x) the prior unanimous written consent of Member (and the unanimous written consent of the board of directors of Member including the Independent Directors) would be required for a voluntary bankruptcy filing by each such Borrower, (y) the prior unanimous written consent of the board of directors of Member (including the Independent Directors), or the 38 unanimous prior written consent of the board of managers' of each Borrower, including the Independent Directors' would be required for a voluntary bankruptcy filing by Member, (z) such unanimous consent requirements are enforceable against Member in accordance with their terms; (2) under Delaware law the bankruptcy or dissolution of Member would not cause the dissolution of any of the Borrowers and the bankruptcy or dissolution of Guarantor would not cause the dissolution of Member; (3) under Delaware law, creditors of Member shall have no legal or equitable remedies with respect to the assets of any of the Borrowers and creditors of Guarantor shall have no legal or equitable remedies with respect to the assets of Member; and (4) a federal bankruptcy court would hold that Delaware law governs the determination of what Persons have authority to file a voluntary bankruptcy petition on behalf of each Borrower and Member; and (d) such other legal opinions as Lender may reasonably request. (F) TITLE POLICIES. On or before the Closing Date, Lender shall have received the Title Policies. The Title Policies shall be in form and substance reasonably satisfactory to Lender. (G) SURVEY. Lender shall have received a survey of the Jekyll Island Property, certified to Lender and its successors, assigns and designees and to each Title Company by a surveyor reasonably satisfactory to Lender (the "SURVEY"). The Survey shall contain the minimum detail for land surveys as most recently adopted by ALTA/ASCM, shall comply with Lender's survey requirements and shall contain Lender's standard form certification, and shall show no state of facts or conditions reasonably objectionable to Lender. (H) ZONING. On or before the Closing Date, Lender shall have received evidence reasonably satisfactory to Lender as to the zoning and subdivision compliance of the Jekyll Island Property. (I) CERTIFICATES OF FORMATION AND GOOD STANDING. On or before the Closing Date, Lender shall have received copies of the organizational documents and filings of each Borrower Party, together with good standing certificates (or similar documentation) (including verification of tax status) from the state of its formation and from all states in which the laws thereof require such Person to be qualified and/or licensed to do business. Each such certificate shall be dated not more than 30 days prior to the Closing Date, as applicable, and certified by the applicable Secretary of State or other authorized governmental entity. In addition, on or before the Closing Date the secretary or corresponding officer of each Borrower Party, or the secretary or corresponding officer of the partner, trustee, or other Person as required by such Borrower Party's organizational documents (as the case may be, the "BORROWER PARTY SECRETARY") shall have delivered to Lender a certificate stating that the copies of the organizational documents as delivered to Lender are true and complete and are in full force and effect, and that the same have not been amended except by such amendments as have been so delivered to Lender. (J) CERTIFICATES OF INCUMBENCY AND RESOLUTIONS. On or before the Closing Date, Lender shall have received certificates of incumbency and resolutions of each Borrower Party and its constituents as requested by Lender, approving and authorizing the Loan and the execution, delivery and performance of the Loan Documents, certified as of the Closing Date by the Borrower Party Secretary as being in full force and effect without modification or amendment. 39 (K) FINANCIAL STATEMENTS. On or before the Closing Date, Lender shall have received such financial statements and other financial information as shall be satisfactory to Lender for each Borrower, for each Guarantor and for the Properties. If any such statements are not available for the Properties, then the Borrowers shall cause the Mortgage Borrowers to provide such financial reports as are available. All such financial statements shall be certified to Lender by the applicable Borrower Party (through its chief financial officer or other officer charged with similar duties), which certification shall be in form and substance reasonably satisfactory to Lender. (L) OPERATING AND CAPEX/FF&E BUDGETS; CAPITAL IMPROVEMENT PLAN. On or before the Closing Date, Lender shall have received and approved the Operating Budget and CapEx/FF&E Budget for the Properties for the remainder of the current calendar year and the Capital Improvement Plan for the Properties. (M) AGREEMENTS. On or before the Closing Date, Lender shall have received a list of all Material Agreements and, to the extent requested by Lender, copies thereof. (N) MANAGEMENT AGREEMENT; FRANCHISE AGREEMENT. On or before the Closing Date, Lender shall have received copies of the Management Agreements and any leasing brokerage agreements pertaining to the Properties and the Assignments of Management Agreements, duly executed by each Manager and the applicable Mortgage Borrower or the Jekyll Island Borrowers. On or before the Closing Date, Lender shall have received copies of the existing Franchise Agreements and each Franchisor Letter (including any Property Improvement Plan) duly executed by the applicable Franchisor and, if applicable, such additional Franchise Agreement (or commitment to issue such Franchise Agreement), together with Franchisor Letters (including any Property Improvement Plan) duly executed by the Franchisors. (O) RENT ROLL. Prior to the Closing, Lender shall have received from the Borrowers a rent roll for the Jekyll Island Property (the "RENT ROLL") with respect to Material Leases, if any, certified by the Jekyll Island Borrowers, and in form and substance satisfactory to Lender. The Rent Roll shall constitute a true, correct, and complete list of each and every Material Lease at the Jekyll Island Property, together with all extensions and amendments thereof, and shall accurately and completely disclose all annual and monthly rents payable by all tenants, including all percentage rents, if any, and expiration dates of such Material Leases at the Jekyll Island Property, and the amount of security deposit being held by the Borrowers under each Material Lease at the Jekyll Island Property, if any. (P) MATERIAL LEASES. Prior to the Closing, Lender shall have received true, correct and complete copies of the Material Leases at the Jekyll Island Property, as amended. (Q) LICENSES, PERMITS AND APPROVALS. On or before Closing Date, Lender shall have received copies of the final, unconditional certificates of occupancy issued with respect to the Jekyll Island Property, together with all other applicable licenses (including, without limitation, each liquor license and beer permit), permits and approvals required for the Jekyll Island Borrowers to own, use, occupy, operate and maintain the Jekyll Island Property as a hotel. 40 (R) INSURANCE POLICIES AND ENDORSEMENTS. On or before the Closing Date, Lender shall have received copies of certificates of insurance (dated not more than 20 days prior to the Closing Date) regarding insurance required to be maintained under this Loan Agreement and the other Loan Documents by the Jekyll Island Borrowers, together with endorsements satisfactory to Lender naming Lender as an additional insured and loss payee, as required by this Loan Agreement, under such policies. In addition, as to any insurance matters arising under Environmental Laws or pertaining to any environmental insurance that any of the Borrowers has with respect to the Jekyll Island Property, the same shall be endorsed to Lender as required by this Loan Agreement and shall name Lender as an insured, additional insured and/or loss payee, as applicable. (S) ENVIRONMENTAL ASSESSMENT. Lender shall have received the Environmental Reports relating to the Jekyll Island Property, together with a letter from each preparer thereof entitling Lender and its successors and assigns to rely upon said Environmental Report. (T) PROPERTY CONDITION REPORT. On or before the Closing Date, Lender shall have received a property condition report for the Jekyll Island Property, which shall be prepared by an engineer or other consultant satisfactory to Lender and otherwise shall be in form and substance satisfactory to Lender in its sole discretion (the "PROPERTY CONDITION REPORT"). Such report shall set forth any items of deferred maintenance at the Jekyll Island Property. (U) APPRAISAL. On or before the Closing Date, Lender shall have received an independent appraisal of the Jekyll Island Property from a state certified appraiser engaged by Lender. Each such appraisal shall conform in all respects to the criteria for appraisals set forth in the Financial Institutions Reform and Recovery Act of 1989 and the regulations promulgated thereunder (as if Lender were an institution under the jurisdiction thereof) and the Uniform Standards of Professional Appraisal Practices of the Appraisal Foundation. (V) SEARCHES. Prior to the Closing Date, Lender shall have received copies of Uniform Commercial Code, judgment, lien, bankruptcy and litigation search reports with respect to the Borrowers, Guarantor and Member, all dated not more than thirty (30) days prior to the Closing Date. (W) LEGAL FEES; CLOSING EXPENSES. The Borrowers shall have paid any and all reasonable legal fees and expenses of counsel to Lender, together with all recording fees and taxes, title insurance premiums, and other reasonable costs and expenses related to the Closing. (X) COMMITMENT CONDITIONS. If a commitment letter or similar agreement shall have been issued by Lender for the Loan, such additional conditions as shall be specified in such commitment shall have been satisfied. (Y) OTHER REVIEW. Lender shall have completed all other review of the Borrowers, the Guarantors, the Properties, and such other items as it reasonably determines relevant, and shall have determined based upon such review to fund the Loan. The Borrowers shall have satisfied such other reasonable criteria as Lender may reasonably specify. (Z) GROUND LEASES; GROUND LESSOR ESTOPPELS. On or before the Closing Date, Lender shall have received (i) true and complete copies of each of the Ground Leases, certified 41 by the Borrowers, and (ii) estoppels and agreements substantially in the form of EXHIBIT E, or otherwise reasonably acceptable to Lender, duly executed by each Ground Lessor. (AA) MORTGAGED CONDOMINIUM PROPERTY AGREEMENTS. On or before the Closing Date, Lender shall have received an estoppel and agreement of the Board of Mangers in form and substance reasonably acceptable to Lender. ARTICLE IV REPRESENTATIONS AND WARRANTIES In order to induce Lender to enter into this Loan Agreement and to make the Loan, each of the Borrowers represents and warrants to Lender that the statements set forth in this Article IV, after giving effect to the Closing, will be, true, correct and complete in all material respects as of the Closing Date. SECTION 4.1 ORGANIZATION, POWERS, CAPITALIZATION, GOOD STANDING, BUSINESS. (A) ORGANIZATION AND POWERS. Each Borrower Party is duly organized, validly existing and in good standing under the laws of the state of its formation. Each Borrower Party has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and proposed to be conducted, and to enter into each Loan Document to which it is a party and to perform the terms thereof. (B) QUALIFICATION. Each Borrower Party is duly qualified and in good standing in the state of its formation. In addition, each Borrower Party is duly qualified and in good standing in each state where necessary to carry on its present business and operations, except in jurisdictions in which the failure to be qualified and in good standing could not reasonably be expected to have a Material Adverse Effect. (C) ORGANIZATION. The organizational chart set forth as SCHEDULE 4.1(C) accurately sets forth the direct and indirect ownership structure of the Borrowers, Mortgage Borrowers and Members. The Borrowers (excluding the Jekyll Island Borrowers), individually or together own all direct and indirect interests in the Mortgage Borrowers (other than, with respect to Servico Centre Associates, Ltd., the interests held by the individual limited partners consisting of 50% of the ownership interests in Servico Centre Associates, Ltd.) and have the power and authority to control the actions of the Mortgage Borrowers. SECTION 4.2 AUTHORIZATION OF BORROWING, ETC. (A) AUTHORIZATION OF BORROWING. The Borrowers have the power and authority to incur the Indebtedness evidenced by the Note. The execution, delivery and performance by each Borrower of each of the Loan Documents to which it is a party and the consummation of the transactions contemplated thereby have been duly authorized by all necessary limited liability company, partnership, trustee, corporate or other action, as the case may be. (B) NO CONFLICT. The execution, delivery and performance by each Borrower of the Loan Documents to which it is a party and the consummation of the transactions contemplated thereby do not and will not: (1) violate (x) any provision of law applicable to any Borrower; 42 (y) the partnership agreement, certificate of limited partnership, certificate of incorporation, bylaws, declaration of trust, operating agreement or other organizational documents, as the case may be, of each Borrower; or (z) any order, judgment or decree of any Governmental Authority binding on any Borrower or any of its Affiliates; (2) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of any Borrower or any of its Affiliates (except where such breach will not cause a Material Adverse Effect); (3) result in or require the creation or imposition of any material Lien (other than the Lien of the Loan Documents) upon the Collateral or assets of any Borrower; or (4) except as set forth on SCHEDULE 4.2, require any approval or consent of any Person under any material Contractual Obligation of any Borrower, which approvals or consents have been obtained on or before the dates required under such material Contractual Obligation, but in no event later than the Closing Date. (C) GOVERNMENTAL CONSENTS. The execution and delivery by each Borrower Party of the Loan Documents to which it is a party, and the consummation of the transactions contemplated thereby do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Governmental Authority. (D) BINDING OBLIGATIONS. This Loan Agreement is, and the Loan Documents, including the Note, when executed and delivered will be, the legally valid and binding obligations of each Borrower that is a party thereto, enforceable against each of the Borrowers, as applicable, in accordance with their respective terms, subject to bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting creditor's rights. No Borrower has any defense or offset to any of its obligations under the Loan Documents to which it is a party. No Borrower has any claim against Lender or any Affiliate of Lender. SECTION 4.3 FINANCIAL STATEMENTS. To the Borrowers' Knowledge after due inquiry, all financial statements concerning any of the Borrowers, their Affiliates, the Mortgage Borrowers and the Properties which have been furnished by or on behalf of the Borrowers or the Mortgage Borrowers to Lender pursuant to this Loan Agreement have been prepared in accordance with GAAP consistently applied (except as disclosed therein) and present fairly the financial condition of the Persons covered thereby as at the dates thereof and the results of their operations for the periods then ended. Since the date of the financial statements delivered to Lender, there has been no material adverse change in the financial condition, operations or business of the Borrowers or the Properties from that set forth in said financial statements. SECTION 4.4 INDEBTEDNESS AND CONTINGENT OBLIGATIONS. As of the Closing, except as previously disclosed to and approved by Lender in writing and set forth on SCHEDULE 4.4, neither the Borrowers nor the Mortgage Borrowers shall have any outstanding Indebtedness or Contingent Obligations other than the Obligations or any other Permitted Indebtedness. SECTION 4.5 TITLE TO THE PROPERTIES AND COLLATERAL. Each of the Mortgage Borrowers and the Jekyll Island Borrowers had good and marketable fee simple title (or, in the case of the Ground Leased Properties, leasehold title) to its Property, free and clear of all Liens except for the Permitted Encumbrances. The Mortgage Borrowers or the Jekyll Island Borrowers own and will own at all times all FF&E relating to the Properties (other than personal property which is either owned by tenants of such Property, not used or necessary for the operation of the applicable 43 Property, or leased by the Mortgage Borrowers or the Jekyll Island Borrowers as permitted hereunder), subject only to Permitted Encumbrances. The Borrowers are the record and beneficial owners and own good and indefeasible title to the Collateral, free and clear of all Liens. There are no outstanding options to purchase or rights of first refusal affecting the Collateral. To the Borrowers' Knowledge, there are no proceedings in condemnation or eminent domain affecting any of the Properties, and to the actual knowledge of the Borrowers, none is threatened. No Person has any option or other right to purchase all or any portion of any of the Properties or any interest therein. To the Borrowers' Knowledge, there are no mechanic's, materialman's or other similar liens or claims which have been filed for work, labor or materials affecting the Properties. None of the Permitted Encumbrances, individually or in the aggregate, materially interfere with the benefits of the security intended to be provided by the Pledge Agreement, the Jekyll Island Mortgage and this Loan Agreement, materially and adversely affect the value of any of the Collateral or impair the Borrowers' ability to pay its obligations in a timely manner. SECTION 4.6 ZONING; COMPLIANCE WITH LAWS. Except as set forth on SCHEDULE 4.6, to the Borrower's Knowledge, the Jekyll Island Property and the use thereof comply in all material respects with all applicable zoning, subdivision and land use laws, regulations and ordinances, all applicable health, fire, building codes, parking laws and all other laws, statutes, codes, ordinances, rules and regulations applicable to the Jekyll Island Property, including without limitation the Americans with Disabilities Act. To the Borrowers' Knowledge, there are no illegal activities relating to controlled substances on the Jekyll Island Property. All material permits, licenses and certificates for the lawful use, occupancy and operation of each component of the Jekyll Island Property in the manner in which it is currently being used, occupied and operated, including, but not limited to liquor licenses and certificates of occupancy, or the equivalent, have been obtained and are current and in full force and effect. To the Borrower's Knowledge, except as disclosed on Schedule 4.6, in the event that all or any part of the Improvements located on the Jekyll Island Property is destroyed or damaged, said Improvements can be legally reconstructed to their condition prior to such damage or destruction, and thereafter exist for the same use without violating any zoning or other ordinances applicable thereto and without the necessity of obtaining any variances or special permits, other than customary demolition, building and other construction related permits. To the Borrowers' Knowledge, no legal proceedings are pending or threatened with respect to the zoning of the Jekyll Island Property. To the Borrowers' Knowledge, except as set forth in the Title Policies and/or the Survey, neither the zoning nor any other right to construct, use or operate the Jekyll Island Property is in any way dependent upon or related to any real estate other than the Jekyll Island Property. No tract map, parcel map, condominium plan, condominium declaration, or plat of subdivision will be recorded by the Jekyll Island Borrowers with respect to the Jekyll Island Property without Lender's prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned. SECTION 4.7 LEASES; AGREEMENTS. (A) LEASES; AGREEMENTS. To the Borrowers' Knowledge, it has delivered to Lender true and complete copies (in all material respects) of all (i) Leases, if any, and (ii) Material Agreements affecting the operation and management of the Jekyll Island Property, and such Leases and Material Agreements have not been modified or amended except pursuant to 44 amendments or modifications delivered to Lender. Except for the rights of the current Manager pursuant to the existing Management Agreement at the Jekyll Island Property, no Person has any right or obligation to manage the Jekyll Island Property or to receive compensation in connection with such management. Except for the parties to any leasing brokerage agreement that has been delivered to Lender, no Person has any right or obligation to lease or solicit tenants for the Jekyll Island Property, or (except for cooperating outside brokers) to receive compensation in connection with such leasing. (B) RENT ROLL, DISCLOSURE. A true and correct copy of the Rent Roll is attached hereto as SCHEDULE 4.7(B) and, except for the Material Leases described in the Rent Roll, if any, the Jekyll Island Property is not subject to any Material Leases. Except only as specified in the Rent Roll, or as otherwise disclosed to Lender in the estoppel certificates delivered to Lender at Closing, to the Borrowers' Knowledge, (i) the Material Leases, if any, are in full force and effect; (ii) the Borrowers have not given any notice of default to any tenant under any Lease which remains uncured; (iii) no tenant has any set off, claim or defense to the enforcement of any Lease; (iv) no tenant is in arrears in the payment of rent, additional rent or any other charges whatsoever due under any Material Lease, or is materially in default in the performance of any other obligations under such Material Lease; (v) the Borrowers have completed all work or alterations required of the landlord or lessor under each Material Lease, and all of the other obligations of landlord or lessor under the Material Leases have been performed; and (vi) there are no rent concessions (whether in form of cash contributions, work agreements, assumption of an existing tenant's other obligations, or otherwise) or extensions of time whatsoever not reflected in such Rent Roll. There are no legal proceedings commenced (or, to the Knowledge of the Borrowers, threatened) against the Borrowers by any tenant or former tenant. No rental in excess of one month's rent has been prepaid under any of the Material Leases. To the Borrowers' Knowledge, each of the Material Leases is valid and binding on the parties thereto in accordance with its terms. (C) NO RESIDENTIAL UNITS. There are no residential units in the Jekyll Island Property and, to each Borrowers' Knowledge, no person (other than a site manager employed by Manager) occupies any part of the Jekyll Island Property for dwelling purposes other than on a transient basis. (D) MANAGEMENT AGREEMENT. The Borrowers have delivered to Lender a true and complete copy of the Management Agreement relating to the Jekyll Island Property to which the Jekyll Island Borrowers are a party that will be in effect on the Closing Date, and such Management Agreement has not been modified or amended except pursuant to amendments or modifications delivered to Lender. Such Management Agreement is in full force and effect and no default by the Jekyll Island Borrowers or Manager exists thereunder. (E) FRANCHISE AGREEMENT. The Borrowers have delivered to Lender a true and complete copy of the Franchise Agreement relating to the Jekyll Island Property to which the Jekyll Island Borrowers are a party, and such Franchise Agreement has not been modified or amended except pursuant to amendments or modifications delivered to Lender. To the Borrowers' Knowledge, (i) the Franchise Agreement relating to the Jekyll Island Property is in full force and effect and (ii) except as set forth on Schedule 4.7(E), no material default by the Jekyll Island Borrowers, Manager or the applicable Franchisor exists thereunder. 45 SECTION 4.8 CONDITION OF THE JEKYLL ISLAND PROPERTY. To each Borrower's Knowledge, except as set forth in the property condition report for the Jekyll Island Property delivered to Lender, all Improvements including, without limitation, the roof and all structural components, plumbing systems, HVAC systems, fire protection systems, electrical systems, equipment, elevators, exterior doors, parking facilities, sidewalks and landscaping are in working condition and repair. Except as disclosed in the Property Condition Report, (i) the Borrowers are not aware of any latent or patent structural or other material defect or deficiency in the Jekyll Island Property and, (ii) to the Borrower's Knowledge, city water supply, storm and sanitary sewers, and electrical, gas (if applicable) and telephone facilities are available to the Jekyll Island Property within the boundary lines of the Jekyll Island Property (except as may be shown on the applicable Survey), are fully connected to the Improvements and are fully operational, are sufficient to meet the reasonable needs of the Jekyll Island Property as now used or presently contemplated to be used, and no other utility facilities are necessary to meet the reasonable needs of the Jekyll Island Property as now used or presently contemplated. Except as may be shown on the Survey, to the Borrowers' Knowledge no part of the Jekyll Island Property is within a flood plain and none of the Improvements create encroachment over, across or upon the Jekyll Island Property's boundary lines, rights of way or easements, and no building or other improvements on adjoining land create such an encroachment which could reasonably be expected to have a Material Adverse Effect. All public roads and streets necessary for service of and access to the Jekyll Island Property for the current and contemplated uses thereof have been completed and are serviceable and are physically and legally open for use by the public. To the Borrowers' Knowledge after due inquiry, and except as disclosed in the Property Condition Report, any septic system located at the Jekyll Island Property is in good and safe condition and repair and in compliance with all applicable law. SECTION 4.9 (A) REPRESENTATIONS AND WARRANTIES OF THE MORTGAGE BORROWERS. All of the representations and warranties of the Mortgage Borrowers or any Affiliate of the Mortgage Borrowers made under the Mortgage Loan Documents are true, complete and correct in all material respects. (B) LITIGATION; ADVERSE FACTS. Except as set forth on SCHEDULE 4.9, to the Borrowers' Knowledge after due inquiry, there are no judgments outstanding against any Borrower or any Mortgage Borrower, or affecting any of the Collateral or any property of the Borrowers or of the Mortgage Borrowers, nor is there any action, charge, claim, demand, suit, proceeding, petition, governmental investigation or arbitration now pending or threatened against any Borrower or any Mortgage Borrower, that could reasonably be expected to result in a Material Adverse Effect. To the Borrowers' Knowledge after due inquiry, the actions, charges, claims, demand, suits, proceedings, petitions, investigations and arbitrations set forth on SCHEDULE 4.9 are not reasonably expected to result, either individually or in the aggregate, in any Material Adverse Effect. SECTION 4.10 PAYMENT OF TAXES. All federal, state and local tax returns and reports of each Borrower required to be filed have been timely filed (or each Borrower has timely filed for an extension and the applicable extension has not expired), and all taxes, assessments, fees and other governmental charges (including any payments in lieu of taxes) upon such Person and upon its properties, assets, income and franchises which are due and payable have been paid. To the 46 Borrowers' Knowledge, except as set forth on SCHEDULE 4.10, no taxes remain unpaid and no claims are being asserted with respect to any such taxes. SECTION 4.11 ADVERSE CONTRACTS. Except for the Loan Documents, none of the Borrowers are a party to or bound by, nor is any property of such Person subject to or bound by, any contract or other agreement which restricts such Person's ability to conduct its business in the ordinary course as currently conducted that, either individually or in the aggregate, has a Material Adverse Effect or could reasonably be expected to have a Material Adverse Effect. SECTION 4.12 PERFORMANCE OF AGREEMENTS. To the Borrowers' Knowledge, the Borrowers are not in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Contractual Obligation of any such Person which could reasonably be expected to have a Material Adverse Effect, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default which could reasonably be expected to have a Material Adverse Effect. SECTION 4.13 GOVERNMENTAL REGULATION. The Borrowers are not subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940 or to any federal or state statute or regulation limiting its ability to incur indebtedness for borrowed money. SECTION 4.14 EMPLOYEE BENEFIT PLANS. The Borrowers do not maintain or contribute to, or have any obligation (including a contingent obligation) under, any Employee Benefit Plans. SECTION 4.15 BROKER'S FEES. No broker's or finder's fee, commission or similar compensation will be payable by or pursuant to any contract or other obligation of any Borrower Party with respect to the making of the Loan or any of the other transactions contemplated hereby or by any of the Loan Documents. The Borrowers shall indemnify, defend, protect, pay and hold Lender harmless from any and all broker's or finder's fees claimed to be due in connection with the making of the Loan arising from any Borrower Parties' actions. SECTION 4.16 INTENTIONALLY DELETED. SECTION 4.17 SOLVENCY. The Borrowers (a) have not entered into the transaction or any Loan Document with the actual intent to hinder, delay, or defraud any creditor and (b) received reasonably equivalent value in exchange for its obligations under the Loan Documents. Giving effect to the Loan, the fair saleable value of each Borrower's assets exceed and will, immediately following the making of the Loan, exceed such Borrower's total liabilities, including, without limitation, subordinated, unliquidated, disputed and Contingent Obligations. The fair saleable value of each Borrower's assets is and will, immediately following the making of the Loan, be greater than such Borrower's probable liabilities, including the maximum amount of its Contingent Obligations on its debts as such debts become absolute and matured. Each Borrower's assets do not and, immediately following the making of the Loan will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. The Borrowers do not intend to, and do not believe that they will, incur Indebtedness and liabilities (including Contingent Obligations and other commitments) beyond its ability to pay such Indebtedness and liabilities as they mature (taking into account the timing and amounts of 47 cash to be received by the Borrowers and the amounts to be payable on or in respect of obligations of the Borrowers). SECTION 4.18 DISCLOSURE. No financial statements furnished to Lender by or on behalf of any Borrower Party contains any untrue representation, warranty or statement of a material fact, or omits to state a material fact necessary in order to make the statements contained therein not misleading. No Loan Document or any other document, certificate or written statement for use in connection with the Loan and prepared by any Borrower Party, or any information provided by any Borrower Party and contained in, or used in preparation of, any document or certificate for use in connection with the Loan, contains any untrue representation, warranty or statement of a material fact, or omits to state a material fact necessary in order to make the statements contained therein not misleading. There is no material fact actually known to the Borrowers that has had or will have a Material Adverse Effect and that has not been disclosed in writing to Lender by the Borrowers. SECTION 4.19 USE OF PROCEEDS AND MARGIN SECURITY. The Borrowers shall use the proceeds of the Loan only for the purposes set forth herein and consistent with all applicable laws, statutes, rules and regulations. No portion of the proceeds of the Loan shall be used by the Borrowers or any Person in any manner that might cause the borrowing or the application of such proceeds to violate Regulation T, Regulation U or Regulation X or any other regulation of the Board of Governors of the Federal Reserve System. SECTION 4.20 INSURANCE Set forth on SCHEDULE 4.20 is a complete and accurate description of all policies of insurance for the Jekyll Island Borrowers that are in effect as of the Closing Date. No notice of cancellation has been received with respect to such policies, and, to each Borrower's Knowledge, the Jekyll Island Borrowers are in compliance with all conditions contained in such policies. SECTION 4.21 SEPARATE TAX LOTS. The Jekyll Island Property is comprised of one (1) or more parcels which constitute separate tax lots. No part of the Jekyll Island Property is included or assessed under or as part of another tax lot or parcel, and no part of any other property is included or assessed under or as part of the tax lots or parcels comprising any of the Properties. SECTION 4.22 SECURITY INTERESTS. Upon execution and delivery of the Pledge Agreement, delivery to Lender of the certificates representing the LLC Interests, the LP Interests and the Stock Interests, the recording of the Jekyll Island Mortgage and the filing of the Financing Statements with the Secretaries of State of the state of, Delaware, Lender shall have a first priority perfected security interest in the Collateral, subject to the Permitted Encumbrances. SECTION 4.23 INVESTMENTS. Each Borrower has no (i) direct or indirect interest in, including without limitation stock, partnership interest or other securities of, any other Person, not pledged to Lender pursuant to the terms of the Pledge Agreement, or (ii) direct or indirect loan, advance or capital contribution to any other Person, including all indebtedness and accounts receivable from that other Person. SECTION 4.24 DEFAULTS. To the Borrower's Knowledge, except as disclosed to Lender in writing, no Default exists. 48 SECTION 4.25 NO PLAN ASSETS. No Borrower is or will be (i) an employee benefit plan as defined in Section 3(3) of ERISA which is subject to ERISA, (ii) a plan as defined in Section 4975(e)(1) of the IRC which is subject to Section 4975 of the IRC, or (iii) an entity whose underlying assets constitute "plan assets" of any such employee benefit plan or plan for purposes of Title I of ERISA of Section 4975 of the IRC; provided that, in making such representation, the Borrowers have assumed that (i) no portion of the Loan shall be funded with plan assets of any employee benefit plan that is subject to Title I of ERISA or any plan that is covered by Section 4975 of the Code unless the Lender is eligible to apply one or more exemptions such that the Loan will not constitute a nonexempt prohibited transaction under Section 406 of ERISA or that could subject a Borrower Party or its Affiliates to an excise tax under Section 4975 of the IRC; and (ii) such assumption in the preceding clause is true and correct with respect to any party to which Lender transfers or assigns any portion of the Loan. SECTION 4.26 GOVERNMENTAL PLAN. No Borrower is or will be a "governmental plan" within the meaning of Section 3(32) of ERISA and transactions by or with the Borrowers are not and will not be subject to state statutes applicable to the Borrowers' regulating investments of and fiduciary obligations with obligations with respect to governmental plans. SECTION 4.27 NOT FOREIGN PERSON. No Borrower is a "foreign person" within the meaning of Section 1445(f)(3) of the IRC. SECTION 4.28 NO COLLECTIVE BARGAINING AGREEMENTS. Except as set forth on SCHEDULE 4.28, no Borrower is a party to any collective bargaining agreement. SECTION 4.29 PRE-PETITION TAX LIABILITIES. Attached hereto as SCHEDULE 4.10 is a full and complete schedule of all unpaid tax liabilities of the Mortgage Borrowers through December 21, 2001, together with accrued interest and penalties thereon through November 15, 2002 and pursuant to the Plan of Reorganization, such tax liabilities remain obligations of the applicable Borrower or the applicable Mortgage Borrower and are not secured by Liens on the Properties or the Collateral. SECTION 4.30 JEKYLL ISLAND GROUND LEASE. (A) The Jekyll Island Ground Lease contains the entire agreement of the Ground Lessor and the Jekyll Island Borrowers pertaining to the Jekyll Island Ground Leased Property covered thereby. The Jekyll Island Borrowers have no estate, right, title or interest in or to the Jekyll Island Ground Leased Property except under and pursuant to the Jekyll Island Ground Lease. The Jekyll Island Borrowers have delivered true and correct copies of the Jekyll Island Ground Lease to Lender and the Jekyll Island Ground Lease has not been modified, amended or assigned except as set forth on SCHEDULE 4.30. (B) To the Knowledge of the Borrowers, the Ground Lessor under the Jekyll Island Ground Lease is the exclusive fee simple owner of the Jekyll Island Ground Leased Property, subject only to the Jekyll Island Ground Lease and the Permitted Encumbrances, and the Jekyll Island Ground Lessor is the sole owner of the lessor's interest in the Jekyll Island Ground Lease. 49 (C) There are no rights to terminate the Jekyll Island Ground Lease other than the Jekyll Island Ground Lessor's right to terminate by reason of default, casualty, condemnation or other reasons, in each case as expressly set forth in the Jekyll Island Ground Lease. (D) The Jekyll Island Ground Lease is in full force and effect and to the Borrowers' Knowledge, and except as may have been disclosed in the estoppel certificate given to Lender at Closing, no breach or default or event that with the giving of notice or passage of time would constitute a breach or default under the Jekyll Island Ground Lease (a "JEKYLL ISLAND GROUND LEASE DEFAULT") exists or has occurred on the part of the Jekyll Island Borrowers or on the part of the Jekyll Island Ground Lessor under the Jekyll Island Ground Lease. The Jekyll Island Borrowers have not received any written notice that a Jekyll Island Ground Lease Default has occurred or exists, or that the Jekyll Island Ground Lessor or any third party alleges the same to have occurred or exist. (E) The Jekyll Island Borrowers are the exclusive owners of the lessee's interest under and pursuant to the Jekyll Island Ground Lease and have assigned, transferred, or encumbered its interest in, to, or under the Jekyll Island Ground Lease (other than assignments that will terminate on or prior to Closing), except in favor of Lender pursuant to this Loan Agreement and the other Loan Documents. ARTICLE V COVENANTS OF BORROWER PARTIES Each of the Borrowers covenants and agrees that until payment in full of the Loan, all accrued and unpaid interest and all other Obligations, the Borrowers shall perform and comply with all covenants in this Article V applicable to such Person. SECTION 5.1 FINANCIAL STATEMENTS AND OTHER REPORTS. (A) FINANCIAL STATEMENTS. (i) ANNUAL REPORTING. Within one hundred twenty (120) days after the end of each calendar year, the Borrowers shall, and shall cause Mortgage Borrowers (on a consolidated basis) to, provide true and complete copies of their Financial Statements for such year to Lender, and within ninety (90) days after the end of each calendar year, Guarantor shall provide true and complete copies of its Financial Statements for such year to Lender. All such Financial Statements (other than those with respect to the Jekyll Island Borrowers, which may be unaudited) shall be audited by an Approved Accounting Firm or by other independent certified public accountants reasonably acceptable to Lender, and shall bear the unqualified certification of such accountants that such Financial Statements present fairly in all material respects the financial position of the subject company. The annual Financial Statements shall be accompanied by Supplemental Financial Information of such calendar year. Such annual Financial Statements shall be accompanied by a certification executed by the entity's chief executive officer or chief financial officer (or other officer with similar duties), satisfying the criteria set forth in Section 5.1(A)(viii) below, and a Compliance Certificate (as defined below). (ii) QUARTERLY REPORTING - THE BORROWERS. Within forty-five (45) days after the end of each calendar quarter, the Borrowers shall provide copies of their Financial 50 Statements for such quarter to Lender (including the Financial Statements of Mortgage Borrowers), together with a certification executed on behalf of such Borrower by its chief executive officer or chief financial officer (or other officer with similar duties) in accordance with the criteria set forth in Section 5.1(A)(viii) below. Such quarterly Financial Statements shall be accompanied by Supplemental Financial Information and a Compliance Certificate for such quarter. (iii) QUARTERLY REPORTING - GUARANTOR. Within forty-five (45) days after the end of each calendar quarter, Guarantor shall provide copies of its Financial Statements for such quarter to Lender, together with a certification executed on behalf of Guarantor by its chief executive officer or chief financial officer (or other officer with similar duties) in accordance with the criteria set forth in Section 5.1(A)(viii) below. (iv) LEASING REPORTS. Within forty-five (45) days after each calendar quarter, the Borrowers shall provide or cause the Mortgage Borrowers to provide to Lender a certified rent roll and a schedule of security deposits held under Material Leases, each in form and substance reasonably acceptable to Lender. Within forty-five (45) days after each calendar quarter, the Borrowers shall also provide or cause the Mortgage Borrowers to provide to Lender (a) a schedule of any retail Material Leases that expired during such calendar quarter and a schedule of retail Material Leases scheduled to expire within the next twelve (12) months and (b) to the extent the Mortgage Borrowers received notice thereof, a list of any retail tenants under Material Leases that filed bankruptcy, insolvency or reorganization proceedings during such calendar quarter. Within ninety (90) days after the end of each calendar year, the Borrowers shall provide or cause the Mortgage Borrowers to provide to Lender a statement of income and expenses for all retail space at each of the Properties and sales reports for retail tenants for such year. (v) MONTHLY REPORTING. Within thirty (30) days after the end of each calendar month, each of the Borrowers shall provide, or cause Manger or the Mortgage Borrowers to provide, to Lender the following items determined on an accrual basis: (a) a calculation of the average daily rate, RevPAR and occupancy calculations and statistics for the Properties for the subject month; (b) Smith Travel Research "STAR" reports then available; (c) monthly and year to date operating statements prepared for such calendar month, noting Net Operating Income, Net Cash Flow and including budgeted and last year results for the same year-to-date period and other information necessary and sufficient under GAAP to fairly represent the results of operation of the Properties during such calendar month, all in form reasonably satisfactory to Lender; (d) reports for FF&E and Capital Expenditure projects completed during such calendar month (including a detailed explanation for any material deviations from budget); (e) monthly and year to date detailed reports of Operating Expenses, including supporting documentation satisfactory to Lender in its sole discretion for each item of Extraordinary Expense (as such term is defined in the Cash Management Agreement or in the Jekyll Island Cash Management Agreement, as applicable) for which Lender has approved a disbursement from the Cash Trap Reserve pursuant to the terms of Section 3.3(a)(viii) of the Cash Management Agreement; (f) most recently available "QFI", or similar quality index, scores; and (g) a report setting forth (i) the date of termination by Property for each Franchise Agreement that has been terminated after the Closing Date and not replaced with an Approved Franchisor, (ii) the number of Properties for which a default has occurred and has continued 51 beyond applicable notice and grace periods under the applicable Franchise Agreement (including the percentage of the Aggregate Outstanding Principal Balance represented by such Properties), (iii) a summary report establishing whether the Borrowers are diligently continuing to pursue reflagging efforts with respect to each such Property, and (iv) a summary report including (a) the aggregate number of Properties for which the Mortgage Borrowers or the Jekyll Island Borrowers have entered into new Franchise Agreements as permitted by Sections 5.13(D)(i) and 5.13(D)(iv) together with the resulting Category of each such Property, and (b) the aggregate number of Properties for which any replacement (and, if more than one replacement has occurred to a single Property, the number of replacements with respect to such Property) of the applicable Franchise Agreements has occurred pursuant to the terms of Sections 5.13(D)(ii) and 5.13(D)(iii) together with the percentage of the Aggregate Outstanding Principal Balance represented by such Properties and including the resulting Category of each such Property. Along with such operating statements, each Borrower shall deliver to Lender a Compliance Certificate of such Borrower's chief executive officer or chief financial officer (or other officer with similar duties) satisfying the criteria set forth in Section 5.1(A)(viii) below. (vi) ADDITIONAL REPORTING. In addition to the foregoing, the Borrowers shall, and shall cause the Mortgage Borrowers, Guarantor and Manager to, promptly provide to Lender such further documents and information concerning its operations, properties, ownership, and finances as Lender shall from time to time reasonably request upon prior written notice. (vii) GAAP; UNIFORM SYSTEM. The Borrowers will, and will cause the Mortgage Borrowers, Guarantor and Manager to, maintain systems of accounting established and administered in accordance with sound business practices and sufficient in all respects to permit preparation of Financial Statements in conformity with GAAP and the Uniform System. All Financial Statements shall be prepared in accordance with GAAP and the Uniform System, consistently applied; provided, however, in the event of a conflict between the Uniform System and GAAP, GAAP will be followed. (viii) CERTIFICATIONS OF FINANCIAL STATEMENTS AND OTHER DOCUMENTS, COMPLIANCE CERTIFICATE. Together with the Financial Statements and other documents and information provided to Lender a certification shall be delivered to Lender, executed on behalf of the applicable Person by its chief executive officer or chief financial officer (or other officer with similar duties), stating that to their Knowledge after due inquiry such quarterly and annual Financial Statements and information fairly present the financial condition and results of operations of such Person for the period(s) covered thereby, and do not omit to state any material information without which the same might reasonably be misleading, and all other non-financial documents submitted to Lender (whether monthly, quarterly or annually) are true, correct, accurate and complete in all material respects. In addition, where this Loan Agreement requires a "COMPLIANCE CERTIFICATE", the Person required to submit the same shall deliver a certificate duly executed on behalf of such Person by its chief executive officer or chief financial officer (or other officer with similar duties) stating that, to their Knowledge after due inquiry, there does not exist any Default or Event of Default under the Loan Documents (or if any exists, specifying the same in detail). 52 (ix) FISCAL YEAR. The Borrowers', Guarantor's, and the Mortgage Borrowers' fiscal years each end on December 31, and no change shall be permitted with respect to any such fiscal year. (B) ACCOUNTANTS' REPORTS. Promptly upon receipt thereof, the Borrowers will deliver copies of all material reports submitted by independent public accountants in connection with each annual, interim or special audit of the Financial Statements or other business operations of the Borrowers or the Mortgage Borrowers made by such accountants, including the comment letter submitted by such accountants to management in connection with the annual audit. (C) TAX RETURNS. Within thirty (30) days after filing the same, the Borrowers shall deliver, and shall cause the Mortgage Borrowers to deliver, to Lender a copy of their Federal income tax returns (or the return of the applicable Person into which the Borrowers' and/or the Mortgage Borrowers' Federal income tax returns are consolidated) certified on its behalf by its chief financial officer (or similar position) to be true and correct. (D) ANNUAL OPERATING BUDGET, CAPEX/FF&E BUDGETS AND CAPITAL IMPROVEMENTS PLAN. Prior to February 1 of each calendar year, the Borrowers shall deliver or cause the Mortgage Borrowers to deliver to Lender for its review for the Properties and for the Jekyll Island Property a proposed Operating Budget, Capital Improvements Plan and CapEx/FF&E Budget (in each case presented on a monthly and annual basis) for such calendar year. Each Operating Budget, CapEx/FF&E Budget and, so long as any funds remain in the Capital Improvement Reserve or Required Capital Improvements remain to be performed, each Capital Improvements Plan shall be subject to Lender's approval which shall not be unreasonably withheld, conditioned or delayed. The Borrowers may allow changes to be made to the Operating Budget and the CapEx/FF&E Budget from time to time as deemed reasonably necessary by the Mortgage Borrowers or the Jekyll Island Borrowers, as applicable, provided no such modification shall alter any single line item (or the applicable Budget as a whole) by more than ten percent (10%) without Lender's prior written approval, which approval shall not be unreasonably withheld. Notice of any modifications to an Operating Budget and an CapEx/FF&E Budget shall be delivered to Lender at the time of delivery of the next financial reporting required pursuant to Section 5.1(A)(v). Lender acknowledges that it has approved the annual Operating Budget for the 2002 calendar year, and the CapEx/FF&E Budget and Capital Improvements Plan for the 2002 and 2003 calendar years. The proposed Operating Budget shall identify and set forth the Mortgage Borrowers' or the Jekyll Island Borrowers' reasonable estimate, after due consideration, of all revenue, costs, and expenses, and shall specify Operating Revenues and Operating Expenses on a line-item basis consistent with the form of Operating Budget delivered to Lender prior to Closing. If any of said budgets or plans requiring Lender's approval is not in form and substance reasonably satisfactory to Lender, Lender may disapprove the same and specify the reasons therefor in writing, and such budget or plan, as applicable, shall promptly be amended and resubmitted for approval, making such changes as are necessary to comply with the reasonable requirements of Lender. If any such budget or plan requiring Lender's approval is not approved or deemed approved by the beginning of the calendar year covered thereby, subject to the terms of the Mortgage Loan Documents or the Loan Documents with respect to the budgets or plans for the Jekyll Island Property, the applicable budget or plan for the previous year shall remain in effect until the new budget or plan is approved or deemed 53 approved. Lender's consent to any budget, plan or amendments thereto shall be deemed given, if the first correspondence from the Borrowers to Lender requesting such approval is in an envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the same has been delivered and, if Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period. (E) MATERIAL NOTICES. (i) The Borrowers shall promptly deliver, or cause to be delivered, copies of all notices given or received with respect to a default under any term or condition related to any Permitted Indebtedness of the Borrowers, and shall notify Lender within five (5) Business Days of any potential or actual event of default with respect to any such Permitted Indebtedness. (ii) The Borrowers shall promptly deliver to Lender copies of any and all material notices (including without limitation any notice alleging any default or breach which is reasonably expected to result in a termination) received with respect to any Material Agreement or any Lease, including, without limitation, any inspection report and any progress reports related to any Property Improvement Plans received from any of the Franchisors related to any of the Mortgage Borrowers' Properties or the Jekyll Island Property. (F) EVENTS OF DEFAULT, ETC. Promptly upon any of the Borrowers obtaining knowledge of any of the following events or conditions, such Borrower shall deliver a certificate executed on its behalf by its chief financial officer or similar officer specifying the nature and period of existence of such condition or event and what action such Borrower or any Affiliate thereof has taken, is taking and proposes to take with respect thereto: (i) any condition or event that constitutes an Event of Default; (ii) any Material Adverse Effect; or (iii) any actual or alleged breach or default or assertion of (or written threat to assert) remedies under any Management Agreement, Franchise Agreement or Ground Lease. (G) LITIGATION. Promptly upon any of the Borrowers obtaining knowledge of (1) the institution of any action, suit, proceeding, governmental investigation or arbitration against the Borrowers, any of the Properties, or the Collateral not previously disclosed in writing by the Borrowers to Lender which would be reasonably likely to have a Material Adverse Effect or is not covered by insurance or (2) any material development in any action, suit, proceeding, governmental investigation or arbitration at any time pending against or affecting the Borrowers, or the Mortgage Borrowers, or the Properties which, in each case, if adversely determined would reasonably be expected to have a Material Adverse Effect, the Borrowers will give notice thereof to Lender and, upon request from Lender, provide such other information as may be reasonably available to them to enable Lender and its counsel to evaluate such matter. (H) INSURANCE. At least five (5) Business Days prior to the end of each insurance policy period of the Mortgage Borrowers or the Jekyll Island Borrowers, the Borrowers shall 54 cause to be delivered to Lender certificates, reports, and/or other information (all in form and substance reasonably satisfactory to Lender), (i) outlining all material insurance coverage maintained as of the date thereof by the Mortgage Borrowers or the Jekyll Island Borrowers, and all material insurance coverage planned to be maintained by the Mortgage Borrowers or the Jekyll Island Borrowers in the subsequent insurance policy period and (ii) evidencing payment in full of the premiums for such insurance policies. (I) OTHER INFORMATION. With reasonable promptness, the Borrowers will deliver such other information and data with respect to such Person, the Mortgage Borrowers, their Affiliates, and the Properties as from time to time may be reasonably requested by Lender. SECTION 5.2 EXISTENCE; QUALIFICATION. The Borrowers will at all times preserve and keep in full force and effect its existence as a limited partnership, limited liability company, or corporation, as the case may be, and all rights and franchises material to its business, including its qualification to do business in each state where it is required by law to so qualify. Without limitation of the foregoing, the Borrowers and Member, shall at all times be qualified to do business in each of the states where such qualification is required to continue the business of the Borrowers as in effect on the Closing Date. SECTION 5.3 PAYMENT OF IMPOSITIONS AND CLAIMS. (A) The Borrowers will pay, or cause to be paid, all federal, state and local income taxes, sales taxes, excise taxes and all other taxes and assessments of the Borrowers on their business, income or assets; in each instance before any penalty or fine is incurred with respect thereto. (B) The Borrowers shall cause the Mortgage Borrowers to pay, discharge or remove any Imposition or Claim relating to the Properties owned by such Mortgage Borrowers in accordance with the terms of the Mortgage Loan Agreement. (C) Except for those matters being contested pursuant to clause (D) below, the Jekyll Island Borrowers will pay, to the extent such items relate to the Jekyll Island Property, (i) all Impositions; (ii) all claims (including claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of its properties or assets (hereinafter referred to as the "CLAIMS"); and (iii) all federal, state and local income taxes, sales taxes, excise taxes and all other taxes and assessments of the Jekyll Island Borrowers on their business, income or assets; in each instance before any penalty or fine is incurred with respect thereto. (D) The Jekyll Island Borrowers shall not be required to pay, discharge or remove any Imposition or Claim relating to the Jekyll Island Property so long as the Jekyll Island Borrowers contest in good faith such Imposition, Claim or the validity, applicability or amount thereof by an appropriate legal proceeding which operates to prevent the collection of such amounts and the sale of the Jekyll Island Property or any portion thereof, so long as: (i) no Event of Default shall have occurred and be continuing, (ii) prior to the date on which such Imposition or Claim would otherwise have become delinquent, the Jekyll Island Borrowers shall have given Lender prior written notice of their intent to contest said Imposition or Claim; (iii) prior to the date on which 55 such Imposition or Claim would otherwise have become delinquent, the Jekyll Island Borrowers shall have deposited with Lender (or with a court of competent jurisdiction or other appropriate body reasonably approved by Lender) such additional amounts as are necessary to keep on deposit at all times, an amount by way of cash, Dollar Equivalents, or a Letter of Credit, equal to at least one hundred twenty-five percent (125%) (or such higher amount as may be required by applicable law) of the total of (x) the balance of such Imposition or Claim then remaining unpaid, and (y) all interest, penalties, costs and charges accrued or accumulated thereon; (iv) no risk of sale, forfeiture or loss of any interest in the Jekyll Island Property or any part thereof arises, in Lender's reasonable judgment, during the pendency of such contest; (v) such contest does not, in Lender's reasonable determination, have a Material Adverse Effect; and (vi) such contest is based on bona fide, material, and reasonable claims or defenses. Any such contest shall be prosecuted with due diligence, and the Jekyll Island Borrowers shall promptly pay the amount of such Imposition or Claim as finally determined, together with all interest and penalties payable in connection therewith. Lender shall have full power and authority, but no obligation, to apply any amount deposited with Lender under this subsection to the payment of any unpaid Imposition or Claim to prevent the sale or forfeiture of the Jekyll Island Property for non-payment thereof, if Lender reasonably believes that such sale or forfeiture is threatened. Any surplus retained by Lender after payment of the Imposition or Claim for which a deposit was made shall be promptly repaid to the Jekyll Island Borrowers unless an Event of Default shall have occurred, in which case said surplus may be retained by Lender to be applied to the Obligations. Notwithstanding any provision of this Section to the contrary, the Jekyll Island Borrowers shall pay any Imposition or Claim which they might otherwise be entitled to contest if an Event of Default shall occur and be continuing, or if, in the reasonable determination of Lender, the Jekyll Island Property is in danger of being forfeited or foreclosed. If the Jekyll Island Borrowers refuse to pay any such Imposition or Claim, Lender may (but shall not be obligated to) make such payment and the Jekyll Island Borrowers shall reimburse Lender on demand for all such advances. SECTION 5.4 MAINTENANCE OF INSURANCE. The Borrowers shall cause the Mortgage Borrowers to continuously maintain the policies of insurance and the Jekyll Island Borrowers shall continuously maintain the policies of insurance (all such policies, the "INSURANCE POLICIES") required pursuant to the terms of Section 5.4 of the Mortgage Loan Agreement, including meeting all insurer requirements thereunder (it being agreed that, with respect to the obligations of the Jekyll Island Borrowers hereunder, insurance shall be maintained as required pursuant to the terms of Section 5.4 of the Mortgage Loan Agreement as if the Jekyll Island Borrowers were a "Mortgage Borrower" thereunder, and, following satisfaction of the Mortgage Loan, the requirements of Section 5.4 of the Mortgage Loan Agreement shall be deemed to be the continuing obligations of the Borrowers and the Mortgage Borrowers hereunder). The provisions of Section 5.4 of the Mortgage Loan Agreement are incorporated herein by reference. The Lender shall be named as an additional named insured or loss payee under such policies to the extent that Mortgage Lender is required to be named as such under the Mortgage Loan Agreement. Upon request from Lender, Lender shall be entitled to receive copies of any insurance policies obtained by Mortgage Lender to the extent and at the time such policies are delivered to the Mortgage Lender by Mortgage Borrower. All Insurance Policies 56 shall provide that the coverage shall not be modified without (30) days' advance written notice to Lender and shall provide that no claims shall be paid thereunder to a Person other than Mortgage Lender or Lender without ten (10) days' advance written notice to Lender. The Borrowers shall furnish Lender receipts for the payment of premiums on such Insurance Policies or other evidence of such payment reasonably satisfactory to Lender in the event that such premiums have not been paid by Lender pursuant to the Loan Agreement. SECTION 5.5 OPERATION AND MAINTENANCE OF THE PROPERTIES; CASUALTY. (A) The Borrowers shall and shall cause the Mortgage Borrowers to operate and maintain the Properties as is necessary to maintain hotel standards at least as high as those that currently apply to each Property, subject to ordinary wear and tear, as reasonably determined by the Mortgage Borrowers or the Jekyll Island Borrowers, as applicable, and otherwise in compliance with the standards under the applicable Franchise Agreement and shall maintain or cause to be maintained in good repair, working order and condition all material property used in the business of each of the Mortgage Borrowers or the Jekyll Island Borrowers, as applicable, including the applicable Property, and will make or cause to be made all appropriate repairs, renewals and replacements thereof. Without limitation of the foregoing, the Borrowers shall and shall cause the Mortgage Borrowers to operate and maintain the Properties substantially in accordance with the applicable Operating Budget (including with respect to Capital Improvements) and the CapEx/FF&E Budget. All work required or permitted under this Loan Agreement shall be performed in a workmanlike manner and in compliance with all applicable laws. So long as no Event of Default has occurred and is continuing, the Borrowers may and may permit the Mortgage Borrowers to, without Lender's consent, perform alterations to the Properties which do not constitute a Material Alteration. The Mortgage Borrowers and the Jekyll Island Borrowers shall not be permitted to perform any Material Alteration without Lender's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that Lender may, in its sole and absolute discretion, withhold consent to any Material Alteration which is likely to result in a decrease of Net Operating Income (taking into consideration all Material Alterations being undertaken at the properties at such time) by 5% or more below that which was in effect prior to the commencement of the first such Material Alteration being undertaken at the time of determination for a period of sixty (60) days or longer; provided, further, however, the Mortgage Borrowers and the Jekyll Island Borrowers may be permitted to perform a Material Alteration without Lender's consent if (i) the delay caused by obtaining Lender's prior consent may result in injury or death at, or further destruction or deterioration of, the applicable Property, (ii) such Material Alteration is necessary to prevent the likelihood of injury or death at, or further destruction or deterioration of, the applicable Property, and (iii) the Borrowers cause notice thereof to be delivered to Lender within two (2) Business Days of commencement of such Material Alteration together with such supporting documentation as Lender may require with respect to such Material Alteration. Lender may, as a condition to giving its consent to a Material Alteration, require that the Borrowers deliver to Lender evidence reasonably satisfactory to Lender that the Mortgage Borrowers or the Jekyll Island Borrowers have cash available for payment of the cost of such material alteration or, if the Borrowers fail to deliver such evidence, cash, Dollar Equivalents or a Letter of Credit in an amount equal to 125% of the cost of such Material Alteration as 57 reasonably estimated by Lender, unless such amounts have previously been deposited with Mortgage Lender pursuant to the terms of the Mortgage Loan Documents. Cash deposited by the Borrowers with Lender in connection with any Material Alteration pursuant to the foregoing sentence shall be held by Lender in a Sub-Account of the Lock Box Account and disbursed to the Borrowers to pay for the cost of such Material Alteration as such work progresses subject to satisfaction of the conditions for disbursement of amounts from the FF&E reserve under section 6.4 (including the requirements set forth under section 6.7) or, with respect to the Jekyll Island Property, from the Jekyll Island FF&E reserve under section 6.3(B). Upon completion of the Material Alteration, the Borrowers shall provide evidence reasonably satisfactory to Lender that (i) the Material Alteration was constructed in accordance with all material applicable laws and substantially in accordance with plans and specifications approved by Lender (which approval shall not be unreasonably withheld or delayed), (ii) all contractors, subcontractors, materialmen and professionals who provided work, materials or services in connection with the Material Alteration have been paid in full and have delivered unconditional releases of lien and (iii) all material licenses necessary for the use, operation and occupancy of the Material Alteration (other than those which depend on the performance of tenant improvement work) have been issued. The Borrowers shall reimburse Lender upon demand for all reasonable out-of-pocket costs and expenses (including the reasonable fees of any architect, engineer or other professional engaged by Lender) incurred by Lender in reviewing plans and specifications or in making any determinations necessary to implement the provisions of this Section 5.5(A). (B) In the event of casualty or loss at any of the Properties, the Borrowers shall give or shall cause the Mortgage Borrowers to give immediate written notice of the same to the insurance carrier and to Lender. The terms of the Mortgage Loan Documents will govern the application and distribution of insurance and condemnation proceeds until the Mortgage Loan has been paid in full (provided that, with respect to the Jekyll Island Property, such Property shall be deemed to be a "Property" under the Mortgage Loan Documents, the Jekyll Island Mortgage shall be deemed to be a "Deed of Trust" under the Mortgage Loan Agreement and the Lender (rather than the Mortgage Lender) shall be deemed to be the "Lender" under the Mortgage Loan Documents). Any insurance and/or condemnation proceeds (other than with respect to the Jekyll Island Property, in which case such proceeds shall be applied and distributed pursuant to this Loan Agreement and the Jekyll Island Cash Management Agreement) shall be paid directly to Mortgage Lender pursuant to the terms of the Mortgage Loan Documents until the Mortgage Loan has been paid in full and, thereafter, shall be paid to Lender pursuant to this Loan Agreement and the Cash Management Agreement. Upon application of any casualty or condemnation proceeds by Mortgage Lender and repayment in full of the Mortgage Loan if the Mezzanine Loan remains outstanding, any remaining insurance or condemnation proceeds shall be disbursed into the Cash Management Agreement and, at Lender's election, applied to prepay the Loan without the imposition of any Prepayment Consideration on the Payment Date immediately following such election. If Lender elects to apply all of such insurance proceeds toward the repayment of the Obligations, the Borrowers shall (subject to compliance with clauses (A), (B), (D) and (F) of section 11.4) be entitled to obtain from Lender a Collateral Release (without representation or warranty) relating to such Property, provided that the Borrowers pay to Lender the amount, if any, by which the Collateral Release Price for such Collateral exceeds the insurance proceeds received by Lender and applied to repayment of the Obligations. 58 SECTION 5.6 INSPECTION. The Borrowers shall and shall cause the Mortgage Borrowers to permit any authorized representatives designated by Lender to visit and inspect during normal business hours the Properties and its business, including its financial and accounting records, and to make copies and take extracts therefrom and to discuss its affairs, finances and business with its officers and independent public accountants (with the Borrowers' representative(s) present), at such reasonable times during normal business hours and as often as may be reasonably requested. Unless an Event of Default has occurred and is continuing, Lender shall provide advance written notice to the Borrower or the Mortgage Borrower of at least three (3) Business Days prior to visiting or inspecting any of the Properties or the Borrowers' offices. SECTION 5.7 O&M PLAN. The Borrowers shall cause the Mortgage Borrowers to, and the Jekyll Island Borrowers shall comply fully with the O&M Plans pursuant to the terms of the Mortgage Loan Agreement and this Loan Agreement. SECTION 5.8 INTENTIONALLY DELETED. SECTION 5.9 COMPLIANCE WITH LAWS AND CONTRACTUAL OBLIGATIONS. The Borrowers will, and will cause the Mortgage Borrowers to, (A) comply with the requirements of all present and future applicable laws, rules, regulations and orders of any governmental authority in all jurisdictions in which it is now doing business or may hereafter be doing business, other than those laws, rules, regulations and orders the noncompliance with which would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect, (B) maintain all licenses and permits now held or hereafter acquired by the Borrowers and the Mortgage Borrowers, the loss, suspension, or revocation of which, or failure to renew, could have a Material Adverse Effect and (C) perform, observe, comply and fulfill all of its material obligations, covenants and conditions contained in any Contractual Obligation. SECTION 5.10 FURTHER ASSURANCES. The Borrowers shall, from time to time, execute and/or deliver such documents, instruments, agreements, financing statements, and perform such acts as Lender at any time may reasonably request to evidence, preserve and/or protect the Collateral at any time securing or intended to secure the Obligations and/or to better and more effectively carry out the purposes of this Loan Agreement and the other Loan Documents. SECTION 5.11 PERFORMANCE OF AGREEMENTS AND LEASES. The Borrowers shall, and shall cause the Mortgage Borrowers to, duly and punctually perform, observe and comply in all material respects with all of the terms, provisions, conditions, covenants and agreements on its or their part to be performed, observed and complied with (i) hereunder and under the other Loan Documents to which it is a party, (ii) under all Material Agreements and Leases and (iii) all other agreements entered into or assumed by such Person in connection with the Properties, and will not suffer or permit any material default or event of default (giving effect to any applicable notice requirements and cure periods) to exist under any of the foregoing except where the failure to perform, observe or comply with any agreement referred to in this clause (iii) would not reasonably be expected to have a Material Adverse Effect. SECTION 5.12 LEASES. (A) Without the prior written consent of Lender, which shall not be unreasonably withheld or delayed, the Borrowers shall not and shall not permit the Mortgage Borrowers, nor shall the Borrowers authorize the Mortgage Borrower or any other Person to, 59 (i) enter into any Material Lease; (ii) cancel or terminate any Material Lease (except to enforce any such Lease after a default thereunder); (iii) amend or modify any Material Lease (except for minor modifications and amendments entered into in the ordinary course of business, consistent with prudent property management practices, not materially and adversely affecting the economic terms of the Lease); (iv) approve any assignment, sublease or underlease of any Material Lease (except as required pursuant to the express terms of any existing Lease or Lease hereafter approved by Lender); or (v) cancel or modify any guaranty, or release any security deposit, letter of credit, or other item constituting security pertaining to any Material Lease (except as required pursuant to the express terms of any existing Lease or Lease hereafter approved by Lender). (B) Any request for approval of any Material Lease or assignment, termination, amendment or modification of any Material Lease shall be made to Lender in writing and together with such request the Borrowers shall or shall cause the Mortgage Borrowers to furnish to Lender: (i) such biographical and financial information about the proposed tenant as Lender may reasonably require in conjunction with its review, (ii) a copy of the proposed form of Lease (or amendment or modification), and (iii) a summary of the material terms of such proposed Lease (or amendment or modification) including, without limitation, rental terms and the term of the proposed Lease and any options. Lender's approval of any Material Lease or assignment, termination, amendment or modification of any Material Lease, shall be deemed given, if the first correspondence from the Borrowers to Lender requesting such approval is in an envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the same has been delivered and, if Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period. Except for security deposits, no Material Lease executed after the Closing Date shall provide for payment of rent more than one month in advance, and the Mortgage Borrowers and the Jekyll Island Borrowers shall not under any circumstances be permitted to collect any such rent more than one month in advance. The Borrowers, at Lender's request, shall furnish Lender with executed copies of all Material Leases hereafter made. SECTION 5.13 MANAGEMENT; FRANCHISE AGREEMENT. (A) The Borrowers shall cause the Properties and the Jekyll Island Property to be managed in accordance with the Management Agreements including, without limitation, maintaining inventory in amounts and types customary for hotels comparable to each Property and the Jekyll Island Property. The Borrowers shall and shall cause the Mortgage Borrowers to (i) perform and observe all of the material terms, covenants and conditions of the Management Agreement on the part of the Mortgage Borrowers or the Jekyll Island Borrowers to be performed and observed, and (ii) promptly notify Lender of any notice of any material default under the Management Agreement of which it is aware. If any Mortgage Borrower or the Jekyll Island Borrowers shall default in the performance or observance of any material term, covenant 60 or condition of the applicable Management Agreement on the part of such Mortgage Borrower or the Jekyll Island Borrowers to be performed or observed, then, without limiting Lender's other rights or remedies under this Agreement or the other Loan Documents, and without waiving or releasing the Borrowers or the Mortgage Borrowers from any of their obligations hereunder or under the applicable Management Agreement, Lender shall have the right, upon prior written notice to the Borrowers, but shall be under no obligation, to pay any sums and to perform any act as may be reasonably appropriate to cause such conditions of the applicable Management Agreement on the part of such Mortgage Borrower or the Jekyll Island Borrowers to be performed or observed. (B) The Borrowers shall not, and shall not permit the Mortgage Borrowers to, surrender, terminate, cancel, modify (other than non-material changes), renew or extend the Management Agreement, or enter into any other Management Agreement with Manager or any new Manager (other than an Acceptable Manager), or consent to the assignment by the Manager (other than as an Acceptable Manager) of its interest under the Management Agreement, in each case without (i) prior to a Securitization, the express consent of Lender, which consent shall not be unreasonably withheld, or (ii) after a Securitization, delivery of Rating Confirmations from each of the Rating Agencies. Notwithstanding the foregoing, the Borrowers may allow the Mortgage Borrowers to terminate the Memphis Interim Agreement pursuant to the term of the Mortgage Loan Agreement. (C) Lender shall have the right, subject to the rights of Mortgage Lender under the terms of the Mortgage Loan Agreement, to require the replacement of any Manager with a Person chosen by the Borrowers and reasonably acceptable to Lender (unless such proposed Manager is an Acceptable Manager) and the applicable Franchisor (to the extent the applicable Franchisor has consent rights), upon the earliest to occur of any one or more of the following events: (i) upon the occurrence and during the continuance of an Event of Default; (ii) thirty (30) days after notice from Lender to the Borrowers if Manager has engaged in fraud, gross negligence or willful misconduct arising from or in connection with its performance under the applicable Management Agreement; or (iii) upon a change of control of the current Manager. (D) The Borrowers shall not and shall not permit the Mortgage Borrowers to terminate or enter into any Franchise Agreement without Lender's prior written consent, which may be granted or withheld in Lender's sole discretion. Notwithstanding the foregoing, the following changes to Franchise Agreements shall be permitted without Lender's prior written consent: (i) Replacement of any Franchise Agreement with a new Franchise Agreement in form substantially similar to a form previously approved by Lender with any Franchisor that would cause a Tier 3 Hotel to become either a Tier 2 Hotel or a Tier 1 Hotel, or that would cause a Tier 2 Hotel to become a Tier 1 Hotel; (ii) Replacement of any Franchise Agreement with a new Franchise Agreement in form substantially similar to a form previously approved by Lender with a Franchisor that would cause the Property to remain within the same Category, provided no such replacement shall occur (in the aggregate) with respect to more than the lesser of (x) five (5) 61 Properties, or (y) Properties with Aggregate Allocated Loan Amounts (in the aggregate) of ten percent (10%) of the Aggregate Outstanding Principal Balance; (iii) Replacement of any Franchise Agreement at a Tier 2 Hotel with a new Franchise Agreement in form substantially similar to a form previously approved by Lender for Tier 3 Hotels, provided no such replacements shall occur (in the aggregate) with respect to more than the lesser of (x) three (3) Properties, or (y) Properties with Aggregate Allocated Loan Amounts (in the aggregate) of two percent (2%) of the Aggregate Outstanding Principal Balance; and (iv) Entering into a new Franchise Agreement in form substantially similar to a form previously approved by Lender with an Approved Franchisor (or with respect to the Property located at 3071 Ross Clark Circle, Dothan, Alabama (the "DOTHAN HOTEL"), La Quinta Corporation under the La Quinta brand) for any of the Non-Flagged Hotels, the Dothan Hotel, and the Property located at 7330 Plantation Road, Pensacola, Florida, at which time the applicable Property shall be deemed to be within the Category determined by the applicable Franchise Agreement; provided that the La Quinta brand shall be deemed to be within the Tier 3 Hotel category solely for the purpose of determining the Dothan Hotel's Category. In connection with the replacement of any Franchisors permitted hereunder, the Borrowers shall cause the applicable Mortgage Borrower or the Jekyll Island Borrowers to, within ten (10) Business Days of the execution of such Franchise Agreement, deliver to Lender a Franchisor Letter from any replacement Franchisor in form and substance reasonably acceptable to Lender. In all cases, each Borrower shall (a) cause the hotel located on the applicable Property to be operated pursuant to the applicable Franchise Agreement; (b) promptly perform and observe in all material respects all of the covenants required to be performed and observed by it under the applicable Franchise Agreement (including the requirements of any Property Improvement Plan); (c) promptly notify Lender of any material default under the applicable Franchise Agreement of which it is aware; and (d) promptly enforce in a commercially reasonable manner the performance and observance of all of the material covenants required to be performed and observed by the Franchisor under the Franchise Agreement. In addition, the Borrowers shall not, and shall not permit any Mortgage Borrower to, without Lender's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed: (x) increase or consent to the increase of the aggregate amount of any fees under any Franchise Agreement; or (y) otherwise materially modify, change, supplement, alter or amend, or waive or release any of its material rights and remedies under, any Franchise Agreement. Lender's consent to any replacement of any Franchise Agreement, or the termination, renewal, extension or modification of an existing Franchise Agreement, shall be deemed given, if the first correspondence from the Borrowers to Lender requesting such consent is in an envelope marked "PRIORITY" and contains a bold-faced, conspicuous legend at the top of the first page thereof stating that "IF YOU FAIL TO RESPOND TO OR TO EXPRESSLY DENY THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIFTEEN (15) DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN", and is accompanied by the information and documents required above and any other information reasonably requested by Lender in writing prior to the expiration of such fifteen (15) day period in order to adequately review the 62 same has been delivered and, if Lender fails to respond or to expressly deny such request for approval in writing within the fifteen (15) day period. SECTION 5.14 MATERIAL AGREEMENTS. The Borrowers shall not, and shall not permit the Mortgage Borrowers to, enter into or become obligated under any Material Agreement pertaining to any Property, including without limitation brokerage agreements, without Lender's prior written approval, which approval shall not be unreasonably withheld or conditioned; except that the following Material Agreements shall not require Lender approval: (i) Leases complying with the Loan Documents, (ii) the Management Agreement, (iii) the existing Material Agreements described on SCHEDULE 5.14 attached hereto, (iv) any Franchise Agreement complying with the provisions of Section 5.13 (E) or (v) any other agreement that may be terminated without cause and without payment of a penalty or premium, or not more than thirty (30) days' prior written notice. SECTION 5.15 DEPOSITS; APPLICATION OF RECEIPTS. The Borrowers will cause all Receipts from the Properties and the Jekyll Island Property to be deposited into, and shall otherwise comply with, the applicable Accounts established from time to time under either the Mortgage Loan Cash Management Agreement, the Cash Management Agreement or the Jekyll Island Cash Management Agreement. Subject to Article VII hereof, the Cash Management Agreement and the Jekyll Island Cash Management Agreement, the Borrowers shall promptly apply all Receipts to the payment of all current and past due Operating Expenses, and to the repayment of all sums currently due or past due under the Loan Documents, including all payments into the Reserves. SECTION 5.16 ESTOPPEL CERTIFICATES. (A) Within ten (10) Business Days following a request by Lender, the Borrowers shall provide to Lender a duly acknowledged written statement confirming (i) the amount of the outstanding principal balance of the Loan, (ii) the terms of payment and maturity date of the Note, (iii) the date to which interest has been paid, (iv) whether any offsets or defenses exist against the Obligations, and if any such offsets or defenses are alleged to exist, the nature thereof shall be set forth in detail and (v) that this Loan Agreement, the Note, the Pledge Agreement, the Jekyll Island Mortgage and the other Loan Documents are legal, valid and binding obligations of the Borrowers and have not been modified or amended, or if modified or amended, describing such modification or amendments. (B) Within ten (10) Business Days following a written request by the Borrowers, Lender shall provide to the Borrowers a duly acknowledged written statement setting forth the amount of the outstanding principal balance of the Loan, the date to which interest has been paid, and whether Lender has provided the Borrowers with written notice of any Event of Default. Compliance by Lender with the requirements of this Section shall be for informational purposes only and shall not be deemed to be a waiver of any rights or remedies of Lender hereunder or under any other Loan Document. SECTION 5.17 INDEBTEDNESS. The Borrowers will not, and will not permit the Mortgage Borrowers to, directly or indirectly create, incur, assume, guaranty, or otherwise become or remain directly or indirectly liable with respect to any Indebtedness except for the following (collectively, "PERMITTED INDEBTEDNESS"): 63 (A) The Obligations; (B) The Mortgage Loan; (C) (i) Unsecured trade payables not evidenced by a note and arising out of purchases of goods or services in the ordinary course of business and (ii) Indebtedness incurred in the financing of equipment or other personal property used at the Properties in the ordinary course of business, provided that (a) each such trade payable is payable not later than ninety (90) days after the original invoice date and is not overdue by more than thirty (30) days and (b) the aggregate amount of such trade payables and Indebtedness relating to financing of equipment and personal property referred to in clauses (i) and (ii) above outstanding does not, at any time, exceed five percent (5%) of the outstanding principal balance of the Loan; and (D) That certain unsecured loan in the original principal amount of $17,686,292, evidenced by a certain replacement promissory note dated as of November 15, 2002 given by Servico Center Associates, Ltd., to Servico Palm Beach General Partner SPE, Inc. the outstanding principal balance of which on the Closing Date is $17,686,292. In no event shall any Indebtedness other than the Mortgage Loan (and, with respect to the Jekyll Island Property only, the Loan) be secured, in whole or in part, by the Properties or any portion thereof or interest therein, nor shall any Indebtedness other than the Loan be secured, in whole or in part, by the Collateral or any portion thereof or interest therein. SECTION 5.18 NO LIENS. The obligations of the Borrowers under this Section are in addition to and not in limitation of its obligations under Article XI herein. The Borrowers shall not, and shall not permit the Mortgage Borrowers to, create, incur, assume or permit to exist any Lien on or with respect to the Properties, any Collateral or any direct or indirect ownership interest in any Borrower or any Mortgage Loan Borrower, except Permitted Encumbrances. SECTION 5.19 CONTINGENT OBLIGATIONS. Other than Permitted Indebtedness, no Borrower or Member shall directly or indirectly create or become or be liable with respect to any Contingent Obligation except Contingent Obligations existing on the Closing Date and described in SCHEDULE 4.4. SECTION 5.20 RESTRICTION ON FUNDAMENTAL CHANGES. Except as otherwise expressly permitted under this Loan Agreement, no Borrower or Member shall, or shall permit any other Person to, (i) amend, modify or waive any term or provision of such Borrower's or Member's partnership agreement, certificate of limited partnership, articles of incorporation, by-laws, articles of organization, operating agreement or other organizational documents so as to violate or permit the violation of the single-purpose entity provisions set forth in Article IX, unless required by law; or (ii) liquidate, wind-up or dissolve such Borrower or Member. SECTION 5.21 TRANSACTIONS WITH RELATED PERSONS. The Borrowers shall not, and shall not permit the Mortgage Borrowers to, directly or indirectly enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Related Person of any of the Borrowers or with any director, officer or employee of any Borrower Party, except transactions in the ordinary course of and pursuant to the reasonable requirements of the business of the Borrowers and upon fair and reasonable terms 64 and are no less favorable to any of the Borrowers than would be obtained in a comparable arm's length transaction with a Person that is not a Related Person of any of the Borrowers. The Borrowers shall not make any payment or permit any payment to be made to any Related Person of any of the Borrowers when or as to any time when any Event of Default shall exist. SECTION 5.22 BANKRUPTCY, RECEIVERS, SIMILAR MATTERS. (A) VOLUNTARY CASES. The Borrower Parties shall not commence any voluntary case under the Bankruptcy Code or under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect. (B) INVOLUNTARY CASES, RECEIVERS, ETC. No Borrower Party shall apply for, consent to, or aid, solicit, support, or otherwise act, cooperate or collude to cause the appointment of or taking possession by, a receiver, trustee or other custodian for all or a substantial part of the assets of any of the Borrower Parties. As used in this Loan Agreement, an "INVOLUNTARY BORROWER BANKRUPTCY" shall mean any involuntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, in which any Borrower Party is a debtor or any portion of the Properties is property of the estate therein. No Borrower Party shall file a petition for, consent to the filing of a petition for, or aid, solicit, support, or otherwise act, cooperate or collude to cause the filing of a petition for an Involuntary Borrower Bankruptcy. In any Involuntary Borrower Bankruptcy, no Borrower Party shall, without the prior written consent of Lender, consent to the entry of any order, file any motion, or support any motion (irrespective of the subject of the motion), and no Borrower Party shall file or support any plan of reorganization. Each Borrower Party having any interest in any Involuntary Borrower Bankruptcy shall do all things reasonably requested by Lender to assist Lender in obtaining such relief as Lender shall seek, and shall in all events vote as directed by Lender. Without limitation of the foregoing, each such Borrower Party shall do all things reasonably requested by Lender to support any motion for relief from stay or plan of reorganization proposed or supported by Lender. SECTION 5.23 ERISA. (A) NO ERISA PLANS. None of the Borrowers or Members will establish any Employee Benefit Plan, Pension Plan or Multiemployer Plan, or will commence making contributions to (or become obligated to make contributions to) any Employee Benefit Plan, Pension Plan or Multiemployer Plan. (B) COMPLIANCE WITH ERISA. The Borrowers shall not: (i) engage in any non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the IRC; or (ii) except as may be necessary to comply with applicable laws, establish or amend any Employee Benefit Plan which establishment or amendment could result in liability to the Borrowers or any ERISA Affiliate or increase the obligation of the Borrowers, provided that, the Borrowers shall not be in default of this covenant if, in either case, any portion of the Loan has been, or will be, funded with plan assets of any employee benefit plan that either (x) is subject to Title I of ERISA or any plan that is covered by Section 4975 of the Code (unless the Lender is eligible to apply for one or more exemptions such that the Loan will not constitute a nonexempt prohibited 65 transaction under Section 406 of ERISA) or (y) could subject a Borrower or its Affiliates to an excise tax under Section 4975 of the IRC. (C) NO PLAN ASSETS. The Borrowers shall not at any time during the term of this Loan Agreement become (1) an employee benefit plan defined in Section 3(3) of ERISA which is subject to ERISA, (2) a plan as defined in Section 4975(e)(1) of the IRC which is subject to Section 4975 of the IRC, (3) a "governmental plan" within the meaning of Section 3(32) of ERISA or (4) an entity any of whose underlying assets constitute "plan assets" of any such employee benefit plan, plan or governmental plan for purposes of Title I or ERISA, Section 4975 of the IRC or any state statutes applicable to the Borrowers regulating investments of governmental plans. SECTION 5.24 PRESS RELEASE. The Borrowers shall not, and shall not permit any other Person within its control to, disclose the name of Lender or terms of this Loan Agreement or the Loan Documents in any press release without the prior written consent of Lender, which shall not be unreasonably withheld. Notwithstanding the foregoing, the Borrowers shall be permitted to make such filings and disclosures with respect to the Loan as are required by law. SECTION 5.25 GROUND LEASES. (A) NO MODIFICATION. The Borrowers shall not permit any party to modify or amend any material or economic terms of, or terminate or surrender any Ground Lease, in each case without the prior written consent of Lender, which consent may be withheld by Lender in its sole and absolute discretion. Any attempted or purported material modification, amendment, or any surrender or termination of any Ground Lease without Lender's prior written consent shall be null and void and of no force or effect. (B) PERFORMANCE OF GROUND LEASES. The Borrowers shall cause the Ground Lease Borrowers to (i) fully perform as and when due each and all of its obligations under each Ground Lease in accordance with the terms of such Ground Lease, and shall not cause or suffer to occur any material breach or default in any of such obligations, (ii) keep and maintain each Ground Lease in full force and effect, and (iii) exercise any option to renew or extend any Ground Lease and give written confirmation thereof to Lender within thirty (30) days after such option is exercised. (C) NOTICE OF DEFAULT. If the Borrowers or any of the Mortgage Borrowers shall receive any written notice that any Ground Lease Default or Jekyll Island Ground Lease Default has occurred, then such Borrower immediately shall notify Lender in writing of the same and immediately deliver to Lender a true and complete copy of each such notice. Further, the Borrowers shall provide and shall cause the Mortgage Borrowers to provide, such documents and information as Lender shall reasonably request concerning the Ground Lease Default or the Jekyll Island Ground Lease Default. (D) LENDER'S RIGHT TO CURE. If any Ground Lease Default or any Jekyll Island Ground Lease Default shall occur and be continuing, or if any Ground Lessor asserts that a Ground Lease Default or any Jekyll Island Ground Lease Default has occurred (whether or not the Borrowers question or deny such assertion), then, subject to the terms and conditions of the 66 applicable Ground Lease, Lender, upon five (5) Business Days' prior written notice to the Borrowers, unless Lender reasonably determines that a shorter period (or no period) of notice is necessary to protect Lender's interest in the Ground Lease, may (but shall not be obligated to) take any action that Lender deems reasonably necessary, including, without limitation, (i) performance or attempted performance of the Ground Lease Borrowers' obligations under the applicable Ground Lease, (ii) curing or attempting to cure any actual or purported Ground Lease Default or purported Jekyll Island Ground Lease Default, (iii) mitigating or attempting to mitigate any damages or consequences of the same and (iv) entry upon the applicable Ground Leased Property for any or all of such purposes. Upon Lender's request, the Borrowers shall submit satisfactory evidence of payment or performance of any of its obligations under each Ground Lease. Lender may pay and expend such sums of money as Lender in its sole discretion deems necessary or desirable for any such purpose, and the Borrowers shall pay to Lender within five (5) Business Days of the written demand of Lender all such sums so paid or expended by Lender, together with interest thereon from the date of expenditure at the Default Rate. (E) LEGAL ACTION. The Borrowers shall not commence, or permit the Ground Lease Borrowers to commence, any action or proceeding against any Ground Lessor or affecting or potentially affecting any Ground Lease or the Ground Lease Borrowers' or Lender's interest therein, the effect of which could cause an event of default or termination of any such Ground Lease, without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed. The Borrowers shall notify Lender immediately if any action or proceeding shall be commenced between any Ground Lessor and the Ground Lease Borrowers, or affecting or potentially affecting any Ground Lease or the Ground Lease Borrowers' or Lender's interest therein (including, without limitation, any case commenced by or against any Ground Lessor under the Bankruptcy Code). Lender shall have the option, exercisable upon notice from Lender to the Borrowers, to participate in any such action or proceeding with counsel of Lender's choice. The Borrowers shall cause the Ground Lease Borrowers to cooperate with Lender, comply with the reasonable instructions of Lender, execute any and all powers, authorizations, consents or other documents reasonably required by Lender in connection therewith, and shall not settle any such action or proceeding without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed. (F) ESTOPPEL CERTIFICATE. Subject to the terms and conditions of the applicable Ground Lease, the Borrowers shall or shall cause the Ground Lease Borrowers to use commercially reasonable efforts to obtain and deliver to Lender within the time period required under the applicable Ground Lease, an estoppel certificate from each Ground Lessor setting forth (A) (i) the identities of the original lessor and lessee under the applicable Ground Lease and each of their respective successors, (ii) that the Ground Lease has not been modified or, if it has been modified, the date of each modification (together with copies of each such modification), (iii) the rent payable under the Ground Lease, (iv) the dates to which all rent and other charges have been paid, (v) whether there are any alleged Ground Lease Defaults or alleged Jekyll Island Ground Lease Defaults and, if so, setting forth the nature thereof in reasonable detail, and (vi) such other matters as Lender may reasonably request or (B) the matters required to be certified by the Ground Lessor under the applicable Ground Lease. The Borrowers shall not be required to request an estoppel from any Ground Lessor more than two (2) times in any calendar year. 67 (G) BANKRUPTCY. (i) If the Jekyll Island Ground Lessor shall reject the Jekyll Island Ground Lease under or pursuant to Section 365 of Title 11 of the Bankruptcy Code, the Jekyll Island Borrowers shall not elect to treat the Jekyll Island Ground Lease as terminated but shall elect to remain in possession of the Ground Leased Property and the leasehold estate under the Jekyll Island Ground Lease. The lien of the Jekyll Island Mortgage covering the Jekyll Island Property does and shall encumber and attach to all of the Jekyll Island Borrowers' right and remedies at any time arising under or pursuant to Section 365 of the Bankruptcy Code, including without limitation, all of the Jekyll Island Borrowers' rights to remain in possession of the Jekyll Island Property and the leasehold estate. (ii) The Jekyll Island Borrowers acknowledge and agree that in any case commenced by or against the Jekyll Island Borrowers under the Bankruptcy Code, Lender by reason of the liens and rights granted under the Jekyll Island Mortgage covering the Jekyll Island Property and the Loan Documents shall have a substantial and material interest in the treatment and preservation of the Jekyll Island Borrwers' rights and obligations under the Jekyll Island Ground Lease, and that such Jekyll Island Borrowers shall, in any such bankruptcy case, provide to Lender immediate and continuous reasonably adequate protection of such interests. The Jekyll Island Borrowers and Lender agree that such adequate protection shall include but shall not necessarily be limited to the following: (a) Lender shall be deemed a party to the Jekyll Island Ground Lease (but shall not have any obligations thereunder) for purposes of Section 365 of the Bankruptcy Code, and shall, provided that, prior to an Event of Default, no such action by Lender would adversely and materially affect the Jekyll Island Borrowers' ability to prosecute, or defend, any such claims asserted therein, have standing to appear and act as a party in interest in relation to any matter arising out of or related to the Jekyll Island Ground Lease or the Jekyll Island Property. (b) The Jekyll Island Borrowers shall serve Lender with copies of all notices, pleadings and other documents relating to or affecting the Jekyll Island Ground Lease or the Jekyll Island Property. Any notice, pleading or document served by the Jekyll Island Borrowers on any other party in the bankruptcy case shall be contemporaneously served by the Jekyll Island Borrowers on Lender, and any notice, pleading or document served upon or received by the Jekyll Island Borrowers from any other party in the bankruptcy case shall be served by the Jekyll Island Borrowers on Lender promptly upon receipt by the Jekyll Island Borrowers. (c) Upon written request of Lender, the Jekyll Island Borrowers shall assume the Jekyll Island Ground Lease, and shall take such steps as are necessary to preserve the Jekyll Island Borrowers' right to assume the Jekyll Island Ground Lease, including without limitation using commercially reasonable efforts to obtain extensions of time to assume or reject the Jekyll Island Ground Lease under Subsection 365(d) of the Bankruptcy Code to the extent it is applicable. (H) If the Jekyll Island Borrowers or the applicable Ground Lessor seeks to reject the Jekyll Island Ground Lease or have the Ground Lease deemed rejected, then prior to the hearing 68 on such rejection Lender shall, subject to applicable law, be given no less than twenty (20) days' notice and opportunity to elect in lieu of rejection to have the Jekyll Island Ground Lease assumed and assigned to a nominee of Lender. If Lender shall so elect to assume and assign the Jekyll Island Ground Lease, then the Jekyll Island Borrowers shall, subject to applicable law, continue any request to reject the Jekyll Island Ground Lease until after the motion to assume and assign has been heard. If Lender shall not elect to assume and assign the Jekyll Island Ground Lease, then Lender may, subject to applicable law, obtain in connection with the rejection of the Jekyll Island Ground Lease a determination that the applicable Ground Lessor, at Lender's option, shall (1) agree to terminate the Jekyll Island Ground Lease and enter into a new lease with Lender on the same terms and conditions as the Jekyll Island Ground Lease, for the remaining term of the Jekyll Island Ground Lease, or (2) treat the Jekyll Island Ground Lease as breached and provide Lender with the rights to cure defaults under the Jekyll Island Ground Lease and to assume the rights and benefits of the Jekyll Island Ground Lease. The Jekyll Island Borrowers shall join with and support any request by Lender to grant and approve the foregoing as necessary for adequate protection of Lender's interests. Notwithstanding the foregoing, Lender may seek additional terms and conditions, including such economic and monetary protections as it deems reasonably appropriate to adequately protect its interests, and any request for such additional terms or conditions shall not delay or limit Lender's right to receive the specific elements of adequate protection set forth herein. The Jekyll Island Borrowers hereby appoint Lender as its attorney in fact to act on behalf of Lender in connection with all matters relating to or arising out of the assumption or rejection of the Jekyll Island Ground Lease, in which the other party to the lease is a debtor in a case under the Bankruptcy Code. This grant of power of attorney is present, unconditional, irrevocable, durable and coupled with an interest. SECTION 5.26 MORTGAGED CONDOMINIUM PROPERTY. (A) NO MODIFICATION. The Borrowers shall not permit the Condominium Mortgage Borrowers to modify or amend any material terms of, or terminate or amend any of the Mortgaged Condominium Property Documents, in each case, without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed. (B) PERFORMANCE OF MORTGAGED CONDOMINIUM PROPERTY DOCUMENTS. The Borrowers shall cause the Condominium Mortgage Borrowers to fully and faithfully pay when due and payable all assessments, common charges and other charges payable by Condominium Mortgage Borrowers under the Mortgaged Condominium Property Documents and shall perform as and when due each of its material obligations under the Mortgaged Condominium Property Documents in substantial accordance with their respective terms, and shall not cause or suffer to occur any breach or default in any of such obligations. The Borrowers shall cause the Condominium Mortgage Borrowers to keep and maintain each of the Mortgaged Condominium Property Documents in full force and effect. (C) NOTICE OF DEFAULT. If the Borrowers of the Condominium Borrowers shall receive any written notice of any Condominium Default, the Borrowers immediately shall notify Lender of same and deliver to Lender a true and complete copy of each such notice, and provide such 69 documents and information as Lender may reasonably request concerning such Condominium Default. (D) LENDER'S RIGHT TO CURE. If any Condominium Default shall occur and be continuing, or if any party to any Mortgaged Condominium Property Document asserts that a Condominium Default has occurred (whether or not the Borrowers question or deny such assertion), then, subject to the terms and conditions of the applicable Mortgaged Condominium Property Documents, after notice to the Borrowers, Lender, upon five (5) Business Days' prior written notice to the Borrowers, unless Lender reasonably determines that a shorter period (or no period) of notice is necessary to protect Lender's interest in the Ground Lease, may (but shall not be obligated to) take any action that Lender deems reasonably necessary to cure such Condominium Default, including, without limitation, (i) performance or attempted performance of the applicable Condominium Mortgage Borrower's obligations under the applicable Mortgaged Condominium Property Documents, (ii) curing or attempting to cure any actual or purported Condominium Default, (iii) mitigating or attempting to mitigate any damages or consequences of the same and (iv) entry upon the Mortgaged Condominium Property for any or all of such purposes. Upon Lender's request, the Borrowers shall submit satisfactory evidence of payment or performance of any of its obligations under each of the Mortgaged Condominium Property Documents. Lender may pay and expend such sums of money as Lender in its sole discretion deems necessary or desirable for any such purpose, and the Borrowers shall pay to Lender within five (5) Business Days of the written demand of Lender all such sums so paid or expended by Lender pursuant to this Section 5.26, together with interest thereon from the date of expenditure at the Default Rate. (E) PRESERVATION OF CONDOMINIUM. The Borrowers will do, and will cause the Condominium Mortgage Borrowers to do, all things necessary to preserve and to keep unimpaired its material rights, powers and privileges under the Mortgaged Condominium Property Documents and to prevent the termination or expiration of the Mortgaged Condominium property Documents, or the withdrawal of the Mortgaged Condominium Property from a condominium form of ownership under applicable law, to the end that the Condominium Mortgage Borrowers may enjoy all of the material rights granted to it as a part to the Mortgaged Condominium Property Documents. (F) STATEMENTS, NOTICES. The Borrowers will, within twenty (20) days after demand from Lender (which shall not be required more than two (2) times in any calendar year), obtain, or cause the Condominium Mortgage Borrowers to obtain, if and to the extent that Condominium Mortgage Borrower is entitled to the same under the Mortgaged Condominium Property Documents, and otherwise request from and make good faith efforts to obtain, from the Board of Managers and deliver to Lender a duly signed and acknowledged certificate (signed also by the Condominium Mortgage Borrowers) that the Mortgaged Condominium Property Documents are unmodified and in full force and effect (or, if the same have been modified in compliance with this Loan Agreement, that the Mortgaged Condominium Property Documents are in full force and effect as to modified and that there have been no other modifications), stating the dates to which the assessments, common charges and other charges payable under the Mortgaged Condominium Property Documents have been paid and stating whether to the certifying party's and the Condominium Mortgage Borrower's knowledge is in compliance with the Mortgaged Condominium Property Documents, or, if not, specifying each default or failure of compliance of 70 which the certifying party has knowledge. The Borrowers will, promptly upon receipt thereof by Condominium Mortgage Borrower, furnish Lender with a copy of all notices and statements, however characterized, issued by the Board of Managers or relating to the Mortgaged Condominium Property Documents including without limitation, financial statements and projected budgets. SECTION 5.27 LENDER'S EXPENSES. The Borrowers shall pay, on demand by Lender, all reasonable out-of-pocket expenses, charges, costs and fees (including reasonable attorneys' fees and expenses) in connection with the negotiation, documentation, closing, administration, servicing, enforcement interpretation, and collection of the Loan and the Loan Documents, and in the preservation and protection of Lender's rights hereunder and thereunder. Without limitation the Borrowers shall pay all costs and expenses, including reasonable attorneys' fees, incurred by Lender in any case or proceeding under the Bankruptcy Code (or any law succeeding or replacing any of the same). At the Closing, Lender is authorized to pay directly from the proceeds of the Loan any or all of the foregoing expenses then or theretofore incurred and approved by the Borrowers. SECTION 5.28 DISTRIBUTIONS. During the continuance of any Event of Default, and at any time that a Cash Trap Event is in effect, the Borrowers shall not make any distributions of cash or other property to any Borrower Party, or make any payments in lieu thereof, without Lender's prior written approval, which may be granted or withheld in Lender's sole discretion. SECTION 5.29 COMPLETION OF REQUIRED CAPITAL IMPROVEMENTS. The Borrowers shall commence and shall cause the Mortgage Borrowers to commence the Required Capital Improvements promptly following the Closing and to complete the Required Capital Improvements in accordance with Section 6.5 of the Mortgage Loan Agreement and, with respect to the Jekyll Island Property, the Jekyll Island Required Capital Improvements in accordance with Section 6.4(B) of this Loan Agreement. SECTION 5.30 COMPLIANCE WITH PLAN OF REORGANIZATION. The Borrowers shall comply, and shall cause all other parties under the control of Borrower, Guarantor or any Affiliates thereof to comply, in all material respects with the Plan of Reorganization. SECTION 5.31 CANCELLATION OF INDEBTEDNESS; SETTLEMENT OF CLAIMS. Unless otherwise specifically provided herein to the contrary, no Borrower shall cancel any indebtedness from any Person owing to any Borrower, or settle any claims without Lender's prior written consent which shall not be unreasonably withheld. SECTION 5.32 MODIFICATION OF MORTGAGE DOCUMENTS. The Borrowers shall not consent to, nor permit the Mortgage Borrowers to agree to, any material amendment, modification, waiver or restatement of any of the Mortgage Loan Documents without Lender's prior written consent, which will not be unreasonably withheld. 71 ARTICLE VI RESERVES SECTION 6.1 SECURITY INTEREST IN RESERVES; OTHER MATTERS PERTAINING TO RESERVES. (A) The Borrowers hereby pledge, assign and grant to Lender a security interest in and to all of the Borrowers' right, title and interest in and to the Account Collateral, including the Reserves, as security for payment and performance of all of the Obligations hereunder and under the Note and the other Loan Documents, subject, in each case to the interests of the Mortgage Lender, if any, in the Account Collateral. The Reserves constitute Account Collateral and are subject to the security interest in favor of Lender created herein and all provisions of this Loan Agreement and the other Loan Documents pertaining to Account Collateral. (B) In addition to the rights and remedies provided in Article VII and elsewhere herein, upon the occurrence and during the continuance of any Event of Default, Lender shall have all rights and remedies pertaining to the Reserves as are provided for in any of the Loan Documents or under any applicable law. Without limiting the foregoing, upon and at all times after the occurrence and during the continuance of an Event of Default, Lender in its sole and absolute discretion, may use the Reserves (or any portion thereof) for any purpose, including but not limited to any combination of the following: (i) payment of any of the Obligations including the Prepayment Consideration (if any) applicable upon such payment in such order as Lender may determine in its sole discretion; provided, however, that such application of funds shall not cure or be deemed to cure any default; (ii) reimbursement of Lender for any actual losses or expenses (including, without limitation, reasonable legal fees) suffered or incurred as a result of such Event of Default; (iii) payment for the work or obligation for which such Reserves were reserved or were required to be reserved; and (iv) application of the Reserves in connection with the exercise of any and all rights and remedies available to Lender at law or in equity or under this Loan Agreement or pursuant to any of the other Loan Documents. Nothing contained in this Loan Agreement shall obligate Lender to apply all or any portion of the funds contained in the Reserves during the continuance of an Event of Default to payment of the Loan or in any specific order of priority. SECTION 6.2 FUNDS DEPOSITED WITH LENDER/JEKYLL ISLAND RESERVES. (A) Except only as expressly provided otherwise herein, all funds of the Borrowers which are deposited with Lock Box Account Bank as Reserves hereunder shall be held by Lock Box Account Bank in one or more Permitted Investments, such Permitted Investments, prior to an Event of Default, to be as directed by Borrower. All interest which accrues on the Reserves shall be taxable to the Borrowers and shall be added to and disbursed in the same manner and under the same conditions as the principal sum on which said interest accrued. Additional provisions pertaining to investments are set forth in Article VII. After repayment of all of the Obligations, all funds held as Reserves will be promptly returned to the Borrowers. (B) The Borrowers shall cause the Mortgage Borrowers to deposit with Mortgage Lender the amounts necessary to fund each of the Reserves as set forth in the Mortgage Loan Agreement and the Mortgage Loan Cash Management Agreement. The Borrowers shall deposit with Lender the amounts necessary to fund each of the Jekyll Island Reserves as set forth below. Deposits into the Jekyll Island Reserves at Closing may occur by 72 deduction from the amount of the Loan that otherwise would be disbursed to the Borrowers, followed by deposit of the same into the applicable Sub-Account or Account of the Jekyll Island Lock Box Account in accordance with the Jekyll Island Cash Management Agreement on the Closing Date. Notwithstanding such deductions, the Loan shall be deemed for all purposes to be fully disbursed at Closing. (C) JEKYLL ISLAND IMPOSITIONS AND INSURANCE RESERVE. On the Closing Date, the Borrowers shall deposit with Lock Box Account Bank $96,310.32 and, pursuant to the Jekyll Island Cash Management Agreement, the Borrowers shall deposit monthly, on each Payment Date commencing on the Payment Date in December 2002, 1/12th of the annual charges (as reasonably estimated by Lender) for all Impositions and all insurance premiums (other than for D&O Insurance) payable with respect to the Jekyll Island Property hereunder (said funds, together with any interest thereon and additions thereto, the "JEKYLL ISLAND IMPOSITIONS AND INSURANCE RESERVE"). The initial amount of the monthly deposit to be made to the Jekyll Island Impositions and Insurance Reserve from and after the date hereof is $12,518. The Borrowers shall also deposit with Lock Box Account Bank within ten (10) Business Days of the written demand by Lender, to be added to and included within such reserve, a sum of money which Lender reasonably estimates, together with such monthly deposits, will be sufficient to make the payment of each such charge at least ten (10) Business Days prior to the date initially due. The Borrowers shall provide Lender with bills and all other documents necessary for the payment of the foregoing charges at least thirty (30) days prior to the date on which each payment shall first become subject to penalty or interest if not paid. So long as (i) no Event of Default has occurred and is continuing, (ii) the Borrowers have provided Lender with the foregoing bills and other documents in a timely manner, and (iii) sufficient funds are held by Lender for the payment of the Impositions and insurance premiums relating to the Jekyll Island Property, as applicable, Lender shall pay said items or disburse to the Borrowers from such Reserve an amount sufficient to pay said items. Interest shall accrue in favor of the Borrowers on funds in the Jekyll Island Impositions and Insurance Reserve. In addition to (and not in lieu of) the aforementioned reserves, at Closing, the Borrowers shall deposit with Lock Box Account Bank the Jekyll Island Supplemental Insurance Reserve Payment to be held in the Impositions and Insurance Reserve. Lender shall be under no obligation to cause any portion of the Jekyll Island Supplemental Insurance Reserve Payment to be released to the Borrowers for the payment of any Impositions. Notwithstanding the foregoing to the contrary, provided no Event of Default has occurred and is then continuing, Lender shall cause the remainder, if any, of the Jekyll Island Supplemental Insurance Reserve Payment to be disbursed to the Borrowers within five (5) Business Days of the delivery by the Borrowers or the Mortgage Loan Borrowers to Lender of each of the Insurance Policies required pursuant to the terms of Section 5.4 hereof providing coverage for a period of one (1) year, together with evidence of the payment in full of the annual premiums payable for such Insurance Policies. SECTION 6.3 (A) FF&E RESERVE. Funds held in the FF&E Reserve may be withdrawn by the Borrowers or the Mortgage Borrowers, subject in all instances to the terms of the Mortgage Loan Cash Management Agreement, only in accordance with the approved CapEx/FF&E Budget relating to the Properties (excluding the Jekyll Island Property). Upon and at all times after the occurrence and during the continuance of an Event of Default, no draws will be permitted from the FF&E Reserve other than for normal repairs, replacements, maintenance expenses, and otherwise in accordance with the terms of the Management Agreement, subject, in each instance, 73 to Manager's compliance with the FF&E reporting requirements set forth in Section 5.1(A)(v)(e). (B) JEKYLL ISLAND FF&E RESERVE. On or prior to the Closing Date, Lender or Servicer on behalf of Lender shall establish and maintain with the Lock Box Account Bank an account, for the purpose of creating a reserve for replacements of the furniture, fixtures and equipment at or in, or used in connection with, the Jekyll Island Property (the "REPLACEMENTS") in accordance with the applicable CapEx/FF&E Budget approved by Lender (said funds, together with any interest thereon and additions thereto, the "JEKYLL ISLAND FF&E RESERVE") which account shall be an Eligible Account entitled "Jekyll Island FF&E Reserve Account for the benefit Merrill Lynch Mortgage Lending, Inc., as secured party" and shall be under the sole dominion and control of Lender, subject to the terms of the Jekyll Island Cash Management Agreement. Pursuant to the Jekyll Island Cash Management Agreement, the Borrowers shall deposit with Lock Box Account Bank at the Closing the sum of $6,540.91 and thereafter monthly, on each Payment Date commencing with the Payment Date in December 2002, an amount equal to 4.0% of the Operating Revenues generated from the Jekyll Island Property for the prior calendar month (such amount, the "JEKYLL ISLAND MONTHLY FF&E PAYMENT"). Funds held in the Jekyll Island FF&E Reserve may be withdrawn by the Borrowers, subject in all instances to the terms of the Jekyll Island Cash Management Agreement, only in accordance with the approved CapEx/FF&E Budget, and no funds held in the Jekyll Island FF&E Reserve shall be used in connection with the Jekyll Island Required Capital Improvements. Upon and at all times after the occurrence and during the continuance of an Event of Default, no draws will be permitted from the Jekyll Island FF&E Reserve other than for normal repairs, replacements, maintenance expenses, and otherwise in accordance with the terms of the Jekyll Island Cash Management Agreement, subject, in each instance, to Manager's compliance with the FF&E reporting requirements set forth in Section 5.1 (A)(v)(d). SECTION 6.4 (A) CAPITAL IMPROVEMENT RESERVE; REQUIRED CAPITAL IMPROVEMENTS. The Borrowers shall cause the Mortgage Borrowers to promptly commence and diligently prosecute to completion the Required Capital Improvements within the time periods for each Required Capital Improvement set forth on EXHIBIT H to the Mortgage Loan Agreement. Funds held in the Capital Improvement Reserve shall be disbursed only in accordance with Section 6.7 of the Mortgage Loan Agreement. (B) JEKYLL ISLAND CAPITAL IMPROVEMENT RESERVE. At Closing, the Borrowers shall reserve from the proceeds of the Loan and shall deposit with Lock Box Account Bank $3,125.00 (said funds, together with any interest thereon, the "JEKYLL ISLAND CAPITAL IMPROVEMENT RESERVE"), which funds shall be made available to the Borrowers solely for payment of certain Capital Improvements required to be made to the Jekyll Island Property and designated as "Required Capital Improvements" on the Capital Improvement Plan attached hereto as EXHIBIT H (the "JEKYLL ISLAND REQUIRED CAPITAL IMPROVEMENTS") and shall not be used by the Borrowers for purposes for which any other Reserve is established or for any other purpose other than completion of the Jekyll Island Required Capital Improvements. The Borrowers shall promptly commence and diligently prosecute to completion, subject to Force Majeure, the Jekyll Island Required Capital Improvements within the time periods for each Jekyll Island Required Capital Improvement set forth on EXHIBIT H. Funds held in the Jekyll Island Capital Improvement Reserve shall be disbursed in accordance with Section 6.6. Subject 74 to the foregoing conditions, the Borrowers shall be entitled to draw any remaining balance in the Jekyll Island Capital Improvement Reserve when all Jekyll Island Required Capital Improvements are complete, and paid for, in accordance with the terms hereof. SECTION 6.5 HAZARDOUS MATERIALS REMEDIATION RESERVE. The funds contained in the Hazardous Materials Remediation Reserve shall be utilized by the Borrowers and the Mortgage Borrowers solely for performance of the Environmental Work in accordance with the Environmental Reports, and shall not be used by the Borrowers and the Mortgage Borrowers for purposes for which any other Reserve is established. Subject to the Mortgage Borrowers' satisfaction of the applicable conditions of Section 6.7 of the Mortgage Loan Agreement, the Borrowers and the Mortgage Borrowers shall be entitled to draw upon the Hazardous Materials Remediation Reserve to pay for costs that have been incurred by the Borrowers, or the Mortgage Borrowers, for such Environmental Work, provided that the Borrowers deliver to Lender such evidence as may be reasonably satisfactory to Lender that, after payment of such draw, the funds remaining in the Hazardous Materials Remediation Reserve shall be sufficient to pay for the remainder of such Environmental Work. Subject to the foregoing conditions, the Borrowers or the Mortgage Borrowers shall be entitled to draw any remaining balance in the Hazardous Materials Remediation Reserve when all such Environmental Work is complete, and is paid for, to Lender's reasonable satisfaction. SECTION 6.6 CONDITIONS TO DISBURSEMENTS FROM HAZARDOUS MATERIALS REMEDIATION RESERVE, CAPITAL IMPROVEMENT RESERVE AND THE JEKYLL ISLAND CAPITAL IMPROVEMENT RESERVE; PERFORMANCE OF WORK. (A) Lender reserves the right, at its option and as a condition to any disbursement from a Work Reserve, to approve (which shall not be unreasonably withheld, delayed or conditioned) (i) all drawings and plans and specifications, if any, for any Work which require aggregate payments in amounts exceeding the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000 and (ii) all contracts and work orders with materialmen, mechanics, suppliers, subcontractors, contractors and other parties providing labor or materials in connection with any Work which require aggregate payments in amounts exceeding the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000. Upon Lender's reasonable request, the Borrowers shall cause the Mortgage Borrowers to assign, or cause to be assigned, (to the extent assignable) any drawings, plans and specifications, contracts or subcontracts to Lender. Drawings, plans and specifications, contracts and work orders approved by Lender shall not be changed in any material respect without Lender's prior written consent, which shall not be unreasonably withheld, delayed or conditioned. The Borrowers shall have delivered a certificate to Lender from an Architect certifying that the Work has been completed in a good and workmanlike manner in accordance with all applicable laws for any item in excess of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000. Lender may retain its own architect or engineer ("LENDER'S CONSULTANT") to review any plans and specifications for any item in excess of the greater of (x) five percent (5%) of the Aggregate Allocated Loan Amount with respect to the applicable Property or (y) $250,000, and to periodically inspect any Work, in each case at the Borrowers' sole cost and expense. 75 (B) Funds in the Jekyll Island Capital Replacement Improvement Reserves shall be disbursed in the same manner as the disbursements from reserves pursuant to Section 6.7 of the Mortgage Loan Agreement (which Section is incorporated herein by reference) and as if the Jekyll Island Borrowers were "Mortgage Borrowers", the Jekyll Island Capital Improvement Reserves were "Work Reserves" and the Lender is the "Lender" under the Mortgage Loan Agreement. (C) PERFORMANCE OF WORK. If Lender determines in its reasonable discretion that any Work is not being performed in a workmanlike or timely manner or that any Work has not been completed in a workmanlike manner, Lender shall have the option to withhold disbursement for such unsatisfactory work and so notify the Borrowers with reasonable detail regarding the basis for Lender's dissatisfaction and, after the expiration of forty-five (45) days from the giving of such notice by Lender to the Borrowers of such unsatisfactory work without the cure thereof (or, if such unsatisfactory work is susceptible of a cure but cannot reasonably be cured within said forty-five (45) day period and provided that the Borrowers shall have commenced to cure such unsatisfactory work within said forty-five (45) day period and thereafter diligently and expeditiously proceeds to cure the same, after the expiration of such longer period as is reasonably necessary for the Borrowers in the exercise of due diligence to cure such unsatisfactory work, up to a maximum of an additional sixty (60) days subject to Force Majeure, without the cure thereof), Lender may proceed under existing contracts or contract with third parties to complete such Work, as the case may be, and apply amounts contained in the applicable Work Reserve toward the labor and materials necessary to complete the same, without providing any additional prior notice to the Borrowers, and exercise any and all other remedies available to Lender upon and during the continuance of an Event of Default hereunder. In order to facilitate Lender's completion or making of any Work pursuant to this Section 6.7(C), the Borrowers shall cause the Mortgage Borrowers to grant Lender the right to enter onto each Property during normal business hours after the expiration of the notice specified above and perform, subject to the rights of tenants, any and all work and labor necessary to complete the applicable Work and/or employ watchmen to protect the Property from damage. All sums so expended by Lender shall be deemed to have been advanced under the Loan to the Borrowers and secured by the Pledge Agreement. For this purpose, the Borrowers constitute and appoint Lender their true and lawful attorney-in-fact with full power of substitution to complete or undertake the applicable Work in the name of the Borrowers pursuant to Section 6.7(B)(ii) above. Such power of attorney shall be deemed to be a power coupled with an interest and cannot be revoked. Upon the occurrence and during the continuance of an Event of Default, the Borrowers empower said attorney-in-fact as follows: (i) to use any funds in the applicable Work Reserve for the purpose of making or completing any Work; (ii) to make such additions, changes and corrections to any Work as shall be reasonably necessary or desirable to complete the same; (iii) to employ such contractors, subcontractors, agents, architects and inspectors as shall be required for such purposes; (iv) to pay, settle or compromise all existing bills and claims which are or may become Liens against any Property, or as may be necessary or desirable for the completion of any Work, or for clearance of title; (v) to execute all applications and certificates in the name of the applicable Mortgage Borrower which may be required by any of the contract documents; (vi) in its reasonable discretion, to prosecute and defend all actions or proceedings in connection with any Property or the rehabilitation and repair of such Property; and (vii) to do any 76 and every act which the Borrowers might do in their own behalf to fulfill the terms of this Loan Agreement. Nothing in this Section shall: (i) make Lender responsible for making or completing any Work; (ii) require Lender to expend funds in addition to the amounts on deposit in the applicable Work Reserve to make or complete any Work; (iii) obligate Lender to proceed with any Work; or (iv) obligate Lender to demand from the Borrowers additional sums to make or complete any Work. The Borrowers shall and shall cause the Mortgage Borrowers to permit Lender and Lender's agents and representatives (including, without limitation, Lender's engineer, architect or inspector) or third parties performing any Work pursuant to this Section 6.7 to enter onto any Property during normal business hours upon reasonable notice (subject to the rights of tenants under their Leases) to inspect the progress of any Work and all materials being used in connection therewith, to examine all plans and shop drawings relating thereto which are or may be kept at any Property, and to complete any Work made pursuant to Section 6.7(B)(ii). The Borrowers shall, and shall cause the Mortgage Borrowers to, use commercially reasonable efforts to cause all contractors and subcontractors to cooperate with Lender or Lender's representatives or such other persons described above in connection with inspections described in this Section 6.7(B) or the completion of the Work pursuant to this Section 6.7(B). (D) INDEMNIFICATION. The Borrowers shall indemnify Lender and hold Lender harmless from and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations, out-of-pocket costs and expenses (including, without limitation, litigation costs and reasonable attorneys fees and expenses) arising from or in any way connected with the performance of the Work, except to the extent caused by the bad faith, willful misconduct or gross negligence of Lender. The Borrowers shall assign, and shall cause to be assigned, to Lender all rights and claims the Mortgage Borrowers or the Jekyll Island Borrowers may have against all Persons supplying labor or materials in connection with the Work; provided, however, that Lender may not pursue any such right or claim or pursue any other action with respect to such rights and claims unless an Event of Default has occurred and remains uncured. SECTION 6.7 CASH TRAP RESERVE. (i) If, at any time prior to the repayment of the Obligations (as defined in the Mortgage Loan Agreement) in full, a Cash Trap Event shall occur, then, from and after the occurrence of such Cash Trap Event and for so long as such Cash Trap Event continues to exist, all Excess Cash Flow (except as otherwise expressly provided below) shall be deposited with Mortgage Lender (or its Servicer or agent) and held by Mortgage Lender in accordance with the Mortgage Loan Cash Management Agreement or, if not so held by Mortgage Lender, shall be deposited with Lender and held in the Lock Box Account and, in each case disbursed in accordance with the terms of the Mortgage Loan Cash Management Agreement. SECTION 6.8 SUBSTITUTE CASH MANAGEMENT AGREEMENT. If the Mortgage Loan shall have been satisfied prior to the payment in full of the Loan, the Borrowers shall, and shall cause the Mortgage Borrowers to enter into a substitute Cash Management Agreement and related lockbox agreements and pledge agreements with substantially the same terms as the agreements entered into as of the date hereof in connection with the Mortgage Loan (including, the provisions in the 77 Mortgage Loan Agreement relating to all Reserves and Collateral Accounts, Section 5.4, Article VI and Article VII of the Mortgage Loan Agreement) within five (5) days after the satisfaction of such Mortgage Loan, all of which agreements shall be for the benefit of Lender rather than Mortgage Lender. Such substitute agreements shall provide that all Receipts shall be deposited directly into the Deposit Account for disbursement in accordance with the terms of such substitute Cash Management Agreement and this Agreement. Notwithstanding the foregoing, the substitute Cash Management Agreement shall provide that the aggregate amortization payments that were being made prior to the satisfaction of the Mortgage Loan shall continue to be paid and 100% of such payments shall be distributed to Lender. ARTICLE VII LOCK BOX; CASH MANAGEMENT SECTION 7.1 ESTABLISHMENT OF DEPOSIT ACCOUNT AND LOCK BOX ACCOUNT. (A) (i) DEPOSIT ACCOUNT. On or before the Closing Date, one or more deposit accounts shall be established at the Borrowers' sole cost and expense in the name of Lender, as secured party hereunder (said accounts, and any accounts replacing same in accordance with this Loan Agreement and the Deposit Account Agreement, collectively, the "DEPOSIT ACCOUNT") with one or more financial institutions reasonably approved by Lender (collectively, the "DEPOSIT BANK"), pursuant to one or more agreements (collectively, the "DEPOSIT ACCOUNT AGREEMENT") substantially similar to Lender's form or otherwise in form and substance reasonably acceptable to Lender, executed and delivered by the Borrowers and the Deposit Bank. The Deposit Account shall be under the sole dominion and control of Lender (which dominion and control may be exercised by Servicer). Among other things, the Deposit Account Agreement shall provide that the Borrowers shall have no access to or control over the Deposit Account, that all available funds on deposit in the Deposit Account shall be transferred by wire transfer (or transfer via the ACH System) on each Business Day by the Deposit Bank into the Lock Box Account, for application in accordance with the Cash Management Agreement. The Deposit Bank and the Lock Box Account Bank shall be directed to deliver to the Borrowers copies of bank statements and other information made available by the Deposit Bank and the Lock Box Account Bank concerning the Deposit Account and the Lock Box Account. Notwithstanding the forgoing to the contrary, the requirement to establish the Deposit Accounts pursuant to this Section shall be deemed to be satisfied to the extent that, and for so long as, one or more accounts meeting the requirements for the Deposit Accounts set forth above are established and maintained pursuant to the terms of the Mortgage Loan Documents for the benefit of Mortgage Lender. (ii) Upon establishing the Jekyll Island Deposit Account, (1) the Borrowers shall cause any and all Operating Revenues from the Jekyll Island Property, including distributions or other payments made directly or indirectly to the Jekyll Island Borrowers, Manager, or any of their respective Affiliates, from any Beverage Company, to be deposited promptly into the Jekyll Island Deposit Account and in no event later than two (2) Business Days after the same are paid to or for the benefit of the Borrowers, and (2) the Borrowers shall each obtain an agreement (each, a "Credit Card Receivables Payment Direction Letter") from each of the Persons paying or disbursing credit card receivables (the "Credit Card Companies"), substantially similar to Lender's form or otherwise in form and substance reasonably acceptable 78 to Lender, pursuant to which the Credit Card Companies agree to pay all credit card receivables into the Jekyll Island Lock Box Account, and acknowledge and agree that Lender shall have a first priority perfected security interest in such credit card receivables. To the extent that the Borrowers or any Person on the Borrowers' behalf holds any Receipts, whether in accordance with this Loan Agreement or otherwise, the Borrowers shall be deemed to hold the same in trust for Lender for the protection of the interests of Lender hereunder and under the Loan Documents. The Borrowers represent and warrant that, as of the date hereof, the only Credit Card Companies paying or disbursing credit card receivables with respect to the Jekyll Island Property are Chase Merchant Services, American Express, Discover Financial Service, Diners Club, JCB (Japanese Credit Bureau), and, if the Jekyll Island Borrowers shall hereafter enter into an agreement with any other Credit Card Company pursuant to which such Credit Card Company shall pay credit card receivables with respect to the Jekyll Island Property, such Jekyll Island Borrowers shall promptly obtain a Credit Card Receivables Payment Direction Letter in form and substance reasonably acceptable to Lender from such Credit Card Company. (iii) The Borrowers shall pay all reasonable out-of-pocket costs and expenses incurred by Lender in connection with the transactions and other matters contemplated by this Section 7.1, including but not limited to, Lender's reasonable attorneys fees and expenses, and all reasonable fees and expenses of the Deposit Bank and the Lock Box Account Bank, including without limitation their reasonable attorneys fees and expenses. (B) LOCK BOX ACCOUNTS. On or before the Closing Date pursuant to the terms of the Cash Management Agreement and the Jekyll Island Cash Management Agreement, as applicable, Eligible Accounts shall be established in the name of Lender, as secured party hereunder, to serve as (i) the "Lock Box Account" (said account, and any account replacing the same in accordance with this Loan Agreement and the Cash Management Agreement, the "LOCK BOX ACCOUNT"); and (ii) the "Jekyll Island Lock Box Account" (said account, and any account replacing the same in accordance with this Loan Agreement and the Jekyll Island Cash Management Agreement, the "JEKYLL ISLAND LOCK BOX ACCOUNT"), and the depositary institution in which the Lock Box Account and the Jekyll Island Lock Box Account are maintained, the "LOCK BOX ACCOUNT BANK"). The Lock Box Account and the Jekyll Island Lock Box Account shall be under the sole dominion and control of Lender (which dominion and control may be exercised by Servicer); and except as expressly provided hereunder and/or in the Cash Management Agreement and/or in the Jekyll Island Cash Management Agreement, the Borrowers shall not have any right to control or direct the investment or payment of funds therein during the continuance of an Event of Default. Lender may elect to change any financial institution in which the Lock Box Account and the Jekyll Island Lock Box Account shall be maintained if such institution is no longer an Eligible Bank, upon not less than five (5) Business Days' notice to the Borrowers. The Lock Box Account and the Jekyll Island Lock Box Account shall be deemed to contain such sub-accounts as Lender may designate ("SUB-ACCOUNTS"), which may be maintained as separate ledger accounts and need not be separate Eligible Accounts. The Sub-Accounts shall include the following as more particularly described in the Cash Management Agreement and the Jekyll Island Cash Management Agreement. (i) "DEBT SERVICE SUB-ACCOUNT" shall mean the Sub-Account of the Lock Box Account established for the purposes of reserving for payments of principal and interest and 79 other amounts due under the Loan Documents (but without duplication of amounts covered under item (ii) below); and (ii) "RESERVE SUB-ACCOUNTS" shall mean the Sub-Accounts of the Lock Box Account and of the Jekyll Island Lock Box Account established for the purpose of holding funds in the Reserves including: (a) the "Imposition and Insurance Reserve Sub-Account", (b) the "Hazardous Materials Remediation Reserve Sub-Account" (c) the "Capital Improvement Reserve Sub-Account"; (d) the "Cash Trap Reserve Sub-Account", (e) the "Jekyll Island Imposition and Insurance Reserve Sub-Account"; and (f) the "Jekyll Island Capital Improvement Reserve Sub-Account". SECTION 7.2 APPLICATION OF FUNDS IN LOCK BOX ACCOUNT. Funds in the Lock Box Account shall be allocated to the Sub-Accounts or the other Accounts, if any, (or paid, as the case may be) in accordance with the Cash Management Agreement, and funds in the Jekyll Island Lock Box Account shall be allocated to Sub Accounts or the other Accounts, if any (or paid, as the case may be) in accordance with the Jekyll Island Cash Management Agreement. SECTION 7.3 APPLICATION OF FUNDS AFTER EVENT OF DEFAULT. If any Event of Default shall occur and be continuing, then notwithstanding anything to the contrary in this Section or elsewhere, Lender shall have all rights and remedies available under applicable law and under the Loan Documents. Without limitation of the foregoing, for so long as an Event of Default exists, Lender may apply any and all funds in the Deposit Account, the Lock Box Account, the Jekyll Island Lock Box Account, and/or any Sub-Accounts against all or any portion of any of the Obligations, in any order. SECTION 7.4 MORTGAGE LOAN LOCK BOX. If the lock box and cash management arrangements under the Mortgage Loan Documents in effect as of the Closing Date are terminated, or if the Mortgage Loan shall be repaid in full, while any portion of the Obligations remain outstanding, the Borrowers will immediately cause the Mortgage Borrowers to comply with the requirements of Section 6.8 and Section 7.1 hereof. In addition, the Borrowers shall cause the Mortgage Borrowers to direct the Mortgage Lender to release all funds held in the Mortgage Loan Lock Box or any of the reserves established pursuant to the Mortgage Loan Cash Management Agreement, or the Mortgage Loan Documents, to be deposited with Lock Box Account Bank to be held in the applicable Reserves in accordance with the terms hereof and the Cash Management Agreement. ARTICLE VIII DEFAULT, RIGHTS AND REMEDIES SECTION 8.1 EVENT OF DEFAULT. "EVENT OF DEFAULT" shall mean the occurrence or existence of any one or more of the following: (A) SCHEDULED PAYMENTS. Failure of the Borrowers to pay any scheduled payment amount when the same is due under this Loan Agreement, the Note, or any other Loan Documents (whether such amount is interest, principal, Reserves, or otherwise), or to pay for any Insurance Policies required pursuant to Section 5.4 hereof; or 80 (B) OTHER PAYMENTS. Failure of the Borrowers to pay any amount from time to time owing under this Loan Agreement, the Note, or any other Loan Documents (other than amounts subject to the preceding paragraph) within ten (10) days after written notice to the Borrowers; or (C) BREACH OF REPORTING PROVISIONS. Failure of any Borrower Party to perform or comply with any term or condition contained in Section 5.1 which continues for a period of ten (10) days after written notice to the Borrowers (except that no notice or grace period shall be granted for any breach under Section 5.1(H)); or (D) BREACH OF PROVISIONS REGARDING INSURANCE, TRANSFERS, LIENS, SINGLE PURPOSE. Breach or default under any of Section 5.4, 5.12, 5.17, 5.18, 5.19, 5.20, Article IX, or Section 11.1 (provided that in the case of an involuntary Lien under Section 5.18 or 11.1, the same shall not constitute an Event of Default if within thirty (30) days after the filing thereof, the Borrowers shall either (i) cause the same to be removed of record, or (ii) provide to Lender security for the same in an amount and pursuant to terms both satisfactory to Lender in Lender's sole discretion; provided however that if (x) the default under Section 5.18 or 11.1 is capable of cure but with diligence cannot be cured within such period of thirty (30) days, (y) the Borrowers (or the applicable Borrower Party) has commenced the cure within such thirty (30) day period and has pursued such cure diligently, and (z) each Borrower delivers to Lender promptly following written demand (which demand may be made from time to time by Lender) evidence reasonably satisfactory to Lender of the foregoing, then such period shall be extended for so long as is reasonably necessary for the Borrowers in the exercise of due diligence to cure such default, but in no event beyond ninety (90) days after the original notice of default)); or (E) BREACH OF WARRANTY. Any representation, warranty, certification or other statement made by any Borrower, Guarantor or any Affiliate thereof in any Loan Document or in any statement or certificate at any time given in writing pursuant to or in connection with any Loan Document is false in any material respect as of the date made; or (F) OTHER DEFAULTS UNDER LOAN DOCUMENTS. A default shall occur in the performance of or compliance with any term contained in this Loan Agreement or the other Loan Documents and such default is not fully cured within thirty (30) days after receipt by the Borrowers of written notice from Lender of such default (other than occurrences described in other provisions of this Section 8.1 for which a different grace or cure period is specified or which constitute immediate Events of Default); provided however that if (i) the default is capable of cure but with diligence cannot be cured within such period of thirty (30) days, (ii) the Borrowers (or the applicable Borrower Party) has commenced the cure within such thirty (30) day period and has pursued such cure diligently, and (iii) each Borrower delivers to Lender promptly following written demand (which demand may be made from time to time by Lender) evidence reasonably satisfactory to Lender of the foregoing, then such period shall be extended for so long as is reasonably necessary for the Borrowers in the exercise of due diligence to cure such default, but in no event beyond one hundred and twenty (120) days after the original notice of default; or (G) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) A court enters a decree or order for relief with respect to any Borrower Party, in an Involuntary Borrower Bankruptcy, which decree or order is not stayed or other similar relief is not granted under any 81 applicable federal or state law unless dismissed within ninety (90) days; (ii) the occurrence and continuance of any of the following events for ninety (90) days unless dismissed or discharged within such time: (x) an Involuntary Borrower Bankruptcy is commenced, (y) a decree or order of a court for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over any Borrower Party or over all or a substantial part of its property, is entered, or (z) an interim receiver, trustee or other custodian is appointed without the consent of any Borrower Party, for all or a substantial part of the property of such Person; or (H) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) An order for relief is entered with respect to any Borrower Party, or any such Person commences a voluntary case under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case or to the conversion of an involuntary case to a voluntary case under any such law or consents to the appointment of or taking possession by a receiver, trustee or other custodian for any Borrower Party or for all or a substantial part of the property of any Borrower Party; (ii) any Borrower Party makes any assignment for the benefit of creditors; or (iii) the Board of Directors or other governing body of any Borrower Party adopts any resolution or otherwise authorizes action to approve any of the actions referred to in this subsection 8.1(H); or (I) BANKRUPTCY INVOLVING OWNERSHIP INTERESTS OR PROPERTIES. Other than as described in either of Subsections 8.1(G) or 8.1(H), all or any portion of the Collateral becomes property of the estate or subject to the automatic stay in any case or proceeding under the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law now or hereafter in effect (provided that if the same occurs in the context of an involuntary proceedings, it shall not constitute an Event of Default if it is dismissed or discharged within ninety (90) days following its occurrence); or (J) SOLVENCY. Any Borrower Party ceases to be solvent or admits in writing its present or prospective inability to pay its debts as they become due; or (K) JUDGMENT AND ATTACHMENTS. Any lien, money judgment, writ or warrant of attachment, or similar process is entered or filed against any Borrower Party or any of its assets, which claim is not fully covered by insurance (other than with respect to the amount of commercially reasonable deductibles permitted hereunder), would have a Material Adverse Effect and remains undischarged, unvacated, unbonded or unstayed for a period of forty-five (45) days; or (L) INJUNCTION. The Borrowers are enjoined, restrained or in any way prevented by the order of any court or any administrative or regulatory agency from conducting all or any material part of their business and such order continues for more than thirty (30) days; or (M) INVALIDITY OF LOAN DOCUMENTS. This Loan Agreement, any Pledge Agreement or any of the Loan Documents for any reason ceases to be in full force and effect or ceases to be a legally valid, binding and enforceable obligation of the Borrowers or any Lien securing the Obligations shall, in whole or in part, cease to be a perfected first priority Lien, subject to the Permitted Encumbrances (except in any of the foregoing cases in accordance with the terms hereof or under any other Loan Document) and the Borrowers do not take all actions requested 82 by Lender to correct such defect within ten (10) days after the written request by Lender to take such action, or any Person under the control of the Borrowers or Guarantor who is a party thereto, other than Lender, denies that it has any further liability (as distinguished from denial of the existence of a Default or Event of Default) under any Loan Documents to which it is party, or gives notice to such effect; or (N) CROSS-DEFAULT WITH OTHER LOAN DOCUMENTS. A default beyond any applicable grace periods shall occur under any of the other Loan Documents; or (O) DEFAULT UNDER MANAGEMENT AGREEMENTS OR FRANCHISE AGREEMENTS. (i) An Uncured Franchise Default occurs; or (ii) any breach or default shall occur in the material obligations of the Mortgage Borrowers under any of the Management Agreements, and such breach or default either is of such a nature or continues for such a period of time beyond applicable notice and cure periods, if any, the Manager shall have the right to exercise material remedies as a consequence thereof; or (P) GROUND LEASE/MORTGAGED CONDOMINIUM PROPERTY. Any default by any of the Mortgage Borrowers beyond any applicable grace period shall occur under any Ground Lease or any Mortgaged Condominium Property Document or any actual or attempted surrender, termination, modification or amendment of any Ground Lease or any Mortgaged Condominium Property Document without Lender's prior written consent; (Q) MORTGAGE LOAN DOCUMENTS. Any "Event of Default" (as defined in the Mortgage Loan Agreement) or any other default beyond any applicable notice and grace period under the Mortgage Loan Documents shall occur, or (R) PRE-PETITION TAX LIABILITIES. Any failure of the Borrowers or the Mortgage Borrowers to pay the Pre-Petition Tax Liabilities as and when due and payable. If more than one of the foregoing paragraphs shall describe the same condition or event, then Lender shall have the right to select which paragraph or paragraphs shall apply. In any such case, Lender shall have the right (but not the obligation) to designate the paragraph or paragraphs which provide for non-written notice (or for no notice) or for a shorter time to cure (or for no time to cure). SECTION 8.2 ACCELERATION AND REMEDIES. (A) Upon the occurrence and during the continuance of any Event of Default described in any of Subsections 8.1(G), 8.1(H), or 8.1(I), the unpaid principal amount of and accrued interest and fees on the Loan and all other Obligations shall automatically become immediately due and payable, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other requirements of any kind, all of which are hereby expressly waived by each Borrower Party. Upon and at any time after the occurrence of any other Event of Default, at the option of Lender, which may be exercised without notice or demand to anyone, all or any portion of the Loan and other Obligations shall immediately become due and payable. 83 (B) Upon the occurrence and during the continuance of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to Lender against the Borrowers under this Loan Agreement or any of the other Loan Documents, or at law or in equity, may be exercised by Lender at any time and from time to time, whether or not all or any of the Obligations shall be declared due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to the Properties. Any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in such order as Lender may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein or in the other Loan Documents. Without limiting the generality of the foregoing, if an Event of Default is continuing (i) to the fullest extent permitted by law, Lender shall not be subject to any "one action" or "election of remedies" law or rule, and (ii) all liens and other rights, remedies or privileges provided to Lender shall remain in full force and effect until Lender has exhausted all of its remedies against the Collateral and the Pledge Agreement have been foreclosed, sold and/or otherwise realized upon in satisfaction of the Obligations or the Obligations have been paid in full. (C) Lender shall have the right from time to time to partially foreclose upon the Collateral in any manner and for any amounts secured by the Collateral then due and payable as determined by Lender in its sole discretion including, without limitation, the following circumstances: (i) in the event the Borrowers default beyond any applicable grace period in the payment of one or more scheduled payments of principal and interest, Lender may foreclose upon the Collateral to recover such delinquent payments, or (ii) in the event Lender elects to accelerate less than the entire outstanding principal balance of the Loan, Lender may foreclose upon the Collateral to recover so much of the principal balance of the Loan as Lender may accelerate and such other sums secured by the Collateral as Lender may elect. Notwithstanding one or more partial foreclosures, the Collateral shall remain subject to the Pledge Agreement to secure payment of sums secured by the Collateral and not previously recovered. (D) During the continuance of an Event of Default, Lender shall have the right from time to time to sever the Note and the other Loan Documents into one or more separate notes, mortgages and other security documents in such denominations as Lender shall determine in its sole discretion for purposes of evidencing and enforcing its rights and remedies provided hereunder. The Borrowers shall execute and deliver to Lender from time to time, within ten (10) days after the request of Lender, a severance agreement and such other documents as Lender shall reasonably request in order to effect the severance described in the preceding sentence, all in form and substance reasonably satisfactory to Lender. The Borrowers hereby absolutely and irrevocably appoint Lender as their true and lawful attorney, coupled with an interest, in their name and stead to make and execute all documents reasonably necessary to effect the aforesaid severance if the Borrowers fail to do so within ten (10) days of Lender's written request, the Borrowers ratifying all that their said attorney shall do by virtue thereof. (E) Any amounts recovered from the Properties or any other collateral for the Loan after an Event of Default may be applied by Lender toward the payment of any interest and/or 84 principal of the Loan and/or any other amounts due under the Loan Documents in such order, priority and proportions as Lender in its sole discretion shall determine. (F) The rights, powers and remedies of Lender under this Loan Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender may have against the Borrowers pursuant to this Loan Agreement or the other Loan Documents, or existing at law or in equity or otherwise. Lender's rights, powers and remedies may be pursued singly, concurrently or otherwise, at such time and in such order as Lender may determine in Lender's sole discretion. No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient. A waiver of one Default or Event of Default with respect to the Borrowers shall not be construed to be a waiver of any subsequent Default or Event of Default by the Borrowers or to impair any remedy, right or power consequent thereon. SECTION 8.3 PERFORMANCE BY LENDER. (A) Upon the occurrence and during the continuance of an Event of Default, if the Borrowers shall fail to perform, or cause to be performed, any material covenant, duty or agreement contained in any of the Loan Documents (subject to applicable notice and cure periods), Lender may perform or attempt to perform such covenant, duty or agreement on behalf of the Borrowers including making protective advances on behalf of any of the Borrowers, or, in its sole discretion, causing the obligations of any of the Borrowers to be satisfied with the proceeds of any Reserve. In such event, the Borrowers shall, at the request of Lender, promptly pay to Lender, or reimburse, as applicable, any of the Reserves, any actual amount reasonably expended or disbursed by Lender in such performance or attempted performance, together with interest thereon at the Default Rate (including reimbursement of any applicable Reserves), from the date of such expenditure or disbursement, until paid. Any amounts advanced or expended by Lender to perform or attempt to perform any such matter shall be added to and included within the indebtedness evidenced by the applicable Note and shall be secured by all of the Collateral securing the applicable Loan. Notwithstanding the foregoing, it is expressly agreed that Lender shall not have any liability or responsibility for the performance of any obligation of the Borrowers under this Loan Agreement or any other Loan Document, and it is further expressly agreed that no such performance by Lender shall cure any Event of Default hereunder. (B) The Borrowers, on behalf of the Mortgage Borrowers, hereby agree that Lender shall have the right to cure defaults by the Mortgage Borrowers under the Mortgage Loan Documents whenever, in Lender's reasonable judgment (after taking into consideration all cure periods provided to Lender under any intercreditor agreement with Mortgage Lender), the existence of such default by the Mortgage Borrowers is reasonably likely to have a material adverse affect on any Borrower, any Mortgage Borrower, the Collateral or any Property. Lender shall endeavor, in good faith, to notify the Borrowers prior to taking any such cure action, but shall have no liability to the Borrowers or the Mortgage Borrowers for failing to do so. From and after the occurrence of a default under the Mortgage Loan Documents, the Borrowers shall cooperate in all commercially reasonable respects with, and shall cause the Mortgage Borrowers to cooperate in all commercially reasonable respects with (and not to impede or interfere with in any respect), Lender's efforts to cure (or cause the cure of) all monetary and non-monetary 85 defaults under the Mortgage Loan Documents, including, without limitation, causing the payment, removal or bonding over of all Liens, claims or judgments, or entering upon the Properties (or any portion thereof) to cure (or cause the cure of) any non-monetary default under the Mortgage Loan Documents. In addition, after the occurrence of a default under the Mortgage Loan Documents, the Borrowers agree that they will cause the Mortgage Borrowers to coordinate with Lender with respect to all communications (written or oral) with the Mortgage Lender (or any person or entity servicing the Mortgage Loan). (C) Any funds expended by or on behalf of Lender to effect a cure of the Mortgage Loan as contemplated in this Section shall constitute protective advances under the Loan. If Lender so elects to cure (or attempt to cure) any default under the Mortgage Loan, the amount of such expenditures made by or on behalf of Lender shall be added to the Obligations, shall accrue interest at the Default Rate, and shall be secured by the Collateral. (D) Lender may cease or suspend any and all performance required of Lender under the Loan Documents upon and at any time after the occurrence and during the continuance of any Event of Default. SECTION 8.4 EVIDENCE OF COMPLIANCE. Promptly following request by Lender, the Borrowers shall provide such documents and instruments as shall be reasonably satisfactory to Lender to evidence compliance with any material provision of the Loan Documents applicable to the Borrowers. ARTICLE IX SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS SECTION 9.1 APPLICABLE TO ALL BORROWERS. The Borrowers hereby represent, warrant and covenant as of the Closing Date and until such time as all Obligations are paid in full, that absent express advance written waiver from Lender, which may be withheld in Lender's sole discretion, that each Borrower: (A) does not own and will not own any assets other than, in the case of the Jekyll Island Borrowers, the Jekyll Island Property, and in the case of the other Borrowers, the Collateral (including incidental personal property necessary for the operation thereof and proceeds therefrom) or direct or indirect ownership interests in the Borrowers, and such other wholly owned subsidiaries of the Borrowers established solely for the purpose of holding liquor licenses with respect to one or more of the Properties or such incidental assets as are necessary to enable it to discharge its obligations with respect to the Borrowers (the "OWNERSHIP INTERESTS"); (B) is not engaged and will not engage in any business, directly or indirectly, other than the ownership, management and operation of the Collateral, or the Ownership Interests; (C) will not enter into any contract or agreement with any partner, member, shareholder, trustee, beneficiary, principal or Affiliate of any Borrower or Member except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with third parties other than such Affiliate; 86 (D) has not incurred any debt that remains outstanding as of Closing and will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than (i) the Obligations and (ii) Permitted Indebtedness; (E) has not made any loans or advances to any Person that remains outstanding as of Closing and will not make any loan or advances to any Person (including any of its Affiliates), and has not acquired and will not acquire obligations or securities of any of its Affiliates other than the other Borrower Parties; (F) is and reasonably expects to remain solvent and pay its own liabilities, indebtedness, and obligations of any kind from its own separate assets as the same shall become due other than the other Borrower Parties; (G) has done or caused to be done and will do all things necessary to preserve its existence, and will not, nor will any partner, member, shareholder, trustee, beneficiary, or principal amend, modify or otherwise change its partnership certificate, partnership agreement, articles of incorporation, by-laws, articles of organization, operating agreement, or other organizational documents in any manner with respect to the matters set forth in this Article IX; (H) shall continuously maintain its existence and be qualified to do business in all states necessary to carry on its business; (I) will conduct and operate its business as presently contemplated with respect to the ownership of the Collateral; (J) will maintain books and records and bank accounts (other than bank accounts established hereunder) separate from those of its partners, members, shareholders, trustees, beneficiaries, principals, Affiliates, and any other Person and will maintain separate financial statements except that it may also be included in consolidated financial statements of its Affiliates; (K) will be, and at all times will hold itself out to the public as, a legal entity separate and distinct from any other Person (including any of its partners, members, shareholders, trustees, beneficiaries, principals and Affiliates, and any Affiliates of any of the same), and not as a department or division of any Person and will correct any known misunderstandings regarding its existence as a separate legal entity; (L) will pay the salaries of its own employees, if any; (M) will allocate fairly and reasonably any overhead for shared office space; (N) will use stationery, invoices and checks; (O) will file its own tax returns with respect to itself (or consolidated tax returns, if applicable) as may be required under applicable law; 87 (P) reasonably expects to maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; (Q) will not seek, acquiesce in, or suffer or permit its liquidation, dissolution or winding up, in whole or in part; (R) will not enter into any transaction of merger or consolidation, or acquire by purchase or otherwise all or substantially all of the business or assets of, or any stock or beneficial ownership of, any Person; (S) will not commingle or permit to be commingled its funds or other assets with those of any other Person (other than, with respect to the Borrowers, each other Borrower); (T) has and will maintain its assets in such a manner that it is not costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person; (U) does not and will not hold itself out to be responsible for the debts or obligations (other than the Obligations) of any other Person; (V) has not guaranteed or otherwise become liable in connection with any obligation of any other Person that remains outstanding, and will not guarantee or otherwise become liable on or in connection with any obligation (other than the Obligations) of any other Person that remains outstanding; (W) except for funds deposited into the Accounts in accordance with the Loan Documents, shall not hold title to its assets other than in its name; and (X) shall comply with all of the assumptions, statements, certifications, representations, warranties and covenants regarding or made by it contained in or appended to the nonconsolidation opinion delivered pursuant hereto. SECTION 9.2 APPLICABLE TO THE BORROWERS AND MEMBER. In addition to their respective obligations under Section 9.1, each of the Borrowers and Member hereby represent, warrant and covenant as of the Closing Date and until such time as all Obligations are paid in full, that absent express advance written waiver from Lender, which may be withheld in Lender's sole discretion: (A) Each Member shall at all times act only as the sole member of the Borrowers with all of the rights, powers, obligations and liabilities thereof under the limited liability company operating agreement of such Borrower and shall take any and all actions and do any and all things necessary or appropriate to the accomplishment of the same and will engage in no other business; (B) No Borrower that is a limited liability company shall, without the prior written consent of Member (including the unanimous written consent of Member's board of directors including the Independent Directors or the unanimous written consent of such Borrower's board of managers including the Independent Directors), institute proceedings for itself to be adjudicated bankrupt or insolvent; consent to the institution of bankruptcy or insolvency 88 proceedings against itself; file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) for itself or a substantial part of its property; make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; (C) Member shall not, without the unanimous vote of its board of directors including its Independent Directors, institute proceedings for itself or any Borrower, to be adjudicated bankrupt or insolvent; consent to the institution of a bankruptcy or insolvency proceeding against it or any Borrower; file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) for itself or any Borrower; or a substantial part of its or the Borrowers' property; make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; (D) Each Member that is a corporation shall each promptly elect and at all times maintain at least two (2) Independent Directors on its board of directors, who shall be selected by Member. Each Borrower that is a single member limited liability company shall promptly appoint and at all times maintain at least two (2) Independent Directors on its board of managers, who shall be selected by such Borrower; (E) The Borrowers that are corporations shall, without the prior unanimous written consent of its board of directors, including its two (2) Independent Directors (if required to have Independent Directors), institute proceedings for itself to be adjudicated bankrupt or insolvent; consent to the institution of bankruptcy or insolvency proceedings against it; file a petition seeking, or consent to, reorganization or relief under any applicable federal or state law relating to bankruptcy; consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) for itself or a substantial part of its property; make any assignment for the benefit of creditors; or admit in writing its inability to pay its debts generally as they become due; and (F) Each Borrower that is a corporation shall promptly elect and at all times maintain at least two (2) Independent Directors on its board of directors, who shall be selected by such Borrower. ARTICLE X RESTRUCTURING LOAN, SECONDARY MARKET TRANSACTIONS SECTION 10.1 SECONDARY MARKET TRANSACTIONS GENERALLY. Lender shall have the right to engage in one or more Secondary Market Transactions with respect to the Loan, and to structure and restructure all or any part of the Loan, including without limitation in multiple tranches, as a wraparound loan, or for inclusion in a REMIC or other Securitization. Without limitation, Lender shall have the right, at Lender's sole cost (other than the Borrowers' internal costs and expenses and the costs and expenses of the Borrowers' counsel), to cause the Note and any Pledge Agreement to be split into one or more loans evidenced by multiple notes and secured by multiple pledge agreements in whatever proportion Lender determines, and thereafter to engage in Secondary Market Transactions with respect to all or any part of the indebtedness and loan 89 documentation. Each of the Borrower Parties further acknowledge that additional structural modifications may be required to satisfy issues raised by any Rating Agencies. As used herein, "SECONDARY MARKET TRANSACTION" means any of (i) the sale, assignment, or other transfer of all or any portion of the Obligations or the Loan Documents or any interest therein to one or more investors, (ii) the sale, assignment, or other transfer of one or more participation interests in the Obligations or Loan Documents to one or more investors, (iii) the transfer or deposit of all or any portion of the Obligations or Loan Documents to or with one or more trusts or other entities which may sell certificates or other instruments to investors evidencing an ownership interest in the assets of such trust or the right to receive income or proceeds therefrom or (iv) any other Securitization backed in whole or in part by the Loan or any interest therein. SECTION 10.2 COOPERATION; LIMITATIONS. The Borrower Parties shall use all reasonable efforts and cooperate reasonably and in good faith with Lender in effecting up to three (3) such restructuring or Secondary Market Transactions at Lender's sole cost (other than, with respect to the first successful Secondary Market Transaction only, each Borrower's internal costs and expenses and the costs and expenses of the Borrowers' counsel). Such cooperation shall include without limitation, executing and delivering such reasonable amendments to the Loan Documents and the organizational documents of each Borrower as Lender or any Interested Party (as defined below) may request, provided however that, no such amendment shall modify (i) the weighted average interest rate payable under the Note (or notes); (ii) the stated maturity date of the Note, (iii) the amortization of the principal amount of the Note, (iv) any other material economic terms of the Obligations, (v) the non-recourse provisions of the Loan or (vi) any provision, the effect of which would increase the Borrowers' obligations or decrease the Borrowers' rights under the Loan Documents except to a de minimis extent. The Borrower Parties shall not be required to provide additional collateral to effect any such restructuring or Secondary Market Transaction after the Closing Date. The Borrower Parties shall not be required to pay any third party (other than with respect to the first successful Secondary Market Transaction only, the costs and expenses of the Borrowers' counsel) costs and expenses incurred by Lender in connection with any such Secondary Market Transaction unless otherwise expressly payable by the Borrower Parties under this Loan Agreement or the other Loan Documents. SECTION 10.3 INFORMATION. The Borrower Parties, at Lender's cost and expense (other than each Borrower's internal costs and, with respect to the first successful Secondary Market Transaction only, expenses and the costs and expenses of the Borrowers' counsel), shall provide such access to personnel and such information and documents relating to the Borrower Parties, Manager, the Properties and Collateral and the business and operations of all of the foregoing and access to such opinions of counsel (including nonconsolidation opinions) as any Rating Agency may request or as Lender or any other Interested Party may reasonably request in connection with any such Secondary Market Transaction including, without limitation, updated financial information, appraisals, market studies, environmental reviews (Phase I's and, if appropriate, Phase II's), mold inspection, property condition reports and other due diligence investigations together with appropriate verification of such updated information and reports through letters of auditors and consultants and, as of the closing date of the Secondary Market Transaction, updated representations and warranties made in the Loan Documents and such additional representations and warranties as any Rating Agency may request or any purchaser, transferee, assignee, trustee, servicer or potential investor (the Rating Agencies and all of the 90 foregoing parties, collectively, "INTERESTED PARTIES") may reasonably request, to the extent such updated representations and warranties are true. On or prior to the date of closing of any Secondary Market Transaction, the Borrowers, at Lender's cost and expense (other than each Borrower's internal costs and expenses and, with respect to the first successful Secondary Market Transaction only, the costs and expenses of the Borrowers' counsel), shall, if required by any Rating Agency or reasonably required by Lender, provide revisions or "bringdowns" to any opinions delivered at Closing (including nonconsolidation opinions), or if required by the Rating Agencies, new versions of such opinions, which opinions shall be consistent, in substance, with the opinions covered by the original opinions addressed to Lender, any trustee under any Securitization backed in whole or in part by the Loan, any Rating Agency that assigns a rating to any securities in connection therewith and any investor purchasing securities therein. Lender shall be permitted to share all such information with the investment banking firms, Rating Agencies, accounting firms, law firms, other third party advisory firms, potential investors, servicers and other service providers and other parties directly involved in any proposed Secondary Market Transaction. The Borrowers understand that any such information may be incorporated into any offering circular, prospectus, prospectus supplement, private placement memorandum or other offering documents for any Secondary Market Transaction. Lender and the Rating Agencies shall be entitled to rely upon such information. Without limiting the foregoing, the Borrowers and Guarantor shall each provide in connection with each of (i) a preliminary and a final private placement memorandum or (ii) a preliminary and final prospectus or prospectus supplement, as applicable (the documents referred to in the foregoing clauses (i) and (ii), collectively, the "DISCLOSURE DOCUMENTS"), an agreement reasonably satisfactory to the Borrowers and Guarantor certifying that the Borrowers and Guarantor have examined such Disclosure Documents specified by Lender and that the sections of such Disclosure Document describing the Borrowers, Guarantor, the Properties and Manager do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not materially misleading. The Borrowers and Guarantor shall each indemnify, defend, protect and hold harmless Lender, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MERRILL LYNCH"), and their respective Affiliates, directors, employees, agents and each Person, if any, who controls Lender, Merrill Lynch or any such Affiliate within the meaning of Section 15 of the Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934, and any other placement agent or underwriter with respect to any Securitization or Secondary Market Transaction from and against any losses, claims, damages and liabilities that arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Disclosure Document as to the Borrowers, Guarantor, Manager and the Properties or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated in such information or necessary in order to make the statements in such information not materially misleading; provided, however, the Borrowers shall not be required to indemnify Merrill Lynch for any liabilities arising out of untrue statements or omissions that were identified to Lender in writing or are set forth in any third party report not prepared by the Borrowers or their Affiliates unless such reports are caused to be incorrect or misleading based upon information provided by the Borrowers or their Affiliates. Lender may publicize the existence of the Obligations in connection with Lender's Secondary Market Transaction activities or otherwise. 91 SECTION 10.4 ADDITIONAL PROVISIONS. In any Secondary Market Transaction, Lender may transfer its obligations under this Loan Agreement and under the other Loan Documents (or may transfer the portion thereof corresponding to the transferred portion of the Obligations), and thereafter Lender shall be relieved of any obligations hereunder and under the other Loan Documents arising after the date of said transfer with respect to the transferred interest. Each transferee investor shall become a "Lender" hereunder. ARTICLE XI RESTRICTIONS ON LINES, TRANSFERS; ASSUMABILITY; RELEASE OF PROPERTIES SECTION 11.1 RESTRICTIONS ON TRANSFER AND ENCUMBRANCE. Except for a Transfer or a Permitted Assumption expressly permitted under this Article XI, the Borrowers shall not cause or suffer to occur or exist, directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, any sale, transfer, mortgage, pledge, Lien or encumbrance of (i) all or any part of the Collateral, the Jekyll Island Property, the Properties or any interest therein, or (ii) any direct or indirect ownership or beneficial interest in the Borrowers or the Mortgage Borrowers, irrespective of the number of tiers of ownership without Lender's consent. SECTION 11.2 TRANSFERS OF BENEFICIAL INTERESTS IN THE BORROWERS. The following voluntary or involuntary sales, encumbrances, conveyances, transfers and pledges (each, a "TRANSFER") of a direct, indirect or beneficial interest in any Borrower shall be permitted without Lender's consent ("PERMITTED OWNERSHIP INTEREST TRANSFERS"): (A) A Transfer of no more than forty-nine percent (49%) of the direct or indirect ownership interests in such Borrower (in the aggregate), provided that, following such Transfer, Guarantor maintains control of such Borrower. (B) A Transfer or a series of Transfers that result in the proposed transferee, together with Affiliates of such transferee, owning in the aggregate (directly or indirectly) more than forty-nine percent (49%) of the economic and beneficial interests in such Borrower (where, prior to such Transfer, such proposed transferee and its Affiliates owned in the aggregate (directly or indirectly) forty-nine percent (49%) or less of such interests in that Borrower) and, provided that such Transfer shall not be a Permitted Ownership Interest Transfer unless Lender receives, prior to such Transfer, both (x) evidence reasonably satisfactory to Lender (which shall include a legal non-consolidation opinion reasonably acceptable to Lender and the Rating Agencies) that the single purpose nature and bankruptcy remoteness of such Borrower (and its members and general partners, as applicable) following such Transfer or Transfers will be the same as prior to such Transfer or Transfers and (y) a Rating Agency Confirmation. (C) For so long as Guarantor's (or its successor's) stock is traded through the "over-the-counter market" or through any recognized stock exchange, any Transfer of all or any portion of the issued and outstanding capital stock of Guarantor, or the issuance of additional capital stock of Guarantor (including common or preferred shares) through the "over-the-counter market" or through any recognized stock exchange. 92 For purposes of this Section 11.2, "control" shall have the meaning given thereto in the definition of "Affiliate" in Section 1.1 and a "change of control" of any Person shall include the Transfer of legal or equitable ownership interests in such Person which after giving effect to such Transfer results in any transferee or pledgee of such interests holding more than a 49% legal or equitable ownership interest or security interest in such Person. SECTION 11.3 ASSUMABILITY. (A) The Borrowers shall have the right to request that Lender consent to (i) a transfer of all of the Collateral to another Person (the "TRANSFEREE BORROWER") and the assumption by the Transferee Borrower of all of the Borrowers' obligations under the Loan Documents, (ii) replacement of Guarantor with new guarantors and indemnitors who shall assume all of the obligations of the Guarantors arising from and after such date and release of the Borrowers and Guarantor from obligations arising after such date and (iii) the replacement of the Mortgage Borrowers with new owners of the Properties, all in connection with an assumption completed in accordance with Section 11.3 of the Mortgage Loan Agreement (collectively, an "ASSUMPTION"), subject to the conditions set forth in paragraph (C) and (D) of this Section. Together with such written application, the Borrowers will pay to Lender the reasonable review fee of $10,000. The Borrowers also shall pay on demand all of the reasonable out-of-pocket costs and expenses incurred by Lender, including reasonable attorneys' fees and expenses, and the fees and expenses of Rating Agencies, if any, and other outside entities, in connection with considering any proposed Transfer and Assumption, whether or not the same is permitted or occurs. (B) Lender shall not withhold its consent to an Assumption (any such Assumption consented to by Lender, a "PERMITTED ASSUMPTION" provided and upon the conditions that: (i) No Event of Default shall have occurred and be continuing at the time of such Assumption; (ii) The Borrowers shall have submitted to Lender true, correct and complete copies of any and all information and documents reasonably requested by Lender concerning the Transferee Borrower, replacement guarantors and indemnitors and all of such information and documents shall be reasonably acceptable to Lender; (iii) Evidence reasonably satisfactory to Lender shall have been provided showing that the Transferee Borrower and such of its Affiliates as shall reasonably be designated by Lender comply and will comply with Article IX, as those provisions may be modified by Lender taking into account the ownership structure of Transferee Borrower and its Affiliates; (iv) The Borrowers shall have obtained (and delivered to Lender) a Rating Confirmation with respect to the Assumption, the Transferee Borrower, the new guarantors and indemnitors and all related transactions; (v) The Borrowers shall have paid all of Lender's reasonable out-of-pocket costs and expenses in connection with considering the Assumption, and shall have paid the amount reasonably requested by Lender as a deposit against Lender's reasonable costs and expenses in connection with effecting the Assumption; 93 (vi) The Borrowers, the Transferee Borrower, and the replacement guarantors and indemnitors shall have indicated in writing in form and substance reasonably satisfactory to Lender their readiness and ability to satisfy the conditions set forth in Subsection (C) below; (vii) (a) The Transferee Borrower shall be a Permitted Transferee or an Affiliate of a Permitted Transferee or (b) the identity, experience and financial condition of the Transferee Borrower shall otherwise be satisfactory to Lender in its sole discretion; and (viii) The identity and financial condition of the replacement guarantors and indemnitors shall be satisfactory to Lender. (C) If Lender consents to the proposed Assumption, the Transferee Borrower and/or the Borrowers, as the case may be, shall promptly and as a condition to the Assumption deliver the following to Lender: (i) The Borrowers, Transferee Borrower, the original and replacement guarantors and indemnitors shall execute and deliver any and all documents reasonably required by Lender to evidence the Transfer and Assumption of the Loan, in form and substance reasonably required by Lender and similar to those received at Closing; (ii) Counsel to the Transferee Borrower and replacement guarantors and indemnitors shall deliver to Lender opinions in form and substance reasonably satisfactory to Lender as to such matters as Lender shall reasonably require in connection with such Assumption, which may include opinions as to substantially the same matters as were required in connection with the origination of the Loan including, without limitation, bankruptcy non-consolidation opinion; (iii) The Borrowers shall cause to be delivered to Lender, an endorsement (relating to the change in the identity of the Borrowers and execution and delivery of the Assumption documents) to Lender's policy of title insurance in form and substance acceptable to Lender, in Lender's reasonable discretion; and (D) The Borrowers shall deliver to Lender a payment in the amount of all remaining unpaid reasonable costs incurred by Lender in connection with the Assumption, including but not limited to, Lender's reasonable attorneys' fees and expenses, all recording fees, and all fees payable to the title company in connection with the Transfer and Assumption. SECTION 11.4 RELEASE OF COLLATERAL. On one or more occasions, Lender shall permit the Borrowers to cause the Mortgage Borrowers to transfer a Property and the Borrowers may obtain the release of a portion of the Collateral, other than the Jekyll Island Mortgage (each, a "COLLATERAL RELEASE") relating only to the Borrowers' direct or indirect interest in the Property that is the subject of a Property Release completed in accordance with Section 11.4 of the Mortgage Loan Agreement, simultaneous with such Property Release subject to the satisfaction of the following conditions: (A) Lender shall have received from the Borrowers at least fifteen (15) days prior written notice of the date proposed for such release (the "RELEASE DATE") which notice is revocable; 94 (B) No Event of Default shall have occurred and be continuing as of the date of such notice and the Release Date; (C) Lender shall have received on the date proposed for such Collateral Release the Mezzanine Lender's Percentage of the Release Price for the Property that is the subject of the Property Release (the " COLLATERAL RELEASE PRICE") it being agreed that, following satisfaction of the Mortgage Loan the entire Release Price shall be paid to Lender and applied to the payment of the Obligations. (D) The Borrowers at their sole cost and expense, shall have delivered to Lender, one or more endorsements to the Title Policies insuring that, after giving effect to such Collateral Release, (i) the Liens insured under the Title Policies are first priority Liens on the remaining Collateral, and (ii) that the Title Policies remain in full force and effect and unaffected by such Collateral Release; (E) Immediately following any Collateral Release both the Debt Service Coverage Ratio and the Debt Yield (based upon a trailing twelve (12) month period) shall be equal to or greater than the Debt Service Coverage Ratio and the Debt Yield in effect immediately prior to the Collateral Release (based upon a trailing twelve (12) month period); and (F) The Borrowers shall pay all reasonable out-of-pocket costs and expenses (including, without limitation, title search costs and endorsement premiums and reasonable attorney's fees and disbursements) incurred by Lender, Servicer, and any custodian employed by Lender or Servicer, in connection with the Collateral Release. Upon satisfaction of the above conditions, Lender shall effectuate the following: the security interest of Lender in and to that portion of the Collateral and the other Loan Documents relating to the Released Property shall be released and Lender will execute and deliver any agreements reasonably requested by the Borrowers to effectuate such release. The Borrowers each acknowledge that they have, in most cases, pledged equity interests in multiple Mortgage Borrowers and that, in several cases, the Mortgage Borrowers own more than one Property. Accordingly, the Borrowers acknowledge that, until such time as all Properties owned by a particular Mortgage Borrower have been released, the Collateral relating to such Mortgage Borrower shall not be released and, notwithstanding that no Collateral Release shall have occurred (until the last Property owned by such Mortgage Borrower is being released), a condition to the Borrower permitting any Mortgage Borrower to obtain any Property Release shall be the payment to Lender of the applicable Collateral Release Price and satisfaction of the other conditions set forth in this Section 11.4. (G) CONVERSION/RELEASE. Provided no Event of Default shall have occurred and be continuing, the Borrowers may allow a Conversion (as such term is defined in the Mortgage Loan Agreement) pursuant to the terms of Section 11.5 of the Mortgage Loan Agreement. SECTION 11.5 RELEASE OF THE JEKYLL ISLAND PROPERTY. The Borrowers may obtain the release (a "JEKYLL ISLAND RELEASE") of the Jekyll Island Property from the Lien of the Jekyll Island Mortgage in connection with (x) a sale of the Jekyll Island Property to one or more Persons which are not Related Persons of the Borrowers or Guarantor, (y) a Release necessary to prevent 95 an Uncured Franchise Default, or (z) a Release necessary to enable the Borrowers to comply with the restrictions set forth in Section 5.13(D), and prepayment of all or a portion of the Loan subject to the conditions of the Note and subject to the satisfaction of the following conditions: (A) Lender shall have received from the Borrowers at least fifteen (15) days prior written notice of the date proposed for such release (the "JEKYLL ISLAND RELEASE DATE") which notice is revocable; (B) No Event of Default shall have occurred and be continuing as of the date of such notice and the Jekyll Island Release Date; (C) Lender shall have received from the Borrowers on the date proposed for such Release, a Release Price calculated in accordance with the definition of Release Price in the Mortgage Loan Agreement as if the Jekyll Island Property were a "Property" under the Mortgage Loan Agreement (the "JEKYLL ISLAND RELEASE PRICE"), for deposit into the Jekyll Island Lock Box Account and disbursement in accordance with the terms of the Jekyll Island Cash Management Agreement; (D) Immediately following such Jekyll Island Release both the Debt Service Coverage Ratio and the Debt Yield (based upon a trailing twelve (12) month period) shall be equal to or greater than the Debt Service Coverage Ratio and the Debt Yield in effect immediately prior to the Jekyll Island Release (based upon a trailing twelve (12) month period); (E) The Borrowers shall pay all reasonable out-of-pocket costs and expenses (including, without limitation, title search costs and endorsement premiums and reasonable attorney's fees and disbursements) incurred by Lender, Servicer, and any custodian employed by Lender or Servicer, in connection with the Jekyll Island Release; and (F) Immediately following such Jekyll Island Release, the Jekyll Island Property will be owned by a Person other than the Borrowers or Related Persons of the Borrowers or Guarantors. Upon satisfaction of the above conditions, Lender shall effectuate the following: the security interest of Lender under the Jekyll Island Mortgage and other Loan Documents relating to the Jekyll Island Property shall be released and Lender will execute and deliver any agreements reasonably requested by the Borrowers to release and terminate or reassign, at the Borrowers' option, the Jekyll Island Mortgage, the applicable Assignment of Leases, and financing statements as to the Jekyll Island Property; provided, that such release and termination or reassignment shall be without recourse to Lender and without any representation or warranty except that Lender shall be deemed to have represented that such release and termination or reassignment has been duly authorized and that it has not assigned or encumbered the Jekyll Island Mortgage or the other Loan Documents relating to the Jekyll Island Property (except as contemplated hereby) and Lender shall return the originals of any Loan Documents that relate solely to the Jekyll Island Property to the Borrowers; provided, further, that upon the release and termination or reassignment of Lender's security interest in the Jekyll Island Mortgage, all references herein to the Jekyll Island Mortgage shall be deemed deleted, except as otherwise provided herein with respect to indemnities. 96 SECTION 11.6 SALE OF BUILDING EQUIPMENT. Notwithstanding anything to the contrary contained herein, provided no Event of Default exists, the Borrowers may permit the Mortgage Borrowers to and the Jekyll Island Borrower may transfer or dispose of building equipment which is being replaced or which is no longer necessary in connection with the operation of the Properties, provided that such transfer or disposal will not have a Material Adverse Effect on the value of any individual Property or on the Properties taken as a whole, will not materially impair the utility of any individual Property or on the Properties, taken as a whole, and will not result in a reduction or abatement of, or right of offset against, the rents payable under any Lease, in either case as a result thereof. SECTION 11.7 IMMATERIAL TRANSFERS AND EASEMENTS, ETC. Notwithstanding anything to the contrary contained herein, provided no Event of Default exists, the Borrowers may permit the Mortgage Borrowers to and the Jekyll Island Borrower may, without the consent of Lender, (i) make immaterial transfers of portions of the Properties to Governmental Authorities for dedication for public use, and (ii) grant easements, restrictions, covenants, reservations and rights of way in the ordinary course of business for access, water and sewer lines, telephone and telegraph lines, electric lines or other utilities or for other similar purposes, provided that no such transfer, conveyance or encumbrance set forth in the foregoing clauses (i) and (ii) shall materially impair the utility and operation of the Properties or have a Material Adverse Effect on the value of the Properties taken as a whole. ARTICLE XII RECOURSE; LIMITATIONS ON RECOURSE SECTION 12.1 LIMITATIONS ON RECOURSE. Subject to the provisions of this Article, and notwithstanding any provision of the Loan Documents other than this Article, the personal liability of the Borrowers to pay any and all Obligations including but not limited to the principal of and interest on the debt evidenced by the Note and any other agreement evidencing the Borrowers' obligations under the Note shall be limited to (i) the Collateral and (ii) the rents, profits, issues, products and income of the Collateral, received or collected by or on behalf of the Borrowers or any Borrower Party after an Event of Default. Notwithstanding anything to the contrary in this Loan Agreement, the Pledge Agreement or any of the Loan Documents, Lender shall not be deemed to have waived any right which Lender may have under Section 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code to file a claim for the file amount of the Obligations secured by the Collateral or to require that all collateral shall continue to secure a of the Obligations owing to Lender in accordance with the Loan Documents. SECTION 12.2 PARTIAL RECOURSE. Notwithstanding Section 12.1, the Borrowers (but not their members, partners, employees, shareholders agents, directors or officers (the "EXCULPATED PARTIES")) and Guarantor shall be personally liable to the extent of any liability, loss, damage, cost or expense (including, without limitation, attorneys' fees and expenses) suffered or incurred by Lender resulting from any and all of the following: (i) fraud of any of the Borrower Parties or their agents or employees; (ii) any material misrepresentation made by the Borrowers or any Borrower Party in this Loan Agreement or any other Loan Document; (iii) insurance proceeds, condemnation awards, or other sums or payments attributable to the Properties which are not 97 applied in accordance with the provisions of the Loan Documents; (iv) all rents, profits, issues, products and income of the Properties and the Jekyll Island Property received or collected by or on behalf of the Borrowers or any Borrower Party or Manager and not deposited into the Deposit Account in accordance with Article VII and the Cash Management Agreement or the Jekyll Island Cash Management Agreement; (v) failure to turn over to Lender or Mortgage Lender, after an Event of Default, or misappropriation of any tenant security deposits or rents collected in advance (other than by Mortgage Lender, the servicer of the Mortgage Loan, Lender or Servicer); (vi) failure to notify Lender of any change in the principal place of business address of the Borrowers or of any change in the name of any Borrower or if any Borrower takes any other action which could make the information set forth in the Financing Statements relating to the Loan materially misleading; (vii) failure by any Borrower, any general partner or managing member of such Borrower, or any indemnitor or guarantor to comply with the covenants, obligations, liabilities, warranties and representations contained in the Environmental Indemnity or otherwise pertaining to environmental matters; (viii) material waste; (ix) all liabilities and expenses under the indemnification provisions of Section 10.3; (x) any uncured default under Section 11.1; (xi) any material uncured default under Article IX; and (xii) any distributions made in violation of Section 5.28 (to the extent of any such distribution) including amounts improperly paid or distributed, directly or indirectly, by Manager in circumvention of such restrictions. Notwithstanding the preceding sentence, the Loan shall be fully recourse to the Borrowers and Guarantor (but, with respect to Guarantor only, not in excess of ten percent (10%) of the original principal balance of the Loan) upon the happening of any of the following: (i) any Borrower Party's defense of any such collection efforts following maturity of the Loan or acceleration of the Loan on account of an Event of Default under Section 8.1(A), or any other defense of any collection efforts without a good faith basis following any other Event of Default), and (ii) any condition or event described in any of Subsections 8.1(G), 8.1(H), or 8.1(I) (except that the Borrowers and Guarantor shall not be liable under this Section 12.2 in connection with any Involuntary Borrower Bankruptcy unless such involuntary proceeding is solicited, procured, consented to or acquiesced in by any Borrower, Guarantor or any Related Person of either of them. SECTION 12.3 MISCELLANEOUS. No provision of this Article shall (i) affect the enforcement of the Environmental Indemnity, the Guaranty or any guaranty or similar agreement executed in connection with the Loan, (ii) release or reduce the debt evidenced by the Note, (iii) impair the lien of any of the Pledge Agreement or any other security document, (iv) impair the rights of Lender to enforce any provisions of the Loan Documents, or (v) limit Lender's ability to obtain a deficiency judgment or judgment on the Note or otherwise against any Borrower Party but not any Exculpated Party to the extent necessary to obtain any amount for which such Borrower Party may be liable in accordance with this Article or any other Loan Document. ARTICLE XIII WAIVERS OF DEFENSES OF GUARANTORS AND SURETIES SECTION 13.1 WAIVERS. To the extent that any Borrower (in this Article, a "WAIVING PARTY") is deemed for any reason to be a guarantor or surety of or for any other Borrower Party or Affiliate or to have rights or obligations in the nature of the rights or obligations of a guarantor or surety (whether by reason of execution of a guaranty, provision of security for the obligations of another, or otherwise) then this Article shall apply. This Article shall not affect the rights of the 98 Waiving Party other than to waive or limit rights and defenses that Waiving Party would have (i) in its capacity as a guarantor or surety or (ii) in its capacity as one having rights or obligations in the nature of a guarantor or surety. Waiving Party hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of receivership or bankruptcy of any of the other Borrower Parties, protest or notice with respect to any of the obligations of any of the other Borrower Parties, setoffs and counterclaims and all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor and notices of acceptance, the benefits of all statutes of limitation, and all other demands whatsoever (and shall not require that the same be made on any of the other Borrower Parties as a condition precedent to the obligations of Waiving Party), and covenants that the Loan Documents will not be discharged, except by complete payment and performance of the obligations evidenced and secured thereby, except only as limited by the express contractual provisions of the Loan Documents. Waiving Party further waives all notices that the principal amount, or any portion thereof, and/or any interest on any instrument or document evidencing all or any part of the obligations of any of the other Borrower Parties to Lender is due, notices of any and all proceedings to collect from any of the other Borrower Parties or any endorser or any other guarantor of all or any part of their obligations, or from any other person or entity, and, to the extent permitted by law, notices of exchange, sale, surrender or other handling of any security or collateral given to Lender to secure payment of all or any part of the obligations of any of the other Borrower Parties. Except only to the extent provided otherwise in the express contractual provisions of the Loan Documents, Waiving Party hereby agrees that all of its obligations under the Loan Documents shall remain in full force and effect, without defense, offset or counterclaim of any kind, notwithstanding that any right of Waiving Party against any of the other Borrower Parties or defense of Waiving Party against Lender may be impaired, destroyed, or otherwise affected by reason of any action or inaction on the part of Lender. Waiving Party waives all rights and defenses arising out of an election of remedies by the Lender, even though that election of remedies, may have destroyed the Waiving Party's rights of subrogation and reimbursement against the other Borrower Parties. Lender is hereby authorized, without notice or demand, from time to time, (a) to renew, extend, accelerate or otherwise change the time for payment of, or other terms relating to, all or any part of the obligations of any of the other Borrower Parties; (b) to accept partial payments on all or any part of the obligations of any of the other Borrower Parties; (c) to take and hold security or collateral for the payment of all or any part of the obligations of any of the other Borrower Parties; (d) to exchange, enforce, waive and release any such security or collateral for such obligations; (e) to apply such security or collateral and direct the order or manner of sale thereof as in its discretion it may determine; (f) to settle, release, exchange, enforce, waive, compromise or collect or otherwise liquidate all or any part of such obligations and any security or collateral for such obligations. Any of the foregoing may be done in any manner, and Waiving Party agrees that the same shall not affect or impair the obligations of Waiving Party under the Loan Documents. Waiving Party hereby assumes responsibility for keeping itself informed of the financial condition of all of the other Borrower Parties and any and all endorsers and/or other guarantors 99 of all or any part of the obligations of the other Borrower Parties, and of all other circumstances bearing upon the risk of nonpayment of such obligations, and Waiving Party hereby agrees that Lender shall have no duty to advise Waiving Party of information known to it regarding such condition or any such circumstances. Waiving Party agrees that neither Lender nor any person or entity acting for or on behalf of Lender shall be under any obligation to marshal any assets in favor of Waiving Party or against or in payment of any or all of the obligations secured hereby. Waiving Party further agrees that, to the extent that any of the other Borrower Parties or any other guarantor of all or any part of the obligations of the other Borrower Parties makes a payment or payments to Lender, or Lender receives any proceeds of collateral for any of the obligations of the other Borrower Parties, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid or refunded, then, to the extent of such payment or repayment, the part of such obligations which has been paid, reduced or satisfied by such amount shall be reinstated and continued in full force and effect as of the time immediately preceding such initial payment, reduction or satisfaction. Waiving Party (i) shall have no right of subrogation with respect to the obligations of the other Borrower Parties; (ii) waives any right to enforce any remedy that Lender now has or may hereafter have against any of the other Borrower Parties any endorser or any guarantor of all or any part of such obligations or any other person; and (iii) waives any benefit of, and any right to participate in, any security or collateral given to Lender to secure the payment or performance of all or any part of such obligations or any other liability of the other parties to Lender. Waiving Party agrees that any and all claims that it may have against any of the other Borrower Parties, any endorser or any other guarantor of all or any part of the obligations of the other Borrower Parties, or against any of their respective properties, shall be subordinate and subject in right of payment to the prior payment in full of all obligations secured hereby. Notwithstanding any right of any of the Waiving Party to ask, demand, sue for, take or receive any payment from the other Borrower Parties, all rights, liens and security interests of Waiving Party, whether now or hereafter arising and howsoever existing, in any assets of any of the other Borrower Parties (whether constituting part of the security or collateral given to Lender to secure payment of all or any part of the obligations of the other Borrower Parties or otherwise) shall be and hereby are subordinated to the rights of Lender in those assets. ARTICLE XIV MISCELLANEOUS SECTION 14.1 EXPENSES AND ATTORNEYS' FEES. Whether or not the transactions contemplated hereby shall be consummated, the Borrowers agree to promptly pay all reasonable fees, costs and expenses incurred by Lender in connection with any matters contemplated by or arising out of this Loan Agreement, including the following, and all such fees, costs and expenses shall be part of the Obligations, payable on demand: (A) reasonable fees, costs and expenses (including reasonable attorneys' fees, and other professionals retained by Lender) incurred in connection with the examination, review, due diligence investigation, documentation and closing of the financing arrangements evidenced by the Loan Documents; (B) subject to Section 10.2, reasonable fees, costs and expenses (including reasonable attorneys' fees and other professionals 100 retained by Lender) incurred in connection with the administration of the Loan Documents and the Loan and any amendments, modifications and waivers relating thereto; (C) subject to Section 10.2, reasonable fees, costs and expenses (including reasonable attorneys' fees) incurred in connection with the review, documentation, negotiation, closing and administration of any subordination or intercreditor agreements; and (D) reasonable fees, costs and expenses (including attorneys' fees and fees of other professionals retained by Lender) incurred in any action to enforce or interpret this Loan Agreement or the other Loan Documents or to collect any payments due from the Borrowers under this Loan Agreement, the Note or any other Loan Document or incurred in connection with any refinancing or restructuring of the credit arrangements provided under this Loan Agreement, whether in the nature of a workout" or in connection with any insolvency or bankruptcy proceedings or otherwise, Any costs and expenses due and payable to Lender after the Closing Date may be paid to Lender pursuant to the Cash Management Agreement. SECTION 14.2 INDEMNITY. In addition to the payment of expenses as required elsewhere herein, whether or not the transactions contemplated hereby shall be consummated, the Borrowers agree to indemnify, defend, protect, pay and hold Lender, Servicer and their successors and assigns (including, without limitation, the trustee and/or the trust under any trust agreement executed in connection with any Securitization backed in whole or in part by the Loan and any other Person which may hereafter be the holder of the Note or any interest therein), and the officers, directors, stockholders, partners, members, employees, agents, Affiliates and attorneys of Lender and such successors and assigns (collectively called the "INDEMNITEES") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, Tax Liabilities, broker's or finders fees, reasonable costs, expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of outside counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto) that are imposed on, incurred by, or asserted against that Indemnitee, in any manner relating to or arising out of (A) the negotiation, execution, delivery, performance, administration, ownership, or enforcement of any of the Loan Documents; (B) any of the transactions contemplated by the Loan Documents, (C) any breach by the Borrowers of any material representation, warranty, covenant, or other agreement contained in any of the Loan Documents; (D) Lender's agreement to make the Loan hereunder, (E) any claim brought by any third party arising out of any condition or occurrence at or pertaining to the Properties; (F) any design, construction, operation, repair, maintenance, use, non-use or condition of the Properties or Improvements, including claims or penalties arising from violation of any applicable laws or insurance requirements, as well as any claim based on any patent or latent defect, whether or not discoverable by Lender; (G) any performance of any labor or services or the furnishing of any materials or other property in respect of the Properties, the Collateral, or any part thereof; (H) any contest referred to in Section 5.3(B) hereof, (I) any obligation or undertaking relating to the performance or discharge of any of the terms, covenants and conditions of the landlord contained in the Leases, or (J) the use or intended use of the proceeds of any of the Loan (the foregoing liabilities herein collectively referred to as the "INDEMNIFIED LIABILITIES"); provide that the Borrowers shall not have an obligation to an Indemnitee hereunder with respect to Indemnified Liabilities arising from the fraud, gross negligence or willful misconduct of such Indemnitee as determined by a court of competent jurisdiction. The obligations and liabilities of the Borrowers under this Section 14.2 shall survive the term of the Loan and the exercise by Lender of any of its rights or 101 remedies under the Loan Documents, including the acquisition of the Properties by foreclosure or a conveyance in lieu of foreclosure. SECTION 14.3 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no amendment, modification, termination or waiver of any provision of this Loan Agreement, the Note or any other Loan Document, or consent to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by Lender and any other party to be charged. Each amendment, modification, termination or waiver shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on the Borrowers in any case shall entitle the Borrowers or other Person to any other or further notice or demand in similar or other circumstances. SECTION 14.4 RETENTION OF THE BORROWERS' DOCUMENTS. Lender may, in accordance with Lender's customary practices, destroy or otherwise dispose of all documents, schedules, invoices or other papers, delivered by the Borrowers to Lender (other than the Note) unless the Borrowers request in writing that same be returned. Upon such request and at the Borrowers' expense, Lender shall return such papers when Lender's actual or anticipated need for same has terminated. SECTION 14.5 NOTICES. Unless otherwise specifically provided herein, any notice or other communication required or permitted to be given shall be in writing and addressed to the respective party as set forth below. Notices shall be effective (i) three (3) days after the date such notice is mailed, (ii) on the next Business Day if sent by a nationally recognized overnight courier service, (iii) on the date of delivery by personal delivery and (iv) on the date of transmission if sent by telefax during business hours on a Business Day (otherwise on the next Business Day). Notices shall be addressed as follows: If to the Borrowers or any Borrower Party: c/o Lodgian 3445 Peachtree Road NE Suite 700 Atlanta, Georgia 30326 Attention: General Counsel Facsimile: (404) 364-0088 With a copy to: Cadwalader Wickersham & Taft 100 Maiden Lane New York, New York 10038 Attention: Robert F. McDonough Facsimile: (212) 504-6666 102 If to Lender: c/o Merrill Lynch & Co. 4 World Financial Center New York, New York 10080 Attention: Steve Glassman Facsimile: (212) 738-1013 and Attention: John Katz Facsimile: (212) 449-8094 With a copy to: Sidley Austin Brown & Wood LLP 787 Seventh Avenue New York, New York 10019 Attn: Alan S. Weil, Esq. Facsimile: (212) 839-5599 Any party may change the address at which it is to receive notices to another address in the United States at which business is conducted (and not a post-office box or other similar receptacle), by giving notice of such change of address in accordance with the foregoing. This provision shall not invalidate or impose additional requirements for the delivery or effectiveness of any notice (i) given in accordance with applicable statutes or rules of court, or (ii) by service of process in accordance with applicable law. If there is any assignment or transfer of Lender's interest in the Loan, then the new Lenders may give notice to the parties in accordance with this Section, specifying the addresses at which the new Lenders shall receive notice, and they shall be entitled to notice at such address in accordance with this Section. SECTION 14.6 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All agreements, representations and warranties made herein shall survive the execution and delivery of this Loan Agreement, the making of the Loan hereunder and the execution and delivery of the Note. Notwithstanding anything in this Loan Agreement or implied by law to the contrary, the agreements of Borrower Parties to indemnify or release Lender or Persons related to Lender, or to pay Lender's costs, expenses, or taxes shall survive the payment of the Loan and the termination of this Loan Agreement. SECTION 14.7 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of Lender in the exercise of any power, right or privilege hereunder or under the Note or any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing under this Loan Agreement, the Note and the other Loan Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available. 103 SECTION 14.8 MARSHALING; PAYMENTS SET ASIDE. Lender shall not be under any obligation to marshal any assets in favor of any Person or against or in payment of any or all of the Obligations. To the extent that any Person makes a payment or payments to Lender, or Lender enforces its remedies or exercises its rights of set off, and such payment or payments or the proceeds of such enforcement or set off or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such recovery, the Obligations or part thereof originally intended to be satisfied, and all Liens, if any, and rights and remedies therefor, shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or set off had not occurred. SECTION 14.9 SEVERABILITY. The invalidity, illegality or unenforceability in any jurisdiction of any provision in or obligation under this Loan Agreement, the Note or other Loan Documents shall not affect or impair the validity, legality or enforceability of the remaining provisions or obligations under this Loan Agreement, the Note or other Loan Documents or of such provision or obligation in any other jurisdiction. SECTION 14.10 HEADINGS. Section and subsection headings in this Loan Agreement are included herein for convenience of reference only and shall not constitute a part of this Loan Agreement for any other purpose or be given any substantive effect. SECTION 14.11 APPLICABLE LAW. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS WERE NEGOTIATED IN THE STATE OF NEW YORK, AND EXECUTED AND DELIVERED IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN WERE DISBURSED FROM NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW YORK AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. SECTION 14.12 SUCCESSORS AND ASSIGNS. This Loan Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns except that the Borrowers may not assign their rights or obligations hereunder or under any of the other Loan Documents except as expressly provided in Article XI. SECTION 14.13 SOPHISTICATED PARTIES, REASONABLE TERMS, NO FIDUCIARY RELATIONSHIP. The Borrowers represent, warrant and acknowledge that (i) they are sophisticated real estate investors, familiar with transactions of this kind, and (ii) they have entered into this Loan Agreement and the other Loan Documents after conducting their own assessment of the alternatives available to them in the market, and after lengthy negotiations in which they have been represented by legal counsel of their choice. The Borrowers also acknowledge and agree 104 that the rights of Lender under this Loan Agreement and the other Loan Documents are reasonable and appropriate, taking into consideration all of the facts and circumstances including without limitation the quantity of the Loan, the nature of the Properties, and the risks incurred by Lender in this transaction. No provision in this Loan Agreement or in any of the other Loan Documents and no course of dealing between the parties shall be deemed to create (i) any partnership or joint venture between Lender and the Borrowers or any other Person, or (ii) any fiduciary or similar duty by Lender to the Borrowers or any other Person. The relationship between Lender and the Borrowers is exclusively the relationship of a creditor and a debtor, and all relationships between Lender and any other Borrowers are ancillary to such creditor/debtor relationship. SECTION 14.14 REASONABLENESS OF DETERMINATIONS. In any instance where any consent, approval, determination or other action by Lender is, pursuant to the Loan Documents or applicable law, required to be done reasonably or required not to be unreasonably withheld, then Lender's action shall be presumed to be reasonable, and the Borrowers shall bear the burden of proof of showing that the same was not reasonable. In the event that a claim or adjudication is made that Lender or its agents have acted unreasonably or unreasonably delayed acting in any case where, by law or under this Loan Agreement or the other Loan Documents, Lender or such agent, as the case may be, has an obligation to act reasonably or promptly, neither Lender nor its agents shall be liable for any monetary damages, and the Borrowers' sole remedy shall be limited to commencing an action seeking injunctive relief or declaratory judgment. Any action or proceeding to determine whether Lender has acted reasonably shall be determined by an action seeking declaratory judgment. SECTION 14.15 LIMITATION OF LIABILITY. Neither Lender, nor any Affiliate, officer, director, employee, attorney, or agent of Lender, shall have any liability with respect to, and each of the Borrowers hereby waives, releases, and agrees not to sue any of them upon, any claim for any special, indirect, incidental, or consequential damages suffered or incurred by the Borrower Parties in connection with, arising out of, or in any way related to, this Loan Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Loan Agreement or any of the other Loan Documents, other than the gross negligence or willful misconduct of Lender. Each of the Borrowers hereby waives, releases, and agrees not to sue Lender or any of Lender's Affiliates, officers, directors, employees, attorneys, or agents for punitive damages in respect of any claim in connection with, arising out of, or in any way related to, this Loan Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Loan Agreement or any of the transactions contemplated hereby, except to the extent the same is caused by the gross negligence or willful misconduct of Lender. SECTION 14.16 NO DUTY. All attorneys, accountants, appraisers, and other professional Persons and consultants retained by Lender shall have the right to act exclusively in the interest of Lender and shall have no duty of disclosure, duty of loyalty, duty of care, or other duty or obligation of any type or nature whatsoever to any of the Borrowers or Affiliates thereof, or any other Person. SECTION 14.17 ENTIRE AGREEMENT. This Loan Agreement, the Note, and the other Loan Documents referred to herein embody the final, entire agreement among the parties hereto and supersede any and all prior commitments, agreements, representations, and understandings, whether written or oral, relating to the subject matter hereof and may not be contradicted or 105 varied by evidence of prior, contemporaneous, or subsequent oral agreements or discussions of the parties hereto. There are no oral agreements among the parties to the Loan Documents. SECTION 14.18 CONSTRUCTION; SUPREMACY OF LOAN AGREEMENT. The Borrowers and Lender acknowledge that each of them has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review this Loan Agreement and the other Loan Documents with its legal counsel and that this Loan Agreement and the other Loan Documents shall be construed as if jointly drafted by the Borrowers and Lender. If any term, condition or provision of this Loan Agreement shall be inconsistent with any term, condition or provision of any other Loan Document, then this Loan Agreement shall control. SECTION 14.19 CONSENT TO JURISDICTION. EACH OF THE BORROWERS HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK OR WITHIN THE COUNTY AND STATE IN WHICH THE COLLATERAL IS LOCATED AND IRREVOCABLY AGREES THAT, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH OF THE BORROWERS ACCEPTS FOR ITSELF AND IN CONNECTION WITH THE COLLATERAL, GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE NOTE, SUCH OTHER LOAN DOCUMENTS OR SUCH OBLIGATION. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDER TO BRING PROCEEDINGS AGAINST ANY BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. SECTION 14.20 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS AND LENDER HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS LOAN AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN ANY BORROWER PARTY AND LENDER RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. EACH OF THE BORROWER PARTIES AND LENDER ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF IT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH OF THE BORROWERS AND LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO THIS LOAN AGREEMENT, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS LOAN AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN 106 THE FUTURE. EACH OF THE BORROWERS AND LENDER FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LOAN AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOAN. IN THE EVENT OF LITIGATION, THIS LOAN AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. SECTION 14.21 COUNTERPARTS; EFFECTIVENESS. This Loan Agreement and other Loan Documents and any amendments or supplements thereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which counterparts together shall constitute but one and the same instrument. This Loan Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto. SECTION 14.22 SERVICER. Lender shall have the right from time to time to designate and appoint a Servicer and special servicer, and to change or replace any Servicer or special servicer. Provided that the Borrowers have been notified of such Servicer's role, all rights of the Lender hereunder may be exercised by Servicer on behalf of Lender and provided the Borrowers shall not be required to deal with more than one such servicing entity at any time. Lender shall notify the Borrowers in writing as to the identity of the Servicer and any special servicer. SECTION 14.23 OBLIGATIONS OF BORROWER PARTIES. The Borrower Parties other than the Borrowers are parties to this Loan Agreement only with regard to the representations, warranties, and covenants specifically applicable to them. SECTION 14.24 ADDITIONAL INSPECTIONS; REPORTS. Notwithstanding anything contained in this Loan Agreement to the contrary, if for any reason whatsoever Lender suspects that any conditions exist or may exist at any Property which might have a Material Adverse Effect, Lender shall have the right, at the Borrowers' sole reasonable cost and expense, to cause such inspections and reports to be prepared and performed with respect to any Property as Lender shall reasonably determine. [signatures follow on next page] 107 IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Loan Agreement as of the date first written above. BORROWERS: IMPAC HOTEL GROUP MEZZANINE, LLC, a Delaware limited liability company By: /s/ Daniel E. Ellis ------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary SERVICO OPERATIONS MEZZANINE, LLC, a Delaware limited liability company By: /s/ Daniel E. Ellis ------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary LODGIAN FINANCING MEZZANINE, LLC, a Delaware limited liability company By: /s/ Daniel E. Ellis ------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary ISLAND MOTEL ENTERPRISES, INC., a Georgia corporation, By: /s/ Daniel E. Ellis ------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary PENMOCO, INC., a Michigan corporation, By: /s/ Daniel E. Ellis ------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary LENDER: MERRILL LYNCH MORTGAGE LENDING, INC. By: /s/ Steve Glassman --------------------------- Name: Steve Glassman Title: Authorised Signatory EXHIBIT A Lodgian: ALA Schedule
- --------------------------------------------------------------------------------------------------------------- ALA ----------------------------- ALLOCATED AGGREGATE LOAN ALLOCATED No. Hotel Location State Rms AMOUNT LOAN AMOUNT - --------------------------------------------------------------------------------------------------------------- 1 Holiday Inn Baltimore - Inner Harbor MD 375 $ 5,996,630 $ 23,359,709 2 Crowne Plaza Albany NY 384 $ 4,484,074 $ 17,467,585 3 Holiday Inn Silver Spring MD 231 $ 4,297,237 $ 16,739,769 4 Holiday Inn Baltimore - BWI Airport MD 259 $ 4,179,470 $ 16,281,009 5 Crowne Plaza Houston TX 291 $ 3,816,038 $ 14,865,269 6 Courtyard by Marriott Atlanta GA 181 $ 3,429,508 $ 13,359,555 7 Holiday Inn Lansing MI 244 $ 2,398,652 $ 9,343,883 8 Doubletree Club Philadelphia PA 282 $ 2,334,203 $ 9,092,823 9 Holiday Inn Select Dallas (DFW Airport) TX 189 $ 2,180,593 $ 8,494,440 10 Hilton Troy (Northfield) MI 191 $ 2,055,200 $ 8,005,977 11 Hilton Columbia MD 152 $ 1,998,877 $ 7,786,570 12 Residence Inn Dedham MA 219 $ 1,817,161 $ 7,078,700 13 Holiday Inn Select Strongsville OH 304 $ 1,817,161 $ 7,078,700 14 Crowne Plaza West Palm Beach FL 81 $ 1,817,161 $ 7,078,700 15 Holiday Inn Rolling Meadows IL 420 $ 1,708,131 $ 6,653,978 16 Countyard by Marriott Bentonville AR 392 $ 1,453,729 $ 5,662,960 17 Holiday Inn St. Louis North MO 90 $ 1,453,729 $ 5,662,960 18 Holiday Inn Select Niagara Falls NY 397 $ 1,362,871 $ 5,309,025 19 Holiday Inn Greentree PA 200 $ 1,308,356 $ 5,096,664 20 Crowne Plaza Cedar Rapids IA 275 $ 1,308,356 $ 5,096,664 21 Holiday Inn Jekyl Island GA 199 $ 1,296,496 $ 1,296,496 22 Holiday Inn Towson (Cromwell Bridge) MD 139 $ 1,272,013 $ 4,955,090 23 Holiday Inn Arden Hills/St. Paul MN 156 $ 1,253,841 $ 4,884,303 24 Holiday Inn Winter Haven FL 228 $ 1,235,669 $ 4,813,516 25 Residence Inn Little Rock AR 96 $ 1,162,983 $ 4,530,368 26 Courtyard by Marriott Abilene TX 99 $ 1,072,125 $ 4,176,433 27 Hampton Inn Pensacola FL 124 $ 1,064,166 $ 4,145,430 28 Courtyard by Marriott Paducah KY 100 $ 1,035,782 $ 4,034,859 29 Holiday Inn SunSpree Myrtle Beach SC 133 $ 1,017,610 $ 3,964,072 30 Holiday Inn Austin TX 210 $ 981,267 $ 3,822,498 31 Holiday Inn Jamestown NY 146 $ 981,267 $ 3,822,498 32 Holiday Inn Glen Bumie MD 127 $ 963,095 $ 3,751,711 33 Holiday Inn Frederick MD 158 $ 926,752 $ 3,610,137 34 Holiday Inn Lancaster PA 189 $ 926,752 $ 3,610,137 35 Holiday Inn Pensacola (University Mall) FL 152 $ 908,580 $ 3,539,350 36 Fairfield Inn Valdosta GA 108 $ 908,580 $ 3,539,350 37 Holiday Inn Sheffield AL 201 $ 781,379 $ 3,043,841 38 Hurstbourne Hotel Louisville KY 398 $ 709,444 $ 2,763,620 39 Holiday Inn Brunswick GA 126 $ 708,693 $ 2,760,693 40 Courtyard by Marriott Florence KY 78 $ 690,521 $ 2,689,906 41 Quality Hotel Metairie LA 205 $ 672,349 $ 2,619,119 42 Holiday Inn York PA 100 $ 672,349 $ 2,619,119 43 Holiday Inn Valdosta GA 167 $ 599,663 $ 2,335,971 44 Holiday Inn East Hartford CT 130 $ 599,663 $ 2,335,971 45 Hampton Inn Dothan AL 113 $ 564,322 $ 2,198,299 46 Holiday Inn Express Pensacola FL 214 $ 563,320 $ 2,194,397 47 French Quarter Suites Memphis TN 105 $ 523,637 $ 2,039,815 48 Holiday Inn Pittsburgh (Pkwy East) PA 180 $ 490,633 $ 1,911,249 49 Four Points Niagara Falls NY 189 $ 454,290 $ 1,769,675 50 Holiday Inn Baltimore West (Belmont) MD 135 $ 436,119 $ 1,698,888 51 Holiday Inn Express Gadsden AL 141 $ 436,119 $ 1,698,888 52 Holiday Inn Marietta (hotel & suites) GA 196 $ 399,775 $ 1,557,314 53 Holiday Inn Select Dallas (Mkt Center) TX 246 $ 363,432 $ 1,415,740 54 Clarion Charleston SC 197 $ 308,917 $ 1,203,379 55 Holiday Inn Grand Island NY 261 $ 236,231 $ 920,231 56 Holiday Inn Dothan AL 102 $ 236,231 $ 920,231 Total (Excluding Windsor) 11,005 $78,671,201 $302,707,526
EXHIBIT B MANAGEMENT AGREEMENTS Exhibit B MANAGEMENT AGREEMENTS 1. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Albany Hotel, Inc. as owner, re: Crowne Plaza, Albany, NY. 2. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and AMI Operating Partners, L.P., as owner, re: Holiday Inn, East Hartford, CT. 3. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and AMI Operating Partners, L.P., as owner, re: Holiday Inn, Fredrick, MD. 4. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and AMI Operating Partners, L.P., as owner, re: Holiday Inn, Cromwell Bridge, MD. 5. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and AMI Operating Partners, L.P., as owner, re: Holiday Inn, Belmont, MD. 6. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and AMI Operating Partners, L.P., as owner, re: Holiday Inn, York, PA. 7. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Apico Hills, Inc., as owner, re: Holiday Inn, Pittsburgh, PA. 8. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Apico Inns of Green Tree, Inc., as owner, re: Holiday Inn Green Tree, Pittsburgh, PA. 9. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Brunswick Motel Enterprises, Inc., as owner, re: Holiday Inn, Brunswick, GA. 10. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Dedham Lodging Associates I, Limited Partnership, as owner, re: Residence Inn, Dedham, MA. 11. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Dothan Hospitality 3053, Inc., as owner, re: Holiday Inn, Dothan, AL. 12. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Dothan Hospitality 3071, Inc., as owner, re: Hampton Inn, Dothan, AL. 13. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Gadsden Hospitality, Inc., as owner, re: Holiday Inn Express, Gadsden, AL. 14. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: Courtyard by Marriott, Atlanta, GA. 15. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: Courtyard by Marriott, Abilene TX. 16. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: Courtyard by Marriott, Florence, KY. 17. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: Courtyard by Marriott, Bentonville, AR. 18. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: DoubleTree Club, Philadelphia, PA. 19. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: The Hurtsbourne Hotel, Louisville, KY. 20. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: Fairfield Inn, Valdosta, GA. 21. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: Holiday Inn, Valdosta, GA. 22. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: Holiday Inn Select, Dallas/Fort Worth Airport, TX. 23. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: Holiday Inn, North St. Louis, MO. 24. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: Holiday Inn, Surfside Beach, SC. 25. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: Holiday Inn Select Strongsville OH. 26. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: Holiday Inn Suites, Marietta, GA. 27. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Impac Hotels I, L.L.C., as owner, re: Courtyard by Marriott, Paducah, KY. 28. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Little Rock Lodging Associates I, Limited Partnership, as owner, re: Residence Inn, Little Rock, AR. -2- 29. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Lodgian AMI, Inc., as owner, re: Holiday Inn, Inner Harbor, Baltimore, MD. 30. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Lodgian AMI, Inc., as owner, re: Holiday Inn, Glen Burnie, MD. 31. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Lodgian AMI, Inc., as owner, re: Holiday Inn, BWI Airport, Baltimore, MD. 32. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Lodgian AMI, Inc., as owner, re: Holiday Inn, Lancaster, PA. 33. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Minneapolis Motel Enterprises, Inc., as owner, re: Holiday Inn, St. Paul, MN. 34. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and NH Motel Enterprises, Inc., as owner, re: Hilton Norfield, Troy, MI. 35. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Cedar Rapids, Inc., as owner, re: Crowne Plaza, Cedar Rapids, IA. 36. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Centre Associates, Ltd., as owner, re: Crowne Plaza, West Palm Beach, FL. 37. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Grand Island, Inc., as owner, re: Holiday Inn, Grand Island, NY. 38. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Jamestown, Inc., as owner, re: Holiday Inn, Jamestown, NY. 39. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Lansing, Inc., as owner, re: Holiday Inn, Lansing, MI. 40. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Maryland, Inc., as owner, re: Holiday Inn, Silver Springs, MD. 41. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Metairie, Inc., as owner, re: Quality Hotel, Metaire, LA. 42. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico New York, Inc., as owner, re: Holiday Inn Select, Niagara Falls, NY. -3- 43. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Niagara Falls, as owner, re: Four Points Sheraton, Niagara Falls, NY. 44. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Northwoods, Inc., as owner, re: Clarion Hotel, Charleston, SC. 45. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Pensacola 7200, Inc., as owner, re: Holiday Inn, Pensacola, FL. 46. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Pensacola 7330, Inc., as owner, re: Hampton Inn, Pensacola, FL. 47. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Pensacola, Inc., as owner, re: Holiday Inn Express, Pensacola, FL. 48. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Rolling Meadows, Inc., as owner, re: Holiday Inn, Rolling Meadows, IL. 49. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Winter Haven, Inc., as owner, re: Holiday Inn, Winter Haven, FL. 50. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Sheffield Motel Enterprises, Inc., as owner, re: Holiday Inn, Sheffield, AL. 51. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Austin, Inc., as owner, re: Holiday Inn, Austin, TX. 52. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Columbia, Inc., as owner, re: Hilton, Columbia, MD. 53. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Houston, Inc., as owner, re: Crowne Plaza, Houston, TX. 54. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Servico Market Center, Inc., as owner, re: Holiday Inn, Dallas, TX. 55. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Lodgian Memphis Property Owner, LLC, as owner, re: French Quarter Suites, Memphis, TN. 56. Management Agreement, dated November 12, 2002, between Lodgian Management Corp., as manager, and Penmoco, Inc. and Island Motel Enterprises, Inc., as owner, re: Holiday Inn, Jekyll Island, GA. -4- EXHIBIT C PROPERTIES Exhibit C EXHIBIT C LODGIAN
CHAIN/NAME CITY ST ADDRESS CITY/ST/ZIP ---------- ---- -- ------- ----------- Hampton Inn Dothan AL 3071 Ross Clark Circle Dothan, AL 36301 Holiday Inn West Dothan AL 3053 Ross Clark Dothan, AL 36301 Holiday Inn Express Gadsden AL 801 Cleveland Ave. Gadsden, AL 35954 Holiday Inn Sheffield AL 4900 Hatch Blvd. Sheffield, AL 35660 Courtyard by Marriott Bentonville AR 1001 McClain Rd. Bentonville, AR 72712 Residence Inn Little Rock AR 1401 S. Shackleford Rd. Little Rock, AR 72211 Holiday Inn East Hartford CT 363 Roberts St. E. Hartford, CT 06108 Hampton Inn Pensacola FL 7330 Plantation Rd. Pensacola, FL 32504 Holiday Inn Express Pensacola FL 6501 Pensacola Blvd. Pensacola, FL 32505 Holiday Inn Pensacola FL 7200 Plantation Rd. Pensacola, FL 32504 (University Mall) Crowne Plaza West Palm Beach FL 1601 Belvedere Rd. West Palm Beach, FL 33406 Holiday Inn Winter Haven FL 1150 3rd St., SW Winter Haven, FL 33880 Courtyard by Marriott Atlanta GA 3332 Peachtree Rd. Atlanta, GA 30326 Holiday Inn Brunswick GA 5252 New Jesup Hwy Brunswick, GA 31525 Holiday Inn Marietta (hotel & GA 2265 Kingston Ct. Marietta, GA 30067 suites) Fairfield Inn Valdosta GA 1311 St. Augustine Rd. Valdosta, GA 31601 Holiday Inn Valdosta GA 1309 St. Augustine Rd. Valdosta, GA 31601 Crowne Plaza Cedar Rapids IA 350 1st Ave, NE Cedar Rapids, IA 52401 Holiday Inn Rolling Meadows IL 3405 Algonquin Rd. Rolling Meadows, IL 60008 Courtyard by Marriott Florence KY 46 Cavalier Blvd. Florence, KY 41042 Hurstbourne Hotel Louisville KY 9700 Blue Grass Parkway Louisville, KY 40299 Courtyard by Marriott Paducah KY 3835 Technology Dr. Paducah, KY 42001 Quality Hotel Metairie LA 2261 N. Causeway Blvd. Metairie, LA 70001 Residence Inn Dedham MA 259 Elm St. Dedham, MA 02026 Holiday Inn Baltimore - BWI MD 890 Elkridge Landing Rd. Linthicum Heights, MD Airport 21090 Holiday Inn Baltimore West MD 1800 Belmont Ave. Baltimore, MD 21244 (Belmont) Holiday Inn Baltimore, Inn Harbor MD 301 W. Lombard St. Baltimore, MD 21201 Hilton Columbia MD 5485 Twin Knolls Rd. Columbia, MD 21045 Holiday Inn Frederick MD 999 W. Patrick St. Frederick, MD 21702 Holiday Inn Glen Burnie MD 6323 Governor Ritchie Glen Burnie, MD 21061 Hwy Holiday Inn Silver Spring MD 8777 Georgia Ave. Silver Spring, MD 20910 Holiday Inn Towson (Cromwell MD 1100 Cromwell Bridge Rd. Towson, MD 21286 Bridge) Holiday Inn Lansing MI 7501 W. Saginaw Hwy Lansing, MI 48917 Hilton Troy (Northfield) MI 5500 Crooks Rd. Troy, MI 48098
EXHIBIT C Holiday Inn Arden Hills/St. Paul MN 1201 West Country Rd. E St. Paul, MN 55112 Holiday Inn St. Louis North MO 4545 N. Lindbergh Blvd. St. Louis, MO 63044 Crowne Plaza Albany NY Ten Eyck Plaza Albany, NY 12207 Holiday Inn Grand Island NY 100 Whitehaven Rd. Grand Island, NY 14072 Holiday Inn Jamestown NY 150 W. 4th St. Jamestown, NY 14701 Four Points Niagara Falls NY 114 Buffalo Ave. Niagara Falls, NY 14303 Holiday Inn Select Niagara Falls NY 300 Third St. Niagara Falls, NY 14303 Holiday Inn Select Strongsville OH 15471 Royalton Rd. Strongsville, OH 44136 Holiday Inn Select Windsor ONT 1855 Huron Church Road Canada N9C 2L6 Holiday Inn Greentree PA 401 Holiday Drive Pittsburgh, PA 15220 Holiday Inn Lancaster PA 521 Greenfield Rd. Lancaster, PA 17601 Doubletree Club Philadelphia PA 9461 Roosevelt Blvd. Philadelphia, PA 19114 Holiday Inn Pittsburgh (Pkwy East) PA 915 Brinton Rd. Pittsburgh, PA 15221 Holiday Inn York PA 334 Arsenal Rd. York, PA 17402 Clarion North Charleston SC 7401 Northwoods Blvd. Charleston, SC 29406 Holiday Inn SunSpree Myrtle Beach SC 1601 N. Ocean Blvd. Surfside Beach, SC 29575 French Quarter Suites Memphis TN 2144 Madison Ave. Memphis, TN 38104 Courtyard by Marriott Abilene TX 4350 Ridgemont Dr. Abilene, TX 79606 Holiday Inn Austin TX 3401 South I-35 Austin, TX 78741 Holiday Inn Select Dallas (DFW Airport) TX 4441 Hwy 114 & Esters Irving, TX 75063 Blvd. Holiday Inn Dallas (Mkt Center) TX 1955 Market Center Dallas, TX 75207 Blvd. Crowne Plaza Houston TX 12801 NW Freeway US 290 Houston, TX 77040

EXHIBIT D PROPERTY IMPROVEMENT PLANS CLARION HOTEL CHARLESTON, SC HILTON HOTEL TROY (NORTHFIELD), MI HILTON HOTEL COLUMBIA, MD DOUBLETREE CLUB HOTEL PHILADELPHIA, PA HOLIDAY INN SHEFFIELD, AL HOLIDAY INN JEKYLL ISLAND, GA PROPERTY IMPROVEMENT PLAN CLARION HOTEL CHARLESTON, SC SC237 CLARION HOTEL ADDENDUM NO. 1 The Franchise Agreement ("Agreement") of even date between Choice Hotels International. Inc., a Delaware corporation ("we" or "us") and SERVICO NORTHWOODS INC., a Florida corporation, TOM GRYBOSKI, Individually, jointly and severally ("you") is amended by the following: 1. You agree to make the following changes and additions to upgrade the Hotel to meet our standards or to cure existing deficiencies before entering the CLARION HOTEL System, BUT IN NO EVENT LATER THAN SEPTEMBER 15, 2000. You may not use the proprietary marks until we authorize you to do so. (a) replace informational/ directional signage package (b) provide minimally 4 Guest Privileges "upgrade" type rooms. (c) install towel rack at all guest bath room vanity's (d) replace all damaged guest bath room ceiling grids and tiles in atrium rooms. (e) install Clarion Sleeper by SERTA bedding in 50% of guest rooms. (f) replace all guest room door signage, numbers, to a more contemporary design (g) paint guest room entry doors (h) install a microwave oven in all Clarion Class Leisure rooms. (i) install refrigerators in all Clarion Leisure and Business Class rooms. All refrigerators are to be placed in enclosed cabinet. (j) renovate and equip no less than 20% of available room inventory as Clarion Class Leisure Rooms. (k) renovate and equip no less than 35% of available room inventory as Clarion Class Business rooms. These must include the Class One Business Station per the Clarion rules & regulations. (l) replace damaged luggage carts (m) replace all desk chairs not meeting Clarion minimum specifications. Desk chairs must have a fully upholstered seat and back (n) repaint all damaged restaurant and lounge furniture (in Atrium) (o) paint all railings (interior and exterior) (p) install full sized irons and ironing boards in all guestrooms (q) install a hair dryer (minimum heat output of 1500 watts) in all guestrooms (r) install telephone data ports in all guest rooms Addendum No. 1 Page 2 (s) install required furniture at pool, to include, but not limited to umbrella tables with chairs, chaise lounges and suntan lounges per the Clarion minimum specifications. (t) repair pool fence and gate(s). Pool gates must be self closing and self locking. (u) replace damaged wall vinyl in atrium/ lobby. Paint damaged area as needed. (v) replace stained/ damaged ceiling tile in all public bathrooms. (w) replace damaged/ stained ceiling tile in public corridors. Restore acoustic spray where lacking. (x) replace damaged windows in atrium/ lobby. (y) clean all walkways and driveway (under porte-cochere) thoroughly. 2. You agree to make the following changes and additions to upgrade the Hotel to meet our standards or to cure existing deficiencies in accordance with the CLARION HOTEL Rules and Regulations after entering the System in accordance with the following schedule: By December 1, 2001 (a) install new Clarion Sleeper by Serta bed sets in all remaining guestrooms (b) replace guest bath room tile floors with ceramic tile of at least 2 square inches. (c) replace all television sets with 25", swivel mounted remote control television sets (d) replace wall vinyl in all guest rooms and guest bath rooms. By December 31, 2001 (e) enclose closets in guest rooms per requirements of the Clarion rules and regulations. (f) install window sheers in all guest rooms. (g) modify and equip an area to comply with all requirements of the Clarion BIZNET business center. It is strongly recommended that guests have access to this area 24 hours per day. (h) replace all wall vinyl in interior (atrium) hallways (i) recondition both elevator cabs by renovating ceiling, walls and floor. (j) replace damaged lobby entrance doors. 3. You acknowledge and agree that the changes and additions stated in paragraphs 1 and 2 are in addition to your continuing obligation to comply with the Rules and Regulations under paragraph 6.a. of the Franchise Agreement. Addendum No. 1 Page 3 4. You represent and warrant to us that you are not party to any contract that would conflict with this Agreement. If the Hotel is presently operated under a franchise agreement with another franchisor, this Agreement is contingent on you furnishing verification satisfactory to us within thirty (30) days, but in any event before entering the System, evidencing your right to terminate the other franchise. Furthermore, you agree to defend, indemnify and hold us harmless against any claims, losses, or liabilities that may be asserted against us by the other franchisor arising out of or related to the termination of the other franchise, including tortious interference with contractual relations or similar claims. 5. The secondary name "Airport" may be used so long as the Hotel is located within five (5) miles of the airport, you provide or have arranged transportation to and from the airport upon guest demand (this service does not need to be complimentary) and you must have a direct-dial telephone in the terminal of the airport. In the event any of the aforementioned requirements have not been met or cease to be met, the Hotel will not be authorized to use the secondary name. 6. We agree that you may use the secondary name of airport. Your property will now be referred to as "CLARION HOTEL Airport". Please bear in mind that our approval of this secondary marketing name does not grant you a contractual right to use this name indefinitely. If the circumstances, market conditions, or our criteria change, we reserve the right to revoke our approval of this secondary name at a later date. 7. Subject to the provisions of paragraph 8 below, paragraph 4(b) of the Agreement thereto are hereby replaced by the following: (a) "You must pay to Us a monthly Royalty Fee as follows: beginning on the Opening Date, a sum equal to 3.13% of the Gross Room Revenues for each month. (b) "You must pay to Us a monthly Marketing Fee as follows: beginning on the Opening Date, a sum equal to 0.83% of the Gross Room Revenues for each month. We may increase the Marketing Fee for increases in inflation or costs of advertising, publicity, public relations or marketing so long as any the increases apply to all or most of the U.S. hotels in the System unless we get your approval to a greater amount. (c) "You must pay to Us a monthly Reservations Fee as follows: beginning on the Opening Date, sum equal to 1.04% of the Gross Room Revenues for each month. We may increase the Reservations Fee for increases in our cost of providing the reservations system so long as any the increases apply to all or most of the U.S. hotels in the System unless we get your approval to a greater amount Addendum No. 1 Page 4 8. The modifications referred to in paragraph 7 above are made upon the express conditions that you permit no material default of your obligations in this Agreement (including any Addenda thereto) to continue for more than 30 days or, after the Opening Date, that you not receive a failing Quality Assurance Review score in any of the categories which are scored (i.e., Housekeeping, Mandatory or Maintenance & Capital Improvements). "Material default" includes non payment of any fees or other monies required to be paid by this Agreement. In the event either of the aforementioned deficiencies shall occur, the modification(s) referred to in paragraph 7 shall thereafter automatically become null and void and shall not be reinstated even if the conditions are subsequently removed and paragraph 4(b) of the Agreement thereto shall be reinstated. Such modification is exclusive to you and is not transferable to any other party. 9. Notwithstanding anything to the contrary contained in paragraph 10 of the Agreement, if the Hotel is sold to a bona fide purchaser and the purchaser does not enter into a Franchise Agreement with us for the Hotel or does not assume this Agreement, the amount of liquidated damages shall not exceed $25,000 so long as liquidated damages and all fees accruing under the Agreement are paid in certified funds within 30 days from the sale of the Hotel. 10. Notwithstanding anything contained in paragraph 9(b) of the Agreement, you may transfer a direct or indirect interest in the Hotel or in this Agreement to a limited liability company, a corporation or a partnership formed within 60 months of the date of this Agreement without payment of any affiliation fee, if: (a) You send us prior written notice of the transfer, (b) You are not in default under this Agreement; (c) You execute and deliver to us a general release of all claims you have against us; (d) You will own a majority of the beneficial interest in the limited liability company, corporation or partnership after the transfer; (e) You agree that you are not relieved of your obligation under this Agreement unless we specifically release you in writing; (f) Your successor assumes, in a writing that we accept, your obligations under this Agreement; (g) Your successor submits evidence to us that it owns the Hotel; and (h) We approve of the transfer after a credit and legal review. 11. Notwithstanding anything to the contrary, if we approve and enter into 2 additional franchise agreements with you for NE069-CLHO (Omaha) and IA078-QIIN (Council Bluffs) by September 10, 2000, then the Affiliation Fee pursuant to paragraph 4(a) of this Agreement will be $25,000, the discounted fees contained in paragraph 7 of Addendum No. 1 will be in effect and liquidated damages pursuant to paragraph 9 of Addendum No. 1 will be in effect. The additional franchise agreements will be entitled to the same discounted fees in this Agreement. If we do not approve and enter into the 2 additional franchise agreements with you pursuant to this paragraph, then the affiliation fee will be $40,000 and you must pay the balance according to the terms of the attached Promissory Note that you will execute, and the modification(s) referred to in paragraphs 7 and 9 shall thereafter automatically become null and void and paragraph 4(b) of the Agreement shall be reinstated if we do execute the 2 additional franchise agreements with you, then we will waive the terms of the Promissory Note. (SEE NEXT PAGE FOR SIGNATURES) Addendum No. 1 Page 5 IN WITNESS WHEREOF, you and we have signed this Addendum to the Franchise Agreement. ATTEST: CHOICE HOTELS INTERNATIONAL, INC., A Delaware corporation ____________________________ By: ___________________________________ L.S. Name: Kevin M. Rooney Name: Michael J. DeSantis Title: Assistant Secretary Title: Senior Vice President SERVICO NORTHWOODS INC., a Florida corporation, TOM GRYBOSKI, Individually, jointly and severally Witness: SERVICO NORTHWOODS INC., a Florida corporation ____________________________ By: ___________________________________ L.S. Name: Name: Karyn M. Gutierrez Title: Title: President Date: _______________________ Witness: TOM GRYBOSKI, Individually ____________________________ _______________________________________ L.S. Name: Date: _______________________ Witness: By: ___________________________________ L.S. ____________________________ Name: Name: Title: Title: Date: _______________________ Witness: ____________________________ By: ___________________________________ L.S. Name: Name: Title: Title: Date: _______________________ PROPERTY IMPROVEMENT PLAN HILTON HOTEL TROY (NORTHFIELD), MI PRELIMINARY PRODUCT IMPROVEMENT REPORT HILTON HOTEL DETROIT NORTHFIELD, MI CONDUCTED ON: 7/15/02. BY C. ENGELHARDT THE IMPROVEMENTS IDENTIFIED IN THIS REPORT ARE BASED ON CONDITIONS EXISTING ON THE ABOVE DATE. PROPERTY TRANSACTIONS OCCURRING AFTER 180 DAYS WILL REQUIRE AN UPDATED REPORT. ANY WAIVERS AND/OR VARIANCES ISSUED ARE CANCELLED AND NO LONGER EFFECTIVE AT TIME OF SALE, CLOSING, OR ANY OTHER AMENDMENT TO THE ORIGINAL FRANCHISE AGREEMENT. HILTON HOTELS DOES NOT AND CANNOT WARRANT CONFORMANCE WITH INTERPRETATION OF THE AMERICANS WITH DISABILITIES ACT ("ADA") AND THE ADA ACCESSIBILITY GUIDELINES. OWNERSHIP IS RESPONSIBLE FOR COMPLIANCE WITH APPLICABLE PROVISIONS OF THE ADA. APPROPRIATE COUNSEL TO ENSURE COMPLIANCE IS URGED. EXTERIOR
========================================================================================================= START FINISH DATE SCOPE OF WORK DATE STATUS ========================================================================================================= BUILDING, ENTRANCE, PORTE COCHERE AND SIGNAGE ========================================================================================================= 7/31/02 Replace T-10-11 Surface with EIFS. 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Add decorative stamped paver slab under Porte Cochere 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Add new recessed lighting package to underside of Porte Cochere roof. 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Repair water stains Porte Cochere ceiling. 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Replace damaged PTAC grills. 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Resurface cracked areas of building exterior 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Add electronic card swipes at all entrances 180 days - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- ========================================================================================================= PARKING LOT, LANDSCAPING, LIGHTING, ETC. ========================================================================================================= 7/31/02 Resurface and stripe entire parking area. 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Add additional landscaping around perimeter of hotel and on all island 180 days beds in parking lot. - --------------------------------------------------------------------------------------------------------- 7/31/02 Replace all exterior signage with new Hilton logo. 180 days - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------
Page 1 of 9 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- =========================================================================================================

PUBLIC AREAS
========================================================================================================= START FINISH DATE SCOPE OF WORK DATE STATUS ========================================================================================================= LOBBY/ENTRANCE ========================================================================================================= 7/31/02 Cover all concrete surfaces with gypsum board or an appropriate 180 days millwork treatment. - --------------------------------------------------------------------------------------------------------- 7/31/02 Replace wall sconces. 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Replace carpet a entrance. 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Replace and upgrade all millwork on telephone partitions must be 180 days modified to comply with ADA requirements. - --------------------------------------------------------------------------------------------------------- 7/31/02 Replace wall vinyl in lobby area and first floor corridors. 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Refinish front desk surfaces. 180 days - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- ========================================================================================================= - --------------------------------------------------------------------------------------------------------- ========================================================================================================= PUBLIC RESTROOMS ========================================================================================================= 7/31/02 Remodel restrooms to include; wall coverings, partitions, vanities, 180 days tile, lighting package and mirrors. - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- ========================================================================================================= CORRIDORS/ELEVATOR/STAIRWELLS ========================================================================================================= 7/31/02 Replace all carpet and carpet pad 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Upgrade wall sconces on floors 1 and 3 to same style as 2nd floor. 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Provide artwork in all guest room corridors. 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Upgrade ceiling in guest corridors. 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Refinish elevator cabs to include; walls floors ceilings and lighting. 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Ensure panel controls are ADA compliant. 180 days - ---------------------------------------------------------------------------------------------------------
Page 2 of 9 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 - --------------------------------------------------------------------------------------------------------- ========================================================================================================= COMPLIMENTARY SERVICES AREA ========================================================================================================= - --------------------------------------------------------------------------------------------------------- ========================================================================================================= RESTAURANT ========================================================================================================= 7/31/02 Completely remodel the restaurant facility, to include; carpet, carpet 180 days pad, walls, lighting package, artwork, tables, chairs, ceiling, entrance/host stand and buffet line. - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- ========================================================================================================= KITCHENS ========================================================================================================= 7/31/02 Professionally deep clean walls and equipment. 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Replace ceiling tiles. 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Replace kitchen floor tile 180 days - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------

PUBLIC AREAS
========================================================================================================= START FINISH DATE SCOPE OF WORK DATE STATUS ========================================================================================================= LOUNGE ========================================================================================================= 7/31/02 Refinish bar surface and front. Replace bar stools. 180 days - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------
Page 3 of 9 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- ========================================================================================================= ========================================================================================================= - --------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------
MEETING FACILITIES
========================================================================================================= START FINISH DATE SCOPE OF WORK DATE STATUS ========================================================================================================= BALLROOM ========================================================================================================= 7/31/02 Replace existing lay-in ceiling tile with a combination of gyp board 180 days and lay-in tile. New ceiling tile must be a tegular edge tile with a fine line 9/16" grid system. - --------------------------------------------------------------------------------------------------------- 7/31/02 Replace vinyl wall covering. 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Repair or replace existing air walls. 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Replace carpet and carpet pad. 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Replace all banquet stack chairs. 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Replace lighting package. 180 days - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- ========================================================================================================= PRE-FUNCTION AREA ========================================================================================================= 7/31/02 Replace carpet and carpet pad 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Replace all wall vinyl 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Replace soft seating groups 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Replace lighting package 180 days - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- ========================================================================================================= MEETING ROOM ========================================================================================================= 7/31/02 Replace lay in ceiling system with a 2x2' tile with tegular edge and a 180 days 9/16" grid system. - --------------------------------------------------------------------------------------------------------- 7/31/02 Replace carpet and carpet pad 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Replace all wall vinyl 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Replace lighting package 180 days - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- ========================================================================================================= RESTROOMS-PRE-FUNCTION AREA ========================================================================================================= 7/31/02 Completely remodel restrooms to include; floors, vanities, mirrors, 180 days partitions, wall vinyl, ceilings, and chrome - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------
Page 4 of 9 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------
BACK OF HOUSE/STORAGE AREAS
========================================================================================================= START FINISH DATE SCOPE OF WORK DATE STATUS ========================================================================================================= HOUSEKEEPING/MAINTENANCE ========================================================================================================= - --------------------------------------------------------------------------------------------------------- ========================================================================================================= STORAGE AREAS ========================================================================================================= - --------------------------------------------------------------------------------------------------------- =========================================================================================================
RECREATIONAL FACILITIES
========================================================================================================= START FINISH DATE SCOPE OF WORK DATE STATUS ========================================================================================================= POOL AND ADJACENT AREAS ========================================================================================================= 7/31/02 Remodel pool area to include; new deck, replace vinyl and resurface 180 days bottom of pool. - --------------------------------------------------------------------------------------------------------- 7/31/02 Repair broken window seals. 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Add required exercise room with appropriate pieces of equipment. 180 days - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------
Page 5 of 9 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 - --------------------------------------------------------------------------------------------------------- ========================================================================================================= POOL-PUBLIC RESTROOMS ========================================================================================================= 7/31/02 Remodel Men's and Women's Locker rooms, restrooms and shower 180 days areas to include: ceramic tile surfaces, wall finishes, ceilings, vanities, fixtures, chrome and lighting package. - ---------------------------------------------------------------------------------------------------------
GUESTROOMS
========================================================================================================= START FINISH DATE SCOPE OF WORK DATE STATUS ========================================================================================================= BEDROOM ========================================================================================================= 9/1/01 Add two line telephones with two phones present in each room. The 180 days telephone on the desk must be equipped with an RJ11 jack located at the base of the phone that is clearly labeled Data Port. - --------------------------------------------------------------------------------------------------------- 7/31/02 Install 27" televisions per brand standards. 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Install approved closet rod system as stated in the Design and 180 days Construction Standards Manual. - --------------------------------------------------------------------------------------------------------- 7/31/02 Add new "soft goods" and case good pieces to rooms to include; 180 days Carpet, carpet pad, drapes, bedspreads, soft seating, lamps and Hilton approved work desk and ergonomic chair. - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------
Page 6 of 9 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------
GUEST ROOMS
========================================================================================================= START FINISH DATE SCOPE OF WORK DATE STATUS ========================================================================================================= BATHROOM ========================================================================================================= 7/31/02 Remodel all guest bathrooms on 1st and 3rd floor to include; minimum 180 days 6x6" ceramic tile, new tub surrounds that meet current standards, new VWC, new lighting package, replace varities, new chrome and paint ceilings. - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------
Page 7 of 9 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- =========================================================================================================
OTHER
========================================================================================================= DATE AREA STATUS ========================================================================================================= 7/31/02 Replace carpet in back office area. 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Replace flooring in back of house offices. 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Replace office furniture in back of house offices 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Repair leaks in stairwells and repair water damage. 180 days - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- ========================================================================================================= ========================================================================================================= - --------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------
Page 8 of 9 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- =========================================================================================================
Page 9 of 9 PROPERTY IMPROVEMENT PLAN HILTON HOTEL COLUMBIA, MD PRELIMINARY PRODUCT IMPROVEMENT REPORT HILTON HOTEL-COLUMBIA, MD. CONDUCTED ON: 7/16/02 BY: C. ENGELHARDT THE IMPROVEMENTS IDENTIFIED IN THIS REPORT ARE BASED ON CONDITIONS EXISTING ON THE ABOVE DATE. PROPERTY TRANSACTIONS OCCURRING AFTER 180 DAYS WILL REQUIRE AN UPDATED REPORT. ANY WAIVERS AND/OR VARIANCES ISSUED ARE CANCELLED AND NO LONGER EFFECTIVE AT TIME OF SALE, CLOSING, OR ANY OTHER AMENDMENT TO THE ORIGINAL FRANCHISE AGREEMENT. HILTON HOTELS DOES NOT AND CANNOT WARRANT CONFORMANCE WITH INTERPRETATION OF THE AMERICANS WITH DISABILITIES ACT ("ADA") AND THE ADA ACCESSIBILITY GUIDELINES. OWNERSHIP IS RESPONSIBLE FOR COMPLIANCE WITH APPLICABLE PROVISIONS OF THE ADA. APPROPRIATE COUNSEL TO ENSURE COMPLIANCE IS URGED. EXTERIOR
========================================================================================================= START FINISH DATE SCOPE OF WORK DATE STATUS ========================================================================================================= BUILDING, ENTRANCE, PORTE COCHERE AND SIGNAGE ========================================================================================================= 7/31/02 The Porte Cochere requires renovation in conjunction with the exterior 180 days improvements to heighten curb appeal and create a "First Class" sense of arrival. Provide new roofline, strong architectural detail at the fascia, built out columns with capitals and bases, decorative lighting, new ceiling treatment and upgraded stamped paving. The entrance walk areas where matting exists are to receive upgraded treatments. Architect renderings are to be submitted to Hilton for approval. - --------------------------------------------------------------------------------------------------------- 7/31/02 Resurfacing of exterior wall finishes with synthetic stucco, stone or 180 days brick. Reseal or replace all exterior windows and repaint frames. Install upgraded exterior lighting package and exterior entrances. Architect renderings are to be submitted to Hilton for approval. - --------------------------------------------------------------------------------------------------------- 7/31/02 Replace all sidewalks that are cracked, graveled or sunken. 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Replace existing Hilton signage with new logo and cartouche to meet 180 days all current Hilton standards and requirements. - --------------------------------------------------------------------------------------------------------- 7/31/02 Install Hilton Brand Standard flagpoles (3) and flags in front of 180 days building. - --------------------------------------------------------------------------------------------------------- 7/31/02 Vans to be repainted and conform to the current graphic identity 180 days standards. - --------------------------------------------------------------------------------------------------------- 7/31/02 Remove existing enclosure of trash/dumpster area. Remove and replace 180 days concrete pad and adequately seal at wall joint to prevent further sub structure leakage. Resurface exterior walls and provide additional lighting. - --------------------------------------------------------------------------------------------------------- 7/31/02 Replace awning at exterior restaurant entrance. 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Properly enclose chilling tower to include wooden louvered vent 180 days panels. - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------
Page 1 of 10 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 - --------------------------------------------------------------------------------------------------------- ========================================================================================================= PARKING LOT, LANDSCAPING, LIGHTING, ETC. ========================================================================================================= 7/31/02 Patch, resurface and stripe entire parking lot. Remove or replace all 180 days concrete car curbs. - --------------------------------------------------------------------------------------------------------- 7/31/02 Retain a professional landscape artist that will design and install an 180 days upgraded landscaping package to creates a "First Class" sense of arrival. Ensure tree, shrubbery and plantings are designed for a four-season approach with seasonal foliage at all times of year. Submit design plan to Hilton for approval. - --------------------------------------------------------------------------------------------------------- 7/31/02 Install upgraded parking lot lighting package that meets Hilton lighting 180 days design specifications. - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- =========================================================================================================
PUBLIC AREAS
========================================================================================================= START FINISH DATE SCOPE OF WORK DATE STATUS ========================================================================================================= LOBBY/ENTRANCE ========================================================================================================= 7/31/02 Remodel entire lobby to include: carpet, carpet pad, VWC, soft 180 days seating, case good pieces and artwork. - --------------------------------------------------------------------------------------------------------- 7/31/02 Refinish front desk millwork. 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Replace floor to ceiling windows in lobby with a dry wall surface. 180 days - --------------------------------------------------------------------------------------------------------- 7/31/02 Install upgraded directional signage package that meets Hilton and 180 days ADA specifications. - --------------------------------------------------------------------------------------------------------- 7/31/02 Place business center in public area to increase guest 180 days impact/utilization. - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- ========================================================================================================= - --------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------
Page 2 of 10 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 =========================================================================================== PUBLIC RESTROOMS =========================================================================================== 7/31/02 Replace vanities with corian or equal, marble or 180 days granite with undermount china bowl. - ------------------------------------------------------------------------------------------- 7/31/02 Replace all chrome, mirrors and provide an upgraded 180 days lighting package. - ------------------------------------------------------------------------------------------- 7/31/02 Upgrade/refinish restroom entrance doors. 180 days - ------------------------------------------------------------------------------------------- 7/31/02 Upgrade ceiling tile with a 2x2' regular tile with 9/16 180 days grid. - ------------------------------------------------------------------------------------------- 7/31/02 Replace VWC. 180 days - ------------------------------------------------------------------------------------------- 7/31/02 Replace ceramic floor tile with 8x8" 180 days - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- =========================================================================================== CORRIDORS/ELEVATOR/STAIRWELLS =========================================================================================== 7/31/02 The corridors will require a complete renovation to 180 days include carpet and pad (ensure new carpet has "rug" inset style design), wall vinyl and color coordinated corner guards, ceiling finish, lighting upgrade, window treatments, artwork and ADA compliant signage. - ------------------------------------------------------------------------------------------- 7/31/02 Upgrade the appearance of the elevator foyers with 180 days appropriately scaled accent furnishings, decorative lighting, artwork and accessories. - ------------------------------------------------------------------------------------------- 7/31/02 Paint and install VCT flooring in all stairways. 180 days - ------------------------------------------------------------------------------------------- 7/31/02 Resurface all finishes in elevators including floor, 180 days wall and ceiling. Ensure panel controls meet all ADA requirements. - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- =========================================================================================== COMPLIMENTARY SERVICES AREA. =========================================================================================== - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- =========================================================================================== RESTAURANT =========================================================================================== 7/31/02 Repair wood floor, replace bar stools, apply new 180 days fabric/vinyl to all booth type seating. - ------------------------------------------------------------------------------------------- 7/31/02 Replace carpeting in both restaurant and lounge 180 days areas. Replace stained and damaged ceiling tile in both areas. - ------------------------------------------------------------------------------------------- 7/31/02 Replace or repair all restaurant tables and 180 days scating to "like new condition." - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- =========================================================================================== KITCHENS =========================================================================================== - -------------------------------------------------------------------------------------------
Page 3 of 10 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 ~~- ------------------------------------------------------------------------------------------- ===========================================================================================~~

PUBLIC AREAS
=========================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS =========================================================================================== LOUNGE =========================================================================================== See restaurant area... - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- ===========================================================================================
METTING FACILITIES
=========================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS =========================================================================================== BALL ROOM =========================================================================================== 7/31/02 Repair and paint all millwork. 180 days - ------------------------------------------------------------------------------------------- 7/31/02 Replace carpet and carpet pad. 180 days - ------------------------------------------------------------------------------------------- 7/31/02 Replace VWC. 180 days - ------------------------------------------------------------------------------------------- 7/31/02 Replace all banquet stack chairs 180 days - ------------------------------------------------------------------------------------------- 7/31/02 Replace both ballrooms' entrance signage and 180 days upgrade the overall meeting room sign package. - ------------------------------------------------------------------------------------------- 7/31/02 Replace or repair air walls to like new condition. 180 days - ------------------------------------------------------------------------------------------- 7/31/02 Replace or refinish all podiums 180 days - ------------------------------------------------------------------------------------------- =========================================================================================== PRE-FUNCTION AREA =========================================================================================== 7/31/02 In conjunction with the adjacent Atrium renovation 180 days the pre-function - -------------------------------------------------------------------------------------------
Page 4 of 10 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 - ------------------------------------------------------------------------------------------- area will require a complete renovation to include floor and wall surfaces, base and wall moldings, ceiling and lighting upgrade, art and accessories package. - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- =========================================================================================== MEETING ROOM =========================================================================================== 7/31/02 Repair and paint all millwork 180 days - ------------------------------------------------------------------------------------------- 7/31/02 Install window treatments allowing blackout 180 days conditions for audio/visual purposes. - ------------------------------------------------------------------------------------------- 7/31/02 Replace all VWC. 180 days - ------------------------------------------------------------------------------------------- 7/31/02 Replace all carpet and carpet pad. 180 days - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- =========================================================================================== RESTROOMS - PRE-FUNCTION AREA =========================================================================================== 7/31/02 Complete restroom remodel in Women's restroom 180 days - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- ===========================================================================================

BACK OF HOUSE/STORAGE AREAS
=========================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS =========================================================================================== HOUSEKEEPING/MAINTENANCE =========================================================================================== - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- =========================================================================================== STORAGE AREAS =========================================================================================== - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- ===========================================================================================
Page 5 of 10 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001
- ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- ===========================================================================================
RECREATIONAL FACILITIES
=========================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS =========================================================================================== POOL AND ADJACENT AREAS =========================================================================================== 7/31/02 Replace flooring in pool area. Resurface pool and 180 days spa. - ------------------------------------------------------------------------------------------- 7/31/02 Repaint depth markers on coping around pool. 180 days - ------------------------------------------------------------------------------------------- 7/31/02 Replace pool expansion joint seal. 180 days - ------------------------------------------------------------------------------------------- 7/31/02 Reseal exterior windows. Repair water damage on wall 180 days above window. Repaint rusted sprinkler pipes. - ------------------------------------------------------------------------------------------- 7/31/02 Refinish or replace any entrance doors. 180 days - ------------------------------------------------------------------------------------------- 7/31/02 Replace carpet, pad and base at pool as well as 180 days fitness center entrance. - ------------------------------------------------------------------------------------------- 7/31/02 Replace pool and deck furniture. 180 days - ------------------------------------------------------------------------------------------- 7/31/02 Replace fitness area exercise equipment to 180 days Hilton specifications. - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- =========================================================================================== POOL-PUBLIC RESTROOMS =========================================================================================== 7/31/02 Repair and refinish saunas in both the women and men's 180 days restrooms. - ------------------------------------------------------------------------------------------- 7/31/02 Install new toiletry dispensers in both women's 180 days and men's restrooms. - ------------------------------------------------------------------------------------------- 7/31/02 Install upgraded lighting package. 180 days - -------------------------------------------------------------------------------------------
GUESTROOMS
=========================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS =========================================================================================== BEDROOM =========================================================================================== 7/31/02 The guest rooms will require a complete replacement 180 days of the FF&E to include but not limited to: carpet, pad and base, wall vinyl, ceiling paint, case-goods to include desks (ensure desks are replaced with over-scaled work desks that meet all Hilton requirements), desk chairs (ensure desk chairs are replaced with ergonomic chairs), coverlets and dust ruffles, drapery treatments and sheers, lighting package, art, mirrors, lever type door hardware and Serta Perfect Sleeper "Suite Dreams by Hilton". - -------------------------------------------------------------------------------------------
Page 6 of 10 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 - ------------------------------------------------------------------------------------------- 7/31/02 All HVAC units must have wall mounted remote 180 days thermostats. Replace all dented, damaged, poorly operating and noisy PTAC units. - ------------------------------------------------------------------------------------------- 7/31/02 Replace or repair all closet doors. 180 days - ------------------------------------------------------------------------------------------- 7/31/02 The suites will require a complete replacement of 180 days the FF&E to include, but not limited to: carpet, pad and base, wall vinyl, ceiling paint, case-goods to include desks (ensure desks are replaced with over-scaled work desks that meet Hilton requirements), desk chairs (ensure desk chairs are replaced with ergonomic chairs), coverlets and dust ruffles, drapery treatments and sheers, lighting package, art, mirrors, and Serta Perfect Sleeper "Suite Dreams by Hilton". - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- ===========================================================================================

Page 7 of 10 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 GUEST ROOMS
=========================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS =========================================================================================== BATHROOM =========================================================================================== 7/31/02 Replace remaining 65 rooms of bathrooms floor tiles 180 days with either ceramic, marble or granite tiles with dimensions of 8x8 or greater. - ------------------------------------------------------------------------------------------- 7/31/02 Replace remaining 65 rooms of fiberglass inserts in 180 days tub surrounds with either a ceramic tile, marble or granite with same dimensions as above. Caulk existing tub surrounds. - ------------------------------------------------------------------------------------------- 7/31/02 Move remaining 65 rooms of towel racks to the back of 180 days the shower in all guest baths and vinyl walls. - ------------------------------------------------------------------------------------------- 7/31/02 Repaint remaining 65 rooms of bathroom ceilings. 180 days - ------------------------------------------------------------------------------------------- 7/31/02 Replace vanity hardware and relocate toilet tissue 180 days bolders. - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- ===========================================================================================
Page 8 of 10 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 OTHER
=========================================================================================== DATE AREA STATUS =========================================================================================== LIFESAFETY =========================================================================================== 7/31/02 Ensure all systems are in complete compliance with 180 days Hilton and Governmental requirements for Life Safety. - ------------------------------------------------------------------------------------------- 7/31/02 Ensure all Hilton requirements are met to 180 days ensure guest security. - ------------------------------------------------------------------------------------------- 7/31/02 Ensure all applicable Federal, State, and Local 180 days codes have been met to ensure compliance with ADA requirements. - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- =========================================================================================== STRUCTURAL/MECHANICAL/OFFICES =========================================================================================== 7/31/02 Repair or replace concrete foundation located in 180 days cooling tower and gas main area. Repair or replace loading-dock doors and walls. - ------------------------------------------------------------------------------------------- 7/31/02 Repair and seal basement walls caused by water 180 days leakage from concrete foundation collapse and sinking. - ------------------------------------------------------------------------------------------- 7/31/02 Replace public area air exchange or heating and 180 days cooling towers for proper ventilation. - ------------------------------------------------------------------------------------------- 7/31/02 Replace carpet in back offices to include behind 180 days front desk and executive offices. - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- ===========================================================================================
Page 9 of 10 HILTON HOTELS PRODUCT IMPROVEMENT REPORT 2001 Page 10 of 10 PROPERTY IMPROVEMENT PLAN DOUBLETREE CLUB HOTEL PHILADELPHIA, PA PRELIMINARY PRODUCT IMPROVEMENT REPORT DOUBLETREE CLUB HOTEL--PHILADELPHIA, PA CONDUCTED ON: APRIL 6, 2002 THE IMPROVEMENTS IDENTIFIED IN THIS REPORT ARE BASED ON CONDITIONS EXISTING ON THE ABOVE DATE. PROPERTY TRANSACTIONS OCCURRING AFTER 180 DAYS WILL REQUIRE AN UPDATED REPORT. ANY WAIVERS AND/OR VARIANCES ISSUED ARE CANCELLED AND NO LONGER EFFECTIVE AT TIME OF SALE, CLOSING, OR ANY OTHER AMENDMENT TO THE ORIGINAL FRANCHISE AGREEMENT. HILTON HOTELS DOES NOT AND CANNOT WARRANT CONFORMANCE WITH INTERPRETATION OF THE AMERICANS WITH DISABILITIES ACT ("ADA") AND THE ADA ACCESSIBILTY GUIDELINES. OWNERSHIP IS RESPONSIBLE FOR COMPLIANCE WITH APPLICABLE PROVISIONS OF THE ADA, APPROPRIATE COUNSEL TO ENSURE COMPLIANCE IS URGED. EXTERIOR This is a six-story interior corridor hotel. It was converted to a Doubletree Club hotel approximately six years ago. The actual building is twenty-eight years old. The curb appeal is average at best. The repair of the damaged canopy ceiling and the addition of decorative pavers under the canopy will help create a sense of arrival for guests. The numerous areas of ceiling damaged throughout the interior of the property indicate the need for a new roof. There is a missing section of mansard that will also need to be replaced.
=========================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS =========================================================================================== BUILDING, ENTRANCE, PORTE COCHERE AND SIGNAGE =========================================================================================== Closing Replace roof of building. Ensure all open seams of 6 months flashing are covered. - ------------------------------------------------------------------------------------------- Closing Replace missing section of mansard 6 months - ------------------------------------------------------------------------------------------- Closing Repair damage to building at Dumpster entrance 6 months - ------------------------------------------------------------------------------------------- Closing Repair/replace all inoperative exhaust fans 6 months - ------------------------------------------------------------------------------------------- Closing Add decorative pavers under canopy 6 months - ------------------------------------------------------------------------------------------- Closing Replace mismatched windows (some are clear and some 6 months are bronze) - ------------------------------------------------------------------------------------------- Closing Repair all broken window seals 6 months - ------------------------------------------------------------------------------------------- Closing Add entrance or primary sign at secondary entrance 6 months (Grant Ave.) - ------------------------------------------------------------------------------------------- Closing Repair peeling/damaged ceiling areas of canopy 6 months ceiling - ------------------------------------------------------------------------------------------- Closing Repair to a like new appearance all holes left 6 months in building from previous signs - ------------------------------------------------------------------------------------------- Closing Replace beating core and compressor of roof mounted 6 months unit - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- =========================================================================================== PARKING LOT, LANDSCAPING, LIGHTING, ETC. =========================================================================================== Closing Add additional building mounted down lights to 6 months front of building - ------------------------------------------------------------------------------------------- Closing Repair damaged asphalt at rear of building 6 months - ------------------------------------------------------------------------------------------- Closing Repair landscape damage to islands and ends of parking 6 months lot by snow plows - ------------------------------------------------------------------------------------------- Closing Add drainage to sunken area at end of building 6 months - ------------------------------------------------------------------------------------------- Closing Trim overhanging trees at rear of building 6 months - ------------------------------------------------------------------------------------------- Closing Add 20 ft. concrete pad at Dumpster - ------------------------------------------------------------------------------------------- ===========================================================================================
Page 1 of 8 HILTON HOTELS CORP. DOUBLETREE HOTELS PRODUCT IMPROVEMENT REPORT 2002 PUBLIC AREAS The public areas of the hotel are in overall poor condition and most items will need to be replaced. The soft seating in the lobby and registration areas is worn and will need to be replaced. The carpet is also in poor condition and will require replacement. As in most areas of the hotel, there were numerous ceiling tiles that will need to be replaced after roof repairs. Corridor carpet is also worn.
=========================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS =========================================================================================== LOBBY/ENTRANCE =========================================================================================== Closing Electrostatically repaint faded finish on electric 6 months entry doors - ------------------------------------------------------------------------------------------- Closing Replace carpet 6 months - ------------------------------------------------------------------------------------------- Closing Replace all soft seating 6 months - ------------------------------------------------------------------------------------------- Closing Replace all discolored or water damaged ceiling tiles 6 months - ------------------------------------------------------------------------------------------- Closing Repair any ceilings that have been water damaged 6 months - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- =========================================================================================== REGISTRATION AREA =========================================================================================== Closing Add ADA tray to registration desk. Repair 6 months small chip in counter top - ------------------------------------------------------------------------------------------- Closing Replace soft scaning (worn and misshapen) 6 months - ------------------------------------------------------------------------------------------- Closing Replace wall vinyl (holed where previous sign was 6 months mounted) - ------------------------------------------------------------------------------------------- Closing Replace vinyl cove base with carpet cove base (at 6 months wall behind registration desk) - ------------------------------------------------------------------------------------------- Closing Add cookie warmer 6 months - ------------------------------------------------------------------------------------------- Closing Replace carpet (at area from registration desk to 6 months elevators) - ------------------------------------------------------------------------------------------- Closing Repair chips on pay telephone enclosures 6 months - ------------------------------------------------------------------------------------------- =========================================================================================== PUBLIC RESTROOMS =========================================================================================== Closing 6 months - ------------------------------------------------------------------------------------------- Closing Add recessed feminine hygiene machine to ladies 6 months room - ------------------------------------------------------------------------------------------- Closing Replace dated wall tile with vinyl wall covering. 6 months Repair any damaged vinyl in stall areas - ------------------------------------------------------------------------------------------- Closing Replace vanities and basins (china undermounts 6 months required) - ------------------------------------------------------------------------------------------- Closing Recess towel dispensers and other equipment 6 months - ------------------------------------------------------------------------------------------- Closing Replace discolored ceiling tiles 6 months - ------------------------------------------------------------------------------------------- Closing Replace scratched vanity mirrors 6 months - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- =========================================================================================== CORRIDORS/ELEVATOR/STAIRWELLS =========================================================================================== Closing Replace carpet 6 months - ------------------------------------------------------------------------------------------- Closing Add additional lighting in elevator landings. 6 months Increase light levels in corridors and stairwells. Increase light levels in vending areas - ------------------------------------------------------------------------------------------- Closing Return handrails to wall in stairwells 6 months - ------------------------------------------------------------------------------------------- Closing Replace sign package (all signs throughout the hotel 6 months should be coordinated). Additional directional signage required in corridors - ------------------------------------------------------------------------------------------- Closing Regrout floor tile in vending areas 6 months - ------------------------------------------------------------------------------------------- Closing Refinish elevator cabs and landings 6 months - ------------------------------------------------------------------------------------------- Closing Paint and seal discolored stairwell landings 6 months - -------------------------------------------------------------------------------------------
Page 2 of 8 HILTON HOTELS CORP. DOUBLETREE HOTELS PRODUCT IMPROVEMENT REPORT 2002 - ------------------------------------------------------------------------------------------- Closing Paint all back of house doors 6 months - ------------------------------------------------------------------------------------------- Closing Replace or refinish all worn door handles 6 months - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- =========================================================================================== ADMINISTRATIVE AREAS =========================================================================================== Closing Add window treatment to sales office 6 months - ------------------------------------------------------------------------------------------- Closing Replace all discolored ceiling tiles 6 months - ------------------------------------------------------------------------------------------- Closing Replace vinyl wall covering in back offices 6 months - ------------------------------------------------------------------------------------------- Closing Replace ceiling tiles in admin areas 6 months - ------------------------------------------------------------------------------------------- Closing Replace carpet in back offices 6 months =========================================================================================== CLUB ROOM =========================================================================================== Closing Replace carpet 6 months - ------------------------------------------------------------------------------------------- Closing Add additional phones and lines to Club Room 6 months - ------------------------------------------------------------------------------------------- Closing Add supplies to personal harbors 6 months - ------------------------------------------------------------------------------------------- Closing Replace chairs in Steel Case units. Repair controls 6 months (fan, lights) - ------------------------------------------------------------------------------------------- Closing Repair damaged ceilings 6 months - ------------------------------------------------------------------------------------------- Closing Replace damaged ceiling tiles 6 months - ------------------------------------------------------------------------------------------- Closing Refinish foot rails at bar in Club Lounge 6 months - ------------------------------------------------------------------------------------------- Closing Professionally mount light fixture under counter at 6 months employee side of bar - ------------------------------------------------------------------------------------------- Closing Clean or replace chairs/fabric in conference room 6 months - ------------------------------------------------------------------------------------------- Closing Repair chipped bar (employee side) 6 months - ------------------------------------------------------------------------------------------- Closing Replace wall vinyl in business center and Club Room 6 months - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- =========================================================================================== GIFT SHOP =========================================================================================== Closing The gift shop has been eliminated and is now 6 months currently being used as a vending area. There are numerous vending machines lining the walls. Although a vending area is required on each floor, this space could potentially be used as an arcade area or other amenity for guests. Approval must be obtained and specifications must be submitted for approval. An arcade would require a door (with view panel) to reduce the noise level as this area is adjacent to the registration area. As a vending area, vinyl wall covering must be added and ceramic floor tile installed. - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- ===========================================================================================

PUBLIC AREAS
=========================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS =========================================================================================== AU BON PAIN =========================================================================================== Closing Replace carpet 6 months - ------------------------------------------------------------------------------------------- Closing Replace discolored ceiling tiles (guest and employee 6 months side) - ------------------------------------------------------------------------------------------- Closing Remove banquet tables used for serving. Suggest 6 months installing counters for buffet service. - ------------------------------------------------------------------------------------------- Closing Replace worn laminate counter top at beverage 6 months service station. Solid surface required. - -------------------------------------------------------------------------------------------
Page 3 of 8 HILTON HOTELS CORP. DOUBLETREE HOTELS PRODUCT IMPROVEMENT REPORT 2002 - ------------------------------------------------------------------------------------------- Closing Refinish or replace worn tables and chairs (wooden 6 months arms and table edges are scarred). Metal frame chairs are in good condition. - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- =========================================================================================== GUEST LAUNDRY =========================================================================================== Closing Replace door. Must have view panel and electronic 6 months card reader to ensure access by guests only - ------------------------------------------------------------------------------------------- Closing Add folding table or counter 6 months - ------------------------------------------------------------------------------------------- Closing Increase light levels 6 months - ------------------------------------------------------------------------------------------- Closing Conceal exposed pipes and valves in ceiling. Add 6 months lowered ceiling - ------------------------------------------------------------------------------------------- Closing Replace discolored floor with tile 6 months - ------------------------------------------------------------------------------------------- Closing Paint walls or add vinyl wall covering 6 months - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- ===========================================================================================

MEETING FACILITIES There are four separate meeting spaces at this property. Overall, these areas are in acceptable condition. As in all other areas of the hotel, there are some discolored ceiling tiles that will need to be replaced. The Philadelphia and Roosevelt rooms were guestrooms at one time. The carpet must be replaced as well as window treatment. The wall vinyl may be repaired to a like new condition and appearance.
=========================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS =========================================================================================== MEETING ROOM(S) =========================================================================================== Closing Add incandescent lighting and rheostats to 6 months Philadelphia and Roosevelt rooms. - ------------------------------------------------------------------------------------------- Closing Laminate at wet bars in all meeting rooms is 6 months chipped and damaged. Replace with solid surface countertops - ------------------------------------------------------------------------------------------- Closing Upgrade restrooms (former guestrooms). Replace 6 months small floor tile, replace de-silvered mirrors - ------------------------------------------------------------------------------------------- Closing Replace HVAC units 6 months - ------------------------------------------------------------------------------------------- Closing Repair any damaged wall vinyl 6 months - ------------------------------------------------------------------------------------------- Closing Repair ceiling damage (Roosevelt, Pennsylvania) 6 months - ------------------------------------------------------------------------------------------- Closing Replace seating 6 months - ------------------------------------------------------------------------------------------- Closing Add under counter lighting at wet bar areas where 6 months missing - ------------------------------------------------------------------------------------------- Closing Replace window treatment (Philadelphia) 6 months - ------------------------------------------------------------------------------------------- Closing Replace carpet 6 months - ------------------------------------------------------------------------------------------- Closing Refinish or replace worn podiums 6 months - ------------------------------------------------------------------------------------------- =========================================================================================== =========================================================================================== BALL ROOM (BRANDYWINE) =========================================================================================== Closing Replace carpet 6 months - ------------------------------------------------------------------------------------------- Closing Replace all discolored ceiling tiles 6 months - ------------------------------------------------------------------------------------------- Closing Repair any damaged wall vinyl 6 months - ------------------------------------------------------------------------------------------- Closing Replace drapes and sheers 6 months - ------------------------------------------------------------------------------------------- Closing Repaint or clean discolored glass panels above 6 months windows - ------------------------------------------------------------------------------------------- Closing Replace tarnished door hardware at entry 6 months - ------------------------------------------------------------------------------------------- Closing Repair, replace, or remove portable dance floor 6 months - ------------------------------------------------------------------------------------------- Closing Repair/refinish chipped window ledges 6 months - -------------------------------------------------------------------------------------------
Page 4 of 8 HILTON HOTELS CORP. DOUBLETREE HOTELS PRODUCT IMPROVEMENT REPORT 2002 - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- ===========================================================================================

BACK OF HOUSE/STORAGE AREAS
=========================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS =========================================================================================== HOUSEKEEPING/MAINTENANCE =========================================================================================== Closing Add central air to laundry area 6 months - ------------------------------------------------------------------------------------------- Closing Enclose dryers from general work area. Add smoke 6 months detector and heat detector to dryer enclosure after completion - ------------------------------------------------------------------------------------------- Closing Repair damaged walls in housekeeping and laundry 6 months areas. - ------------------------------------------------------------------------------------------- Closing Replace worn laundry carts and maids carts 6 months - ------------------------------------------------------------------------------------------- Closing Add full size refrigerator to break rooms. 6 months Upgrade employee breakrooms. This includes painting, ventilation, carpet, and bathrooms. - ------------------------------------------------------------------------------------------- Closing Replace vinyl wall covering and carpet in break 6 months rooms - ------------------------------------------------------------------------------------------- Closing Add additional venting to smoking break room 6 months - ------------------------------------------------------------------------------------------- Closing Clean and paint all back of house area walls 6 months - ------------------------------------------------------------------------------------------- Closing Clean and paint (or replace) rusted employee 6 months lockers - ------------------------------------------------------------------------------------------- Closing Repair ceiling damage. Replace discolored or 6 months damaged ceiling tiles in all back of house areas - ------------------------------------------------------------------------------------------- Closing Repair or replace chipped folding table in 6 months laundry - ---------------------------------------------------------------------------------------- STORAGE AREAS/MECHANICAL ROOMS - ---------------------------------------------------------------------------------------- Closing Replace rusted pipes and fittings on boilers 6 months - ------------------------------------------------------------------------------------------- Closing Replace worn rollaway beds 6 months - ------------------------------------------------------------------------------------------- Closing Repair ceiling damage 6 months - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- ===========================================================================================
RECREATIONAL FACILITIES The swimming pool area is in very poor condition. It is covered by a dome type structure that will need to be replaced, repaired, or removed. It is cracking and the leaks from the cracks and condensation create a need for constant operational attention. This area will require a complete renovation/ refurbishment.
=========================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS =========================================================================================== POOL AND ADJACENT AREAS =========================================================================================== Closing Repair leaks in dome 6 months - ------------------------------------------------------------------------------------------- Closing Add dehumidification unit 6 months - ------------------------------------------------------------------------------------------- Closing Replace pool furniture and patio/deck furniture 6 months - ------------------------------------------------------------------------------------------- Closing Resurface pool bottom 6 months - ------------------------------------------------------------------------------------------- Closing Replace pool deck (new deck must have proper 6 months drainage capabilities) - ------------------------------------------------------------------------------------------- Closing Add heating, air conditioning, and ventilation 6 months - ------------------------------------------------------------------------------------------- Closing Repair damaged walls and door in entry way 6 months - ------------------------------------------------------------------------------------------- Closing Replace peeling tint on windows 6 months - ------------------------------------------------------------------------------------------- Closing Replace, repair to a like new condition, or 6 months remove wooden deck at exterior of pool. - -------------------------------------------------------------------------------------------
Page 5 of 8 HILTON HOTELS CORP. DOUBLETREE HOTELS PRODUCT IMPROVEMENT REPORT 2002 Closing Replace cracked windows 6 months - ------------------------------------------------------------------------------------------- Closing Replace all tarnished door and window hardware 6 months =========================================================================================== EXERCISE ROOM =========================================================================================== Closing Replace drapes 6 months - ------------------------------------------------------------------------------------------- Closing Add carpet cove base where missing 6 months - ------------------------------------------------------------------------------------------- Closing Replace ceiling tiles 6 months - ------------------------------------------------------------------------------------------- Closing Add door with view panel and card reader to 6 months separate from pool area - ------------------------------------------------------------------------------------------- Closing Replace rusted HVAC unit 6 months - ------------------------------------------------------------------------------------------- Closing Replace vinyl wall covering 6 months - ------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------

GUEST ROOMS The guestrooms are dated and in severe need of a complete facelift. Carpet, bedspreads, mattresses and box springs, window treatment, wall vinyl all need to be replaced. On the positive side, the guestrooms are large and there is tremendous potential with a new room package in place. The undersized desk will need to be replaced with the larger executive workspace and an ergonomic desk chair must also be added. The required new lamp package must also contain a task lamp for the desk surface.
=========================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS =========================================================================================== BEDROOM =========================================================================================== Closing Replace carpet 6 months - ------------------------------------------------------------------------------------------- Closing Replace wall vinyl 6 months - ------------------------------------------------------------------------------------------- Closing Replace HVAC units 6 months - ------------------------------------------------------------------------------------------- Closing Replace mattresses and box springs 6 months - ------------------------------------------------------------------------------------------- Closing Professionally refinish casegoods to a like new 6 months appearance (credenzas, nightstands, headboards, etc.). Refinished product must coordinate/match with the required addition of large desks and ergonomic desk chairs. - ------------------------------------------------------------------------------------------- Closing Replace lamp package. Most shades are yellowed 6 months and many are misshapen. Task lamp is required at desk. Bases of floor lamps are dented. One wall-mounted lamp is currently positioned behind the television set and does not provide illumination to any guest impact area. Table lamps at nightstands will be acceptable. - ------------------------------------------------------------------------------------------- Closing Replace bedspreads 6 months - ------------------------------------------------------------------------------------------- Closing Replace drapery sheers and drapes 6 months - ------------------------------------------------------------------------------------------- Closing Replace soft seating. Wingback chairs will also 6 months need to be replaced. Standards require a chair/ottoman combo or a recliner. - ------------------------------------------------------------------------------------------- Closing Replace guest service directories 6 months - ------------------------------------------------------------------------------------------- Closing Remove extension cords from guestrooms 6 months - ------------------------------------------------------------------------------------------- Closing Refurbish/renovate suites (one each on fifth and 6 months sixth floors). The small tile at the wet bar area will need to be replaced. Microwaves must be enclosed in cabinets and the painted and laminate surfaces at the wet bars should be replaced with a solid surface. Repair damaged wall and ceiling in sixth floor suite (from roof leaks)
Page 6 of 8 HILTON HOTELS CORP. DOUBLETREE HOTELS PRODUCT IMPROVEMENT REPORT 2002 - ------------------------------------------------------------------------------------------- Closing Add wall mounted door stops 6 months - ------------------------------------------------------------------------------------------- Closing Replace sofa sleepers. Mechanisms are binding and 6 months fabric is worn - ------------------------------------------------------------------------------------------- Closing Refinish/paint chipped entry doors 6 months - ------------------------------------------------------------------------------------------- Closing Replace any missing door guards at entry doors 6 months - ------------------------------------------------------------------------------------------- Closing Replace telephones that do not meet current 6 months standards (CareLine button/info missing, bedside phones do not have 2 line capabilities, etc.) - -------------------------------------------------------------------------------------------

GUEST ROOMS
=========================================================================================== START FINISH DATE SCOPE OF WORK DATE STATUS =========================================================================================== BATHROOM =========================================================================================== Closing Replace 2" floor tile (6" min. required) 6 months - ------------------------------------------------------------------------------------------- Closing Replace any missing sound deadening pads/tabs 6 months - ------------------------------------------------------------------------------------------- Closing Replace basins with china undermounts. Vanities 6 months must be restored to a like new condition or replaced. - ------------------------------------------------------------------------------------------- Closing Replace all chrome (single lever chrome required) 6 months - ------------------------------------------------------------------------------------------- Closing Resurface tub bottoms. All tub bottoms currently 6 months are discolored and the non slip provision is gone - ------------------------------------------------------------------------------------------- Closing Add pulsating shower heads to all showers 6 months - ------------------------------------------------------------------------------------------- Closing Replace door knobs with lever type hardware 6 months - ------------------------------------------------------------------------------------------- Closing Add second soap dish in showers 6 months - ------------------------------------------------------------------------------------------- Closing Refinish/paint chipped entry doors 6 months - ------------------------------------------------------------------------------------------- Closing Replace wall vinyl 6 months - ------------------------------------------------------------------------------------------- Closing Replace hollow core doors (or remove full length 6 months mirrors from doors) - ------------------------------------------------------------------------------------------- Closing Add support bracket to towel shelves 6 months - ------------------------------------------------------------------------------------------- Closing Wrap exposed vanity popes with insulation in 6 months accessible rooms - ------------------------------------------------------------------------------------------- Closing Replace any metal soap dishes in showers with non 6 months metal soap dish - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- ===========================================================================================
OTHER
=========================================================================================== DATE STATUS =========================================================================================== KITCHEN =========================================================================================== Closing Replace rusted bins on ice machines. Repair door. 6 months - ---------------------------------------------------------------------------------------- Closing Replace ceiling tiles 6 months - ---------------------------------------------------------------------------------------- Closing Repair ceiling damage 6 months - ---------------------------------------------------------------------------------------- Closing Clean and refinish scarred floors 6 months - ---------------------------------------------------------------------------------------- Closing Clean walls 6 months - ---------------------------------------------------------------------------------------- Closing Replace door hardware leading into dry goods 6 months storage area - ---------------------------------------------------------------------------------------- Closing Replace, remove, or repair any inoperative 6 months equipment. ex: cold line prep unit now used for storage - ---------------------------------------------------------------------------------------- Closing Replace worn cutting boards 6 months - ---------------------------------------------------------------------------------------- Closing Replace microwave (interior discolored) 6 months - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- ========================================================================================
Page 7 of 8 PROPERTY IMPROVEMENT PLAN HOLIDAY INN SHEFFIELD, AL BASS HOTELS & RESORTS LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 PROPERTY IMPROVEMENT PLAN January 25, 1999 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 TABLE OF CONTENTS: PROPERTY INFORMATION ....................................... 1 LIFE SAFETY ................................................ 3 EXTERIOR ................................................... 5 LOBBY/ENTRANCE/FRONT DESK .................................. 9 PUBLIC RESTROOMS ........................................... 12 FOOD SERVICE FACILITIES .................................... 14 LOUNGE FACILITIES .......................................... 15 MEETING/BANQUET ROOMS ...................................... 17 ATRIUMS/POOL ENCLOSURES .................................... 18 KITCHEN .................................................... 20 INTERIOR CORRIDORS ......................................... 21 GUEST ROOMS ................................................ 23 GUEST ROOM BATHS ........................................... 26 BACK OF HOUSE .............................................. 27

PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 PROPERTY INFORMATION Address: Holiday Inn - Sheffield, AL Florence-Muscle Shoals Area 4900 Hatch Blvd. Sheffield, AL 35660 256-381-7313 GENERAL DESCRIPTION: This 3-story, interior corridor hotel (with ground level rooms also having exterior doors as well as interior doors) was originally constructed in 1982. The hotel will require varying degrees of renovation to all areas of the hotel; guest room areas, commercial areas and the exterior. More specifically, the guest rooms will require the installation of the Standardized Room Decor Package, while 2/3's of the guest bathrooms will vanity/sink/hardware replacement. The commercial areas will require a complete renovation of the restaurant and lounge. The exterior will require roofline enhancements, new stucco finishes and replacement of the guestroom storefronts with a new insulated synthetic stucco wall system and new windows. Submit all plans, specifications and color boards to Bass Hotels & Resorts for review and approval, prior to purchasing or renovation. Any items not submitted for approval may be required to be replaced or modified. Professional Architectural and design assistance is required. Franchisee to ensure all areas of the hotel are in complete compliance with local codes and Americans with Disabilities Act (ADA). An ADA certification letter is required to be submitted during the design review and prior to final sign off of the PIP. Owner is required to repair or replace all items and finishes in the hotel that may be damaged during the course of the renovation. Ensure all areas of the hotel are in new condition upon completion of the PIP. During the Property Improvement process, signage from the Holiday Inn "Renovation Kit" must be put on display, in a professional manner, throughout appropriate areas of the hotel. You will receive this kit within 90 days from license execution. All areas of the hotel must meet current Holiday Inn standards, including all supplements and addendum's. Year Built: 1982 Year(s) Renovated: 1991 Parking Spaces: 250 Swimming Pool 20 X 15 Dimensions/maximum depth: Number of Stories: 3 Commercial Area Capacities Food Service Facility: Great Southern Mining Company seats: 45 1 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 Lounge: Fizz seats: 75 Meeting/Banquet Room: Cedar, Cypress, Willow, Magnolia seats: 450 Fitness Room: yes X no _____ Guest Rooms: No. of Rooms/Opening Date Original Rooms: 201 1st Addition: 2nd Addition: Total Rooms: 201 HVAC Systems: (2/4 pipe: thru-wall or split system) Commercial Area 2/4 pipe Guest room Building thru-wall Fire Safety Systems: Hardwire Smoke Commercial Area yes X no ___ Guest room Building yes X no ___ Holidomes Structure yes ___ no ___ Sprinkler System Commercial Area yes ___ no X Guest room Building yes ___ no X Holidomes Structure yes ___ no ___ This Property Improvement Plan was developed from an on-site review of the subject hotel on 1/14/99 by Jim Brink of Bass Hotels and Resorts accompanied by General Manager Linda Whitaker, and Chief Engineer Keith Yerbey. 2 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 LIFE SAFETY
AREAS REQUIRING ACTION CURE/REMEDY ---------------------- ----------- - ------------------------------------------------------------------------------------------------------------------------------------ FIRE SAFETY SYSTEM Prior to issuance of the license, written documentation must be submitted certifying that the Fire Safety System meets or exceeds Holiday Inn's Standards and that the system if fully operational as of that date. - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL & PUBLIC AREAS - ------------------------------------------------------------------------------------------------------------------------------------ Emergency Lighting: Ensure emergency lighting is in proper working condition. - ------------------------------------------------------------------------------------------------------------------------------------ Exit Signs: Ensure adequate exit signage is provided per standards and codes. Ensure bright illumination. - ------------------------------------------------------------------------------------------------------------------------------------ Panic Hardware: Ensure panic hardware at all exit doors is in proper working condition. - ------------------------------------------------------------------------------------------------------------------------------------ Fire Separation: Ensure area meets fire separation requirements per codes and standards. - ------------------------------------------------------------------------------------------------------------------------------------ Visual Heat/Smoke Detectors: Ensure adequate heat and smoke detectors are present per code and standards. - ------------------------------------------------------------------------------------------------------------------------------------ Manual Pull Stations: Ensure manual pull stations are present per code and standards. - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ PUBLIC RESTROOMS - ------------------------------------------------------------------------------------------------------------------------------------ Emergency Lighting: Ensure emergency lighting is provided. Lights must remain on continuously in all public restrooms. - ------------------------------------------------------------------------------------------------------------------------------------ Visual Heat/Smoke Detectors: Ensure adequate heat and smoke detectors are present per code and standards. - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ HOLIDOMES/ATRIUMS/POOL ENCLOSURES - ------------------------------------------------------------------------------------------------------------------------------------ Emergency Lighting: Ensure emergency lighting is provided at indoor pool area. - ------------------------------------------------------------------------------------------------------------------------------------ Exit Signs: Ensure adequate exit signage is provided at indoor pool area per standards and codes. Ensure bright illumination. - ------------------------------------------------------------------------------------------------------------------------------------ Panic Hardware: Provide panic hardware at all exit doors in the indoor pool area. - ------------------------------------------------------------------------------------------------------------------------------------ Fire Separation: Ensure indoor pool area meets fire separation requirements per codes and standards. - ------------------------------------------------------------------------------------------------------------------------------------ Visual Heat/Smoke Detectors: Ensure adequate heat and smoke detectors are present at the indoor pool area per code and standards. - ------------------------------------------------------------------------------------------------------------------------------------ Manual Pull Stations: Ensure manual pull stations are present at the indoor pool area per code and standards. - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ KITCHEN - ------------------------------------------------------------------------------------------------------------------------------------ Emergency Lighting: Ensure emergency lighting is provided. - ------------------------------------------------------------------------------------------------------------------------------------ Exit Signs: Ensure adequate exit signage is provided per standards and codes. Ensure bright illumination. - ------------------------------------------------------------------------------------------------------------------------------------ Panic Hardware: Provide panic hardware at all exit doors. - ------------------------------------------------------------------------------------------------------------------------------------ Fire Extinguisher: Provide required fire extinguishers per codes and standards. - ------------------------------------------------------------------------------------------------------------------------------------ Fire Separation: Ensure area meets fire separation requirements per codes and standards. - ------------------------------------------------------------------------------------------------------------------------------------ Heat/Smoke Detectors: Ensure adequate heat and smoke detectors are present per code and standards. - ------------------------------------------------------------------------------------------------------------------------------------ Manual Pull Stations: Ensure manual pull stations are present per code and standards. Ensure a pull station is located at the rear exit door wall. - ------------------------------------------------------------------------------------------------------------------------------------ Sprinklers: - ------------------------------------------------------------------------------------------------------------------------------------
3 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Req. Number of Exits: Ensure adequate exit signage is provided per standards and codes. Ensure bright illumination. - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ INTERIOR CORRIDORS - ------------------------------------------------------------------------------------------------------------------------------------ Emergency Lighting: Ensure emergency lighting is provided, including in all stairwells and in all elevator cabs - ------------------------------------------------------------------------------------------------------------------------------------ Exit Signs: Ensure adequate exit signage is provided per standards and codes. Ensure bright illumination. - ------------------------------------------------------------------------------------------------------------------------------------ Panic Hardware: Provide panic hardware at all exit doors. - ------------------------------------------------------------------------------------------------------------------------------------ Fire Extinguisher: Ensure fire extinguisher boxes are recessed into corridor walls. - ------------------------------------------------------------------------------------------------------------------------------------ Fire Separation: Ensure fire separation is maintained per standards. - ------------------------------------------------------------------------------------------------------------------------------------ Visual Heat/Smoke Detectors: Ensure adequate heat and smoke detectors are present per code and standards, including in all stairwells. - ------------------------------------------------------------------------------------------------------------------------------------ Manual Pull Stations: Ensure manual pull stations are present per code and standards. - ------------------------------------------------------------------------------------------------------------------------------------ Sprinklers: - ------------------------------------------------------------------------------------------------------------------------------------ Req. Number of Exits: Ensure adequate exit signage is provided per standards and codes. Ensure bright illumination. - ------------------------------------------------------------------------------------------------------------------------------------ Dead End (+25 Feet) - ------------------------------------------------------------------------------------------------------------------------------------ Fire Separation (1 hour min) Ensure area meets fire separation requirements per codes and standards. - ------------------------------------------------------------------------------------------------------------------------------------ Sounding Devises: Ensure sounding devises are present per code and standards, including in all stairwells. - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ GUEST ROOMS - ------------------------------------------------------------------------------------------------------------------------------------ Fire Separation: Ensure area meets fire separation requirements per codes and standards. - ------------------------------------------------------------------------------------------------------------------------------------ Heat/Smoke Detectors: Ensure hard wire smoke detectors are present per standards. - ------------------------------------------------------------------------------------------------------------------------------------ Visual Heat/Smoke Ensure that visual heat and smoke detectors are present in the wheelchair accessible and Detectors in ADA rooms rooms for the deaf and hard of hearing per ADAAG standards. - ------------------------------------------------------------------------------------------------------------------------------------ Sprinklers: - ------------------------------------------------------------------------------------------------------------------------------------ Fire Separation (1 hour min) Ensure guest rooms meet fire separation requirements per codes and standards. - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ BACK OF HOUSE - ------------------------------------------------------------------------------------------------------------------------------------ Emergency Lighting: Ensure emergency lighting is provided. - ------------------------------------------------------------------------------------------------------------------------------------ Exit Signs: Ensure adequate exit signage is provided per standards and codes. Ensure bright illumination. - ------------------------------------------------------------------------------------------------------------------------------------ Panic Hardware: Provide panic hardware at all exit doors. - ------------------------------------------------------------------------------------------------------------------------------------ Fire Extinguisher: Provide required fire extinguishers per codes and standards. - ------------------------------------------------------------------------------------------------------------------------------------ Fire Separation: Ensure area meets fire separation requirements per codes and standards. - ------------------------------------------------------------------------------------------------------------------------------------ Heat/Smoke Detectors: Ensure adequate heat and smoke detectors are present per code and standards. - ------------------------------------------------------------------------------------------------------------------------------------ Manual Pull Stations: Ensure manual pull stations are present per code and standards. - ------------------------------------------------------------------------------------------------------------------------------------ Sprinklers: - ------------------------------------------------------------------------------------------------------------------------------------ Req. Number of Exits: Ensure adequate exit signage is provided per standards and codes. Ensure bright illumination. - ------------------------------------------------------------------------------------------------------------------------------------ Dead End (+25 Feet) Ensure area meets fire separation requirements per codes and standards. - ------------------------------------------------------------------------------------------------------------------------------------ Fire Separation (1 hour min) - ------------------------------------------------------------------------------------------------------------------------------------ 18 Gauge Steel Cabinet Provide an 18 gauge steel cabinet for storage of flammable materials. - ------------------------------------------------------------------------------------------------------------------------------------

4 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 EXTERIOR GENERAL DESCRIPTION: The exterior will require moderate renovations to the Porte Cochere, roofline and facade to update the appearance and address conditional issues. Professional design assistance is required. All plans color rendernings and specifications are to reviewed by Holiday Inn for approval prior to any renovation and installation. ADA compliance certification letters are required at the time of plan review.
- ----------------------------------------------------------------------------------------------------------------------------------- BASIS FOR --------- REQUIRED -------- AREAS REQUIRING ACTION ACTION CURE/REMEDY - ---------------------- ------ ----------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- COMMERCIAL BUILDING - ------------------------------------------------------------------------------------------------------------------------------------ Porte Cochere Competitive The Porte Cochere requires renovation in conjunction with the exterior improvements to heighten curb appeal. Install a new decorative synthetic stucco parapet or metal hip, gable, mansard, or other appropriate roof structure to coincide with the new commercial and rental building roofline enhancements Incorporate new interesting design elements into the structure, such as frieze work, medallions, accent lighting and the addition of built-out column capitals and bases. Provide new upgraded light fixtures to the Porte Cochere underside and decorative fixtures at the columns. - ------------------------------------------------------------------------------------------------------------------------------------ Drive through surface Competitive Provide a new colored stamped concrete or new interlocking pavers beneath the Porte Cochere. Integrate ADA compliant ramp into the new drive through surface to eliminate the steep existing ramp in front of the entry doors. - ------------------------------------------------------------------------------------------------------------------------------------ Building roof line/arch, Competitive Upgrade the existing flat, linear roof line. The roofline finishes & features lacks detail and architectural interest. Incorporate new architectural details into the existing commercial building parapet with an emphasis on vertical roof line elements. These vertical roof line elements should be repeated in a reoccurring pattern around the structure. Conceal all rooftop equipment. Design enhancements must coordinate with the new rental building and Porte Cochere upgrades. Submit new plans to Bass Hotels & Resorts for review. - ------------------------------------------------------------------------------------------------------------------------------------ Entrance doors Competitive Recommend installing power actuated (2 sets within a vestibule) doors for guest convenience. - ------------------------------------------------------------------------------------------------------------------------------------ Color scheme Condition Provide new color scheme to update and freshen the exterior Competitive appearance of the Porte Cochere, commercial and rental buildings. Consider horizontal or vertical earth tone contrasting colors or shading to add interest. - ------------------------------------------------------------------------------------------------------------------------------------ Service doors Repair all holes and refinish doors to like new condition. Replace the service door and frame into the laundry area. - ------------------------------------------------------------------------------------------------------------------------------------
5 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Auxiliary entrance doors Competitive Provide new permanent roof structures with decorative columns over the Fizz, and three side entrances. Awnings are not permitted. Coordinate with new Porte Cochere design. - ------------------------------------------------------------------------------------------------------------------------------------ Commercial Windows/frames Condition Clean oxidation and repaint if necessary to achieve like new appearance. Replace any cloudy windows or windows with broken seals. For energy savings, recommended is tinting the sloped overhead windows into Fizz or replacing them with a solid material. - ------------------------------------------------------------------------------------------------------------------------------------ Lighting Competitive Provide new accent lighting such as concealed up-lighting from landscape beds, and replace the existing building mounted sconces with new sconces incorporated into the new comice work. Install 2 additional lamps on each parking lot fixture that currently has 2 existing lamps for a total of 4 per fixture. - ------------------------------------------------------------------------------------------------------------------------------------ Walkways Condition Repair and resurface sidewalks where lifting, sinking, stained or damaged. Provide new topical surface treatment to return sidewalks to like new condition. Ensure consistent finish throughout project. - ------------------------------------------------------------------------------------------------------------------------------------ Flag poles Standards Provide additional nighttime illumination per standards. - ------------------------------------------------------------------------------------------------------------------------------------ Kitchen/Delivery Screen Competitive Pressure wash existing delivery bay area concrete apron and maintain to an acceptable clean condition. Install a delivery gate to screen off the area from public view. Exposed chain link fencing is not permitted. - ------------------------------------------------------------------------------------------------------------------------------------ News paper stands at entrance Competitive Upgrade the overall appearance of the news stands with an enclosure that compliments the new Porte Cochere design. - ------------------------------------------------------------------------------------------------------------------------------------ Trash cans Condition Replace and upgrade trash can and relocate in appropriate locations. - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ SERVICE/OUT BUILDINGS - ------------------------------------------------------------------------------------------------------------------------------------ Recommended is putting a service building on the site to eliminate clutter from laundry and other areas. Architecture finishes and feature should coordinate with the new facade finishes. - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ RENTAL UNIT (GST. RM.) BUILDINGS - ------------------------------------------------------------------------------------------------------------------------------------

6 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Building roof line / arch. Competitive Upgrade the existing flat, linear roof line. Introduce finishes & features elevation changes and vertical design elements, such as a decorative parapet or peak roof structure to break up the long horizontal runs. These new architectural enhancements must be repeated in a reoccurring pattern around the structure. Ensure a continuity of design between the rental building, commercial building and the Porte Cochere. Submit new plans to Bass Hotels & Resorts for review. Provide new false pilasters, over existing CMU's, along the existing exterior walls. Ensure continuity of design with the Porte Cochere and commercial building improvements. Conceal all drainage pipes and exposed conduits into the new stucco facade. - ------------------------------------------------------------------------------------------------------------------------------------ Color scheme Condition Provide new stucco finish color scheme to update and freshen Competitive the exterior appearance of the Porte Cochere, commercial and rental buildings. Consider horizontal or vertical earth tone contrasting colors or shading to add interest. - ------------------------------------------------------------------------------------------------------------------------------------ Auxiliary entrance doors Competitive Provide new permanent building mounted roof structures with roofline to coordinate with new rental building improvements. - ------------------------------------------------------------------------------------------------------------------------------------ Storefront windows/frames Condition The existing spandrel and glazing systems on the guest room Competitive building are worn, dated and energy inefficient. As such, they will require replacement and upgrading. Remove the entire existing exterior guest room bay storefront system, including door and frame. Construct a new metal stud wall with an exterior skin assembly of sheathing and synthetic stucco (drywall finish on the interior). Provide new insulated window units (with integral mullions), correctly proportioned to the exterior facade, along with a new full blade louvers painted to match the stucco color. Provide new metal insulated guest room exterior entry doors. Window frames must utilize an accent color, bronze is not acceptable. - ------------------------------------------------------------------------------------------------------------------------------------ Windows/Frames Condition Clean oxidation and repaint if necessary to achieve like new appearance. Replace any cloudy windows or windows with broken seals. - ------------------------------------------------------------------------------------------------------------------------------------ HVAC/Grilles Competitive Provide new architectural louvers for all through wall HVAC units. Paint to match new accent color. - ------------------------------------------------------------------------------------------------------------------------------------ Recessed fire extinguishers Competitive Recess fire extinguisher cabinets into walls and columns to eliminate protrusion into the walkway traffic areas. - ------------------------------------------------------------------------------------------------------------------------------------ Walkways Condition Repair and resurface sidewalks where lifting, sinking, stained or damaged. Provide new topical surface treatment to return sidewalks to like new condition. Ensure consistent finish throughout project. - ------------------------------------------------------------------------------------------------------------------------------------

7 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 - ------------------------------------------------------------------------------------------------------------------------------------ PARKING - ------------------------------------------------------------------------------------------------------------------------------------ Asphalt Parking Condition Repair any cracked and damaged parking lot surfaces to like new condition. Ensure low spots are corrected to eliminate/avoid ponding water. - ------------------------------------------------------------------------------------------------------------------------------------ Wheelchair accessible Condition Include blue striped access aisles, signage and proper curb parking spaces. cuts per ADA requirements. - ------------------------------------------------------------------------------------------------------------------------------------ Lighting Standards Increase lighting in all parking areas to meet 1-foot candle minimum per the standards by installing 2 additional lamps to the fixtures that currently have 2 existing lamps. - ------------------------------------------------------------------------------------------------------------------------------------ Curbing Condition Repair all cracked and broken curbing. Remove all painted curbs, unless required by local code. - ------------------------------------------------------------------------------------------------------------------------------------ Transformers Condition Seek permission from the proper authorities to install an upgraded enclosure around the transformer. - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ LANDSCAPING - ------------------------------------------------------------------------------------------------------------------------------------ Rental Units Install additional shrubs and hedges along the guest room building. Include fresh plantings with seasonal foliage to increase overall appearance. - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ EXTERIOR SWIMMING POOL - ------------------------------------------------------------------------------------------------------------------------------------ Deck Finish Condition Provide a new topical deck surface treatment, such as Sundeck. Submit product specifications to Bass Hotels and Resorts for approval. - ------------------------------------------------------------------------------------------------------------------------------------ Pool furnishings Condition Replace and upgrade existing pool deck furniture. Plastic Competitive resin furniture is not acceptable. Provide new high quality, commercial grade chairs, tables and chaise lounges. Furnish ample number of shade umbrellas for guest comfort. - ------------------------------------------------------------------------------------------------------------------------------------ Whirlpool Standards Provide 15-minute timer and emergency cut-off switch per standards. - ------------------------------------------------------------------------------------------------------------------------------------ Drainage(2 drains req.) Standards Provide two anti-vortex drains per Holiday Inn standards. (vortex) - ------------------------------------------------------------------------------------------------------------------------------------

8 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 LOBBY/ENTRANCE/FRONT DESK GENERAL DESCRIPTION: The lobby and entry vestibule will require moderate renovations to furnishings, fixtures and equipment update the appearance and address conditional issues. Professional design assistance is required. All plans, color rendenngs and specifications are to reviewed by Holiday Inn for approval prior to any renovation and installation. ADA compliance certification letters are required at the time of plan review.
- ------------------------------------------------------------------------------------------------------------------------------------ BASIS FOR --------- REQUIRED -------- AREAS REQUIRING ACTION ACTION CURE/REMEDY - ---------------------- ------ ----------- - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ LOBBY One of the guest's first impressions of a Holiday Inn$ hotel occurs in the lobby. The lobby, therefore, must be a welcome, attractive, uncluttered space reflecting the overall decor of the hotel and maintaining comfortable, residential ambiance. The lobby must offer inviting, comfortable seating and appropriate lighting. - ------------------------------------------------------------------------------------------------------------------------------------ Vestibule Doors/Frames Condition Recondition to like new. Recommend installing power actuated (2 sets within a vestibule) doors for guest convenience. - ------------------------------------------------------------------------------------------------------------------------------------ Vestibule Floor Condition Replace and upgrade the existing floor tiles with new marble tiles with a minimum static coefficient of 0.6 per ASTM 1028. Install recessed walk-off mat. Surface mats are not permitted. - ------------------------------------------------------------------------------------------------------------------------------------ Vestibule Walls Condition Replace and upgrade existing wall finishes to coordinate with new lobby wall finishes. - ------------------------------------------------------------------------------------------------------------------------------------ Vestibule Ceiling Condition Replace existing ceiling system. - ------------------------------------------------------------------------------------------------------------------------------------ Vestibule Lighting Competitive Replace and upgrade lighting fixtures. - ------------------------------------------------------------------------------------------------------------------------------------ Luggage Carts Standards Provide minimum 2 luggage carts per standards addendum. Carts must be stored in an appropriate area when not in use. - ------------------------------------------------------------------------------------------------------------------------------------ Directional Signage Condition Install a fully coordinated directional signage package Competitive throughout the entire lobby, commercial and guest room areas. All signage must be ADA complaint. - ------------------------------------------------------------------------------------------------------------------------------------ Lobby Ceiling Condition Replace and upgrade lobby ceiling with new recessed edge, 2' x Competitive 2' architectural ceiling tiles with updated surface texture. Provide new decorative ceiling elements, such as coffer and beams, or tray ceiling with concealed cove lighting to add interest. - ------------------------------------------------------------------------------------------------------------------------------------ Lobby Walls Replace existing wall vinyl with new 20 oz. wall vinyl. - ------------------------------------------------------------------------------------------------------------------------------------ Lobby Floors Replace and upgrade the existing floor tiles with new marble tiles with a minimum static coefficient of 0.6 per ASTM 1028. Install recessed walk-off mat. Surface mats are not permitted. - ------------------------------------------------------------------------------------------------------------------------------------ Windows Condition Paint, clad or replace existing worn aluminum window frames. Replace any windows with broken seals. - ------------------------------------------------------------------------------------------------------------------------------------ Window Treatments Condition Install window treatments. Install new sheers with appropriate side panels and valance to soften the seating areas. - ------------------------------------------------------------------------------------------------------------------------------------
9 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Lobby Feature Standards Provide a lobby feature or an architectural point of interest per standards, such as a focal table with large flower arrangement to give visual interest. - ------------------------------------------------------------------------------------------------------------------------------------ Furnishings Condition Replace and upgrade furnishings with new updated seating group and occasional tables. Provide a mixture of colors. textures and fabrics for visual interest. - ------------------------------------------------------------------------------------------------------------------------------------ Ceiling Lighting Competitive Provide a central chandelier to coordinate with the new lobby feature. - ------------------------------------------------------------------------------------------------------------------------------------ Decor Competitive Provide a complete art and accessories package to include framed original artwork, table top accessory items, well sealed lamps, plants and other similar items to create a residential environment. Coordinate the existing brochures into the new decor. - ------------------------------------------------------------------------------------------------------------------------------------ Area Lighting Competitive Provide for all seating arrangements. - ------------------------------------------------------------------------------------------------------------------------------------ Public Telephone Standards Install new privacy partitions, counter, and appropriate Condition seating for the public telephones that compliment the new lobby finishes. Ensure at least one phone is ADA compatible. Provide power outlet at the wheelchair accessible telephone and a sign indicating that a TDD is available for use at the front desk. - ------------------------------------------------------------------------------------------------------------------------------------ Drinking Fountain Standards Provide a "high/low" unit for guests in wheelchairs and guests that stand. - ------------------------------------------------------------------------------------------------------------------------------------ Ash/waste receptacles Replace and upgrade receptacles. - ------------------------------------------------------------------------------------------------------------------------------------ GM office Condition Replace and upgrade carpet. Install wall vinyl. Provide artwork to walls. Replace sled base chairs and round tables. Relocate Xerox machine from entrance; reduce clutter. Repaint doors and frames. Electrostatically paint existing filing cabinets. - ------------------------------------------------------------------------------------------------------------------------------------ Accounting Office Condition Eliminate clutter from the office. Conceal all exposed wiring in an appropriate chase or enclosure. - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ REGISTRATION DESK The registration desk must be modified to comply with ADA requirements. Specifically, a 3' wide section located 3' above the finished floor must be provided for guests who use wheelchairs or guests that wish to register sitting down. - ------------------------------------------------------------------------------------------------------------------------------------ Registration desk top & face Condition Reconfigure front desk design as needed to eliminate the Competitive ability to view behind the front desk to observe transactions. Replace and upgrade the dated front desk facing to coordinate with other new upgraded lobby finishes. Incorporate new design elements into the facing, such as vertical and horizontal trim pieces, reveals. etc. Provide new hard surface desk top, such as marble. Plans to be reviewed by Holiday Inn for approval. - ------------------------------------------------------------------------------------------------------------------------------------ Work Area Exposed Competitive Conceal all equipment and work areas from guest view. Eliminate all clutter from the area. - ------------------------------------------------------------------------------------------------------------------------------------

10 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Ceiling Competitive Install a new bulkhead with soffit lighting above the registration counter. - ------------------------------------------------------------------------------------------------------------------------------------ Walls Remove mirrors and wall sconces. - ------------------------------------------------------------------------------------------------------------------------------------ Artwork Competitive Provide original art piece on wall behind the front desk. Art piece must be well scaled, decoratively framed, and should reflect locale of hotel. - ------------------------------------------------------------------------------------------------------------------------------------ Floor Condition Replace and upgrade to match new lobby carpet. - ------------------------------------------------------------------------------------------------------------------------------------ Lighting Competitive Install new upgraded lighting above the registration counter. Existing lighting is not bright enough. - ------------------------------------------------------------------------------------------------------------------------------------ Signage Standards Provide appropriate Manager on Duty and Owner/Operator signage. See Holiday Inn standards for proper wording. - ------------------------------------------------------------------------------------------------------------------------------------ Safety Deposit Boxes Standards Replace plastic laminate top and front surfaces. - ------------------------------------------------------------------------------------------------------------------------------------ Fax machine Standards Provide for guest convenience. - ------------------------------------------------------------------------------------------------------------------------------------

11 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 PUBLIC RESTROOMS GENERAL DESCRIPTION: The public restrooms will require moderate renovations to furnishing, fixtures and equipment update the appearance and address conditional issues. Professional design assistance is required. All plans, color renderings and specifications are to reviewed by Holiday Inn for approval prior to any renovation and installation. ADA compliance certification letters are required at the time of plan review.
- ------------------------------------------------------------------------------------------------------------------------------------ BASIS FOR --------- REQUIRED -------- AREAS REQUIRE ACTION ACTION CURE/REMEDY - -------------------- ------ ----------- - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ RESTROOM - ------------------------------------------------------------------------------------------------------------------------------------ Accessible Standards Ensure that all public restrooms meet the Americans with Disabilities Act. - ------------------------------------------------------------------------------------------------------------------------------------ Signage Condition Install signage to coordinate with overall directional signage Competitive package. Room signage needs to meet ADA. - ------------------------------------------------------------------------------------------------------------------------------------ Entry/Door Frame(self closing) Condition Repair, and refinish doors and frames to like new condition. Install new door hardware including handles, pulls and kick plates. - ------------------------------------------------------------------------------------------------------------------------------------ Ceiling Condition Replace existing ceiling system with new 2$2 recessed architectural ceiling, system. - ------------------------------------------------------------------------------------------------------------------------------------ Walls (4' wainscot @ plumbing wall) Condition Replace existing wall finishes. Provide a new 4' tile wainscot at all fixture walls and new Type 11, 20 oz. wall vinyl at all remaining walls. - ------------------------------------------------------------------------------------------------------------------------------------ Floor/cove base Condition Replace and upgrade the existing 1$1 green floor tiles. Competitive Replacement tiles must be a minimum 8" $ 8" in a neutral tone. Provide a coordinating tile cove base and threshold. - ------------------------------------------------------------------------------------------------------------------------------------ Lighting Competitive Lighting must remain on continuously at all times; install Standards keyed switch or motion sensor. - ------------------------------------------------------------------------------------------------------------------------------------ Vanity Condition Replace all vanities with new upgraded solid surface tops and fronts. Provide new under mounted sink bowls, hardware, soap dispensers and tissue dispensers. Conceal all under counter plumbing, pipes. etc. from guest view. - ------------------------------------------------------------------------------------------------------------------------------------ Vanity Lighting Competitive Provide new boxed soffit lighting over the full width of the vanity. Install upgraded parabolic light diffuser. - ------------------------------------------------------------------------------------------------------------------------------------ Vanity hardware Competitive Replace and upgrade to single lever handles. - ------------------------------------------------------------------------------------------------------------------------------------ Mirrors Condition Replace and upgrade worn, delivered mirrors. Ensure mirrors are full width over the vanities. - ------------------------------------------------------------------------------------------------------------------------------------ Soap Dispensers Competitive Integrate the soap dispensers into the "new" vanity top. - ------------------------------------------------------------------------------------------------------------------------------------ Towel/waste receptacles Provide new recessed or semi-recessed paper towel/trash receptacles. Remove any free standing trash units. - ------------------------------------------------------------------------------------------------------------------------------------ Urinals/hardware Install a lowered urinal per the ADA. - ------------------------------------------------------------------------------------------------------------------------------------
12 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Toilet Partitions Condition Replace with new upgraded plastic laminate partitions that compliment the new restroom decor. Ensure ADA requirements are meet. Provide matching urinal screens in the men's room. - ------------------------------------------------------------------------------------------------------------------------------------ Reserve Toilet Tissue Dispenser Standards Provide in each stall per standards. - ------------------------------------------------------------------------------------------------------------------------------------ HVAC Condition Replace and upgrade the existing HVAC vent covers. - ------------------------------------------------------------------------------------------------------------------------------------ Baby Changing Stations Standards Provide a baby changing station in one men's and one women's restroom. - ------------------------------------------------------------------------------------------------------------------------------------

13 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 FOOD SERVICE FACILITIES GENERAL DESCRIPTION: The restaurant is currently located on a raised area of the atrium and will require a ramp that meets the ADA guidelines. Strongly recommended is relocating the restaurant into the Fizz lounge. Professional design assistance is required. All plans, color renderings and specifications are to reviewed by Holiday Inn for approval prior to any renovation and installation. ADA compliance certification letters are required at the time of plan review. Ensure restaurant complies with the Best-4-Breakfast program.
- ------------------------------------------------------------------------------------------------------------------------------------ BASIS FOR --------- REQUIRED -------- AREAS REQUIRE ACTION ACTION CURE/REMEDY - -------------------- ------ ----------- - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ FACILITIES - ------------------------------------------------------------------------------------------------------------------------------------ Signage Condition Replace and upgrade signage due to worn / dated condition. Competitive Coordinate with new signage package throughout the hotel. - ------------------------------------------------------------------------------------------------------------------------------------ Owner/Operator Sign Standards Provide per standards. See standards manual for proper wording. - ------------------------------------------------------------------------------------------------------------------------------------ Walls Condition Replace and upgrade the existing worn wall vinyl. Replacement vinyl must be a Type II, 20 oz, material. - ------------------------------------------------------------------------------------------------------------------------------------ Floor Condition Replace and upgrade worn carpet and pad. Replace existing floor tile. Provide new coordinating carpet, wood or low profile vinyl base. - ------------------------------------------------------------------------------------------------------------------------------------ Steps Standards Install adequate step lighting leading to raised seating areas. Ensure adequate handrails are provided to meet standards. - ------------------------------------------------------------------------------------------------------------------------------------ Host/Cashier Station Standards Remove all storage from behind station. Condition - ------------------------------------------------------------------------------------------------------------------------------------ Tables Condition Replace. Provide new to coordinate with decor theme. - ------------------------------------------------------------------------------------------------------------------------------------ Chairs Condition Replace and upgrade all chairs. Provide an updated style chair to compliment the overall decor scheme of the room. Select a chair with a fabric upholstered seat and back. - ------------------------------------------------------------------------------------------------------------------------------------ Kitchen Access Condition - ------------------------------------------------------------------------------------------------------------------------------------ Buffet Condition Replace the skirted tables being used as a buffet with a new permanent built-in buffet unit which will provide proper heating and cooling for food items. Provide sneeze guards. Relocate out of the atrium area and into the restaurant. - ------------------------------------------------------------------------------------------------------------------------------------ Planting Competitive Provide container plants to soften room and enhance visual interest and atmosphere. - ------------------------------------------------------------------------------------------------------------------------------------ Grab & Go Standards Provide a permanent area to accommodate the Grab & Go concept. - ------------------------------------------------------------------------------------------------------------------------------------
14 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 LOUNGE FACILITIES GENERAL DESCRIPTION: The lounge will require moderate renovations to furnishings, fixtures and equipment update the appearance and address conditional issues. Professional design assistance is required. All plans, color renderings and specifications are to reviewed by Holiday Inn for approval prior to any renovation and installation ADA compliance certification letters are required at the time of plan review
- ------------------------------------------------------------------------------------------------------------------------------------ BASIS FOR --------- REQUIRED -------- AREAS REQUIRE ACTION ACTION CURE/REMEDY - -------------------- ------ ----------- - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ FACILITIES - ------------------------------------------------------------------------------------------------------------------------------------ Entrance Condition Replace the wall vinyl and globe lighting fixture with an upgraded lighting fixture. - ------------------------------------------------------------------------------------------------------------------------------------ Signage Condition Replace and upgrade signage due to worn / dated condition. Competitive Coordinate with new signage package throughout the hotel. - ------------------------------------------------------------------------------------------------------------------------------------ Owner/Operator Sign Standards Provide per standards. See standards manual for proper wording. - ------------------------------------------------------------------------------------------------------------------------------------ Ceiling Replace the existing ceiling system. - ------------------------------------------------------------------------------------------------------------------------------------ Walls Replace the existing wall vinyl. - ------------------------------------------------------------------------------------------------------------------------------------ Floor condition Replace and upgrade the existing worn carpet and coordinate with new decor theme. Refinish existing wood dance floor to like new condition or replace or remove. Replace 1 x 1 tile around the bar with new approved flooring. - ------------------------------------------------------------------------------------------------------------------------------------ Window Treatments Condition Provide new upgraded fabric window treatments. Blinds are not permitted. - ------------------------------------------------------------------------------------------------------------------------------------ Lighting Condition Provide adequate lighting for seating areas and task lighting Standards for servers. - ------------------------------------------------------------------------------------------------------------------------------------ Lighting/Dimmer Control Condition Replace lighting fixtures with new upgraded fixtures with Competitive provide adequate illumination. Provide decorative wall mounted and ceiling hung fixtures. - ------------------------------------------------------------------------------------------------------------------------------------ Decor Competitive Provide a new upscale decor theme to enliven the lounge. If the photos are to be part of the new decor theme then they should be professional mounted and framed and coordinated into the new concept. - ------------------------------------------------------------------------------------------------------------------------------------ Tables Competitive Replace all tables. - ------------------------------------------------------------------------------------------------------------------------------------ Chairs Condition Replace and upgrade all seating, including bar stools and soft seating. Ensure all new seating features fully fabric upholstered seats and backs. - ------------------------------------------------------------------------------------------------------------------------------------ Booths Condition Replace and upgrade the booths due to worn condition. Seat backs must be a fabric upholstered material. - ------------------------------------------------------------------------------------------------------------------------------------ Bar glass rack Competitive The existing rack is dated in appearance and I recommend removing the rack and designing an alternative method of storing glasses. - ------------------------------------------------------------------------------------------------------------------------------------
15 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Bar Top/Rail/Facing Condition Replace bar top and facing with new finishes that compliment new lounge design/decor theme. - ------------------------------------------------------------------------------------------------------------------------------------ Back Bar Condition Replace back bar finishes to compliment new lounge decor. Eliminate all clutter. Position point-of-sale system out of guest view by appropriately screening or recessing. - ------------------------------------------------------------------------------------------------------------------------------------ Television Enclosures Competitive Provide for all televisions. Conceal all cables and wiring from guest view. - ------------------------------------------------------------------------------------------------------------------------------------ Popcorn/Vending Machines Competitive Remove or relocate machines to an appropriate location. - ------------------------------------------------------------------------------------------------------------------------------------

16 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 MEETING/BANQUET ROOMS GENERAL DESCRIPTION: The pre-function and meeting areas will require moderate renovations to furnishings, fixtures and equipment update the appearance and address conditional issues. Professional design assistance is required. All plans, color renderings and specifications are to reviewed by Holiday Inn for approval prior to any renovation and installation. ADA compliance certification letters are required at the time of plan review
- ------------------------------------------------------------------------------------------------------------------------------------ BASIS FOR --------- REQUIRED -------- AREAS REQUIRE ACTION ACTION CURE/REMEDY -------------------- ------ ----------- - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ MEETING-BANQUET FACILITIES - ------------------------------------------------------------------------------------------------------------------------------------ Prefunction Area Condition Replace the existing ceiling tiles. - ------------------------------------------------------------------------------------------------------------------------------------ Door Hardware/Frames Condition Replace the pink doors and sand the frames. Coordinate with new decor theme. - ------------------------------------------------------------------------------------------------------------------------------------ Door Signage Competitive Replace and upgrade signage due to worn / dated condition. Coordinate with new signage package throughout the hotel. - ------------------------------------------------------------------------------------------------------------------------------------ Door Viewer Standards Provide door viewers per the standards at 48 inches above the finish floor. - ------------------------------------------------------------------------------------------------------------------------------------ Ceiling Standards Replace the existing ceiling system with a new 2x2 recessed Competitive ceiling tile system. - ------------------------------------------------------------------------------------------------------------------------------------ Walls Competitive Install new type II wall vinyl on all walls. Refinish all wood trim, base and chair rails. - ------------------------------------------------------------------------------------------------------------------------------------ Partitions (50 STC Min.) Condition Install new type II wall vinyl on all partitions. - ------------------------------------------------------------------------------------------------------------------------------------ Floor Condition Replace the carpet. - ------------------------------------------------------------------------------------------------------------------------------------ Tables Condition Replace and upgrade any worn tables. - ------------------------------------------------------------------------------------------------------------------------------------
17 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 ATRIUMS/POOL ENCLOSURES GENERAL DESCRIPTION: The fitness room will require moderate renovations to furnishings, fixtures and equipment update the appearance and address conditional issues. Professional design assistance is required. All plans, color renderings and specifications are to reviewed by Holiday Inn for approval prior to any renovation and installation. ADA compliance certification letters are required at the time of plan review
- ------------------------------------------------------------------------------------------------------------------------------------ BASIS FOR --------- REQUIRED -------- AREAS REQUIRE ACTION ACTION CURE/REMEDY - -------------------- ------ ----------- - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ STRUCTURE BUILDING Competitive The existing atrium space is drab, dark and uninviting. Create Condition a more enlivened atmosphere, one that is bright and bold. Bring the facing guest rooms into the new vibrant interior make these guests want to keep their drapes open. Design in liberal amounts of accent decor items, such as colorful accent walls, ceiling banners, flags, hanging light fixtures, umbrellas, contemporary furniture and like items. Add pavilions, trellises and other structures to bring down the level of the space. Brighten up the area with new light fixtures utilizing a variety of lighting techniques. Round out the design with upgraded hardscape and generous amounts of exotic landscaping. Professional design assistance is required. Submit all plans to Bass Hotels & Resorts for review. - ------------------------------------------------------------------------------------------------------------------------------------ Ceiling Replace the existing ceiling tile. Ensure skylights are not leaking. - ------------------------------------------------------------------------------------------------------------------------------------ Walls Where the exterior and interior block walls are seen together: continue the stucco finishes into the interior CMU's walls. On the remaining blocks walls not covered in stucco; stain the block to match the new stucco color. - ------------------------------------------------------------------------------------------------------------------------------------ Floor Replace the existing floor tiles. - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ FITNESS ROOM Furnish per the Holiday Inn "Fitness Center Guidelines/Standards" manual. - ------------------------------------------------------------------------------------------------------------------------------------ Entrance Condition Provide a new entrance from the pool side of the fitness center. - ------------------------------------------------------------------------------------------------------------------------------------ Restroom Condition Either make the restroom wheelchair accessible or consider removing it. Maybe provide a sink and vanity only. - ------------------------------------------------------------------------------------------------------------------------------------ Ceiling Standards Minimum 8' high, 10' recommended. - ------------------------------------------------------------------------------------------------------------------------------------ Walls Standards Provide one fully mirrored wall. - ------------------------------------------------------------------------------------------------------------------------------------ Floor Standards Provide a minimum 28 oz. carpet per Fitness Center standards. - ------------------------------------------------------------------------------------------------------------------------------------ Door/Frame (elec. Lock) Standards Provide with electronic lock. - ------------------------------------------------------------------------------------------------------------------------------------ Visual access Standards Provide a glass door, door viewer or window with a minimum of 144 sq. in. of continuous viewing space. - ------------------------------------------------------------------------------------------------------------------------------------
18 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 - ------------------------------------------------------------------------------------------------------------------------------------ HVAC Standards Provide to maintain a constant 68-72 degrees Fahrenheit temperature. - ------------------------------------------------------------------------------------------------------------------------------------ Exercise Equipment Standards 3 pieces of brand name exercise equipment are required, such (minimum 3, depending on as Lifecycle. Stairmaster and Nordic-track. Minimum 2 size of hotel) treadmills and 1 upright bike required. Include equipment instructions. - ------------------------------------------------------------------------------------------------------------------------------------ House Telephone Standards Provide a house phone that rings directly to the switchboard. - ------------------------------------------------------------------------------------------------------------------------------------ Magazine Rack Competitive Recommended to provide. - ------------------------------------------------------------------------------------------------------------------------------------ Drinking Water Standards Provide a chilled drinking water fountain or chilled bottled water cooler per standards. - ------------------------------------------------------------------------------------------------------------------------------------ Towels and towel racks Standards Provide per the Holiday Inn Fitness Center Guidelines/Standards - ------------------------------------------------------------------------------------------------------------------------------------ Area map Standards Provide a detailed map of the area around the hotel showing streets, landmarks a distances, including 1.3 and 6 mile routes. - ------------------------------------------------------------------------------------------------------------------------------------ Clock Standards A wall mounted minimum size 14" diameter clock is required. - ------------------------------------------------------------------------------------------------------------------------------------ TV Standards Provide a 25" minimum size T.V. - ------------------------------------------------------------------------------------------------------------------------------------ Artwork Competitive Provide colorful graphics with a sports theme. - ------------------------------------------------------------------------------------------------------------------------------------ Scale Standards Provide per standards. - ------------------------------------------------------------------------------------------------------------------------------------ Lighting Standards Provide 50-60 foot-candles of ambient neutral color temperature fluorescent lighting per standards. - ------------------------------------------------------------------------------------------------------------------------------------ INTERIOR POOL/SAUNA/WHIRLPOOL - ------------------------------------------------------------------------------------------------------------------------------------ Pool furnishings Condition Replace and upgrade existing pool deck furniture. Provide new high quality, commercial grade chairs, tables and chaise lounges. Furnish ample number of shade umbrellas for guest comfort. - ------------------------------------------------------------------------------------------------------------------------------------ Whirlpool (15timer & Kill switch?) Ensure that the 15 timer and kill switch is in proper working condition. - ------------------------------------------------------------------------------------------------------------------------------------ Drainage (2 drains req.)(vortex) Install an anti vortex drain. - ------------------------------------------------------------------------------------------------------------------------------------ Fence Standard Pool must be secured with appropriately designed, decorative 4'0" minimum height fence with a self-closing and latching gate. - ------------------------------------------------------------------------------------------------------------------------------------

19 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 KITCHEN GENERAL DESCRIPTION:
- ------------------------------------------------------------------------------------------------------------------------------------ BASIS FOR --------- REQUIRED -------- AREAS REQUIRE ACTION ACTION CURE/REMEDY - -------------------- ------ ----------- - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ FACILITIES - ------------------------------------------------------------------------------------------------------------------------------------ Ceiling (Washable) Replace damage ceiling tile. - ------------------------------------------------------------------------------------------------------------------------------------ Equipment Install a metal shield between the grease fryer and the open flame grille. - ------------------------------------------------------------------------------------------------------------------------------------ Walk-ins Replace seals on all walk-ins. - ------------------------------------------------------------------------------------------------------------------------------------
20 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 INTERIOR CORRIDORS GENERAL DESCRIPTION: The interior corridors will require moderate renovations to furnishings, fixtures and equipment update the appearance and address conditional issues. Professional design assistance is required. All plans color renderings and specifications are to reviewed by Holiday Inn for approval prior to any renovation and installation. ADA compliance certification letters are required at the time of plan review
- ------------------------------------------------------------------------------------------------------------------------------------ BASIS FOR --------- REQUIRED -------- AREAS REQUIRE ACTION ACTION CURE/REMEDY - -------------------- ------ ----------- - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ CORRIDOR - ------------------------------------------------------------------------------------------------------------------------------------ Doors Condition Repaint all door frames in conjunction with the guest room improvements. - ------------------------------------------------------------------------------------------------------------------------------------ Signage Condition Replace all signage, including door numbers, vending, and Standards directional, with new upgraded signage package. All Competitive non-smoking rooms must have designated signage. All signage must be ADA compliant, and be consistent throughout the hotel. Return doors to like new condition where old signage was removed from the doors. - ------------------------------------------------------------------------------------------------------------------------------------ Walls Condition Replace and upgrade existing wall vinyl with new Type II wall vinyl. Replace and upgrade chair rail with new architectural millwork. Remove ash urns from walls. Provide an architectural millwork package to further enhance improvements. - ------------------------------------------------------------------------------------------------------------------------------------ Misc. Doors Repair any damaged or worn doors and frames. - ------------------------------------------------------------------------------------------------------------------------------------ Floor Replace carpet on the 3rd floor. Remove the 12 inch base and replace with a 4 - 6 inch carpet base. - ------------------------------------------------------------------------------------------------------------------------------------ Lighting Replace the existing wall sconces with new light sconces that do not protrude more than 4 inches from the wall. Install 4 additional sconces in each corridor. Center between existing locations. Corridors must have 20 foot candles of light per the standards. Replace the under sized fluorescent fixtures at the guest room bulk heads with fixtures that span the full length of the bulk head. - ------------------------------------------------------------------------------------------------------------------------------------ Window Treatments Install window treatments at the window ends of all corridors. - ------------------------------------------------------------------------------------------------------------------------------------ Misc. vents & grills Condition Replace any damaged miscellaneous vents and grills. - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ VENDING - ------------------------------------------------------------------------------------------------------------------------------------ Alcoves Standards Relocate all vending machines to appropriate vending alcoves. Vending alcoves must include full height wing walls, Type II wallcovering or acrylic knockdown wall finish, appropriate lighting and fully grounded electrical outlets (GFIC). - ------------------------------------------------------------------------------------------------------------------------------------
21 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Walls Condition Replace with new upgraded wall finishes to match the corridor. - ------------------------------------------------------------------------------------------------------------------------------------ ELEVATORS Ensure elevators meet ADA. - ------------------------------------------------------------------------------------------------------------------------------------ Door Finish Condition Paint elevator doors and frames to coordinate with finishes. - ------------------------------------------------------------------------------------------------------------------------------------ Ceiling Replace existing ceiling with new ceiling system. - ------------------------------------------------------------------------------------------------------------------------------------ Walls Replace existing plastic laminate with new upgraded design. - ------------------------------------------------------------------------------------------------------------------------------------ Floor Finish Condition Replace and upgrade to match and/or coordinate with lobby and corridor floor finishes. - ------------------------------------------------------------------------------------------------------------------------------------ Lighting Condition Provide additional lighting to increase illumination. - ------------------------------------------------------------------------------------------------------------------------------------

22 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN: SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 GUEST ROOMS GENERAL DESCRIPTION: The guest rooms will require moderate renovations to furnishings, fixtures and equipment update the appearance and address conditional issues. A total of 8 wheelchair accessible are required 2 of which shall have a roll in shower. Professional design assistance is required. All plans, color renderings and specifications are to reviewed by Holiday Inn for approval prior to any renovation and installation. ADA compliance certification letters are required at the time of plan review
- ------------------------------------------------------------------------------------------------------------- BASIS FOR REQUIRED AREAS REQUIRE ACTION ACTION CURE/REMEDY - ------------------------------------------------------------------------------------------------------------- STRUCTURE BASE BUILDING - ------------------------------------------------------------------------------------------------------------- Doors/Hardware - ------------------------------------------------------------------------------------------------------------- Door Numbers Standards Provide new ADA complaint guest room door number plaques. Plaques must have raised numbers and Braille inscription. Mount plaques 60" above the finished floor on the wall adjacent to the latch side of the door. - ------------------------------------------------------------------------------------------------------------- Self-Closing Standards Ensure all self-closing devices are properly adjusted and fully operational. - ------------------------------------------------------------------------------------------------------------- Closet walls Install new wall finish to coordinate with guest room wall finish. - ------------------------------------------------------------------------------------------------------------- Soundproofing Standards Provide sound gasket at connecting room doors per standards. - ------------------------------------------------------------------------------------------------------------- Electrical Outlets Standards Ensure an electrical outlet and data port are conveniently located near all work surface areas. Eliminate excessive cord visibility by installing addition outlets as required to service the equipment. - ------------------------------------------------------------------------------------------------------------- Service vanity Replace all black plastic laminate on service vanities. - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- INTERIOR BUILDING FINISHES/LIGHTING - ------------------------------------------------------------------------------------------------------------- Ceiling Condition Repaint ceilings to like new condition. Repair any irregularities prior to painting. - ------------------------------------------------------------------------------------------------------------- Walls Condition Replace and upgrade existing wall finishes. Provide new Holiday Inn standardized room decor wall vinyl or color integrated acrylic knockdown wall finish per specifications. All existing wall finishes must be removed, and wall appropriately prepared prior to receipt of new wall finish. - ------------------------------------------------------------------------------------------------------------- Floor Condition Replace and upgrade worn carpet and pad. Provide a new Holiday Inn standardized room decor carpet. Provide a coordinating carpet base or 2-1/2" straight vinyl base. Prepare floor surfaces prior to installation of new floor finishes. - ------------------------------------------------------------------------------------------------------------- Entry Light Competitive Replace and upgrade with decorative wall sconce. - -------------------------------------------------------------------------------------------------------------
23 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 - ------------------------------------------------------------------------------------------------------------- Lighting Condition Replace and upgrade existing worn guest room lighting package to include new table and floor lamps with new Holiday Inn standardized room decor lighting. Wall mounted lamps will not be acceptable. Coordinate all lamps and shades. All bulbs must provide a minimum of 100 watts of light. Provide touch sensitive fixtures in ADA accessible rooms. Provide smart lamps at work areas. Replace and upgrade ceiling mounted entry lights. - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- SOFT GOODS All new soft goods must comply with the new Holiday Inn standardized room decor program. - ------------------------------------------------------------------------------------------------------------- Window Treatment Condition Replace all drapes with new upgraded Standards window treatments that comply with the new Holiday Inn standardized room decor program. These include sheers and over-drapes with blackout lining. - ------------------------------------------------------------------------------------------------------------- Linens Condition Replace all worn lines. Ensure new linens meet Holiday Inn minimum weight standards. - ------------------------------------------------------------------------------------------------------------- Bedspreads Condition Replace bedspreads with new bedspreads Standards and optional dust ruffles that comply with the new Holiday Inn standardized room decor program. - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- CASE GOODS Replace all Americans of Martinsville casegoods. Including all headboards. night stands, desks, activity tables, credenzas and credenza mirrors, occasional tables, and luggage benches by Jan. 1, 2003. Refinish any existing damaged casegoods to like new condition in conjuction with this renovation. Ensure all rooms are furnished per Holiday Inn standards. All new room furnishings must comply with the new Holiday Inn standardized guest room decor program. - ------------------------------------------------------------------------------------------------------------- Credenza Standards Replace existing credenzas with new armoires per the standardized guest room decor program. - ------------------------------------------------------------------------------------------------------------- Activity Chair Condition Reupholster with the SRD approved fabric. - ------------------------------------------------------------------------------------------------------------- Desk Chair Condition Replace with new ergonomic chair per standardized guest room decor program with Krypton fabric. - ------------------------------------------------------------------------------------------------------------- Sofa Condition Replace any worn sofa fabric and coordinate with the SRD upon replacement. Replace all sofas by Jan 1, 2002. - ------------------------------------------------------------------------------------------------------------- Artwork Condition Replace all artwork to meet the Holiday Inn standardized room decor program. - ------------------------------------------------------------------------------------------------------------- Mattresses Condition Replace any worn, sagging mattresses. - ------------------------------------------------------------------------------------------------------------- Bed Frame Standards Open bed frames are required in wheelchair accessible guest rooms. - -------------------------------------------------------------------------------------------------------------

24 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 - ------------------------------------------------------------------------------------------------------------- EQUIPMENT - ------------------------------------------------------------------------------------------------------------- Televisions (25") Standards Replace all existing undersized televisions with new 25" units. - ------------------------------------------------------------------------------------------------------------- Refrigerator/Microwave Competitive Provide a new piece of furniture to match new case goods to house the refrigerator and microwave units. - ------------------------------------------------------------------------------------------------------------- Coffee Makers Standards Install in all rooms per standards. - ------------------------------------------------------------------------------------------------------------- MOT Standards Comply with all Moment of Truth Standards as deadline dates become affective. - -------------------------------------------------------------------------------------------------------------

25 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 GUEST ROOM BATHS GENERAL DESCRIPTION: The guest bath rooms will require moderate renovations to furnishings, fixtures and equipment update the appearance and address conditional issues. Professional design assistance is required. All plans, color renderings and specifications are to reviewed by Holiday Inn for approval prior to any renovation and installation ADA compliance certification letters are required at the time of plan review
- ------------------------------------------------------------------------------------------------------------- BASIS FOR REQUIRED AREAS REQUIRE ACTION ACTION CURE/REMEDY - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- FACILITIES - ------------------------------------------------------------------------------------------------------------- Entry Doors/Frames Condition Repair, paint and restore doors and frames to like new condition. Replace any corroded door hardware. - ------------------------------------------------------------------------------------------------------------- Walls Condition Replace any worn wall vinyl. - ------------------------------------------------------------------------------------------------------------- Floors Condition Regrout floor tiles to like new condition. - ------------------------------------------------------------------------------------------------------------- Ceiling Paint any stained ceilings. - ------------------------------------------------------------------------------------------------------------- Vanities Condition Replace and upgrade vanities with new cultured marble, natural stone or other solid surface material in the 120 guest rooms with the old orange vanities. - ------------------------------------------------------------------------------------------------------------- Sinks Condition Install under-mounted sinks and new single lever sink hardware in conjunction with vanity top replacement in the 120 guest rooms. - ------------------------------------------------------------------------------------------------------------- Vanity Hardware Replace and upgrade to single lever handles. - ------------------------------------------------------------------------------------------------------------- Vanity Mirrors Condition Replace and any de-silvered mirrors. Recommend wood frame for upgrade appearance. - ------------------------------------------------------------------------------------------------------------- Bathtubs Condition Recondition to like new or replace. - ------------------------------------------------------------------------------------------------------------- Bathtub Hardware Condition Replace tarnished and scratched tub hardware. - ------------------------------------------------------------------------------------------------------------- Mechanical Exhaust Condition Replace any damaged or worn exhaust vents. - -------------------------------------------------------------------------------------------------------------
26 PROPERTY IMPROVEMENT PLAN LICENSE RENEWAL OF THE HOLIDAY INN; SHEFFIELD, AL. - LOCATION #4419 JANUARY 25, 1999 BACK OF HOUSE GENERAL DESCRIPTION:
- ------------------------------------------------------------------------------------------------------------- BASIS FOR REQUIRED AREAS REQUIRE ACTION ACTION CURE/REMEDY - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- SERVICE AREAS/ROOMS - ------------------------------------------------------------------------------------------------------------- Service Corridors Pressure wash service corridor to Dumpster. - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- MAINTENANCE SHOP - ------------------------------------------------------------------------------------------------------------- Other Paint walls and floors. - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- LAUNDRY/HOUSEKEEPING - ------------------------------------------------------------------------------------------------------------- Walls Replace damaged walls. - ------------------------------------------------------------------------------------------------------------- Floors Replace floor tiles. - -------------------------------------------------------------------------------------------------------------
27 PROPERTY IMPROVEMENT PLAN HOLIDAY INN JEKYLL ISLAND, GA BASS ---------------- HOTELS & RESORTS PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN HOTEL JEKYLL - OCEANSIDE JEKYLL ISLAND, GA - LOCATION # 2619 PROPERTY IMPROVEMENT PLAN JANUARY 12, 1999 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN-JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/ #2619 JANUARY 12, 1999 TABLE OF CONTENTS: PROPERTY INFORMATION........................... 1 LIFE SAFETY.................................... 3 EXTERIOR....................................... 5 LOBBY/ENTRANCE/FRONT DESK...................... 10 PUBLIC RESTROOMS............................... 12 FOOD SERVICE FACILITIES........................ 13 LOUNGE FACILITIES.............................. 14 MEETING/BANQUET ROOMS.......................... 16 HOLIDOMES/ATRIUMS/POOL ENCLOSURES.............. 17 KITCHEN........................................ 18 INTERIOR CORRIDORS............................. 19 GUEST ROOMS.................................... 22 GUEST ROOM BATHS............................... 26 BACK OF HOUSE.................................. 28

PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN-JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/ #2619 JANUARY 12, 1999 PROPERTY INFORMATION Address: Holiday Inn Hotel Jekyll - Oceanside 200 South Beachview Drive Jekyll Island, GA 31520 GENERAL DESCRIPTION: This hotel is comprised of a four story building connected to the commercial building and three two story buildings to the north. All of the guestrooms are accessed through central interior corridors and half have exterior balconies accessed through sliding doors. The exterior of the commercial building, as well as the rental units buildings, is undergoing major renovation, to include, installation of new roofline/parapet design features, improvements to the main entry canopy, and concealment of the dated facades with synthetic stucco. Also required is replacement of the storefront with new punched windows and synthetic stucco side panels. The commercial areas require major renovation, to include a complete refurbishment of the lobby, some repair in the restrooms, and ceiling work in the meeting areas, restaurant and lounge. The guestrooms/guest bathrooms also require a major renovation, including replacement of all casegoods, wall finishes, lighting fixtures, carpet, vanities, plumbing fixtures and hardware in at least 149 of the 205 rooms. The other 56 rooms will require renovation to meet the Standardized Room Decor Program requirements, but are in acceptable condition for the interim. Professional Architectural and design assistance is required. Submit all plans, specifications and color boards to Bass Hotels & Resorts for review and approval, prior to purchasing or renovation. Any items not submitted for approval may be required to be replaced or modified. Professional Architectural and design assistance is required. Franchisee to ensure all areas of the hotel are in complete compliance with local codes and Americans with Disabilities Act (ADA) and current Bass Hotels & Resorts life safety and facility standards. Owner is required to repair or replace all items and finishes in the hotel that may be damaged during the course of the renovation. Ensure all areas of the hotel are in new condition upon completion of the PIP. During the Property Improvement process, signage from the Holiday Inn "Renovation Kit" must be put on display, in a professional manner, throughout appropriate areas of the hotel. You will receive this kit within 90 days from license execution. All areas of the hotel must meet current Holiday Inn standards, including all supplements and addenda. Year Built: 1976 Year(s) Renovated: Ongoing Parking Spaces: 350 Swimming Pool 30 x 80 Dimensions/maximum 8'-0" max. depth depth: Number of Stories: 4/2 COMMERCIAL AREA CAPACITIES Food Service Facility: Remington's Bar and Grill seats: 180 Lounge: Remington's Bar and Grill seats: 57 1 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN-JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/ #2619 JANUARY 12, 1999 Meeting/Banquet Room: Grand Ballroom seats: 600 Fitness Room: yes X no_____ Guest Rooms: No. of Rooms/Opening Date Original Rooms: 110/76 1st. Addition: 44 2nd. Addition: 35 Total Rooms: 205 HVAC Systems: (2/4 pipe; thru-wall or split system) Commercial Area Rooftop Guest room Building PTAC Fire Safety Systems: Hardwire Smoke Commercial Area yes X no_____ Guest room Building yes X no Sprinkler System Commercial Area yes_____ no X Guest room Building yes_____ no X This Property Improvement Plan was developed from an on-site review of the subject hotel on January 12, 1999 by Liz York accompanied by Dan Coleman (G.M.). 2 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN-JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/ #2619 JANUARY 12, 1999 LIFE SAFETY
- -------------------------------------------------------------------------------------------------------------------- AREAS REQUIRING ACTION CURE/REMEDY - -------------------------------------------------------------------------------------------------------------------- FIRE SAFETY SYSTEM Prior to issuance of the license, written documentation must be submitted certifying that the Fire Safety System meets or exceeds Holiday Inn's Standards and that the system if fully operational as of that date. - -------------------------------------------------------------------------------------------------------------------- LOBBY/ENTRANCE/FRONT DESK - LIFE SAFETY Ensure that all life-safety equipment is in perfect working order. - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- PUBLIC RESTROOMS - LIFE SAFETY Ensure that all life-safety equipment is in perfect working order. - -------------------------------------------------------------------------------------------------------------------- Emergency Lighting: Provide emergency lighting. - -------------------------------------------------------------------------------------------------------------------- Visual Heat/Smoke Ensure adequate heat and smoke detectors are present Detectors: per code and standards. - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- LOUNGE FACILITIES - LIFE SAFETY Ensure that all emergency equipment is functioning properly. - -------------------------------------------------------------------------------------------------------------------- Exit Signs: Sign on right is not lit. Replace or repair. All signs must match. - -------------------------------------------------------------------------------------------------------------------- Visual Heat/Smoke Ensure adequate heat and smoke detectors are present per Detectors: code and standards. - -------------------------------------------------------------------------------------------------------------------- Req. Number of Exits: Ensure that number of exits satisfies all code and Bass Hotels & Resorts requirements. - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- MEETING/BANQUET ROOMS - LIFE SAFETY Ensure that all life-safety equipment is in perfect working order. - -------------------------------------------------------------------------------------------------------------------- Req. Number of Exits: Ensure that # of exits satisfies all code and Bass Hotels & Resorts requirements. - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- HOLIDOMES/ATRIUMS/POOL ENCLOSURES - LIFE SAFETY Ensure that all life-safety equipment is in perfect working order. - -------------------------------------------------------------------------------------------------------------------- Emergency Lighting: Ensure emergency lighting is provided. - -------------------------------------------------------------------------------------------------------------------- Exit Signs: Ensure adequate exit signage is provided per standards and codes. Ensure bright illumination. - -------------------------------------------------------------------------------------------------------------------- Panic Hardware: Provide panic hardware at all exit doors - -------------------------------------------------------------------------------------------------------------------- Step Lighting: - -------------------------------------------------------------------------------------------------------------------- Fire Separation: Ensure area meets fire separation requirements per codes and standards. - -------------------------------------------------------------------------------------------------------------------- Visual Heat/Smoke Ensure adequate heat and smoke detectors are present per Detectors: code and standards. - -------------------------------------------------------------------------------------------------------------------- Manual Pull Stations: Ensure manual pull stations are present per code and standards. - -------------------------------------------------------------------------------------------------------------------- Sprinklers: Install missing trim rings. - -------------------------------------------------------------------------------------------------------------------- Req. Number of Exits: Ensure that # of exits satisfies all code and Bass Hotels & Resorts requirements. - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- KITCHEN - LIFE SAFETY Ensure that all equipment is in perfect working order. - -------------------------------------------------------------------------------------------------------------------- Emergency Lighting: Ensure emergency lighting is provided. - -------------------------------------------------------------------------------------------------------------------- Exit Signs: Ensure adequate exit signage is provided per standards and codes. Ensure bright illumination. - -------------------------------------------------------------------------------------------------------------------- Panic Hardware: Provide panic hardware at all exit doors - -------------------------------------------------------------------------------------------------------------------- Fire Separation: Ensure area meets fire separation requirements per codes and standards. - --------------------------------------------------------------------------------------------------------------------
3 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN-JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/ #2619 JANUARY 12, 1999 - -------------------------------------------------------------------------------------------------------------------- Heat/Smoke Detectors: Ensure adequate heat and smoke detectors are present per code and standards. - -------------------------------------------------------------------------------------------------------------------- Manual Pull Stations: Ensure manual pull stations are present per code and standards. - -------------------------------------------------------------------------------------------------------------------- Req. Number of Exits: Ensure that # of exits satisfies all code and Bass Hotels & Resorts requirements. - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- INTERIOR CORRIDORS - LIFE SAFETY Ensure that all emergency equipment is functioning properly. - -------------------------------------------------------------------------------------------------------------------- Exit Signs: Ensure adequate exit signage is provided per standards and codes. Ensure bright illumination. - -------------------------------------------------------------------------------------------------------------------- Panic Hardware: Remove door knobs from stairwell doors and install panic bar hardware. - -------------------------------------------------------------------------------------------------------------------- Visual Heat/Smoke Ensure adequate heat and smoke detectors are present per Detectors: code and standards. - -------------------------------------------------------------------------------------------------------------------- Manual Pull Stations: Ensure manual pull stations are present per code and standards. - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- GUEST ROOMS - LIFE SAFETY Ensure that all life-safety equipment is in perfect working order. - -------------------------------------------------------------------------------------------------------------------- Visual-Heat/Smoke in ADA rooms Provide approved hardwired Detectors: speaker/strobe heat/smoke detectors in ADA rooms. - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- BACK OF HOUSE - LIFE SAFETY Ensure that all life-safety equipment is in perfect working order. - -------------------------------------------------------------------------------------------------------------------- Emergency Lighting: Ensure emergency lighting is provided. - -------------------------------------------------------------------------------------------------------------------- Exit Signs: Ensure adequate exit signage is provided per standards and codes. Ensure bright illumination. - -------------------------------------------------------------------------------------------------------------------- Panic Hardware: Ensure operation and location of panic hardware at all doors that exit to the exterior per code and standards. - -------------------------------------------------------------------------------------------------------------------- Fire Extinguisher: Ensure adequate extinguishers are present per code and standards. - -------------------------------------------------------------------------------------------------------------------- Fire Separation: Ensure area meets fire separation requirements per codes and standards. - -------------------------------------------------------------------------------------------------------------------- Visual Heat/Smoke Ensure adequate heat and smoke detectors are present per Detectors: code and standards. - -------------------------------------------------------------------------------------------------------------------- Manual Pull Stations: Ensure manual pull stations are present per code and standards. - -------------------------------------------------------------------------------------------------------------------- Sprinklers: Install missing trim rings. - -------------------------------------------------------------------------------------------------------------------- Req. Number of Exits: Ensure that # of exits satisfies all code and Bass Hotels & Resorts requirements. - -------------------------------------------------------------------------------------------------------------------- Fire Separation Ensure area meets fire separation requirements per codes (1 hour min) and standards. - -------------------------------------------------------------------------------------------------------------------- 18 Gauge Steel Cabinet Ensure that this is provided in the maintenance shop. - --------------------------------------------------------------------------------------------------------------------

4 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN-JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/ #2619 JANUARY 12, 1999 EXTERIOR GENERAL DESCRIPTION: The exterior facades of the rental units are bland, dated and lack visual interest. The landscaping requires enhancing and enlargement of scope. Professional design assistance is required. Submit architectural plans, elevations and renderings to Bass Hotels & Resorts for review.
- --------------------------------------------------------------------------------------------------------------- BASIS FOR REQUIRED AREAS REQUIRE ACTION ACTION CURE/REMEDY - --------------------------------------------------------------------------------------------------------------- COMMERCIAL BUILDING Exterior work is in process. All work must be completed per approved plans. - --------------------------------------------------------------------------------------------------------------- Drive through surface Condition Install pavers or stamped concrete/stamped asphalt coating beneath the canopy. Integrate ramps with the driving surface to eliminate curbs in front of the entry doors. - --------------------------------------------------------------------------------------------------------------- Entrance doors Condition Replace existing aluminum storefront doors and fixed glass with a new upgraded window wall system and new energy efficient entry doors. - --------------------------------------------------------------------------------------------------------------- Service doors Condition Refinish service doors to like new condition ensuring coordination with the new look of the completed renovation. - --------------------------------------------------------------------------------------------------------------- Auxiliary entrance doors Condition Replace with new doors that complement the new main entry doors. - --------------------------------------------------------------------------------------------------------------- Lighting Condition Replace all existing commercial building lighting. Provide a new, upgraded lighting design package which provides safety lighting in parking areas, stairways, ramps, etc.; decorative lighting along walkways and entrances; landscape accent lighting in courtyards, pool area, around main canopy entrance, etc.; and bright inviting lighting at the main canopy entrance, restaurant entrance and drive entrances to welcome guests. - --------------------------------------------------------------------------------------------------------------- Walkways/Pavers Condition Replace and resurface all broken, cracked or otherwise damaged concrete walkways. Provide a consistent finish for all walkways. Provide for proper drainage of walkways to prevent standing water, puddles and flowing obstacles for guests during rain showers. - --------------------------------------------------------------------------------------------------------------- Flag poles Condition Recondition flag pole at front canopy entrance. Ensure that flags are in excellent condition. - --------------------------------------------------------------------------------------------------------------- Kitchen/Delivery Screen Condition Shield all delivery activities from guest's view. Repair and repaint existing screening at delivery entrances. Supplement with new, permanent screen walls, fencing and signage designed to keep guests from entering delivery and back of house areas. This includes foot and vehicle traffic. Install landscaping to further shield this area from guests' view. Coordinate design with the new look of the completed renovation. - -----------------------------------------------------------------------------------------------------------------
5 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN-JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/ #2619 JANUARY 12, 1999 - ----------------------------------------------------------------------------------------------------------------- RENTAL UNIT (GST.RM.) BUILDINGS Exterior work is in process. All work must be completed per approved plans. - ----------------------------------------------------------------------------------------------------------------- Steps Condition Repair damaged and cracked steps. Install code compliant handrails. Provide landing at top and bottom of steps. Install ornamental landscaping and lighting at steps and landings. - ----------------------------------------------------------------------------------------------------------------- Entrance doors Condition Construct permanent awning/vestibule/portal at auxiliary entrance doors to signify entry while protecting the guest from the elements during entry. Add landscaping around the new structure. - ----------------------------------------------------------------------------------------------------------------- Service doors Condition Remove all padlocks from service doors. Replace with key and mortise locks. Repair all holes and refinish doors to like new condition. - ----------------------------------------------------------------------------------------------------------------- Elevators/Satellite Dish Condition Shield elevator overrides and machinery from guests view. - ----------------------------------------------------------------------------------------------------------------- Walkways/Pavers Condition Replace and resurface all broken-cracked or otherwise damaged concrete walkways to like new condition. Replace all broken pavers. Provide a consistent finish for all walkways. Provide for proper drainage of walkways to prevent standing water, puddles and flowing obstacles for guests during rain showers. - ----------------------------------------------------------------------------------------------------------------- Railings Condition Replace all existing railings with a new railing system that meets all Bass Hotels & Resorts and uniform building code standards including a 6" wide top cap. Ensure that new railing system meets all code and ADA requirements. - ----------------------------------------------------------------------------------------------------------------- Windows/Doors/Frames Condition Replace and upgrade the existing spandrel and glazing systems on the guest room building. They are worn, dated and energy inefficient. Remove the entire existing exterior guest room bay storefront system. Construct a new metal stud wall with an exterior skin assembly of sheathing and synthetic stucco (drywall finish on the interior) Provide new insulated windows/door units correctly proportioned to the exterior facade, along with a new full blade louver painted to match the stucco color. - ----------------------------------------------------------------------------------------------------------------- HVAC/Grilles Condition Replace existing HVAC grilles with full blade architectural louvers under the new single punched windows. New louvers to match color of and be flush mounted with new synthetic stucco wall system. - ----------------------------------------------------------------------------------------------------------------- Lighting Condition Replace and upgrade all existing balcony and walkway lighting. Conceal all exposed wiring, conduit, wire-mold and other unsightly services in false beams, pilasters or other new construction. Provide additional accent lighting such as concealed up-lighting from landscape beds or building mounted sconces. - -----------------------------------------------------------------------------------------------------------------

6 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN-JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/ #2619 JANUARY 12, 1999 - ----------------------------------------------------------------------------------------------------------------- Site Stairs/Railings/Decks/Paths Condition Ensure that all decking and stairs are in perfect condition. Repair and refinish as necessary. Rebuild path near beach or remove sand. Repair all railings. Demolish old showers and deck or install benches in the old shower area. Repair worn boards. Provide signage to aid guests in finding beach, bikes, restaurant, etc. - ----------------------------------------------------------------------------------------------------------------- Signage Standards Replace all existing directional signage. Provide new professionally designed directional signage that coordinates with the new color scheme of the hotel. Comply with all codes and ADA Requirements. - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- EXTERIOR VENDING AREAS - ----------------------------------------------------------------------------------------------------------------- Floor Condition Install non-slip hard surface treatment such as quarry tile. Provide a barrier-free and durable edge treatment. - ----------------------------------------------------------------------------------------------------------------- Walls Condition Install new wing walls at all exposed vending areas to screen sides and back of vending equipment. Install louvers in side wing walls to ventilate the backs of the vending machines and ice machines. Paint louvers to match the color of the synthetic stucco. Coordinate design and finishes with the new look of the completed renovation. - ----------------------------------------------------------------------------------------------------------------- Lighting Condition Provide additional lighting for the vending alcove. Coordinate with other exterior lighting fixtures. - ----------------------------------------------------------------------------------------------------------------- Vending Equipment Condition Ensure that all outlets are GFIC's. - ----------------------------------------------------------------------------------------------------------------- Ice Machines Condition Repair leaks. - ----------------------------------------------------------------------------------------------------------------- Exposed conduit Condition Conceal all exposed conduit. - ----------------------------------------------------------------------------------------------------------------- Screening Condition Screen backs and sides of all vending machines from guest's view. - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- PARKING - ----------------------------------------------------------------------------------------------------------------- Condition Condition Resurface the entire parking lot to eliminate severe damage and wear. Completely cover exposed rebar as this may damage guests tires. - ----------------------------------------------------------------------------------------------------------------- Striping Condition Following the new surface coat, restripe the entire parking lot with white stripes and blue HC designations and signage. - ----------------------------------------------------------------------------------------------------------------- Lighting Standards Ensure 1 square foot of candle power is provided per standards. Provide adequate lighting levels for a sense of safety. - ----------------------------------------------------------------------------------------------------------------- Curbing Condition Replace all wood curbing throughout the parking areas. Install concrete curbing and drainage systems throughout the entire lot. Provide decorative retaining walls at main entrance curb areas. - ----------------------------------------------------------------------------------------------------------------- Parking islands Standards Enhance landscaped islands to break up the uninterrupted parking area. Provide color and interest in the parking islands. Plant ground cover, plants and shrubs such as vinca minor, ferns, ornamental grasses, liriope, hostas, lilies, lilies of the valley, azaleas and rhododendrons. Install cypress mulch to cover beds. - -----------------------------------------------------------------------------------------------------------------

7 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN-JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/ #2619 JANUARY 12, 1999 - ----------------------------------------------------------------------------------------------------------------- Signage Condition Install directional signage to aid guests to aid guests in finding commercial and guest room areas. Provide lighting to make signage visible at night. - ----------------------------------------------------------------------------------------------------------------- Dumpster Screen Standards Screen all dumpsters, electrical, mechanical, and other equipment from guests view with permanent screen walls and/or landscaping. Coordinate design with the new look of the completed renovation. The use of exposed chain link is unacceptable. - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- LANDSCAPING Standards Portions of existing landscaping are well maintained and attractive, however many areas are not addressed. Enhance and extend landscaping to address the entire site. Standards require that 15% min of the site must be devoted to landscaping. Plant ground cover, plants and shrubs such as vinca minor, ferns, ornamental grasses, liriope, hostas, lilies, lilies of the valley, azaleas and rhododendrons. Install cypress mulch to cover beds. - ----------------------------------------------------------------------------------------------------------------- Primary entrance Competitive Plant flowers and foliage to enhance existing landscaping. Construct berms to break up flat areas. Plant dense screening and colorful landscaping throughout the parking areas. - ----------------------------------------------------------------------------------------------------------------- Commercial Building Competitive Plant flowers and foliage to enhance existing landscaping. - ----------------------------------------------------------------------------------------------------------------- Rental Units Competitive Remove any dead trees, shrubs, and plants. Replace and enhance existing landscaping. Plant low shrubs or leafy borders to accent concrete/paved areas. Add garden benches to courtyard areas to give focus and additional interest. - ----------------------------------------------------------------------------------------------------------------- Property Perimeter Competitive Plant new/additional trees, shrubs, vines and other plants to frame the extents of the property. Replace and upgrade the fence between the Holiday Inn and the adjacent property and provide new, extensive and lush screening landscape on the Holiday Inn side of the new fence. - ----------------------------------------------------------------------------------------------------------------- Swimming Pool Competitive Prune existing shrubs. Plant flowers and foliage to enhance existing landscaping. Install planters with shrubs and plants in barren areas. - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- EXTERIOR SWIMMING POOL - ----------------------------------------------------------------------------------------------------------------- Coping Finish Condition Replace cracked and damaged coping tiles with new updated coping. - ----------------------------------------------------------------------------------------------------------------- Area/decorative lighting Condition Provide a new, upgraded lighting design package which provides safety and decorative lighting. Provide additional accent lighting such as concealed up-lighting from landscape beds, lanterns or building mounted sconces. Remove utilitarian fixtures at each end of pool. - ----------------------------------------------------------------------------------------------------------------- Rest room/shower facility Condition Paint and repair. Remove mats and install pavers or deck for shower use and path. - ----------------------------------------------------------------------------------------------------------------- Drainage(2 drains req.)(vortex) Standards Ensure that drains are anti-vortex drains. Install if needed. - -----------------------------------------------------------------------------------------------------------------

8 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN-JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/ #2619 JANUARY 12, 1999 - ----------------------------------------------------------------------------------------------------------------- Safety equipment Condition Replace and upgrade worn and faded safety equipment to coordinate with new renovation. (Two life preserver rings and a shepherd's hook.) Hang hook in visible location. - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- TENNIS COURTS - ----------------------------------------------------------------------------------------------------------------- Enclosure Condition Repair hole in fence. Replace any rusted fencing. Remove all dead vines from fencing. - ----------------------------------------------------------------------------------------------------------------- Surface Condition Power wash and keep clean of debris. - ----------------------------------------------------------------------------------------------------------------- Netting Condition Remove mildew and dirt. - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- SIGNAGE - ----------------------------------------------------------------------------------------------------------------- Property/Primary (great) sign Condition Refinish cabinet base of great sign. Install base/curbing around bottom of signage to give more prominence to the sign and allow it to coordinate with the rest of the new exterior finishes. Base to include plants and shrubs, and incorporate elements and materials of the new renovation for an overall design effect. - ----------------------------------------------------------------------------------------------------------------- Directional Signage Condition Provide professional signage package, including directional signage throughout the parking areas and from the lobby to each guest room wing and all other amenities. Ensure that new outdoor signage is weather-proof and non-fading. - ----------------------------------------------------------------------------------------------------------------- Rest room/auxiliary signage Condition Provide professional signage package. Satisfy all ADA signage requirements. - -----------------------------------------------------------------------------------------------------------------

9 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN- JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/ #2619 JANUARY 12, 1999 LOBBY/ENTRANCE/FRONT DESK GENERAL DESCRIPTION: The lobby requires a major renovation, including replacement of all floor and ceiling finishes and furniture. Professional design assistance is required. Submit architectural plans, elevations and renderings to Bass Hotels & Resorts for review.
- ----------------------------------------------------------------------------------------------------------------- BASIS FOR REQUIRED AREAS REQUIRE ACTION ACTION CURE/REMEDY - ----------------------------------------------------------------------------------------------------------------- LOBBY/ENTRANCE/FRONT DESK-LIFE Ensure that all life-safety equipment is in perfect working order. - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- LOBBY AND CORRIDORS - ----------------------------------------------------------------------------------------------------------------- Vestibule Doors/Frames Condition See "Exterior" above. - ----------------------------------------------------------------------------------------------------------------- Vestibule Floor Condition Install recessed flooring walk off tread system. Surface mats are unacceptable. Replace all floor finishes. - ----------------------------------------------------------------------------------------------------------------- Vestibule Walls Condition Refurbish all storefront finishes to new condition or replace. - ----------------------------------------------------------------------------------------------------------------- Vestibule Ceiling Condition Replace existing ceiling and grid with new architectural grid and recessed edge ceiling tiles with updated surface texture. Ceiling area was currently under construction and no ceiling finishes were in place. - ----------------------------------------------------------------------------------------------------------------- Directional Signage Condition Install directional signage as described above. - ----------------------------------------------------------------------------------------------------------------- Lobby Ceiling Condition Replace existing ceiling and grid with new architectural grid and recessed edge ceiling tiles with updated surface texture. Install soffits and other ceiling features to give definition to the various lobby and prefunction spaces. Consider installing false columns and railings to break up the immense space. - ----------------------------------------------------------------------------------------------------------------- Lobby Walls Condition Repaint. - ----------------------------------------------------------------------------------------------------------------- Lobby Floors Condition Replace all existing floor tile and carpeting. Install a new combination of carpeting and upgraded floor tile throughout the lobby. Eliminate all walk-off mats. - ----------------------------------------------------------------------------------------------------------------- Window Treatments Condition Install new sheers and appropriate side panels and valance to soften the windows at the courtyard entrance. - ----------------------------------------------------------------------------------------------------------------- Lobby Doors/Frames Condition Repaint doors and frames and replace tarnished hardware to complement the other new finishes in the lobby. - ----------------------------------------------------------------------------------------------------------------- Furnishings Condition Replace all furnishings with updated seating groups and occasional tables. - ----------------------------------------------------------------------------------------------------------------- Ceiling Lighting Condition Install central chandelier or other ceiling light fixtures to give visual interest. - ----------------------------------------------------------------------------------------------------------------- Area Lighting Condition Install varied new accent lighting with end table fixtures, wall sconces, chandeliers or up-lighting concealed in planters. - ----------------------------------------------------------------------------------------------------------------- House Telephone Standards Install a new house phone to coordinate with other new fixtures and furnishings. Install new partitions, counters and seating for house telephones. - -----------------------------------------------------------------------------------------------------------------
10 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN- JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/ #2619 JANUARY 12, 1999 - ----------------------------------------------------------------------------------------------------------------------------------- Public Telephone Standards Install new partitions, counters and seating for public telephones which the other new fixtures and furnishings. - ----------------------------------------------------------------------------------------------------------------------------------- Drinking Fountain Standards Ensure that all codes and ADA requirements are met. - ----------------------------------------------------------------------------------------------------------------------------------- Brochure Area Competitive Relocate brochures to a vending area which is out of plain view of guests but can easily be found with directions. - ----------------------------------------------------------------------------------------------------------------------------------- Administrative Offices, Sales, Condition Remove existing worn and deteriorating ceilings, carpet, Reservations, etc. vinyl, and furniture in office areas. Replace with durable, efficient and attractive furniture and finishes. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- REGISTRATION DESK - ----------------------------------------------------------------------------------------------------------------------------------- Registration desk top & face Condition Replace existing front desk top and facade. Install new, upgraded Front Desk-finishes. Provide a new ADA accessible section at the front desk. Provide synthetic marble/solid surface material counter top. Provide wood, stone or marble front to coordinate with the other new lobby finishes. - ----------------------------------------------------------------------------------------------------------------------------------- Work Area Exposed Standards Ensure that no work areas or equipment are visible by guests. - ----------------------------------------------------------------------------------------------------------------------------------- Ceiling Condition Install new, upgraded ceiling tile system. Coordinate with the other lobby finishes. - ----------------------------------------------------------------------------------------------------------------------------------- Walls Condition Install new wall vinyl. - ----------------------------------------------------------------------------------------------------------------------------------- Floor Condition Install stand-off tile in front of desk. Remove existing worn and deteriorating carpet behind desk and in office areas. - ----------------------------------------------------------------------------------------------------------------------------------- Lighting Condition Install new lighting package with new, open cell, parabolic diffusers for general fluorescent lighting and decorative wall sconces or desk top fixtures for accent lighting. - ----------------------------------------------------------------------------------------------------------------------------------- Signage Condition Install new signage to coordinate with entire signage package and new lobby finishes. - -----------------------------------------------------------------------------------------------------------------------------------

11 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN- JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/ #2619 JANUARY 12, 1999 PUBLIC RESTROOMS GENERAL DESCRIPTION: Public restrooms require a moderate renovation. Professional design assistance is required. Submit architectural plans, elevations and renderings to Bass Hotels & Resorts for review.
- ----------------------------------------------------------------------------------------------------------------------------------- BASIS FOR REQUIRED AREAS REQUIRE ACTION ACTION CURE/REMEDY - ----------------------------------------------------------------------------------------------------------------------------------- PUBLIC RESTROOMS-LIFE SAFETY Ensure that all life-safety equipment is in perfect working order. - ----------------------------------------------------------------------------------------------------------------------------------- Emergency Lighting: Provide emergency lighting. - ----------------------------------------------------------------------------------------------------------------------------------- Visual Heat/Smoke Ensure adequate heat and smoke detectors are present per code Detectors: and standards. - ----------------------------------------------------------------------------------------------------------------------------------- RESTROOM - ----------------------------------------------------------------------------------------------------------------------------------- Accessible Standards Ensure that all public restrooms meet the Americans with Disabilities Act. - ----------------------------------------------------------------------------------------------------------------------------------- Signage Condition Provide new ADA complaint signage for restrooms. - ----------------------------------------------------------------------------------------------------------------------------------- Entry/Door Frame (self Condition Check door closer pressure/speed and re-calibrate as closing) necessary. - ----------------------------------------------------------------------------------------------------------------------------------- Floor/cove base Condition Restore all grout to new condition. - ----------------------------------------------------------------------------------------------------------------------------------- Lighting Condition Replace and upgrade the general lighting with new lighting. This includes the vestibule fixture. - ----------------------------------------------------------------------------------------------------------------------------------- Vanity Condition Recaulk all seams and corners. - ----------------------------------------------------------------------------------------------------------------------------------- Vanity Lighting Condition Install new vanity lighting to enhance the new toilet room configuration and provide decorative accent. - ----------------------------------------------------------------------------------------------------------------------------------- Mirrors Condition Install large (24" x 36" min.) framed mirrors over each sink or single oversized framed mirror over entire vanity. - ----------------------------------------------------------------------------------------------------------------------------------- Soap Dispensers Condition Install wall mounted or under-counter mounted liquid soap dispensers. - ----------------------------------------------------------------------------------------------------------------------------------- Towel/waste receptacles Condition Install additional semi-recessed paper towel dispensers with integral waste receptacles. Surface mounted towel dispenser is unacceptable. - ----------------------------------------------------------------------------------------------------------------------------------- Toilet Partitions and Condition Install new phenolic, stainless steel, or solid surface toilet Hardware partitions and new hardware to complement the new toilet room configuration. - ----------------------------------------------------------------------------------------------------------------------------------- Commodes/Seats Condition Recaulk around all fixtures and replace tarnished or pitted hardware. - ----------------------------------------------------------------------------------------------------------------------------------- Floor Drain Condition Replace or modify to make flush with flooring. - ----------------------------------------------------------------------------------------------------------------------------------- Tile Wall Condition Replace broken, cracked, and pierced wall tiles as found in the Men's Room vanity area. - -----------------------------------------------------------------------------------------------------------------------------------
12 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN- JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/ #2619 JANUARY 12, 1999 FOOD SERVICE FACILITIES GENERAL DESCRIPTION: Restaurant requires a moderate renovation including new tables, chairs, ceiling, buffet top and window treatments. Professional design assistance is required. Submit architectural plans, elevations and renderings to Bass Hotels & Resorts for review.
- ----------------------------------------------------------------------------------------------------------------------------------- BASIS FOR REQUIRED AREAS REQUIRE ACTION ACTION CURE/REMEDY - ----------------------------------------------------------------------------------------------------------------------------------- FOOD SERVICE FACILITIES - LIFE SAFETY Ensure that all life-safety equipment is in perfect working order. - ----------------------------------------------------------------------------------------------------------------------------------- Visual Heat/Smoke Ensure adequate heat and smoke detectors are present per code Detectors: and standards. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- FACILITIES - ----------------------------------------------------------------------------------------------------------------------------------- Entrance Door/Frame Condition Paint and replace hardware as needed. - ----------------------------------------------------------------------------------------------------------------------------------- Entrance vestibule Condition Replace flooring to complement lobby flooring. - ----------------------------------------------------------------------------------------------------------------------------------- Signage Standards Install new signage as part of a comprehensive signage package. - ----------------------------------------------------------------------------------------------------------------------------------- Ceiling Condition Replace existing ceiling and grid with new architectural grid and recessed edge ceiling tiles with updated surface texture. - ----------------------------------------------------------------------------------------------------------------------------------- Walls Condition Repaint all trim as needed. - ----------------------------------------------------------------------------------------------------------------------------------- Floor Condition Replace existing carpet or clean to new condition. Existing carpet is showing tracks of wear. - ----------------------------------------------------------------------------------------------------------------------------------- Window Treatments Condition Install new treatments to coordinate with the new renovation. Blinds are not acceptable. Suggest a plantation shutter style valance and side shutters or a soft, colorful fabric valance and side panels. - ----------------------------------------------------------------------------------------------------------------------------------- Lighting Condition Replace undersized dated ceiling fans with decorative chandeliers. - ----------------------------------------------------------------------------------------------------------------------------------- Host/Cashier Station Condition Hostess stand and vestibule require a full renovation. Replace all furnishings, fixtures and equipment. Ensure that no work areas are visible by guests and that all ADA guidelines are met. Update look to complement the design of the adjacent areas. - ----------------------------------------------------------------------------------------------------------------------------------- Chairs Condition At time of next replacement, provide chairs with fabric upholstered seats and backs. - ----------------------------------------------------------------------------------------------------------------------------------- HVAC Condition Clean and repaint all ceiling grilles. - -----------------------------------------------------------------------------------------------------------------------------------
13 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN- JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/ #2619 JANUARY 12, 1999 LOUNGE FACILITIES GENERAL DESCRIPTION: The Lounge requires a major renovation. Professional design assistance is required. Submit architectural plans, elevations and renderings to Bass Hotels & Resorts for review.
- ----------------------------------------------------------------------------------------------------------------------------------- BASIS FOR REQUIRED AREAS REQUIRE ACTION ACTION CURE/REMEDY - ----------------------------------------------------------------------------------------------------------------------------------- LOUNGE FACILITIES - LIFE SAFETY Ensure that all emergency equipment is functioning properly. - ----------------------------------------------------------------------------------------------------------------------------------- Exit Signs: Sign on right is not lit. Replace or repair. All Signs must match. - ----------------------------------------------------------------------------------------------------------------------------------- Visual Heat/Smoke Ensure adequate heat and smoke detectors are present per code Detectors: and standards. - ----------------------------------------------------------------------------------------------------------------------------------- Req. Number of Exits: Ensure that number of exits satisfies all code and Bass Hotels & Resorts requirements. - ----------------------------------------------------------------------------------------------------------------------------------- FACILITIES - ----------------------------------------------------------------------------------------------------------------------------------- Entrance Door/Frame Condition Paint and replace hardware as needed. - ----------------------------------------------------------------------------------------------------------------------------------- Signage Standards Install signage as part of a comprehensive signage package. - ----------------------------------------------------------------------------------------------------------------------------------- Ceiling Condition Replace existing ceiling and grid with new architectural grid and recessed edge ceiling tiles with updated surface texture. Install dropped soffits to increase interest and break up the flat expanse of ceiling. - ----------------------------------------------------------------------------------------------------------------------------------- Floor Condition Replace carpet. Repair any worn flooring. Provide barrier free access to all areas including dance floor. - ----------------------------------------------------------------------------------------------------------------------------------- Window Treatments Condition Install new treatments to coordinate with the new renovation. Blinds are not acceptable. Suggest a plantation shutter style valance and side shutters or a soft, colorful fabric valance and side panels. - ----------------------------------------------------------------------------------------------------------------------------------- Lighting Condition Install decorative table top lighting or pendant fixtures. - ----------------------------------------------------------------------------------------------------------------------------------- Tables Condition Replace all tables. Provide an updated style to complement the overall scheme of the lounge. - ----------------------------------------------------------------------------------------------------------------------------------- Chairs Condition Repair all chairs to new condition. Provide an updated style fabric to complement the overall scheme of the lounge. Provide fabric upholstered seat and back. - ----------------------------------------------------------------------------------------------------------------------------------- Bar Top/Rail/Facing Condition Paint as needed. - ----------------------------------------------------------------------------------------------------------------------------------- Back Bar Condition Conceal all work areas from guest view. - ----------------------------------------------------------------------------------------------------------------------------------- Bar Equipment Condition Conceal all work areas from guest view. - ----------------------------------------------------------------------------------------------------------------------------------- HVAC Condition Clean and repaint all grilles. - ----------------------------------------------------------------------------------------------------------------------------------- Stage/Dance Floor Condition Repair and refinish dance floor to like new condition. Provide ADA access to all areas. Remove moss and other decor at stage. Replace black 2 x 4 railing with decorative screen or rail. - ----------------------------------------------------------------------------------------------------------------------------------- Bar Stools Condition Upon replacement, install bar stools to coordinate with new chairs. - -----------------------------------------------------------------------------------------------------------------------------------
14 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN- JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/ #2619 JANUARY 12, 1999 - ----------------------------------------------------------------------------------------------------------------------------------- Television Enclosures Condition, Construct wing walls. All machines must /Vending Machines Standards have their sides screened from view with permanent screen walls or cabinetry. - -----------------------------------------------------------------------------------------------------------------------------------

15 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN-JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/ #2619 JANUARY 12, 1999 MEETING/BANQUET ROOMS GENERAL DESCRIPTION: Meeting Rooms require a moderate renovation. Professional design assistance is required. Submit architectural plans, elevations and renderings to Bass Hotels & Resorts for review.
- ----------------------------------------------------------------------------------------------------------------------------------- BASIS FOR REQUIRED AREAS REQUIRE ACTION ACTION CURE/REMEDY - ----------------------------------------------------------------------------------------------------------------------------------- MEETING/BANQUET ROOMS-LIFE SAFETY Ensure that all life-safety equipment is in perfect working order. - ----------------------------------------------------------------------------------------------------------------------------------- Req. Number of Exits: Ensure that # of exits satisfies all code and Bass Hotels & Resorts requirements. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- MEETING/BANQUET FACILITIES - ----------------------------------------------------------------------------------------------------------------------------------- Door Hardware/Frames Condition Replace damaged/tarnished doors, frames and hardware. Repaint all other doors and trim. - ----------------------------------------------------------------------------------------------------------------------------------- Door Signage Standards Install new signage as part of a comprehensive signage package. Meet all ADA requirements. - ----------------------------------------------------------------------------------------------------------------------------------- Door Viewer Standards Install door viewers into meeting rooms. Meet all ADA requirements. - ----------------------------------------------------------------------------------------------------------------------------------- Ceiling Condition Replace existing ceiling and grid with new architectural grid and recessed edge ceiling tiles with updated surface texture. Tiles are mismatched and some are stained. All require an updated texture. Repaint tray ceilings as necessary. - ----------------------------------------------------------------------------------------------------------------------------------- Partitions (50 STC Min.) Standards Test and address any deficiencies in the sound transmission of the partitions. - ----------------------------------------------------------------------------------------------------------------------------------- Tables Condition Replace any damaged tables. - ----------------------------------------------------------------------------------------------------------------------------------- Chairs Condition Professionally clean all chairs and replace/recover any that are permanently damaged/stained. - ----------------------------------------------------------------------------------------------------------------------------------- HVAC Condition Clean and repaint all grilles. - ----------------------------------------------------------------------------------------------------------------------------------- Kitchen Access Condition Repair all kitchen doors, trim and frames to complement the new decor. Provide professional closure for the moveable partition track opening/door. Clean-up, repaint, and add lighting to service corridor and provide access to all emergency equipment and adequate exit corridor clearances. Repair any broken and chipped flooring. - ----------------------------------------------------------------------------------------------------------------------------------- Window Treatment (Blackout Standards Replace all window treatments with new treatments to Capability) complement the overall scheme of the meeting rooms. Provide blackout panels. - -----------------------------------------------------------------------------------------------------------------------------------
16 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN-JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/ #2619 JANUARY 12, 1999 HOLIDOMES/ATRIUMS/POOL ENCLOSURES GENERAL DESCRIPTION:
- ----------------------------------------------------------------------------------------------------------------------------------- AREAS REQUIRE ACTION BASIS FOR REQUIRED ACTION CURE/REMEDY - ----------------------------------------------------------------------------------------------------------------------------------- HOLIDOMES/ATRIUMS/POOL ENCLOSURES- Ensure that all life-safety equipment is in perfect LIFE-SAFETY working order. - ----------------------------------------------------------------------------------------------------------------------------------- FITNESS ROOM Furnish per the Holiday Inn "Fitness Center Guidelines /Standards" manual. Replace all finishes to meet these standards. - ----------------------------------------------------------------------------------------------------------------------------------- Ceiling Standards Minimum 8' high, 10' recommended. - ----------------------------------------------------------------------------------------------------------------------------------- Walls Standards Provide one fully mirrored wall. Install Plexture or vinyl wallcovering per standards on other walls. - ----------------------------------------------------------------------------------------------------------------------------------- Floor Standards Provide a minimum 28 oz. carpet per Fitness Center standards. - ----------------------------------------------------------------------------------------------------------------------------------- Door/Frame (elec. Lock) Standards Provide with electronic lock. - ----------------------------------------------------------------------------------------------------------------------------------- Visual access Standards Provide a glass door, door viewer or window with a minimum of 144 sq. in of continuous viewing space. - ----------------------------------------------------------------------------------------------------------------------------------- HVAC Standards Provide to maintain a constant 68-72 degrees Fahrenheit temperature. - ----------------------------------------------------------------------------------------------------------------------------------- Exercise Equipment Standards 3 pieces of brand name exercise equipment are required, such (minimum 3, depending on size of hotel) as Lifecycle, Stairmaster and Nordic-track. Minimum 2 treadmills and 1 upright bike required. Include equipment instructions. - ----------------------------------------------------------------------------------------------------------------------------------- House Telephone Standards Provide a house phone that rings directly to the switchboard. - ----------------------------------------------------------------------------------------------------------------------------------- Magazine Rack Competitive Recommend to provide. - ----------------------------------------------------------------------------------------------------------------------------------- Drinking Water Standards Provide a chilled drinking water fountain or chilled bottled water cooler per standards. - ----------------------------------------------------------------------------------------------------------------------------------- Towels and towel racks Standards Provide per the Holiday Inn Fitness Center Guidelines/Standards - ----------------------------------------------------------------------------------------------------------------------------------- Area map Standards Provide a detailed map of the area around the hotel showing streets, landmarks a distances, including 1, 3 and 6 mile routes. - ----------------------------------------------------------------------------------------------------------------------------------- Clock Standards A wall mounted minimum size 14" diameter clock is required. - ----------------------------------------------------------------------------------------------------------------------------------- TV Standards Provide a 25" minimum size T.V. - ----------------------------------------------------------------------------------------------------------------------------------- Artwork Competitive Provide colorful graphics with a sports theme - ----------------------------------------------------------------------------------------------------------------------------------- Scale Standards Provide per standards. - ----------------------------------------------------------------------------------------------------------------------------------- Lighting Standards Provide 50-60 foot-candles of ambient neutral color temperature fluorescent lighting per standards. - -----------------------------------------------------------------------------------------------------------------------------------
17 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN-JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/ #2619 JANUARY 12, 1999 KITCHEN GENERAL DESCRIPTION: The kitchen requires the following renovation and upgrades:
- ----------------------------------------------------------------------------------------------------------------------------------- BASIS FOR REQUIRED AREAS REQUIRE ACTION ACTION CURE/REMEDY - ----------------------------------------------------------------------------------------------------------------------------------- KITCHEN-LIFE SAFETY Ensure that all equipment is in perfect working order. - ----------------------------------------------------------------------------------------------------------------------------------- Emergency Lighting: Ensure emergency lighting is provided. - ----------------------------------------------------------------------------------------------------------------------------------- Exit Signs: Ensure adequate exit signage is provided per standards and codes. Ensure bright illumination. - ----------------------------------------------------------------------------------------------------------------------------------- Panic Hardware: Provide panic hardware at all exit doors - ----------------------------------------------------------------------------------------------------------------------------------- Fire Separation: Ensure area meets fire separation requirements per codes and standards. - ----------------------------------------------------------------------------------------------------------------------------------- Heat/Smoke Detectors: Ensure adequate heat and smoke detectors are present per code and standards. - ----------------------------------------------------------------------------------------------------------------------------------- Manual Pull Stations: Ensure manual pull stations are present per code and standards. - ---------------------------------------------------------------------------------------------------------------------------------- - Req. Number of Exits: Ensure that # of exits satisfies all code and Bass Hotels & Resorts requirements. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- FACILITIES Clean all surfaces. - ----------------------------------------------------------------------------------------------------------------------------------- Walls Condition Clean and paint existing walls. - ----------------------------------------------------------------------------------------------------------------------------------- Dish/Wash Walls Condition Repair damaged walls and re-tile. Recondition all grout and re-caulk. - ----------------------------------------------------------------------------------------------------------------------------------- Floor (non-skid) Condition Replace all broken and chipped tiles. Restore grout to like new condition. - ----------------------------------------------------------------------------------------------------------------------------------- Mats Condition Clean all mats and replace damaged mats. - ----------------------------------------------------------------------------------------------------------------------------------- Storage Condition Replace any rusted racks and equipment. - ----------------------------------------------------------------------------------------------------------------------------------- Reach-ins Condition Repair or replace damaged or rusty equipment. - ----------------------------------------------------------------------------------------------------------------------------------- Walk-ins Condition Repair or replace damaged threshold and rusty equipment. - -----------------------------------------------------------------------------------------------------------------------------------
18 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN-JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/ #2619 JANUARY 12, 1999 INTERIOR CORRIDORS GENERAL DESCRIPTION: All interior corridors require a full renovation. Professional design assistance is required. Submit architectural plans, elevations and renderings to Bass Hotels & Resorts for review.
- ----------------------------------------------------------------------------------------------------------------------------------- BASIS FOR REQUIRED ACTION AREAS REQUIRE ACTION CURE/REMEDY - ----------------------------------------------------------------------------------------------------------------------------------- INTERIOR CORRIDORS-LIFE SAFETY Ensure that all emergency equipment is functioning properly. - ----------------------------------------------------------------------------------------------------------------------------------- Exit Signs: Ensure adequate exit signage is provided per standards and codes. Ensure bright illumination. - ----------------------------------------------------------------------------------------------------------------------------------- Panic Hardware: Remove door knobs from stairwell doors and install panic bar hardware. - ----------------------------------------------------------------------------------------------------------------------------------- Visual Heat/Smoke Ensure adequate heat and smoke detectors are present per code Detectors: and standards. - ----------------------------------------------------------------------------------------------------------------------------------- Manual Pull Stations: Ensure manual pull stations are present per code and standards. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- CORRIDOR - ----------------------------------------------------------------------------------------------------------------------------------- Signage Condition Install ADA compliant signage. - ----------------------------------------------------------------------------------------------------------------------------------- Ceiling Condition Paint existing ceiling. Conceal all exposed conduit. - ----------------------------------------------------------------------------------------------------------------------------------- Walls Condition Replace all wall vinyl with new updated vinyl. - ----------------------------------------------------------------------------------------------------------------------------------- Entrance Door Condition Refinish all decks and entrance walkways. Replace all tarnished, damaged or mismatched hardware or doors. All hardware must be commercial grade hardware of the same material and finish. - ----------------------------------------------------------------------------------------------------------------------------------- Misc. Doors Condition Replace as stated above. - ----------------------------------------------------------------------------------------------------------------------------------- Floor Condition Replace and upgrade all carpet and tile. The existing carpet is stained and worn. The tile is dated. - ----------------------------------------------------------------------------------------------------------------------------------- Lighting Condition Replace and add new wall sconces. Existing sconces are outdated and do not provide enough soft corridor lighting. Many are too high on the walls. Sconces in the north most building are acceptable style, however, these are even spaced too far to provide enough light in the corridors. Increase light levels in all buildings. - ----------------------------------------------------------------------------------------------------------------------------------- HVAC Condition Clean and refinish all grilles. - ----------------------------------------------------------------------------------------------------------------------------------- Decor Condition Install appropriate decor throughout all corridors to give interest and color. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- VENDING - ----------------------------------------------------------------------------------------------------------------------------------- Ceiling Condition Repaint existing ceiling. - ----------------------------------------------------------------------------------------------------------------------------------- Walls Condition Replace vinyl with new vinyl. Coordinate design and finishes with the new look of the completed renovation. - ----------------------------------------------------------------------------------------------------------------------------------- Floor Condition Install non-slip hard surface treatment such as quarry tile. Provide a barrier-free and durable edge treatment. - -----------------------------------------------------------------------------------------------------------------------------------
19 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN-JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/ #2619 JANUARY 12, 1999 - ----------------------------------------------------------------------------------------------------------------------------------- Lighting Condition Provide additional lighting for the vending area. Coordinate with other interior lighting fixtures. - ----------------------------------------------------------------------------------------------------------------------------------- Exposed conduit Competitive, Conceal all exposed conduit and equipment power cords. Standards - ----------------------------------------------------------------------------------------------------------------------------------- Vending Machines (grounded) Condition Ensure that all outlets are GFIC's. Shift equipment so that outlets are hidden from view. Relocate vending machines from lobby vestibule to vending area. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- STAIRWELLS - ----------------------------------------------------------------------------------------------------------------------------------- Doors/hardware Condition Provide panic bar exit hardware. - ----------------------------------------------------------------------------------------------------------------------------------- Walls Condition Conceal exposed block. - ----------------------------------------------------------------------------------------------------------------------------------- Ceiling Condition Repaint all ceilings. - ----------------------------------------------------------------------------------------------------------------------------------- Landings Condition Replace carpet. - ----------------------------------------------------------------------------------------------------------------------------------- Handrails Condition Return all railings to wall. Provide commercial grade railings that conform to all applicable codes and ADA guidelines. - ----------------------------------------------------------------------------------------------------------------------------------- Lighting Condition Replace and upgrade light fixtures in stairwells. Conceal all exposed conduit. - ----------------------------------------------------------------------------------------------------------------------------------- Signage Standards Update to comply with ADA requirements. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- GUEST LAUNDRY - ----------------------------------------------------------------------------------------------------------------------------------- Walls Condition Replace and upgrade vinyl. Cover or remove paneling. Install upgraded artwork. - ----------------------------------------------------------------------------------------------------------------------------------- Lighting Condition Install updated cover for fluorescent tube lighting. - ----------------------------------------------------------------------------------------------------------------------------------- Exposed conduit & ductwork Standards Conceal all exposed conduit. Provide GFIC outlets. - ----------------------------------------------------------------------------------------------------------------------------------- Signage Standards Install ADA compliant signage. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- ELEVATOR LOBBY - ----------------------------------------------------------------------------------------------------------------------------------- Ceiling Condition Paint. - ----------------------------------------------------------------------------------------------------------------------------------- Walls Condition Install new vinyl wall covering. - ----------------------------------------------------------------------------------------------------------------------------------- Floor Competitive Install upgraded tile or border accented carpet at elevators to define the lobby area from the corridor. Install framed wall mirrors and console tables to give visual interest to the lobbies. - ----------------------------------------------------------------------------------------------------------------------------------- Lighting Condition Provide accent lighting such as updated sconces on the sides of the framed mirror or a table lamp for the console table. - ----------------------------------------------------------------------------------------------------------------------------------- Door/Frames Condition Replace all door hardware and repaint auxiliary doors. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- ELEVATORS Ensure elevators meet ADA and other code requirements. - ----------------------------------------------------------------------------------------------------------------------------------- Door Finish Condition Rub out scratches on elevator doors. - ----------------------------------------------------------------------------------------------------------------------------------- Ceiling Condition Replace and upgrade. - ----------------------------------------------------------------------------------------------------------------------------------- Walls Condition Replace dated and damaged laminate panels. Suggest a panel style wall similar to the lobby panel walls constructed out of a solid surface material for durability. - ----------------------------------------------------------------------------------------------------------------------------------- Floor Finish Condition Replace stained carpet. Replace scratched threshold. - ----------------------------------------------------------------------------------------------------------------------------------- Grab Bars Condition Replace to coordinate with new walls. - ----------------------------------------------------------------------------------------------------------------------------------- Lighting Condition Replace to coordinate with new walls. - -----------------------------------------------------------------------------------------------------------------------------------

20 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN-JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/ #2619 JANUARY 12, 1999 - ----------------------------------------------------------------------------------------------------------------------------------- Control Panels Condition Clean-up. Remove scratches. Replace broken buttons. - -----------------------------------------------------------------------------------------------------------------------------------

21 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN-JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/#2619 JANUARY 12, 1999 GUEST ROOMS GENERAL DESCRIPTION: The guest rooms require a major renovation. All case goods and soft goods require replacement in buildings 1, 2, and 5 and 36 rooms in building 3. The other 12 rooms in building 3 and all of building 4 are in acceptable condition and require only maintenance and repair until they are converted to meet Standardized Room Decor requirements in 2002. Following this renovation, all guest rooms must be in a consistent, "like new", condition. Professional design assistance is required. Submit all plans for review prior to the renovation.
- ------------------------------------------------------------------------------------------------------------------------------------ BASIS FOR REQUIRED AREAS REQUIRE ACTION ACTION CURE/REMEDY - ------------------------------------------------------------------------------------------------------------------------------------ GUEST ROOMS - LIFE SAFETY Ensure that all life-safety equipment is in perfect working order. - ------------------------------------------------------------------------------------------------------------------------------------ Visual Heat/Smoke Provide approved hardwired Detectors in ADA rooms speaker/strobe heat/smoke detectors in ADA rooms. - ------------------------------------------------------------------------------------------------------------------------------------ STRUCTURE BASE BUILDING Doors/Hardware Condition Replace all sliding doors in conjunction with the new storefront replacement. Replace any rusted frames or damaged doors. - ------------------------------------------------------------------------------------------------------------------------------------ Door Numbers Condition Replace existing room numbers with a new upgraded ADA sign package. Currently signs are affixed to clear plaques which are screwed into wall finish. The screws are visible and unsightly. Develop another system for anchoring these room signs which is both attractive and vandal resistant. - ------------------------------------------------------------------------------------------------------------------------------------ Entry Door Locksets Condition Ensure that entry door locksets are in excellent condition and that they open properly by pushing the lever downward. - ------------------------------------------------------------------------------------------------------------------------------------ Safety Latch Condition Ensure that safety latches are in excellent condition. - ------------------------------------------------------------------------------------------------------------------------------------ Connecting Doors/hardware Condition Refinish doors to "like new" condition or replace. Provide lever (2 solid core) type door handles at accessible rooms. All door hardware must be the same finish and commercial grade. Remove all foam sound tape and replace with rubber sound insulation strips at all connecting doors. - ------------------------------------------------------------------------------------------------------------------------------------ Soundproofing Condition Install rubber sound insulation strips on all door frames. Provide door sweeps where light is visible beneath doors. - ------------------------------------------------------------------------------------------------------------------------------------ Electrical Outlets Condition Provide accessible and available outlets in all rooms for guests use. All outlets are currently being utilized by room equipment or are inaccessible. - ------------------------------------------------------------------------------------------------------------------------------------ Windows/Sills Condition Replace aluminium storefront with a new exterior synthetic stucco wall system and new punched window openings with energy efficient window/door systems. Current window system has cloudy glass panels, mildewed and stained caulking, damaged doors and tracks and pitted, peeling frames. - ------------------------------------------------------------------------------------------------------------------------------------ Service vanity/kitchenette Condition Replace and upgrade. Install solid surface countertop and coordinating cabinets and appliances. - ------------------------------------------------------------------------------------------------------------------------------------
22 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN-JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/ #2619 JANUARY 12, 1999 - ------------------------------------------------------------------------------------------------------------------------------------ INTERIOR BUILDING FINISHES/LIGHTING - ------------------------------------------------------------------------------------------------------------------------------------ Ceiling Condition Repaint and repair ceilings where stains and patches are visible. - ------------------------------------------------------------------------------------------------------------------------------------ Walls Condition Replace all wall finishes with new wall vinyl or stucco finish that conforms to the Standardized Room Decor Package requirements. - ------------------------------------------------------------------------------------------------------------------------------------ Floor/Base Condition Replace all carpet with new carpet that conforms to the Standardized Room Decor Package requirements. This refers to every guest room. Install vinyl or matching carpet wall base on all guest room walls. - ------------------------------------------------------------------------------------------------------------------------------------ Lighting Condition Replace all lamps and light fixtures. This refers to every guest room in buildings 1, 2, and 5 and the 36 rooms of old fixtures in buildings 3. Install a new coordinated lamp package that conforms to the Standardized Room Decor Package requirements. Replace the remainder of the fixtures by the 2002 compliance date. - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ SOFT GOODS Install a new coordinated soft goods package that conforms to the Standardized Room Decor Package requirements in buildings 1, 2, and 5 and the 36 rooms of old fixtures in building 3. Replace the remainder of the fixtures by the 2002 compliance date. - ------------------------------------------------------------------------------------------------------------------------------------ Window Treatment Condition Replace all window treatments as described above. - ------------------------------------------------------------------------------------------------------------------------------------ Pillows Condition Replace any worn, flat pillows. - ------------------------------------------------------------------------------------------------------------------------------------ Linens Condition Replace any worn, and faded linens. - ------------------------------------------------------------------------------------------------------------------------------------ Bedspreads Condition Replace all bedspreads as described above. - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ CASE GOODS Competitive Condition Standards Replace all casegoods including seating, mirrors, and artwork due to age, poor condition and a noncompetitive appearance. Install a new coordinated case goods package that conforms to the Standardized Room Decor Package requirements. The Thomasville casegoods are acceptable for the interim as long as they are in excellent condition. Any damaged pieces must be replaced or refinished to new condition. All other casegood packages (Stanley, Dillingham, etc.) require replacement immediately. - ------------------------------------------------------------------------------------------------------------------------------------ Armoire Condition Install new armoires. - ------------------------------------------------------------------------------------------------------------------------------------ Night Stands Condition Replace all night stands. - ------------------------------------------------------------------------------------------------------------------------------------ Lounge Chair Condition Replace all lounge chairs. - ------------------------------------------------------------------------------------------------------------------------------------ Headboards Condition Replace all headboards. - ------------------------------------------------------------------------------------------------------------------------------------ Credenza Mirror (15" x 31") Condition Install framed credenza mirrors. - ------------------------------------------------------------------------------------------------------------------------------------ Full - Length Mirror (24" Condition Install framed full length mirrors. x 60") - ------------------------------------------------------------------------------------------------------------------------------------ Coffee Table Condition Replace all coffee tables. - ------------------------------------------------------------------------------------------------------------------------------------ Credenza Condition Remove all credenzas. - ------------------------------------------------------------------------------------------------------------------------------------ Desk Condition Replace all desks. - ------------------------------------------------------------------------------------------------------------------------------------

23 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN-JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/ #2619 JANUARY 12, 1999 - ------------------------------------------------------------------------------------------------------------------------------------ DESK CHAIR Condition Replace all desk chairs. - ------------------------------------------------------------------------------------------------------------------------------------ Activity Table (1100 Sq. Condition Replace all activity tables. Inches) - ------------------------------------------------------------------------------------------------------------------------------------ Activity Chair Condition Replace all activity chairs. - ------------------------------------------------------------------------------------------------------------------------------------ Sofa Condition Replace all sofas. - ------------------------------------------------------------------------------------------------------------------------------------ Artwork Condition Replace all artwork. - ------------------------------------------------------------------------------------------------------------------------------------ Mattresses Condition Replace all worn sleep sets. - ------------------------------------------------------------------------------------------------------------------------------------ Luggage Bench Condition Install new upholstered luggage benches that meet standards. - ------------------------------------------------------------------------------------------------------------------------------------ Sleeper Sofa Condition Replace all sleeper sofas. - ------------------------------------------------------------------------------------------------------------------------------------ Bed Frame Condition Open bed frames are required in wheelchair accessible guests rooms. - ------------------------------------------------------------------------------------------------------------------------------------ Coat Rack Condition Replace all coat racks per SRD program. - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ EQUIPMENT - ------------------------------------------------------------------------------------------------------------------------------------ HVAC Condition Replace any worn, damaged, and noisy units as needed. Replace warped wood trim and damaged caulk around units and repaint. - ------------------------------------------------------------------------------------------------------------------------------------ Televisions (25") Standards Replace all undersized TV sets with new 25" models. All guest rooms must have 25" TV sets per standards. - ------------------------------------------------------------------------------------------------------------------------------------ Console Telephone (14' Standards Ensure that all telephones are equipped with 14 foot cords, Cord)/data port voice messaging capabilities two lines and data ports. - ------------------------------------------------------------------------------------------------------------------------------------ Refrigerator Condition All must be in excellent condition. Refinish fronts of refrigerators to match the casegoods or the millwork which houses them. Provide millwork or cabinetry with solid surface countertop. - ------------------------------------------------------------------------------------------------------------------------------------ Microwave Condition All must be in excellent condition. - ------------------------------------------------------------------------------------------------------------------------------------ Coffee Makers Standards Provide tray per standards. - ------------------------------------------------------------------------------------------------------------------------------------ Items to be removed Condition Remove all cook tops. - ------------------------------------------------------------------------------------------------------------------------------------ Fire Evacuation Plan Standards Install updated plans that coordinate with the signage package. - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ ACCESSIBLE ROOMS Accessible rooms are required by the ADA Guidelines and the Bass Hotels & Resorts Standards. Check those documents for exact number of required accessible rooms and other exact requirements. - ------------------------------------------------------------------------------------------------------------------------------------ Doors/Hardware Standards Install 32" clear with doors at all locations. Install lever type handles on all doors, including both connecting door handles. Install door viewers at high and low height. - ------------------------------------------------------------------------------------------------------------------------------------ Bed Frame Condition Open bed frames are required in wheelchair accessible guest rooms. - ------------------------------------------------------------------------------------------------------------------------------------ Clothes rack, thermostat, Standards Install all accessories and controls in accordance with the robe hooks, shower maximum mounting height of 54'' above floor in a side reach controls, window treatment situation or 48" above floor in a forward reach situation. For wands, wall mounted iron, instance, coat racks would need to be moved down to alllow etc. shelving to be accessed. Another solution would be to install another coat rack at this lower height in the alcove located next to the nightstand. - ------------------------------------------------------------------------------------------------------------------------------------

24 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN-JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/# 2619 JANUARY 12, 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Controls, locks, switches, etc. Standards Controls and operating mechanisms shall be operable with one hand and shall not require tight grasping, pinching, or twisting of the wrist. The force required to activate controls shall be no greater than 5 lbf. (see ADA guidelines) For example, light fixtures require push button controls rather that twist on controls. Also, install secondary latch, rather than chain at entry and connecting doors. - ------------------------------------------------------------------------------------------------------------------------------------ Maneuvering space Standards Provide 36" clear width maneuvering space located along both sides of a sole bed or a 36" clear width maneuvering space between a pair of beds. Provide an accessible route to all controls, doors, windows, closets, electronics, etc. - ------------------------------------------------------------------------------------------------------------------------------------ Bath rooms Standards Accessible bathrooms and roll-in showers are required by the ADA Guidelines and the Bass Hotels & Resorts Standards. Check those documents for exact bathroom guidelines and number of required roll-in showers. Install the required number of roll-in showers. For example, verify proper grab bar location and height and provide anti-scald insulation around all sink piping. - ------------------------------------------------------------------------------------------------------------------------------------

25 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN-JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/ #2619 JANUARY 12, 1999 GUEST ROOM BATHS GENERAL DESCRIPTION: The guest bathrooms require a major renovation. Professional design assistance is required. Submit all plans for review prior to renovation.
BASIS FOR REQUIRED AREAS REQUIRE ACTION ACTION CURE/REMEDY - -------------------- --------- ----------- - ------------------------------------------------------------------------------------------------------------------------------------ FACILITIES - ------------------------------------------------------------------------------------------------------------------------------------ Entry Doors/frames Condition Refinish and repaint interior doors to like new condition or replace. Many are rusted and require replacement or sanding down to bare metal and refinishing. - ------------------------------------------------------------------------------------------------------------------------------------ Robe Hook Condition Replace any tarnished, painted or pitted robe hooks. - ------------------------------------------------------------------------------------------------------------------------------------ Floor Treatment (tile) Condition Replace all small (1" x 1") floor tile with a 4" x 4" min neutral colored tile. Recondition grout to like new condition in all rooms. - ------------------------------------------------------------------------------------------------------------------------------------ Walls Condition Patch all holes in walls. Replace all vinyl with new vinyl or synthetic stucco finish. - ------------------------------------------------------------------------------------------------------------------------------------ Ceiling Condition Repair, refinish and paint all damaged or stained ceilings. - ------------------------------------------------------------------------------------------------------------------------------------ Lighting Condition Replace and upgrade all old general light fixtures to provide adequate illumination level. - ------------------------------------------------------------------------------------------------------------------------------------ Vanities Condition Replace all old laminate vanities. Install new cultured marble or solid surface vanities in a neutral tone. New vanities cannot utilize a visible support leg. - ------------------------------------------------------------------------------------------------------------------------------------ Sinks Condition Ensure that all sinks in building 4 and the 12 new sinks in building 3 are in excellent condition. Replace any marginal sinks. Replace all sinks with metal trim band and top mounted sinks with undermounted dripless sinks as found in building 4. - ------------------------------------------------------------------------------------------------------------------------------------ Vanity Hardware Condition Replace all vanity hardware in conjunction with the new vanity installation. Install single lever chrome anti-scald fixtures. (no acrylic fixtures) Replace tarnished or pitted drains. - ------------------------------------------------------------------------------------------------------------------------------------ Facial Tissue Dispenser Condition Provide recessed wall unit or integral vanity fascia unit in new vanities. - ------------------------------------------------------------------------------------------------------------------------------------ Vanity Lighting Condition Replace and upgrade vanity lighting. - ------------------------------------------------------------------------------------------------------------------------------------ Vanity Mirrors Condition Replace vanity mirrors with framed mirrors. - ------------------------------------------------------------------------------------------------------------------------------------ Bathtubs Condition Replace any discolored, worn, damaged or severely stained tubs. Remove slip strips, glue and grime from all tubs. Provide new, upgraded non-slip feature in all tubs. Replace chipped tubs and tubs with old hardware, such as found in room 401. - ------------------------------------------------------------------------------------------------------------------------------------ Tub Enclosure Walls Condition Replace all caulking and grout as needed. - ------------------------------------------------------------------------------------------------------------------------------------ Bathtub Hardware Condition Replace all bathtub hardware with new, single-lever, anti-scald fixtures. - ------------------------------------------------------------------------------------------------------------------------------------
26 PROPOSED LICENSE RENEWAL OF THE HOLIDAY INN-JEKYLL OCEANSIDE, JEKYLL ISLAND, GA/ #2619 JANUARY 12, 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Commode Condition Ensure that all commodes are in excellent condition. Replace any marginal commodes. Replace all commode seats, caulk, hardware and exposed piping to restore commodes to like new condition. - ------------------------------------------------------------------------------------------------------------------------------------ Reserve Tissue Dispenser Standards Install reserve roll tissue dispenser in each bathroom where missing damaged or pitted. - ------------------------------------------------------------------------------------------------------------------------------------ Mechanical Exhaust Condition Clean and repaint as needed. - ------------------------------------------------------------------------------------------------------------------------------------ Artwork Condition Install artwork to provide interest on blank walls. - ------------------------------------------------------------------------------------------------------------------------------------ Shower Curtain/Rod Condition Replace any pitted, tarnished or rusty shower rods, fasteners, or hardware. In each room, all curtain rings must match. - ------------------------------------------------------------------------------------------------------------------------------------ Shower head Standards Ensure that shower heads are six feet above drain, minimum. - ------------------------------------------------------------------------------------------------------------------------------------ Grab Bars Condition Replace old bars with new. - ------------------------------------------------------------------------------------------------------------------------------------

27 EXHIBIT E GROUND LESSOR ESTOPPEL EXHIBIT E ACKNOWLEDGEMENT, ESTOPPEL CERTIFICATE AND AGREEMENT (HOLIDAY INN, SHEFFIELD, ALABAMA) THIS ACKNOWLEDGMENT, ESTOPPEL CERTIFICATE AND AGREEMENT ("Agreement") is executed and delivered as of the____ day of______, 2002, among THE CITY OF SHEFFIELD ("Landlord"), MERRILL LYNCH MORTGAGE LENDING, INC., its successors and/or assigns ("Lender"), and SHEFFIELD MOTEL ENTERPRISES, INC. ("Tenant"). WHEREAS, Landlord has heretofore leased certain lands described on Exhibit "A" attached hereto (hereinafter the "Premises") to Tenant pursuant to an agreement of lease dated February 6, 1981, which lease was recorded February 16, 1981, in Deed Book 391, page 79 in the Office of the Judge of Probate of Colbert County, Alabama (such lease, as amended, and as it may be further amended and assigned from time to time, hereinafter the "Lease"); WHEREAS, Tenant is desirous of obtaining from Lender a loan (the "Loan") secured by a first leasehold mortgage upon Tenant's interest as tenant in the Lease. WHEREAS, Lender is unwilling to make the Loan unless Landlord reaffirms to Lender that the provisions of the Lease respecting Leasehold mortgages are restated and confirmed for Lender's benefit, NOW THEREFORE, Landlord hereby certifies to Lender as follows: 1. Without implying that Landlord's acknowledgment or consent may be required under the Lease, Landlord does hereby acknowledge (a) the granting by Tenant of a leasehold mortgage ("Leasehold Mortgage") to Lender on Tenant's interests in the Premises, (b) the pledge of the ownership interests in the Tenant by the holder or holders of all ownership interests in Tenant (i.e. the mezzanine borrower) to the applicable Merrill Lynch mezzanine lending entity (together with its successors and assigns, the "Mezzanine Lender") as security for a mezzanine loan (the "Mezzanine Loan") and the right of Mezzanine Lender to foreclose on such ownership interests in the event of a default under the Mezzanine Loan and (c) the address for delivery of notices to Lender and Mezzanine Lender as set forth below. Upon the mortgaging of the Premises, the pledge of the ownership interests in Tenant pursuant to the Mezzanine Loan and the execution of this Agreement, Landlord acknowledges and agrees that both Lender and Mezzanine Lender shall be deemed to be, and shall have all of the rights and protections granted to a "mortgagee" or "Leasehold Mortgagee" or to the "Servicer" under the Lease. 2. Landlord hereby agrees that the execution of this Agreement shall satisfy the notice requirement set forth in Section 5 of the 1995 Amendment of the Lease. 3. All of the Leasehold mortgage protection provisions contained in the Lease, including but not limited to Sections 11.01 and 12.01 of the Lease and Sections 3, 4, 5 and 7 of the 1995 Amendment, and all other provisions inuring to the benefit of Leasehold Mortgagees or their successors and assigns are hereby incorporated into this agreement by reference and restated and confirmed by Landlord for the benefit of Lender, Mezzanine Lender, their successors and assigns. 4. Unless otherwise notified by Lender or Mezzanine Lender, copies of any notices to Lender or Mezzanine Lender, as the case may be, shall be sent to the following address: If to Lender: Merrill Lynch Mortgage Lending, Inc. c/o Merrill Lynch & Co. Global Principal Investments 4 World Financial Center New York, NY 10080 Attn: Steve Glassman (Facsimile: 212-738-1013) Attn: John Gluszak (Facsimile: 212-738-2053) with a copy to: Sidley Austin Brown & Wood, LLP 787 Seventh Avenue New York, NY 10019 Attn: Alan S. Weil, Esq. Facsimile: (212) 839-5599 If to Mezzanine Lender: Merrill Lynch Mortgage Lending, Inc. c/o Merrill Lynch & Co. Global Principal Investments 4 World Financial Center New York, NY 10080 Attn: Steve Glassman (Facsimile: 212-738-1013) Attn: John Katz (Facsimile: 212-738-8094) with a copy to: Sidley Austin Brown & Wood, LLP 787 Seventh Avenue New York, NY 10019 Attn: Alan S. Weil, Esq. Facsimile: (212) 839-5599 5. Landlord hereby agrees that for so long as any sums in respect of the Loan remain outstanding, it shall not, without the prior written consent of both Lender and Mezzanine Lender: (a) notwithstanding any provisions of the Lease to the contrary, accept, consent to or join in the execution of any instrument purporting to (i) effect the termination, prior to November 30, 2077, of the Lease by Tenant, or (ii) amend or modify the Lease; (b) permit or accept the 2 exercise by Tenant of any right it may have to purchase the Premises without having first obtained Lender's written consent thereto. To the extent Lender shall have approved any such exercise by Tenant of such right, the conveyance instrument executed in connection therewith shall expressly provide for the preservation of the leasehold under the Lease, and for the non-merger of the fee and leasehold estates in the Premises. 6. Landlord hereby confirms with respect to the new lease referred to in Section 5 of the 1995 Amendment that should Lender or Mezzanine Lender become the tenant under a new lease pursuant to Section 5 of the Amendment title to all improvements including the Building, as defined in the Lease, situate on the Land, as defined in the Lease, shaft automatically vest in Lender or Mezzanine Lender, pursuant to Section 5 of the 1995 Amendment. 7. Landlord acknowledges that as between Landlord and Lender, its nominee, or a purchaser at a foreclosure or other sale, the Lease shall not be deemed to be terminated, notwithstanding the rejection of the Lease by the Tenant thereunder or its representative in any proceeding under the Bankruptcy Code (11 U.S.C. Section 101 et seq.) (the "Bankruptcy Code") or any other insolvency law. Lender shall be deemed to have satisfied its obligation to commence foreclosure proceedings by asserting a claim in a proceeding under the Bankruptcy Code or other insolvency proceeding, and Lender shall not be deemed to have failed to satisfy such obligation if Lender is unable to do so as a result of the provisions of Section 362 of the Bankruptcy Code or similar provisions of any other insolvency law. 8. Landlord acknowledges that Lender shall have the right to act on behalf of Tenant in any proceeding commenced by or against Landlord under the Bankruptcy Code. 9. Landlord acknowledges that Lender and Mezzanine Lender have requested that Landlord execute this Agreement in connection with the Loan and the Mezzanine Loan, and that Lender has agreed to make the Loan and Mezzanine Lender has agreed to make the Mezzanine Loan in reliance on the matters set forth herein. 10. Landlord hereby confirms that pursuant to Section 1 of the 1995 Amendment, any mortgage placed by Landlord on the fee estate of the Premises shall be subject to and subordinate to the terms of this Lease and the Leasehold Mortgage. 11. Landlord hereby certifies as follows: (a) Landlord is the owner of the fee simple estate in the Premises subject to covenants, easements and restrictions of record, and is the Landlord under the Lease, (b) Landlord has not mortgaged the fee simple estate in the Premises and there are currently no fee simple mortgages, deeds of trust or other security interests encumbering the fee estate in the Premises. (c) The Lease is in full force and effect in accordance with its terms and has not been further assigned, supplemented, modified or otherwise amended accept as set forth herein. 3 (d) To the best of Landlord's knowledge, each of the obligations on Tenant's part to be performed to date under the Lease have been performed. (e) To the best of Landlord's knowledge, there are no offsets, counterclaims, defenses, deductions or credits whatsoever with respect to the Lease. (f) There are, with respect to the Lease, no options to renew or extend, and no security deposits or prepaid rent or liens. (g) Except for the Amendment of Lease dated January 24, 1995 (the "1995 Amendment") and Second Amendment of Lease dated June 16, 1997 (the "1997 Amendment"), there are no agreements (including Subordination, Non-Disturbance and Attornment Agreements) concerning the Premises, whether oral or written between Landlord and Tenant under the Lease (or its predecessors or successors). (h) As of the date hereof, basic rent is $100 per year, payable on or before December 1st of each year. Basic rent due under the Lease has been paid through _____, 20 _______. (i) The term commencement date of the Lease was February 6, 1981, and the current term of the lease shall expire on November 30, 2077. 12. The parties agree that the protections and rights granted to the Lender and Mezzanine Lender by this Agreement shall also apply to any other prospective mortgagee of Tenant's interest in the Lease or any other prospective pledgee of the ownership interests in Tenant, provided that the name and address of such lender is provided in writing to Landlord, and such other lender shall be deemed the "Servicer" or the "Leasehold Mortgagee" for the purposes of this Agreement and for the purposes of the Lease. 13. Except as amended hereby, the Lease and all the terms, covenants and conditions thereof remain unchanged and in full force and effect, and the Lease, as amended hereby, is hereby ratified and confirmed in all respects. 14. This Agreement may be executed in counterparts, and each such counterpart shall constitute an original. This Agreement shall be binding upon, and may be relied upon by, the parties, their successors and assigns, and the terms hereof shall inure to the benefit of the parties, their successors and assigns. [SIGNATURE PAGES FOLLOW] 4 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date and year first above written. LANDLORD: CITY OF SHEFFIELD, ALABAMA By:___________________________________ Name: Title: TENANT: SHEFFIELD MOTEL ENTERPRISES, INC. By:___________________________________ Name: Title: [NO FURTHER SIGNATURES ON THIS PAGE] 5 LENDER: MERRILL LYNCH MORTGAGE LENDING, INC. By:___________________________________ Name: Title: MEZZANINE LENDER: MERRILL LYNCH MORTGAGE LENDING, INC. By:___________________________________ Name: Title: [ACKNOWLEDGEMENTS ON FOLLOWING PAGES] A-1 ACKNOWLEDGMENT, ESTOPPEL CERTIFICATE AND AGREEMENT (Holiday Inn - East Hartford, Connecticut) THIS ACKNOWLEDGMENT, ESTOPPEL CERTIFICATE AND AGREEMENT ("Agreement") is executed and delivered as of the ___ day of _____, 2002, among H. W. STEANE COMPANY, INC., formerly known as The Poly Choke Company, Inc. ("Lessor"), and MERRILL LYNCH MORTGAGE LENDING, INC., as Administrative Agent, its successors and/or assigns ("Lender"), and AMI OPERATING PARTNERS, L. P., a Delaware limited partnership ("Lessee"). RECITALS A. Lessor is the lessor under the ground lease described on Exhibit "A" hereto between Lessor, as lessor, and Lessee, as lessee, affecting the real property ("Land") and improvements ("Improvements") known as and located at 363 Roberts Street, East Hartford, Connecticut 06108, more particularly described on Exhibit "B" hereto (the Land and Improvements, collectively, the "Leased Premises", such lease, as so amended and assigned, and as it may be further amended and assigned from time to time, the "Lease"); B. Lessee has transferred controlling interest in its partnership to [_____________], a [__________] corporation, and Lessee is now in the process of obtaining from Lender a refinancing loan (the "Loan") to be secured by, among other things, a leasehold mortgage (the "Mortgage") on and collateral assignment of all of Lessee's interests under the Lease; C. Lender is unwilling to make the Loan unless Lessor reaffirms to Lender that the provisions of the Lease are confirmed and restated for Lender's benefit. NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00), and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, Lessor agrees as follows: 1. Without implying that Lessor's acknowledgment or consent may be required under the Lease, Lessor does hereby acknowledge the granting by Lessee of the Mortgage to Lender on Lessee's interests in the Leased Premises, (b) the pledge of the ownership interests in the Lessee by the holder or holders of all ownership interests in Lessee (i.e. the mezzanine borrower) to the applicable Merrill Lynch mezzanine lending entity (together with its successors and assigns, the "Mezzanine Lender") as security for a mezzanine loan (the "Mezzanine Loan") and the right of Mezzanine Lender to foreclose on such ownership interests in the event of a default under the Mezzanine Loan and (c) the address for delivery of notices to Lender and Mezzanine Lender as set forth below. Upon the mortgaging of the Leased Premises, the pledge of the ownership interests in Lessee pursuant to the Mezzanine Loan and the execution of this Agreement, Lessor acknowledges and agrees that both Lender and Mezzanine Lender shall be deemed to be, and shall have all of the rights and protections granted to a "mortgagee" or "Leasehold Mortgagee" or to the "Servicer" under the Lease. 2. Lessor and Lessee hereby certify to Lender that: (a) Lessor is the current owner of (i) the fee interest in the Leased Premises, and (ii) all of the rights and benefits of "Lessor" under the Lease; (b) all rents and other sums due and owing under the Lease as of the date hereof are current and not in arrears; (c) there exists no uncured default under the Lease by Lessor or Lessee; (d) the Lease is in full force and effect, (e) the current term of the Lease expires on April 30, 2007, the extended term of the Lease expires on April 30, 2022, and Lessee has remaining two (2) 15-year options to renew the term; (f) all of the material obligations under the Lease which have accrued prior to the date of this Agreement have been fully performed; and (g) Exhibit "A" lists the only instruments governing Lessor's and Lessee's rights and obligations with respect to the Leased Premises. 3. The "Net Basic Rental" for the current period (5/01/02 through 4/30/07) is payable $9,398.19 per month. Net Basic Rental shall next be adjusted in 2007 to be effective for the 5-year period beginning 05/01/07. Rent is due in advance on the 1st day of each month. Rent is paid through October 31, 2002, and the next rent payment is due on _________, 2002. 4. There is no parking lot lease, either oral or written, currently in effect. 5. Unless otherwise notified by Lender or Mezzanine Lender, copies of any notices to Lender or Mezzanine Lender, as the case may be, shall be sent to the following address: If to Lender: Merrill Lynch Mortgage Lending, Inc. c/o Merrill Lynch & Co. Global Principal Investments 4 World Financial Center New York, NY 10080 Attn: Steve Glassman Facsimile: (212) 738-1013 Attn: John Gluszak Facsimile: (212) 738-2053 with a copy to: Sidley Austin Brown & Wood, LLP 787 Seventh Avenue New York, NY 10019 Attn: Alan S. Weil, Esq. Facsimile: (212) 839-5599 If to Mezzanine Lender: 2 Merrill Lynch Mortgage Lending, Inc. c/o Merrill Lynch & Co. 4 World Financial Center New York, NY 10080 Attn: Steve Glassman Facsimile: (212) 738-1013 Attn: John Katz Facsimile: (212) 738-8094 with a copy to: Sidley Austin Brown & Wood, LLP 787 Seventh Avenue New York, NY 10019 Attn: Alan S. Weil, Esq. Facsimile: (212) 839-5599 6. In the event Lender shall acquire, assume or succeed to Lessee's interest under the Lease, then in such event, so long as Lender is not in default in the performance of any of the terms, covenants or conditions of the Lease on Lessee's part to be performed and has cured all prior defaults, Lender's possession under the Lease and Lender's rights and privileges thereunder, or under any extensions thereof which may be effected in accordance with any option therefor contained in the Lease, shall not be diminished or interfered with by Lessor, and Lender's occupancy shall not be disturbed by Lessor during the term of the Lease or any such extensions or renewals thereof. 7. Lender understands and agrees that Lessor is neither a party to the Loan nor are Lessor's fee title and Lessor's interest in the Lease subordinate to the security interest of the Mortgage on the lessee's interest in the Lease. 8. Lessor hereby agrees that either Lender or Mezzanine Lender shall have the right, pursuant to the terms of the Lease, to exercise either of the remaining two (2) options to renew the term of the Lease, if the Lessee shall fail to do so, whether or not an event of default under the Mortgage shall have occurred, provided that Lender or Mezzanine Lender shall do so strictly in accordance with the Lease. In the event Lender or Mezzanine Lender does so exercise any option to renew, Lender or Mezzanine Lender shall become obligated with the Lessee for the performance of the obligations set forth in the Lease. 9. Lessor hereby agrees that for so long as any sums in respect of the Loan remain outstanding, it shall not, without the prior written consent of both Lender and Mezzanine Lender: (a) notwithstanding any provisions of the Lease to the contrary, accept, consent to or join in the execution of any instrument purporting to (i) effect the termination, prior to April 30, 2022, of the Lease by Lessee, or (ii) amend or modify the Lease; (b) permit or accept the exercise by Lessee of any right it may have to purchase the Leased Premises without having first obtained Lender's written consent thereto. To the extent Lender shall have approved any such exercise by Lessee of such right, the conveyance instrument executed in connection therewith 3 shall expressly provide for the preservation of the leasehold under the Lease, and for the non-merger of the fee and leasehold estates in the Leased Premises. 10. Lessor's fee simple interest in the Leased Premises and the Lessor's interest under the Lease are not encumbered. 11. Lessor acknowledges that as between Lessor and Lender, its nominee, or a purchaser at a foreclosure or other sale, the Lease shall not be deemed to be terminated, notwithstanding the rejection of the Lease by the Lessee thereunder or its representative in any proceeding under the Bankruptcy Code (11 U. S. C. Section. 101 et seq.) (the "Bankruptcy Code") or any other insolvency law. Lender shall be deemed to have satisfied its obligation to commence foreclosure proceedings by asserting a claim in a proceeding under the Bankruptcy Code or other insolvency proceeding, and Lender shall not be deemed to have failed to satisfy such obligation if Lender is unable to do so as a result of the provisions of Section 362 of the Bankruptcy Code or similar provisions of any other insolvency law. 12. Lessor acknowledges that Lender shall have the right to act on behalf of Lessee in any proceeding commenced by or against Lessor under the Bankruptcy Code. 13. Lessor acknowledges that Lender and Mezzanine Lender have requested that Lessor execute this Agreement in connection with the Loan and the Mezzanine Loan, and that Lender has agreed to make the Loan and Mezzanine Lender has agreed to make the Mezzanine Loan in reliance on the matters set forth herein. 14. Lessor hereby agrees that for so long as any sums in respect of the Loan remain outstanding, notwithstanding any provisions of the Lease to the contrary, in the event of a casualty to or condemnation affecting the Leased Premises, Lender shall be entitled to receive all insurance proceeds and condemnation awards and apply the same in accordance with the terms of the loan documents entered into between Lessee and Lender in connection with the Loan, and shall have the right, but not the obligation, to restore the Leased Premises. 15. This Agreement may be executed in counterparts, and each such counterpart shall constitute an original. 16. Except as amended hereby, the Lease and all the terms, covenants and conditions thereof remain unchanged and in full force and effect, and the Lease, as amended hereby, is hereby ratified and confirmed in all respects. 17. The parties agree that the protections and rights granted to the Lender and Mezzanine Lender by this Agreement shall also apply to any other prospective mortgagee of Lessee's interest in the Lease or any other prospective pledgee of the ownership interests in Lessee, provided that the name and address of such lender is provided in writing to Lessor, and such other lender shall be deemed the "Servicer" or the "Leasehold Mortgagee" for the purposes of this Agreement and for the purposes of the Lease. 18. This Agreement shall be binding upon, and may be relied upon by, the parties, their successors and assigns, and the terms hereof shall inure to the benefit of the parties, their successors and assigns. 4 IN WITNESS WHEREOF, Lessor has executed this Agreement as of the date and year first above written. LESSOR: H. W. STEANE COMPANY, INC., a Connecticut corporation, formerly known as The Poly Choke Company, Inc. By: ________________________________ Name: Title: [NO FURTHER SIGNATURES ON THIS PAGE] 5 LESSEE: AMI OPERATING PARTNERS, L. P., a Delaware limited partnership, acting by and through its sole general partner, to wit: AMIOP ACQUISITION CORP., a Delaware corporation, By: ________________________________ Name: Title: [NO FURTHER SIGNATURES ON THIS PAGE] LENDER: MERRILL LYNCH MORTGAGE LENDING, INC., as Administrative Agent By: ________________________________ Name: Title: [NO FURTHER SIGNATURES ON THIS PAGE] MEZZANINE LENDER: MERRILL LYNCH MORTGAGE LENDING, INC. By: ________________________________ Name: __________________________ Title: _________________________ [NO FURTHER SIGNATURES ON THIS PAGE] ACKNOWLEDGMENT STATE OF NEW YORK ) )ss: COUNTY OF NEW YORK ) On this ___ day of _____, 2002, before me personally appeared ______________, to me known, who, being by me duly sworn, did depose and say that he/she is _________ of MERRILL LYNCH MORTGAGE LENDING, INC. as Administrative Agent, described in and which executed the foregoing instrument; and that he/she signed his/her name thereto by authority of the Board of Directors of the corporation. _________________________________________ Notary Public, State of New York At Large Print Name: [Notarizations continued on following page.] ACKNOWLEDGMENT STATE OF NEW YORK ) )ss: COUNTY OF NEW YORK ) On this ___ day of _____, 2002, before me personally appeared _____________, to me known, who, being by me duly sworn, did depose and say that he/she is ___________ of MERRILL LYNCH MORTGAGE LENDING, INC. as Administrative Agent, described in and which executed the foregoing instrument; and that he/she signed his/her name thereto by authority of the Board of Directors of the corporation. _________________________________________ Notary Public, State of New York At Large Print Name: [Notarizations continued on following page.] STATE OF _______________) )ss: COUNTY OF ______________) The foregoing instrument was acknowledged before me this _____ day of ______, 2002 by _______, as __________ of H. W. STEANE COMPANY, INC., a Connecticut corporation, on behalf of said corporation. Personally Known _______ OR Produced Identification _______________ Type of Identification Produced: __________________________________ ______________________________________ Print or Stamp Name: Notary Public, State of _____ At Large Commission No.: ______________________ My Commission Expires: _______________ [Notarizations continued on following page.] STATE OF _______________) )ss: COUNTY OF ______________) The foregoing instrument was acknowledged before me this ___ day of _____, 2002 by ____________, as ____________ of AMI Operating Partners, L. P., a Delaware limited partnership, acting by and through its sole general partner, AMIOP Acquisition Corp., a Delaware corporation. Personally Known _____ OR Produced Identification _________________ Type of Identification Produced: __________________________________ ______________________________________ Notary Public, State of _____ At Large Commission No.: ______________________ My Commission Expires: _______________ STATE OF GEORGIA, COUNTY OF GLYNN: ESTOPPEL CERTIFICATE AND AGREEMENT THIS ESTOPPEL CERTIFICATE AND AGREEMENT (hereinafter referred to as "Certificate") is made this ____ day of ________, 2002, by and between the JEKYLL ISLAND-STATE PARK AUTHORITY, a body corporate and politic created by the General Assembly of the State of Georgia (hereinafter referred to as "Lessor"), MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (with its successor and assigns, hereinafter referred to as "Lender"), PENMOCO, INC., a Georgia corporation and ISLAND MOTEL ENTERPRISES, INC., a Georgia corporation and a wholly owned subsidiary of Service, Inc. (hereinafter collectively referred to as "Lessee"). W I T N E S S E T H THAT: WHEREAS, Lessee holds the Lessee's interest in and to the leasehold estate created by virtue of and pursuant to that certain October 23, 1972, Lease Agreement (hereinafter referred to as the "Lease Agreement") made by and between the Lessor and Penmoco, Inc., as Lessee, relating to certain land (hereinafter referred to as "Property") located on Jekyll Island, Georgia, more particularly described in that certain Declaration of Lease for Recordation dated October 23, 1972, between the Lessor and Penmoco, Inc., of record in the Office of the Clerk of the Superior Court of Glynn County, Georgia, in Deed Book 127, page 621; and WHEREAS, the Lease Agreement was subsequently modified and amended by various instruments, including a "Modification Agreement" dated October 8, 1973, a "Modification Agreement" dated October 3, 1974, an "Assignment, Assumption and Agreement" dated October 26, 1976, (wherein SERVICO, INC., a Florida corporation, bound itself as Guarantor of Island Motel Enterprises, Inc.'s performance under the Lease Agreement), and a "Modification of Warranty Deed to Secure Debt" dated April 4, 1978. N O W, T H E R E F O R E, For the benefit of the Lessee and Merrill Lynch Mortgage Lending, Inc., together with its successors and assigns, the Lessor does hereby acknowledge and the parties do hereby agree: 1. As of the date hereof, the Lessee has, to the best of Lessor's knowledge, performed its obligations due and required under the Lease Agreement and the Lease Agreement is in good standing, full force and effect and not in default, with the following exceptions: The Lessee is currently in bankruptcy in the United States Bankruptcy Court for the Southern District of New York, having filed for Chapter 11 bankruptcy, and has a Page 1 pre-petition balance of $7,582.38 due and owing to the Lessor in accordance with the terms of the orders of the Bankruptcy Court. 2. That Lessee, as of the date of this Estoppel Certificate, is not in arrears on payment due Lessor and attributable to the Lease Agreement identified above, with the following exceptions: The Lessee is currently in bankruptcy in the United States Bankruptcy Court for the Southern District of New York, having filed for Chapter 11 bankruptcy, and has a pre-petition balance of $7,582.38 due and owing to the Lessor in accordance with the terms of the orders of the Bankruptcy Court. 3. That Lessee, as of the date of this Estoppel Certificate, is required to pay base rent in the amount of $20,976.66 per month, for the period September 1, 2002 through August 30, 2012, and thereafter adjusted according to the terms of the Lease, with such payment being due and payable on the 1st day of the month. In addition, percentage rent is owed when Gross Income Earned year-to-date multiplied by 3.5% is greater than the annual base rent. 4. That the Lease Agreement covers the site of the Holiday Inn Motel on Jekyll Island, Georgia, and the underlying fee of that site is owned by the State of Georgia, and is leased to the Jekyll Island-State Park Authority through the year 2049. 5. That the site is a beachfront property, not zoned, per se, under the existing ordinances of the Jekyll Island-State Park Authority. However, a combination of the Authority's ordinances and the Lease Agreement would limit the present use of the property to the operation of a modern, first-class, family-oriented hotel and to no other purpose. 6. Because this is a beachfront site, located on a barrier island off the Georgia coast, whether, if destroyed, the property could be rebuilt would depend upon the laws and regulations of the United States Army Corps of Engineers, the Georgia Department of Natural Resources, and any other regulatory agency as those laws and regulations may be in effect at the time of such destruction. The Authority has not undertaken to determine whether presently existing regulations would allow for the rebuilding of the property. 7. Notwithstanding anything to the contrary contained in the Lease, Lessor consents to the mortgaging of the Lease to Lender pursuant to a loan agreement between Lender and Lessee (the "Loan Agreement") and agrees that upon such mortgaging, Lender, and any assignee of the Lender named herein that is a Qualified Assignee, shall be deemed to be, and shall have all of the rights and protections granted to a "mortgagee" or "Leasehold Mortgagee" or to the "Servicer" under the Lease Agreement. "Qualified Assignee" shall mean any successor or assign of Lender that is a financial institution, including any commercial bank, investment bank, savings and loan association, commercial finance company, commercial Page 2 mortgage company, or any commercial real estate lender that is regulated under the laws of any state or the federal laws of the United States, or any entity wholly-owned subsidiary of any such financial institution or any financial institution acting in the capacity of a trustee of a securitization. The mortgage will be required to maintain an agent in the state of Georgia. 8. Lessor hereby waives its rights under Section 75 of the Lease Agreement to exercise any option to purchase the leasehold note and mortgage upon a default by Lessee under the Leasehold Mortgage. 9. Lessor hereby waives the requirements of Section 76 of the Lease Agreement, and hereby agrees that any failure of Lessee to comply with such Section shall not constitute an event of default under the Lease Agreement. 10. During the term of Lender's mortgage, Lessee shall make contributions to a reserve in the amount of 4% of the gross revenues of the Property as required under the Loan Agreement, which reserve shall be held by Lender in a segregated account or subaccount and shall be available only for capital expenditures relating to the Property; provided, however, that Lessor hereby acknowledges that such reserve shall be additional collateral to the loan (made pursuant to the Loan Agreement) and that Lender may realize on it upon an event of default of the loan. This Certificate shall be governed by the laws of the State of Georgia. IN WITNESS WHEREOF Lessor, Lender and Lessee have caused this Certificate to be properly signed and sealed the day and date first set out above. (SIGNATURES BEGIN NEXT PAGE) Page 3 Signed, sealed and delivered JEKYLL ISLAND-STATE for the Jekyll Island-State Park PARK AUTHORITY Authority in our presence: ________________________________ /s/ William A. Donohue Unofficial Witness ---------------------- William A. Donohue ________________________________ Executive Director Notary Public My Commission Expires: ________________________________ (Notary Seal Affixed Here) Page 4 Signed, sealed and delivered PENMOCO, INC. for Penmoco, Inc. in our presence: __________________________________ ________________________________ Unofficial Witness Name: Title: __________________________________ Notary Public My Commission Expires: __________________________________ (Notary Seal Affixed Here) Signed, sealed and delivered ISLAND MOTEL for Island Motel Enterprises, Inc. ENTERPRISES, INC. in our presence: __________________________________ ________________________________ Unofficial Witness Name: Title: __________________________________ Notary Public My Commission Expires: __________________________________ (Notary Seal Affixed Here) Signed, sealed and delivered SERVICO, INC, Guarantor for SERVICO, INC, in our presence: __________________________________ ________________________________ Unofficial Witness Name: Title: Notary Public My Commission Expires: __________________________________ (Notary Seal Affixed Here) Page 5 Signed, sealed and delivered MERRILL LYNCH MORTGAGE for Merrill Lynch Mortgage FUNDING, INC. Funding, Inc. in our presence: __________________________________ ________________________________ Unofficial Witness Name: Title: __________________________________ Notary Public My Commission Expires: __________________________________ (Notary Seal Affixed Here) Page 6 This Document Was Prepared By, Record and Return To: Alan S. Weil, Esq., Sidley Austin Brown & Wood LLP, 787 Seventh Avenue, New York, New York 10019. CONSENT, CERTIFICATE AND AGREEMENT OF LESSOR THIS CONSENT, CERTIFICATE AND AGREEMENT OF LESSOR is executed and delivered as of this _____ day of _____, 2002, by the City of Cedar Rapids, Iowa (the "City"). RECITALS: A. The City is the lessor under that certain Lease of Air Rights dated October 14, 1976, by and between the City, as lessor, and Five Seasons Inn, Inc. ("Five Seasons"), as lessee, relating to "air space", "footings and support columns" and the "stairway and elevator" more particularly described in Exhibit "A" thereto (the "Hotel Leased Premises"), which lease was recorded in Volume 1733, at Page 1 of the Records of Linn County, Iowa, as amended pursuant to that certain Agreement to Correct Legal Description dated January 4, 1978, a true and correct copy of which is attached hereto as Exhibit "A". (Such lease, as so amended and as assigned and as it may be further amended and assigned from tome to time is hereinafter referred to as the "Hotel Air Rights Lease"). The lessee's interests in the Hotel Air Rights Lease were subsequently assigned to and assumed by C. R. I. Hotel Associates, L. P. ("CRI") by that certain Assignment and Assumption of Lease of Air Rights between AETNA Life Insurance Company ("AETNA") (as successor in interest to Five Seasons), as assignor, and CRI, as assignee, recorded in Liber 2877, at Page 344, of the Records of Linn County, Iowa. B. The City is the lessor under that certain unrecorded Lease dated May 23, 1979, by and between the City, as lessor, and Five Seasons, as lessee, relating to an enclosed overhead pedestrian passage in the airspace over a portion of the alley in Block 16. Original Town, Cedar Rapids, Iowa, more particularly described therein (the "Pedestrian Passage"), as amended by that certain Amendment to Lease Originally Executed May 23, 1979, executed by and between the City and Five Seasons as of January 3, 1984 and that certain Amendment to Lease Originally Executed May 23, 1979, executed by and between the City and Five Seasons as of may 22, 1985, true and correct copies of which are attached hereto as Exhibits "B-1", "B-2" and "B-3". (Such lease, as so amended and assigned, and as it may be further amended and assigned from time to time, is hereinafter referred to as the "Block 16 Air Rights Lease"). The lessee's interests in the foregoing Lease were subsequently assigned to and assumed by CRI, by Assignment and Assumption of Lease between AETNA (as successor in interest to Five Seasons), as assignor, and CRI, as assignee. C. The City is the lessor under that certain Ballroom Rental Agreement dated October 26, 1977, by and between the City and Five Seasons, relating to the use of a ballroom (the "Ballroom") located on the second floor of the City's Community Center, which agreement was recorded in Volume 1733, at Page 32, of the Records of Linn County, Iowa, as modified by that certain unrecorded Proposed Amendment to Ballroom Rental Agreement, dated October 26, 1977, by and between the City and CRI (as assignee of AETNA, as successor in interest to Five Seasons), dated February 17, 1993 (a true and correct copy of which unrecorded amendment is attached hereto as Exhibit "C" (such agreement, as to amended and assigned, and as it may be further amended and assigned from time to time, is hereinafter referred to as the "Ballroom Agreement"). D. The City is a party to that certain unrecorded Parking Space Agreement dated May 18, 1977, by and between the City and Five Seasons, relating to the use of City parking facilities by the holder of the lessee's interests in the Hotel Air Rights Lease, a true and correct copy of which is attached hereto as Exhibit "D" (such agreement, as assigned as it may further be amended and assigned form time to time, is hereinafter referred to as the "Parking Agreement"). E. The City is the owner of that certain pedestrian skywalk (the "Garage Skywalk ") extending easterly from Block 23, Original Town of Cedar Rapids, Iowa, across Fourth Street N. E. to the parking garage owned by the City and referred to in the Parking Agreement. F. CRI has sold, transferred, conveyed and assigned to Servico Cedar Rapids, Inc., an Iowa corporation ("Servico") all of its rights, title and interests in and to the Hotel Air Rights Lease, Block 16 Air Rights Lease, Ballroom Agreement, Parking Agreement (collectively, the "Lease Agreements") and any rights of CRI in and to the Garage Skywalk (collectively, the "Assigned Interests"), by Special Warranty Deed dated May 28, 1997, recorded in Book 3494, at Page 693, of the Records of Linn County, Iowa and Assignment and Assumption of Leases dated May 28, 1997, recorded in Book 3494, at Page 684 of the Records of Linn County, Iowa. G. In accordance with the provisions of the Lease Agreements, and in connection with Merrill Lynch Mortgage Lending, Inc. (in its capacity as lender and mezzanine lender, together with its respective successors and assigns and any subsequent holder of mortgages or security interests in the Assigned Interests) (collectively, the "Lender") making a loan to Servico, or any refinancing of such loan, the City has agreed to execute this Agreement. AGREEMENT In consideration of the sum of Ten Dollars ($10.00) and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the City hereby confirms and agrees as follows: 1. The Recitals contained hereinabove are true and correct. 2. The City hereby represents and warrants that it is the current owner, in fee simple, of the Hotel Leased Premises, the Pedestrian Passage and the Ballroom (collectively, the "Lease Agreements Premises"), the Garage Skywalk and the "Five Seasons Parkade" (the garage facility to which the Garage Skywalk is connected). The City is the current owner and holder of all of the rights and benefits of the "lessor" under the Lease Agreements. 2 3. The Lease Agreements are all of the documents pertaining to the Assigned Interests to which the City is a party, such Lease Agreements have not been modified or amended except as described in the Recitals, and the Lease Agreements are in full force and effect. 4. To the City's knowledge, after due inquiry, Servico is not in material default under any of the Lease Agreements, and all rents and other charges payable thereunder are current. 5. With respect to the Hotel Air Rights Lease, the City hereby waives its right of first refusal (as set forth in Section 14 of the Hotel Air Rights Lease) as it applies to the conveyance of the lessee's interests in the Lease Agreements from Servico to Lender (or any designee of Lender) pursuant to a foreclosure upon Lender's security interests in the Assigned Interests, or a conveyance in lieu thereof. 6. With respect to the Block 16 Air Rights Lease, the City confirms and agrees to the following: (a) The current rental rate is $1.00 per year, (b) The date upon which the last structural inspection certificate required under the Block 16 Air Rights Lease was filed with the City is _____; and (c) The City reaffirms the provisions of the Block 16 Air Rights Lease, and confirms that its records reflect that such lease has heretofore been assigned to Servico. 7. With respect to the Ballroom Agreement, the City agrees as follows: (a) In clarification of the provisions of Section 4 of the Ballroom Agreement, the rental payable under such Ballroom Agreement is currently the greater of $50.000.00 per year or the percentage rent described in Section 4 of the Ballroom Rental Agreement. Rental payable for the year 2002 is ______________; and (b) The Ballroom Agreement has been executed pursuant to Section 11 of the Hotel Air Rights Lease, and the City agrees that the lessee under the Hotel Air Rights Lease shall have the exclusive use of the Ballroom throughout the term of the Hotel Air Rights Lease; provided, however, that the Ballroom Agreement may be amended from time to time with respect to the rental payments required thereunder. Accordingly, prior to the expiration of the Ballroom Agreement, City agrees that it shall execute an amendment, renewal or extension thereof, extending the term of the Ballroom Agreement on terms reasonably acceptable to City and the then holder of the lessee's interests under the Hotel Air Rights Lease. 8. With respect to the Parking Agreement, the City agrees that the applicable parking rate has been negotiated by and between the City and the holder of the 3 lessee's interest in the Lease Agreements consistent with Iowa law and the Lease Agreements The current applicable parking rate is _________________________. 9. The Garage Skywalk is public property, and Servico and all subsequent holders of lessee's interests in the Hotel Air rights Lease, their officers, employees, licensees and invitees shall have the right to use the Garage Skywalk for pedestrian access between the Hotel Leased Premises and the Five Seasons Parkade during the term of the Hotel Air Rights Lease. 10. The City hereby consents to the granting of liens in Servico's interests in the Assigned Interests in favor of Lender (without implying herein that the City's consent may be required under any or all of the Lease Agreements). Neither the foregoing consent nor any other provision of this Agreement shall be deemed or interpreted as a subordination by the City of its interests in the Lease Agreements or any of the property relating thereto. 11. The City hereby agrees that in the event of any casualty to the Hotel Leased Premises or the Pedestrian Passage, Servico (and any subsequent holder of the lessee's interests in the Hotel Air Rights Lease) shall be entitled to all insurance proceeds payable with respect to such casualty under insurance policies obtained, maintained and whose premiums are paid by the holder of such lessee's interests, and the City shall have no claim to such proceeds. 12. Unless otherwise notified by Lender, copies of any notices to the lessee under the lease Agreements shall be sent to Lender at the following address: Merrill Lynch Mortgage Lending, Inc. 4 World Financial Center New York, NY 10080 Attn: Steven Glassman Facsimile: (212) 738-1013 With Copy to: Sidley Austin Brown & Wood LLP 787 Seventh Avenue New York, NY 10019 Attn: Alan S. Weil, Esq. Facsimile: (212) 839-5599 The City shall accept the cure, by Lender, of any default under the Lease Agreements with the same force and effect as if such cure had been made by the leasee under the Lease Agreements. 13. In the event Lender shall acquire, assume or succeed to Servico's interests under any of the Lease Agreements, then in such event, so long as Lender is not in default in the performance of any of the terms, conditions or covenants of the Lease Agreements to be performed by the lessees thereunder, Lender's possession of the Lease Agreements Premises under the Lease Agreements and Lender's rights and privileges thereunder, or under 4 any extension or renewals thereof which may be effected in connection with any option therefor contained in the Lease Agreements, shall not be diminished or interfered with by City, and Lender's occupancy shall not be disturbed by the City during the term of the Lease Agreements or any such extensions or renewals thereof and Lender shall be entitled to the benefit of this Agreement. 14. City hereby agrees that for so long as the Loan shall not have been satisfied, notwithstanding any provisions of the Lease Agreements to the contrary, City shall not accept, consent to or join in the execution of any instrument purporting to effect the termination, prior to April 30, 2020, of the Hotel Air Rights Lease without the prior written consent of Lender unless a material default shall have occurred under the Hotel Air Rights Lease and shall not have been waived by resolution of the City Council or cured within any applicable grace or cure period. 15. City hereby acknowledges that it has not given Servico any right to purchase or acquire the Lease Agreements Premises and the City agrees that it shall not permit Servico or any subsequent lessee under the Hotel Air Rights Lease to purchase the Hotel Leased Premises at any time prior to the satisfaction of the Loan without first having obtained Lender's written consent thereto. 16. City acknowledges that, as between City and the Lender, its nominee or a purchaser at a foreclosure or other sale, the Lease Agreements shall not be deemed to be terminated notwithstanding the rejection of the Lease Agreements by the lessee thereunder or its representative in any proceeding under the Bankruptcy Code (11 U. S. C. Section 101 et. seq.) (the "Bankruptcy Code ") or any other insolvency law provided Lender shall, from and after the date it acquires the lessee's interests in the Assigned Interests, comply with the lessee's obligations under the Lease Agreements. CITY OF CEDAR RAPIDS, IOWA By:________________________ Mayor Attest:___________________________________ its Clerk 5 STATE OF IOWA ) )ss: COUNTY OF LINN ) On this _____ day of ________________, 2002, before me, the undersigned, a Notary Public in and for the State of Iowa, personally appeared __________________ and __________________, to me personally known, who being by me duly sworn, did say that they are the Mayor and City Clerk, respectively, of the City of Cedar Rapids, Iowa; a municipal corporation; that the seal affixed to the foregoing instrument is the corporate seal on behalf of the corporation, by authority of its City Council, as contained in Resolution No. _____ passed by the City Council on the _____ day of __________________, 2002; and ___________________________ and _____________________ acknowledged the execution of the instrument to be their voluntary act and deed and the voluntary act and deed of the corporation, by it voluntarily executed. _________________________________ NOTARY PUBLIC - STATE OF IOWA The following parties have executed this Agreement for the purpose of acknowledging and consenting to the matters referred to herein SERVICO CEDAR RAPIDS, INC., an Iowa corporation By:_______________________________ Name: Title: STATE OF ) )ss: COUNTY OF ) On this _____ day of _____, 2002, before me, the undersigned, a Notary Public in and for the State of _______________________, personally appeared _________________, to me personally known, who being by me duly sworn, did say he is the ____________________ of Servico Cedar Rapids, Inc. an Iowa corporation; that the seal affixed to the foregoing instrument is the corporate seal of the corporation, and that the instrument was signed and sealed on behalf of the corporation, by authority of its Board of Directors; and ______________________ acknowledged the execution of the instrument to be his voluntary act and deed and the voluntary act and deed of the corporation, by it voluntarily executed. ____________________________________ NOTARY PUBLIC - STATE OF IOWA HARRY G. PAPPAS & SONS, LLC 5504 KEMPER ROAD BALTIMORE, MD 21210 November 20, 2002 VIA REGULAR MAIL & FACSIMILE (212-738-1013) Merrill Lynch Mortgage Lending. Inc. c/o Merrill Lynch & Co. Global Principal Investments 4 World Financial Center New York, New York 10080 VIA REGULAR MAIL & FACSIMILE (404-364-0088) Lodgian AMI, Inc. c/o Servico, Inc. 3445 Peachtree Road N. E. Atlanta, Georgia 30326 Re: Lease, December 31, 1962, Harry G. Pappas & Sons, LLC to Lodgian AMI, Inc. Holiday Inn - Inner Harbor, Baltimore, Maryland 301 West Lombard Street, Baltimore, Maryland Dear Ladies and Gentlemen: Harry G. Pappas & Sons, LLC, the "Lessor" in connection with the above referenced lease, as amended, (the "Lease"), hereby confirms to you in connection with the granting of a leasehold mortgage from Lodgian AMI, Inc. ("Lessee") to Merrill Lynch Mortgage Lending, Inc. and its successors and assigns ("Lender") with respect to the Lease that: (a) to the best of Lessor's knowledge, information and belief, without investigation or inquiry, all rents and other sums due and owing under the Lease as of the date hereof are current and not in arrears; (b) the current term of the Lease expires on December 31, 2037, and there is one (1) remaining twenty (20) year option to extend the term; ACKNOWLEDGMENT, ESTOPPEL CERTIFICATE AND AGREEMENT (Baltimors - International Airport) THIS ACKNOWLEDGEMENT, ESTOPPEL CERTIFICATE AND AGREEMENT ("Agreement") is executed and delivered as of this____ day of ________, 2002, among HARRY W. RODGERS, III, WILLIAM A. RODGERS and W. DALE HESS, as partners trading as D. R. H. INVESTMENT COMPANY (as to a 90% undivided interest), and BALTIMORE-WASHINGTON SCIENCE AND INDUSTRY CENTER, L.P., a Maryland limited partnership (as to a 10% undivided interest) (collectively, "Lessor "); MERRILL LYNCH MORTGAGE LENDING, INC., in its capacity as mortgage lender and mezzanine lender (together with its respective successors and/or assigns, collectively, "Lender "); and LODGIAN AMI, INC. a Maryland corporation ( "Lessee "). RECITALS A. Lessor is the lessor under the ground lease described on Exhibit "A" hereto between Lessor, as lessor, and Lessee, as lessee, affecting the real property ("Land") and improvements ("Improvements") known as located at BWI International Airport, 890 Elkridge Landing Road, Linthicum Heights, Maryland 21090, more particularly described on Exhibit "B" hereto (the Land and Improvements, collectively, the "Leased Premises"; such lease, as so amended and assigned, and as it may be further amended and assigned from time to time, the "Lease"); B. Lessee is now in the process of obtaining from Lender a refinancing loan (the "Loan ") to be secured by, among other things, a leasehold mortgage and collateral assignment of all interests under the Lease; C. In order to facilitate the transactions described herein, Lessor has agreed to enter into this Agreement, without which Lender would not make the Loan. NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00), and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, Lessor agrees as follows: 1. Without implying that Lessor's acknowledgment or consent may be required under the Lease, Lessor does hereby acknowledge and consent to (a) the granting by Lessee of a leasehold mortgage ("Leasehold Mortgage") to Lender on Lessee's interests in the Leased Premises, (b) the pledge of the ownership interests in the Lessee by the holder or holders of all ownership interests in Lessee (i.e. the mezzanine borrower) to the applicable Merrill Lynch mezzanine lending entity (together with its successors and assigns, the "Mezzanine Lender") as security for a mezzanine loan (the "Mezzanine Loan") and the right of Mezzanine Lender to foreclose on such ownership interests in the event of a default under the Mezzanine Loan and (c) the address for delivery of notices to Lender and Mezzanine Lender as set forth below. Upon the mortgaging of the Leased Premises, the pledge of the ownership interests in Lessee pursuant to the Mezzanine Loan and the execution of this Agreement, Lessor acknowledges and agrees that both Lender and Mezzanine Lender shall be deemed to be, and shall have all of the rights and protections granted to a "mortgagee" or "Leasehold Mortgagee" or to the "Servicer" under the Lease. 2. Lessee hereby gives notice of and Lessor hereby accepts Lessee's election to extend the term of the Lease for an additional 10-year term, to September 11, 2023. 3. Lessor and Lessee hereby certify to Lender that: (a) Lessor is the current owner of (i) the fee interest in the Leased Premises, and (ii) all of the rights and benefits of "Lessor" under the Lease; (b) to the best of Lessor's knowledge, all rents and other sums due and owing under the Lease as of the date hereof are current and not in arrears; (c) to the best of Lessor's knowledge, there exists no uncured default under the Lease by Lessor or Lessee; (d) the Lease is in full force and effect; (e) the current term of the Lease expires on September 11, 2003, the first extended term expires on September 11, 2013, the second extended term expires on September 11, 2023 and Lessee has remaining three (3) 10-year options to extend the term; (f) to the best of Lessor's knowledge, all of the material obligations under the Lease which have accrued prior to the date of this Agreement have been fully performed; (g) Exhibit "A" lists the only instruments governing Lessor's and Lessee's rights and obligations with respect to the Leased Premises; and (h) to the best of Lessor's knowledge, the Option to purchase the Leased Premises granted by Lessor in favor of Lessee expired on June 30, 2002. 4. The "Fixed Rent" for the current period (1/1/02 through 12/31/02) is $51,712.68 per month. Fixed Rent shall remain at this same rate throughout the Initial Term and any Extended Terms. Fixed Rent is due in advance on the 1st day of each month, is paid through November 1, 2002, and the next rent payment is due on December 1, 2002. 5. Unless otherwise notified by Lender, copies of any notices to Lender shall be sent to the following address: If to Lender: Merrill Lynch Mortgage Lending, Inc. c/o Merrill Lynch & Co. Global Principal Investments 4 World Financial Center New York, NY 10080 Attention: Steven Glassman Facsimile: (212) 738-1013 Attention: John Gluszak Facsimile: (212) 738-2053 Attention: John Katz Facsimile: (212) 449-8094 with a copy to: Sidley Austin Brown & Wood, LLP 787 Seventh Avenue New York, NY 10019 Attn: Alan S. Weil, Esq. Facsimile: (212) 839-5599 6. Lender understands and agrees that Lessor is neither a party to the Loan nor are Lessor's fee title and Lessor's interest in the Lease subordinate to the security interest of the Leasehold Mortgage on the lessee's interest in the Lease. 7. Lessor's fee simple interest in the Leased Premises and the Lessor's interest under the Lease are encumbered by the liens described on Exhibit "C" attached hereto and made a part hereof, in the approximate current principal balance(s) shown on Exhibit "C." 8. Lessor acknowledges that Lender has requested that Lessor execute this Agreement in connection with the Loan, and that Lender has agreed to make the Loan in reliance on the matters set forth herein. 9. This Agreement may be executed in counterparts, and each such counterpart shall constitute an original. 10. Except as amended hereby, the Lease and all the terms, covenants and conditions thereof remain unchanged and in full force and effect, and the Lease, as amended hereby, is hereby rarified and confirmed in all respects. 11. The parties agree that the protections and rights granted to the Lender by this Agreement shall also apply to any other prospective mortgagee of Lessee's interest in the Lease or any other prospective pledgee of the ownership interests in Lessee, provided that the name and address of such lender is provided in writing to Lessor, and such other lender shall be deemed the "Servicer" or the "Leasehold Mortgagee" for the purposes of this Agreement and for the purposes of the Lease. 12. This Agreement shall be binding upon, and may be relied upon by, the parties, their successors and assigns, and the terms hereof shall inure to the benefit of the parties, their successors and assigns. [SIGNATURES ON FOLLOWING PAGE] IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date and year first above written. LESSEE: LESSOR: LODGIAN AMI, INC., a D. R. H. INVESTMENT COMPANY (as to a Maryland Corporation 90% undivided interest) By: Harry W. Rodgers, III, as its general partner By:_________________________________ /s/ Harry W. Rodgers Name: ----------------------- Title: [SIGNATURES CONTINUE ON FOLLOWING PAGE] and BALTIMORE-WASHINGTON SCIENCE AND INDUSTRY CENTER, L.P., a Maryland limited partnership (as to a 10% undivided interest) By: Rodgers/BWSIC, LLC, as its general partner By: Harry W. Rodgers, III Family Number 2, L.P., Member By: H.W.R., III Family Number 2, LLC, as its general partner By: /s/ Harry W. Rodgers -------------------------- Harry W. Rodgers, III, Manager [SIGNATURES CONTINUE ON FOLLOWING PAGE] LENDER: MERRILL LYNCH MORTGAGE LENDING, INC. By:__________________________ Name: Title: [ACKNOWLEDGEMENTS ON FOLLOWING PAGE] STATE OF_______________ ) )ss: COUNTY OF______________ ) On this ___ day of ___________, 2002, before me personally appeared _____________, to me known, who, being by me duly swom, did depose and say that he is the ____________ of Merrill Lynch Mortgage Lending, Inc., a Delaware corporation, described in and which executed the foregoing instrument; and that he/she signed his/her name thereto by authority of the Board of Directors of the corporation. ___________________________________ Notary Public Print Name:________________________ STATE OF_______________ ) )ss: COUNTY OF______________ ) On this ___ day of _____________, 2002, before me personally appeared __________________, to me known, who, being by me duly sworn, did depose and say that he is the ______________ of __________________ described in and which executed the foregoing instrument; and that he/she signed his/her name thereto by authority of the Board of Directors of _______________. ___________________________________ Notary Public Print Name:________________________ STATE OF [ILLEGIBLE] ) )ss: COUNTY OF [ILLEGIBLE] ) On this 20 day of November, 2002, before me personally appeared Harry W. Rodgers, III, to me known, who, being by me duly sworn, did depose and say that he executed the foregoing instrument; and that he signed his name thereto in his individual capacity and in the capacity as set forth above in the signature block for Lessor. /s/ Sandra H. Justis ---------------------------- Notary Public Print Name: Sandra H. Justis Expired - 5/1/05 EXHIBIT "A" Lease dated August 24, 1971, among Samuel H. Heffiner, Edward H. Dickinson, Harry W. Rodgers, III, William Rodgers and W. Dale Hess, co-partners, trading as D. R. H. Investment Co. ( "DRH Investment Co. "), Landlord ("Lessor"), and American Motor Inns, Incorporated, Tenant ( "Original Lessee "). (a) Lease dated August 24, 1971, (recorded in Liber 3883, at Folio 284, Land Records of Anne Arundel County, Maryland). (b) Agreement to Construct and Lease dated August 24, 1971, between D. R. H. Investment Co., Landlord, and American Motor Inns, Incorporated, Tenant. (c) Option dated August 24, 1971, between D. R. H. Investment Co., Owners, and American Motor Inns, Incorporated, Lessee (recorded in Liber MSH No. 2467, at Folio 798, of the Land Records of Anne Arundel County, Maryland). (d) First Amendment to Agreement to Construct and Lease dated May 18, 1972, among D. R. H. Investment Co., Landlord, and American Motor Inns, Incorporated, Tenant. (e) Agreement dated May 18, 1972, among D. R. H. Investment Co., Landlord, and American Motor Inns, Incorporated, Tenant (recorded in Liber 2490, at Page 581, of the Land Records of Anne Arundel County, Maryland). (f) Subordination Agreement dated May 18, 1972, between American Motor Inns, Incorporated, Robert J. Schultze and Charles J. Fleury, Trustees, and Loyola Federal Savings & Loan Association (recorded in Liber 2490, at Page 585, of the Land Records of Anne Arundel County, Maryland); and Non-Disturbance and Attornment Agreement dated September 8, 1986, between Loyola Federal Savings and Loan and American Motor Inns, Inc. (recorded in Liber 4212, at Page 211, Land Records of Anne Arundel County, Maryland). (g) Consolidated Amendatory Agreement dated May 7, 1984 between D.R.H. Investment Co. (which now has only 3 partners - Rodgers III, Rodgers and Hess) and American Motor Inns, Incorporated (recorded in Liber EAC No. 3883, at Folio 325, Land Records of Anne Arundel County, Maryland). (h) Notification of Election to Extend Term dated May 9, 1985 (election to extend term to September 11, 2013. (i) Amendment to Lease, dated December 1, 1985, between D.R.H. Investment Co., Landlord, and American Motor Inns, Incorporated, Tenant (recorded in Liber 4009, at Page 445, Land Records of Anne Arundel County, Maryland). (j) Amendment of Lease Agreement dated December 31, 1985, between D. R. H. Investment Co., Landlord, and American Motor Inns, Incorporated, Tenant. (k) Amendment to Lease Agreement dated December 20, 1986, between D.R.H. Investment Co., Lessor, and American Motor Inns, Incorporated, Lessee (recorded in Liber 4223, at Folio 64, of the Land Records of Anne Arundel County, Maryland). (l) Assignment of Lease and Indemnification Agreement, dated December 23, 1986, between American Motor Inns, Incorporated, Assignor, and AMI Operating Partners, L.P., Assignee (recorded in Liber 4223, at Folio 70, of the Land Records of Anne Arundel County, Maryland). (m) Assignment of Option Agreement dated December 23, 1986, from American Motor Inns, Incorporated, to AMI Operating Partners, L. P. (recorded in Liber 4223, folio 75, on the Land Records of Anne Arundel County, Maryland). (n) Subordination, Non-Disturbance and Attornment Agreement dated July 26, 1995 between AMI Operating Partners, L. P., DRH Investment Company and American Enterprise Life Insurance Company. EXHIBIT "B" LEASED PREMISES EXHIBIT "C" ENCUMBRANCES OF LESSOR'S INTEREST IN THE FEE AND THE LEASE Approximate Principal Balance Lien/Encumbrance As of the Date hereof [PRIME HOSPITALITY CORP. LOGO] DOUGLAS W. VICARI Senior Vice President & Chief Financial Officer C/O (973) 808-7776 FAX (973) 882-7669 Email: dwv@primehospitality.com November 21, 2002 Merrill Lynch Mortgage Lending, Inc., In its capacity as mortgage lender and mezzanine lender (together with its respective successors and assigns, collectively, "Merrill") c/o Merrill Lynch & Co. 4 World Financial Center New York, New York 10080 Re: Holiday Inn, Glen Burnie, MD Dear Sir/Madam: Prime has been requested by our tenant to provide you with information concerning our lease of the hotel premises described on Schedule A to his letter. 1. The lease consists of an agreement dated May 10, 1968 by and between David H. Greenberg and Janice C. Greenberg and A.O. Krisch, Joel Krisch and Rosalie K. Shaftman, as amended by Amendment to Lease dated February 24, 1971, Second Amendment to Lease dated August 22, 1975, and Amendment to Lease dated as of December 20, 1986, all attached to this letter. 2. The present monthly rental is $2,000 and rent has been paid through November 30, 2002. 3. There is no notice of default outstanding and uncured. Prime is not aware of the occurrence of any event of default that is uncured. 4. Prime will forward to Merrill Lynch Mortgage Lending, Inc. ("Merrill") a copy of any notice sent to tenant, to the extent that the Lease requires a copy of such notice to be sent to the "Servicer," as defined in the Lease. The failure of Prime to forward to Merrill a copy of any other notice or communication to tenant shall not limit Prime's rights under the Lease nor create any liability or obligation to Merrill, the tenant, or another party. Required notices will be sent to the following addresses unless Prime is otherwise notified by Merrill in writing: -2- Merrill Lynch Mortgage Lending, Inc., In its capacity as mortgage lender and mezzanine lender (together with its respective successors and assigns, collectively, "Merrill") c/o Merrill Lynch & Co. 4 World Financial Center New York, New York 10080 Attention: Steve Glassman Facsimile: 212-738-1013 Attention: John Gluszak Facsimile: 212-738-2053 Attention: John Katz Facsimile: 212-449-8094 With a copy to: Sidley Austin Brown & Wood, LLP 787 Seventh Avenue New York, New York 10019 Attention: Alan S. Weil, Esq. Facsimile: 212-839-5599 5. Notices to Prime will be addressed to Prime Hospitality Corp., 700 Route 46 East, Fairfield, New Jersey 07004, Attention: Douglas Vicari, with a copy to the same address, Law Department. Merrill will provide Prime with a copy of any notice of default sent to tenant. 6 Prime agrees that the Lease may be assigned by Merrill, its successors and assigns, in foreclosure or by a purchaser at foreclosure without Prime's consent and upon that assignee's written acknowledgement and assumption of tenant's obligations under the lease. Merrill shall have no further liability to perform any of the obligations, conditions or covenants contained in the Lease. 7 Merrill acknowledge that this letter is provided as an accommodation to Prime's tenant. Merrill's acceptance of this letter will evidence its agreement to all of the terms of this letter. -3- This letter is given based on the actual knowledge of its signatory without independent inquiry. However, the statements contained in this letter are statements of Prime ("Prime") and no liability will accrue to the signatory. Prime will be estopped from later claiming any state of facts contrary to the statements contained in this letter only if the statements made in this letter were actually known to be false by the signatory at the time made. Very truly yours, PRIME HOSPITALITY CORP. /s/ Douglas Vicari Douglas Vicari Senior Vice President and Chief Financial Officer DV: jm CONSENT, ESTOPPEL CERTIFICATE AND AGREEMENT (Crowne Plaza, Albany, New York) This CONSENT, ESTOPPEL CERTIFICATE AND AGREEMENT is executed and delivered as of this 15 day of November, 2002, among UDC-TEN EYCK DEVELOPMENT CORPORATION-III ("Hotel Lessor"). UDC-TEN EYCK DEVELOPMENT CORPORATION-II ("Garage Lessor"). each a wholly-owned subsidiary of New York Urban Development Corporation, a corporate governmental agency of the State of New York constituting a political subdivision and a public benefit corporation having an address at c/o New York State Urban Development Corporation, 633 Third Avenue. New York, New York 10017 (Hotel Lessor and Garage Lessor, collectively, "Lessor"), ALBANY HOTEL, INC., a Florida corporation ("Lessee") and MERRILL LYNCH MORTGAGE LENDING, INC., as Administrative Agent, its permitted successors and/or assigns as set forth in paragraph 4 hereof, 4 World Financial Center, New York, New York 10080 ("Lender" as that term is defined below). WITNESSETH: WHEREAS, (a) Hotel Lessor is the lessor under a certain Agreement of Lease dated as of December 20, 1979, with Ten Eyck Hotel Associates, a New York limited partnership ("Ten Eyck"), as lessee, affecting the real property described on Exhibit A hereto (the "Hotel Premises") which Lease was recorded January 4, 1980 in Liber 2181 of Deeds. Page 1000 in the Office of the Albany County Clerk; which Lease was subsequently amended and restated in its entirety by Restatement of Agreement of Lease dated as of December 20, 1979 between Hotel Lessor, as lessor, and Ten Eyck, as lessee, recorded December 17, 1981 in Liber 2216 at page 135 in the Office of the Albany County Clerk; the lessee's interests in which Lease were subsequently assigned to Albany Motel Enterprises, Inc., pursuant to Bargain and Sale Deed dated November 11, 1992 and recorded January 21, 1993 in Liber 2476 at page 871 in the Office of the Albany County Clerk with respect to which a corrective instrument naming Albany Hotel, Inc., a Florida corporation, as lessee, dated May 5, 1995 was recorded August 15, 1995 in Liber 2593 at page 703 in the Office of Albany County Clerk (such Lease, as so amended and assigned, and as it may be further amended and assigned from time to time, the "Hotel Lease"); and (b) Garage Lessor is the lessor under a certain Agreement of Lease dated as of December 20, 1979, with Ten Eyck, as lessee, affecting the real property described on Exhibit B hereto (the "Garage Premises"; the Hotel Premises and the Garage Premises, collectively, the "Leased Premises"), which Lease was recorded January 4, 1980 in Liber 2181 of Deeds, Page 845 in the Office of the Albany County Clerk; which Lease was subsequently amended and restated in its entirety by Restatement of Agreement of Lease dated as of December 20, 1979 between Garage Lessor, as lessor, and Ten Eyck, as lessee, recorded December 17, 1981 in Liber 2216 at page 135 in the Office of Albany County Clerk; the lessee's interests in which Lease were subsequently assigned to Albany Motel Enterprises, Inc., pursuant to Bargain and Sale Deed dated November 11, 1992 and recorded January 21, 1993 in Liber 2476 at page 871 in the Office of the Albany County Clerk with respect to which a corrective instrument naming Lessee, as lessee, dated May 5, 1995 was recorded August 15, 1995 in Liber 2593 at page 703 in the Office of the Albany County Clerk (such Lease, as so amended and assigned, and as it may be further amended and assigned from time to time, the "Garage Lease"; the Hotel Lease and the Garage Lease, collectively, the "Lease"); WHEREAS, Lessee has requested that Merrill Lynch Mortgage Lending. Inc., in its capacity as mortgage lender and mezzanine lender (together with its respective successors and assigns, collectively, "Lender") make a loan to Lessee to be secured by, among other things, a first mortgage lien on Lessee's interest in the Leased Premises (such loan, the "Loan"); and WHEREAS, Lender requires that Lessor enter into this Agreement, without which Lender would not make the Loan: NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00), and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, Lessor agrees as follows: 1. Without implying that Lessor's acknowledgment or consent may be required under the Lease, Lessor does hereby acknowledge and consent to (a) the granting by Lessee of a leasehold mortgage in the principal amount of [$15,500,000] to Lender on Lessee's interests in the Leased Premises ("Leasehold Mortgage") and (b) the address for delivery of notices to Lender as set forth below. Lessor acknowledges and agrees that Lender shall be deemed to be and shall have all of the rights and protections granted to a "mortgagee," "Leasehold Mortgagee," "Institutional Lender" or "Servicer" under the Lease. 2. Lessor does hereby certify to Lender that: (a) Lessor is the current owner of (i) the fee estate in the Leased Premises, and (ii) all of the rights and benefits of "Lessor" under the Lease; (b) except as qualified herein, Base Rent and other sums due and owing under the Lease as of the date hereof are current and not in arrears; (c) there exist no Events of Default under the Lease by Lessor or Lessee; (d) the Lease is in full force and effect; (e) the Lease has not been amended or modified; and (f) to the best of Lessor's knowledge, there are no offsets, counterclaims, defenses, deductions or credits whatsoever with respect to the Lease, or any amounts owing under any other agreement. Notwithstanding anything else herein to the contrary, Lessor makes no representations as to whether any portion of the Base Rent is due and owing nor whether Additional Base Rent is due and owing. 3. Lessor does hereby agree that: (a) Lender shall be deemed to be an "Institutional Lender" (as such term is defined in the Lease) for all purposes under the Lease; and (b) the mortgage on the Leased Premises securing the Loan shall be deemed to be a "Permanent Mortgages" (as such term is defined in the Lease) for all purposes under the Lease. 4. Lessor acknowledges that Lender may assign its interests as referred to in paragraph I hereof to any of the following: (a) an Institutional Lender (as referred to in the Lease), and (b) an Institutional Lender acting as trustee, and Lessor hereby approves any such assignment. 5. Unless otherwise notified by Lender, copies of any notices to Lessee shall be sent to Lender at the following address: 2 Merrill Lynch Mortgage Lending, Inc. c/o Merrill Lynch & Co. Global Principal Investments 4 World Financial Center New York, NY 10080 Attention: Steven Glassman Facsimile: (212) 738-1013 Attention: John Gluszak Facsimile: (212) 738-2053 Attention: John Katz Facsimile: (212) 449-8094 with a copy to: Sidley Austin Brown & Wood LLP 787 Seventh Avenue New York, NY 10019 Attn: Alan S. Weil, Esq. Facsimile: (212) 839-5599 6. In the event Lender shall acquire, assume or succeed to Lessee's interest under the Lease, then in such event, so long as there exists no uncured Event of Default under the Lease on Lessee's part to be performed, Lender's possession under the Lease and Lender's rights and privileges thereunder, or under any extensions or renewals thereof which may be effected in accordance with any option therefor contained in the Lease, shall not be diminished or interfered with by Lessor, and Lender's occupancy shall not be disturbed by Lessor during the term of the Lease or any such extensions or renewals thereof. 7. Lessor hereby agrees that for so long as any sums in respect of the Loan remain outstanding. Lessor shall not mortgage its fee interest in the Leased Premises unless such mortgage shall expressly provide for the preservation of the leasehold under the Lease, and for the non-merger of the fee and leasehold estates in the Leased Premises. 8. Lessor hereby agrees that for so long as any sums in respect of the Loan remain outstanding, notwithstanding any provisions of the Lease to the contrary, in the absence of an uncured default. it shall not accept, consent to or join in the execution of any instrument purporting to effect the early cancellation or termination of the Lease by Lessee, or a modification or amendment thereof without the prior written consent of Lender. Lessee hereby agrees that for so long as any sums in respect of the Loan remain outstanding, notwithstanding any provisions of the Lease to the contrary, Lessee will not exercise any right it may have to purchase the Leased Premises without the prior written consent of Lender. 9. Lessor acknowledges that as between Lessor and Lender, its nominee or a purchaser at a foreclosure or other sale, the Lease shall not be deemed to be terminated notwithstanding the rejection of the Lease by the lessee thereunder or its representative in any proceeding under the Bankruptcy Code (11 U.S.C., Section 101 et seq.) (the "Bankruptcy Code") or any other insolvency law provided Lender cures any and all defaults susceptible to cure by Lender, 3 including any monetary defaults. Leader shall be deemed to have satisfied its obligation to commence foreclosure proceedings by asserting a claim in a proceeding under the Bankruptcy Code or other insolvency proceeding, and Lender shall not be deemed to have failed to satisfy such obligation if Lender is unable to do so as a result of the provisions of Section 362 of the Bankruptcy Code or similar provisions of any other insolvency law. 10. Lessor acknowledges that Lender has requested that Lessor execute this Agreement in connection with the Loan, and that Lender has agreed to make the Loan in reliance on the matters set forth herein. 11. This Agreement shall be binding upon, and may be relied upon by, the parties, their successors and assigns, and the terms hereof shall inure to the benefit of the parties, their successors and assigns. [NO FURTHER TEXT ON THIS PAGE] 4 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year first above written. LESSOR: UDC-TEN EYCK DEVELOPMENT CORPORATION-II By: /s/ HARRIS ROSENTHAL --------------------- Name: Title: VP UDC-TEN EYCK DEVELOPMENT CORPORATION-III By: /s/ HARRIS ROSENTHAL --------------------- Name: Title: VP LESSEE: ALBANY HOTEL, INC. By: --------------------- Name: Title: (SIGNATURES CONTINUE OF FOLLOWING PAGE) IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year first above written. LENDER: MERRILL LYNCH MORTGAGE LENDING. INC., as Administrative Agent By: ___________________________ Name: Title: 6 STATE OF NEW YORK ) )ss: COUNTY OF NEW YORK ) The foregoing instrument was acknowledged before me this 15 day of Nov, 2002, by Harris Rosenthal, who resides at WEST ORANGE, NJ, as V.P of UDC-TEN EYCK DEVELOPMENT CORPORATION-II, on behalf of said corporation. He/she is personally known to me or who has produced a driver's license as identification and who did take an oath. /s/ STEVEN J. MATLIN -------------------- Print or Stamp Name: Notary Public STATE OF NEW YORK ) STEVEN J. MATLIN )ss: NOTARY PUBLIC OF NEW YORK COUNTY OF NEW YORK ) Qualifief in New York Country Reg# 02MA6063225 My Commission Expires August 27, 2005 The foregoing instrument was acknowledged before me this 15 day of Nov, 2002, by Harris Rosenthal, who resides at WEST ORANGE, NJ, as V.P. of UDC-TEN EYCK DEVELOPMENT CORPORATION-III, on behalf of said corporation. He/she is personally known to me or who has produced a driver's license as identification and who did take an oath. /s/ STEVEN J. MATLIN -------------------- Print or Stamp Name: Notary Public STATE OF ) STEVEN J. MATLIN )ss: NOTARY PUBLIC OF NEW YORK COUNTY OF _________) Qualifief in New York Country Reg# 02MA6063225 My Commission Expires August 27, 2005 The foregoing instrument was acknowledged before me this ___ day of ___, 2002, by ____, who resides at _____, as ____ of ALBANY HOTEL, INC., on behalf of said corporation. He/she is personally known to me or who has produced a driver's license as identification and who did take an oath. ____________________ Print or Stamp Name: Notary Public STATE OF __________) )ss: COUNTY OF _________) The foregoing instrument was acknowledged before me this ____ day of ____, 2002, by ____, who resides at ____, as _____ of MERRILL LYNCH MORTGAGE LENDING, INC., on behalf of said corporation. He/she is personally known to me or who has produced a driver's license as identification and who did take an oath. ____________________ Print or Stamp Name: Notary Public 2 EXHIBIT A Legal Description - Hotel EXHIBIT A ALL that certain parcel of land in the City and County of Albany, State of New York, comprising Parcel D on a certain map filed April 29, 1976 in the Albany County Clerk's Office as Map No. 5197, filed in Drawer No. 168, said parcel being more particularly bounded and described as follows: BEGINNING at the point where the division line between Parcels A and D on said map intersects the Northeasterly line of State Street and which point is 128.68 feet Northwesterly on a course of North 52 degrees 43 minutes 30 seconds West as measured along the Northeast line of State Street from its intersection with the Northwest line of North Pearl Street; RUNNING THENCE along the Northeast line of State Street, the following courses and distances: North 52 degrees 43 minutes 30 seconds West 44.77 feet; North 51 degrees 30 minutes 20 seconds West 47.68 feet, and North 55 degrees 53 minutes West 134.61 feet to the East line of Lodge Street; as per deed to the City of Albany recorded November 17, 1976 in Book 2123 of deeds page 120. THENCE along the said East line of Lodge Street, the following courses and distances: North 26 degrees 53 minutes 30 seconds East 159.95 feet, and North 25 degrees 47 minutes 00 seconds East 83.31 feet to the division line between Parcel D and Parcel C on said map; THENCE along said division line, South 17 degrees 38 minutes 30 seconds East 45.58 feet; (CONTINUED) THENCE continuing along said division line and the division line between Parcel D and Parcel E, South 62 degrees 38 minutes 30 seconds East 206.09 feet to a point in the division line between Parcel D and Parcel E on said map; THENCE along said division line, the following courses and distances: South 27 degrees 21 minutes 30 seconds West 154.84 feet, and South 17 degrees 38 minutes 30 seconds East 19.72 feet to the division line between Parcel D and Parcel A on said map; THENCE along same, South 72 degrees 21 minutes 30 seconds West 34.11 feet, and South 27 degrees 21 minutes 30 seconds West 50.85 feet to the point of BEGINNING. EASEMENT D-1 TOGETHER with an easement for the footings of the building constructed upon Parcel D to project beyond the division line between Parcel D and Parcel E, said footings to be constructed as shown on the Construction Contract except as modified, changed, altered or redesigned to meet existing conditions. EASEMENT D-2 TOGETHER with an easement for signs erected within the area (Level 51) of the building constructed upon Parcel D to project beyond the division line between Parcel D and Parcel E. The signs so erected shall meet the approval of UDC. EASEMENT D-7 SUBJECT to an easement for the footings of the building constructed upon Parcel C, to project beyond the parcel limits of Parcel C into Parcel D, near the southwest corner of Parcel C. -2- EASEMENT D-3 TOGETHER with an easement for exit onto a portion of Parcel E designated in the Construction Contracts as the "East Plaza" an easement for ingress and egress across said "East Plaza". EASEMENT D-4 TOGETHER with an easement for roof projections of the building constructed upon Parcel D to project beyond the division line between Parcel D and Parcel E. EASEMENT D-5 TOGETHER with an easement for the footings of the buildings to be constructed upon Parcel D to project beyond the Parcel limits of Parcel D into State Street and Lodge Street. EASEMENT D-6 TOGETHER with an easement for the construction, operation, maintenance, repair and replacement of an electric vault within the limits of Lodge Street and/or State Street adjacent to Parcel D if such vault is required and approved by UDC. TOGETHER with the right to erect and maintain within the air space covered by Easement C-1, mentioned in Exhibit "A" to that certain Restatement of Agreement of Lease between UDC - Ten Eyck Development Corporation-II and Ten Eyck Hotel Associates dated as of December 20, 1979, a portion of the Buildings constructed upon the aforesaid Parcel D pursuant to the Lease. -3- EXHIBIT B Legal Description - Garage Description of Land ALL that certain parcel of land in the City and County of Albany, State of New York, comprising Parcel C on a certain map filed April 29, 1976 in the Albany County Clerk's Office as Map No. 5197, filed in Drawer No. 168, said parcel being more particularly bounded and described as follows: BEGINNING at a point in the east line of Lodge Street at the northwest corner of Parcel D on said map; THENCE North 17 degrees 38 minutes 30 seconds West, along the East line of Lodge Street, 2.92 feet; THENCE North 27 degrees 21 minutes 30 seconds East, along the East line of Lodge Street, 32.37 feet; THENCE South 62 degrees 38 minutes 30 seconds East, along the East line of Lodge Street, 1.11 feet; THENCE North 25 degrees 47 minutes 00 seconds East, along the East line of Lodge Street, 120.40 feet to a point in the South line of Pine Street; THENCE South 64 degrees 44 minutes East, along the South line of Pine Street, 129.35 feet; THENCE South 79 degrees 36 minutes 30 seconds East, along the South line of Pine Street, 9.25 feet to the division line between Parcels C and E on said map; THENCE along said division line South 27 degrees 21 minutes 30 seconds West, 194.44 feet to the division line between Parcels C and D on said map; THENCE North 62 degrees 38 minutes 30 seconds West, along said division line 101.62 feet; THENCE continuing along said division line North 17 degrees 38 minutes 30 seconds West, 45.58 feet to the point and place of BEGINNING. EASEMENT C-1 TOGETHER with the right to have that volume of airspace over Parcel D above an elevation of 104 feet 0 inches above Mean Sea Level (U.S.C.G.S.-1929 Datum) retained free of structures or other encumbrances to the free movement of air and light within the following limits: BEGINNING at a point in the south line of Parcel C hereinbefore described, said point of beginning being more EXHIBIT "A" PAGE 1 of 7 particularly described as follows: beginning at the point of intersection of the north line of State Street with the west line of North Pearl Street; thence N. 52 degrees 43' 30" W., along the north line of State Street, 173.45 feet; thence N. 51 degrees 30' 20" W., along the north line of State Street, 47.68 feet; thence N. 55 degrees 53' W., along the north line of State Street, 134.61 feet to a point in the east line of Lodge Street; thence N. 26 degrees 53' 30" E., along the east line of Lodge Street, 159.95 feet; thence N. 25 degrees 47' 00" E., along the east line of Lodge Street, 83.31 feet; thence S. 17 degrees 38' 30" E., 45.58 feet to the first mentioned point of beginning which point is the point of beginning of the parcel herein described: THENCE S. 27 degrees 21' 30" W., 10.0 feet; thence S. 62 degrees 38' 30" E., 183.87 feet; thence N. 27 degrees 21' 30" E., 10.0 feet to a point in the north line of Parcel D; thence N. 62 degrees 38' 30" W., along the north line of Parcel D, 183.87 feet to the point and place of beginning. OCCUPYING on a horizontal plane at an elevation of 104 feet 0 inches above Mean Sea Level (U.S.C.G.S.-1929 Datum) an area of 1838.7 square feet (.04221 Acre). EASEMENT C-2 TOGETHER with all rights to that volume of airspace over Parcel E above an elevation of 67 feet 0 inches above Mean Sea Level (U.S.C.G.S.-1929 Datum) having the following limits: BEGINNING at the southeast corner of Parcel C hereinbefore described, said point of beginning being more particularly described as follows: beginning at the point of intersection of the north EXHIBIT "A" PAGE 2 of 7 line of State Street with the west line of North Pearl Street; thence N. 52 degrees 43' 30" W., along the north line of State Street, 173.45 feet; thence N. 51 degrees 30' 20" W., along the north line of State Street, 47.68 feet; thence N. 55 degrees 53' W., along the north line of State Street, 134.61 feet to the east line of Lodge Street; thence N. 26 degrees 53' 30" E., along the east line of Lodge Street, 159.95 feet; thence N. 25 degrees 47' 00" E., along the east line of Lodge Street, 83.31 feet; thence S. 17 degrees 38' 30" E., 45.58 feet; thence S. 62 degrees 38' 30" E., 101.62 feet to the first mentioned point of beginning which point is the point of beginning of the parcel herein described: THENCE N. 27 degrees 21' 30" E., 194.44 feet to a point in the south line of Pine Street; thence S. 79 degrees 36' 30" E., along the north line of Pine Street, 40.95 feet; thence S. 63 degrees 31' E., along the south line of Pine Street, 25.92 feet; thence S. 27 degrees 21' 30" W., 170.63 feet; thence S. 17 degrees 38' 30" E., 10.13 feet; thence S. 27 degrees 21' 30" W., 29.0 feet; thence N. 62 degrees 38' 30" W., 72.25 feet to the point and place of beginning. OCCUPYING on a horizontal plane at an elevation of 67 feet 0 inches above Mean Sea Level (U.S.C.G.S.-1929 Datum) an area of 13,438 square feet (0.30849 Acre). EASEMENT C-3 TOGETHER with the right to have that volume of airspace over Parcel E above an elevation of 85 feet 0 inches above Mean Sea Level (U.S.C.G.S.-1929 Datum) retained free of structures or other encumbrances to the free movement of air and light within the following limits: EXHIBIT "A" PAGE 3 of 7 BEGINNING at the southeast corner of Easement C-2 hereinbefore described, said point of beginning being more particularly described as follows: beginning at the point of intersection of the north line of State Street with the west line of North Pearl Street; thence N. 52 degrees 43' 30" W., along the north line of State Street, 173.45 feet; thence N. 51 degrees 30' 20" W., along the north line of State Street, 47.68 feet; thence N. 55 degrees 53' W., along the north line of State Street, 134.61 feet to the east line of Lodge Street; thence N. 26 degrees 53' 30" E., along the east line of Lodge Street, 159.95 feet; thence N. 25 degrees 47' 00" E., along the east line of Lodge Street, 83.31 feet; thence S. 17 degrees 38' 30" E., 45.58 feet; thence S. 62 degrees 38' 30" E., 173.87 feet to the first mentioned point of beginning which point is the point of beginning of the parcel herein described: THENCE N. 27 degrees 21' 30" E., 29.0 feet; thence N. 17 degrees 38' 30" W., 10.13 feet; thence N. 27 degrees 21' 30" E., 170.63 feet to a point in the south line of Pine Street; thence S. 63 degrees 31' E., along the south line of Pine Street, 10.00 feet; thence S. 27 degrees 21' 30" W., 166.64 feet; thence S. 17 degrees 38' 30" E., 10.13 feet; thence S. 27 degrees 21' 30" W., 33.14 feet; thence N. 62 degrees 38' 30" W., 10.00 feet to the point and place of beginning. EXHIBIT "A" PAGE 4 of 7 OCCUPYING on a horizontal plane at an elevation of 85 feet 0 inches above Mean Sea Level (U.S.C.G.S.-1929 Datum) an area of 2098 square feet (0.04816 Acre). EASEMENT C-4 TOGETHER with the right to construct, operate, maintain or repair or replace a stairway and elevator within that volume of space within Parcel E below an elevation of 67 feet 0 inches above Mean Sea Level (U.S.C.G.S.-1929 Datum) having the following limits: BEGINNING at the southeast corner of Easement C-2 hereinbefore described, said point of beginning being more particularly described as follows: beginning at the point of intersection of the north line of State Street with the west line of North Pearl Street; thence N. 52 degrees 43' 30" W., along the north line of State Street, 173.45 feet; thence N. 51 degrees 30' 20" W., along the north line of State Street, 47.68 feet; thence N. 55 degrees 53' W., along the north line of State Street, 134.61 feet to the east line of Lodge Street; thence N. 26 degrees 53' 30" E., along the east line of Lodge Street, 159.95 feet; thence N. 25 degrees 47' 00" E., along the east line of Lodge Street, 83.31 feet; thence S. 17 degrees 38' 30" E., 45.58 feet; thence S. 62 degrees 38' 30" E., 173.87 feet to the first mentioned point of beginning which point is the point of beginning of the parcel herein described: THENCE N. 27 degrees 21' 30" E., 29.0 feet; thence N. 62 degrees 38' 30" W., 8.83 feet; thence S. 27 degrees 21' 30" W., 29.0 feet; thence S. 62 degrees 38' 30" E., 8.83 feet to the point and place of beginning. OCCUPYING on a horizontal plane at an elevation of 67 feet 0 inches above Mean Sea Level (U.S.C.G.S.-1929 Datum) an area of 256 square feet (0.00588 Acre). EXHIBIT "A" PAGE 5 of 7 EASEMENT C-5 TOGETHER with the right to construct, repair, replace and maintain columns and other structural elements for the proposed parking structure to be erected upon Parcel C hereinbefore described within that volume of space within Parcel C below an elevation of 67 feet 0 inches above Mean Sea Level (U. S. C. G. S. - 1929 Datum) having the following limits: BEGINNING at the southeast corner of Parcel C hereinbefore described, said point of beginning being more particularly described as follows: beginning at the intersection of the north line of State Street with the west line of North Pearl Street; thence N. 52 degrees 43' 30" W., along the north line of State Street, 173.45 feet; thence N. 51 degrees 30' 20" W., along the north line of State Street, 47.68 feet; thence N. 55 degrees 53' W., along the north line of State Street, 134.61 feet to the east line of Lodge Street; thence N. 26 degrees 53' 30" E., along the east line of Lodge Street, 159.95 feet; thence N. 25 degrees 47' 00" E., along the east line of Lodge Street, 83.31 feet; thence S. 17 degrees 38' 30" E., 45.58 feet; thence S. 62 degrees 38' 30" E., 101.62 feet to the first mentioned point of beginning which point is the point of beginning of the parcel herein described: THENCE N. 27 degrees 21' 30" E., 183.50 feet; thence S. 62 degrees 38' 30" E., 7.5 feet; thence S. 27 degrees 21' 30" W., 57.0 feet; thence N. 62 degrees 38' 30" W., 6.0 feet; thence S. 27 degrees 21' 30" W., 126.5 feet; thence N. 62 degrees 38' 30" W., 1.5 feet to the point and place of beginning. EXHIBIT "A" PAGE 6 of 7 OCCUPYING on a horizontal plane at an elevation of 67 feet 0 inches above Mean Sea Level (U. S. C. G. S. - 1929 Datum) an area of 617.25 square feet (0.01417 Acre). EASEMENT C-6 TOGETHER with an easement for the footings of the building constructed upon Parcel C to project beyond the parcel limits of Parcel C into Pine Street and Lodge Street. TOGETHER with an easement in favor of the Equitable Life Assurance Society of the United States and the Equitable Life Mortgage and Realty Investors, their successors and assigns, as set forth in Easement and Seven Party Agreement dated December 20, 1979 and duly recorded in the office of the Clerk of the County of Albany on January 4, 1980, in Liber 2181 of Deeds, at page 775. SUBJECT to the right of Tenant, as the tenant under a certain Restatement of Lease Agreement ("Ground Lease") dated as of December 20, 1979 between UDC-Ten Eyck Development Corporation-III, as Landlord, and Ten Eyck Hotel Associates, as Tenant, to be recorded simultaneously herewith to erect and maintain within the airspace covered by the foregoing Easement C-1 a portion of the Buildings to be constructed pursuant to the Ground Lease as located upon completion thereof. EXHIBIT "A" PAGE 7 of 7 ACKNOWLEDGMENT, ESTOPPEL CERTIFICATE AND AGREEMENT (Lancaster, PA-East) THIS ACKNOWLEDGMENT, ESTOPPEL CERTIFICATE AND AGREEMENT ("Agreement") is executed and delivered as of this 14th day of November, 2002, among JOYCE A. BRISTOW, as Personal Representative of the estate of Dorothy H. Herr, ("Lessor"); MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation ("Lender") and AMI OPERATING PARTNERS, L. P., a Delaware limited partnership ("Lessee"). RECITALS A. Lessor is the lessor under the ground lease described on Exhibit "A" hereto between Lessor, as lessor, and Lessee, as lessee, affecting the real property ("Land") and improvements ("Improvements") known as and located at 521 Greenfield Road, Lancaster, Pennsylvania 17601 more particularly described on Exhibit "B" hereto (the Land and Improvements, collectively, the "Leased Premises"; such lease, as so amended and assigned, and as it may be further amended and assigned from time to time, the "Lease"); B. Lessee is now in the process of obtaining from Lender a refinancing loan (the "Loan") to be secured by, among other things, a mortgage and collateral assignment of all of Lessee's interests under the Lease; C. In order to facilitate the transactions described herein, Lessor has agreed to enter into this Agreement, without which Lender would not make the Loan. NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00), and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, Lessor agrees as follows: 1. Without implying herein that Lessor's acknowledgment or consent may be required under the Lease, Lessor does hereby acknowledge (a) the granting by Lessee of a leasehold mortgage ("Leasehold Mortgage") to Lender on Lessee's interests in the Leased Premises (b) the pledge of the ownership interests in the Lessee by the holder or holders of all ownership interests in Lessee (i.e. the mezzanine borrower) to the applicable Merrill Lynch mezzanine lending entity (together with its successors and assigns, the "Mezzanine Lender") as security for a mezzanine loan (the "Mezzanine Loan") and the right of Mezzanine Lender to foreclose on such ownership interests in the event of a default under the Mezzanine Loan and (c) the address for delivery of notices to Lender and Mezzanine Lender as set forth below. Upon the mortgaging of the Leased Premises, the pledge of the ownership interests in Lessee pursuant to the Mezzanine Loan and the execution of this Agreement, Lessor acknowledges and agrees that both Lender and Mezzanine Lender shall be deemed to be, and shall have all of the rights and protections granted to the "Servicer" under the Lease. 2. Lessor and Lessee hereby certify to Lender that: (a) Lessor is the current owner of (i) the fee interest in the Leased Premises, and (ii) all of the rights and benefits of "Lessor" under the Lease; (b) all rents and other sums due and owing under the Lease as of the date hereof are current and not in arrears; (c) there exists no uncured default under the Lease by Lessor or Lessee; (d) the Lease is in full force and effect; (e) the current renewal term of the Lease expires June 30, 2024, and Lessee has remaining two (2) 20-year options to renew the term; (f) all of the material obligations under the Lease which have accrued prior to the date of this Agreement have been fully performed; and (g) Exhibit "A" lists the only instruments governing Lessor's and Lessee's rights and obligations with respect to the Leased Premises. 3. The annual rental for the current period (08/01/99 through 07/30/04) is $67,456, payable $5,621,34 per month. Annual rental shall next be adjusted in August, 2004, to be effective for the 5-year period beginning 08/01/04. Rent is due in advance on the 1st day of each month. Rent is paid through November, 2002 and the next rent payment is due on December 1, 2002. 4. Lessor confirms that, notwithstanding any provisions of the Lease to the contrary, in the event of casualty to the Improvements on the Leased Premises, insurance proceeds in respect of such casualty shall be paid to and held by Lender for Lender's disbursement to Lessee for repair and/or reconstruction of the Improvements. 5. In accordance with the provisions of Section 13 of the Lease, Lessor has at all times complied with the covenants regarding non-competition contained therein. 6. Unless otherwise notified by Lender or Mezzanine Lender, copies of any notices to Lender or Mezzanine Lender, as the case may be, shall be sent to the following addresses: If to Lender: Merrill Lynch Mortgage Lending, Inc. c/o Merrill Lynch & Co. Global Principal Investments 4 World Financial Center New York, New York 10080 Attn: Steve Glassman Facsimile: (212) 738-1013 Attn: John Gluszak Facsimile: (212) 738-2053 With a copy to: Sidley Austin Brown & Wood, LLP 787 Seventh Avenue New York, New York 10019 Attn: Alan S. Weil, Esq. Facsimile: (212) 839-5599 If to Mezzanine Lender: Merrill Lynch Mortgage Lending, Inc. c/o Merrill Lynch & Co. Global Principal Investments 4 World Financial Center New York, New York 10080 Attn: Steven Glassman Facsimile: (212) 738-1013 Attn: John Katz Facsimile: (212) 738-8094 With a copy to: Sidley Austin Brown & Wood, LLP 787 Seventh Avenue New York, New York 10019 Attn: Alan S. Weil, Esq. Facsimile: (212) 839-5599 7. In the event Lender shall acquire, assume or succeed to Lessee's interest under the Lease, then in such event, so long as Lender is not in default in the performance of any of the terms, covenants or conditions of the Lease on Lessee's part to be performed, Lender's possession under the Lease and Lender's rights and privileges thereunder, or under any extensions or renewals thereof which may be effected in accordance with any option therefor contained in the Lease, shall not be diminished or interfered with by Lessor, and Lender's occupancy shall not be disturbed by Lessor during the term of the Lease or any such extensions or renewals thereof. 8. Lender understands and agrees that Lessor is neither a party to the Loan nor are Lessor's fee title and Lessor's interest in the Lease subordinate to the security interest of the Leasehold Mortgage on the lessee's interest in the Lease. 9. Lessor's Encumbrances. Lessor's fee simple interest in the Leased Premises and the Lessor's interest under the Lease are not encumbered. 10. Lessor hereby agrees that either Lender or Mezzanine Lender shall have the right, pursuant to the terms of the Lease, to exercise the remaining two (2) options to renew the term of the Lease, if the Lessee shall fail to do so, whether or not an event of default under the Leasehold Mortgage shall have occurred, provided that Lender or Mezzanine Lender shall do so strictly in accordance with the Lease. In the event Lender or Mezzanine Lender does so exercise any option to renew, Lender or Mezzanine Lender shall become obligated with the Lessee for the performance of the obligations set forth in the Lease. 11. Lessor hereby agrees that for so long as any sums in respect of the Loan remain outstanding, it shall not, without the prior written consent of both Lender and Mezzanine Lender: (a) notwithstanding any provisions of the Lease to the contrary, accept, consent to or join in the execution of any instrument purporting to (i) effect the termination, prior to June 30, 2024, of the Lease by Lessee, or (ii) amend or modify the Lease with respect to the term, amounts payable by the Lessee thereunder, the protections afforded to Lender as a leasehold mortgagee thereunder or other material non-monetary modifications and shall give Lender written notice of any other proposed modification thirty (30) days prior to the effective date; (b) permit or accept the exercise by Lessee of any right it may have to purchase the Leased Premises without having first obtained Lender's written consent thereto. To the extent Lender shall have approved any such exercise by Lessee of such right, the conveyance instrument executed in connection therewith shall expressly provide for the preservation of the leasehold under the Lease, and for the non-merger of the fee and leasehold estates in the Leased Premises. 12. Lessor acknowledges that as between Lessor and Lender, its nominee or a purchaser at a foreclosure or other sale, the Lease shall not be deemed to be terminated notwithstanding the rejection of the Lease by the Lessee thereunder or its representative in any proceeding under the Bankruptcy Code (11 U. S. C. Section 101 et seq.) (the "Bankruptcy Code") or any other insolvency law. Lender shall be deemed to have satisfied its obligation to commence foreclosure proceedings by asserting a claim in a proceeding under the Bankruptcy Code or other insolvency proceeding, and Lender shall not be deemed to have failed to satisfy such obligation if Lender is unable to do so as a result of the provisions of Section 362 of the Bankruptcy Code or similar provisions of any other insolvency law, provided all arrearages and rents are paid within ninety (90) days of the institution of the bankruptcy proceeding. 13. Lessor acknowledges that Lender and Mezzanine Lender have requested that Lessor execute this Agreement in connection with the Loan and the Mezzanine Loan, and that Lender has agreed to make the Loan and Mezzanine Lender has agreed to make the Mezzanine Loan in reliance on the matters set forth herein. 14. This Agreement may be executed in counterparts, and each such counterpart shall constitute an original. 15. Except as amended hereby, the Lease and all the terms, covenants and conditions thereof remain unchanged and in full force and effect, and the Lease, as amended hereby, is hereby ratified and confirmed in all respects. 16. The parties agree that the protections and rights granted to the Lender and Mezzanine Lender by this Agreement shall also apply to any other prospective mortgagee of Lessee's interest in the Lease or any other prospective pledgee of the ownership interests in Lessee, provided that the name and address of such lender is provided in writing to Lessor, and such other lender shall be deemed the "Servicer" or the "Leasehold Mortgagee" for the purposes of this Agreement and for the purposes of the Lease. 17. This Agreement shall be binding upon, and may be relied upon by, the parties, their successors and assigns, and the terms hereof shall inure to the benefit of the parties, their successors and assigns. IN WITNESS WHEREOF, the parties hereto have executed Agreement as of the date and year first above written. LENDER: LESSOR MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation By: __________________________ /s/ Joyce A. Bristow -------------------- Name: Joyce A. Bristow, as Personal Title: Representative of the state of Dorothy H. Herr MEZZANINE LENDER: LESSEE: MERRILL LYNCH MORTGAGE AMI OPERATING PARTNERS, L.P., LENDING, INC., a Delaware limited partnership a Delaware corporation By: _________________________ By: ________________________________ Name: Name: Title: Title: [Notarizations commence on following page] CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT State of California } ss. County of Solano On Nov 14, 2002 before me, Linda Bergen Date (Name and Title of Officer (e.g. " Jang Dee, Notary Public") personally appeared Joyce A. Bristow --------------------- Name(s) of Signer(s) [ ] personally known to me [X] proved to me on the basis of satisfactory evidence to be the person whose name is/ subscribed to the within instrument and acknowledged to me that she executed the same in her authorized capacity. and that by her signature on the instrument the person. or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. [SEAL OF LINDA BERGEN] /s/ Linda Bergen -------------------------- Place Notary Seal Above Signature of Notary Public ___________________________________ OPTIONAL___________________________________ Though the information below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent removal and reattachment of this form to another document. DESCRIPTION OF ATTACHED DOCUMENT Title or Type of Document: Acknowledgement, Estoppel Cert + agreement Document Date: Nov 14, 2002 Number of Pages: 7 Signer(s) Other Than Named Above: Merrill Lynch, Mtg, ami operating partners L.P. CAPACITY (IES) CLAIMED BY SIGNER Signer's Name: ________________________________________ RIGHT THUMBPRINT [X] Individual OF SIGNER [ ] Corporate Officer -- Title(s):_____________________ Top of thumb here [ ] Partner -- [ ] Limited [ ] General [ ] Attorney in Fact [ ] Trustee [ ] Guardian or Conservator [ ] Other:_____________________________________________ Signer is Representing:________________________________ STATE OF _______ ) ) ss: COUNTY OF ______ ) On this _____ day of ______, 2002, before me personally appeared _________ to me known, who, being by me duly sworn, did depose and say that he is the ________ of Merrill Lynch Mortgage Lending, Inc., a Delaware corporation, described in and which executed the foregoing instrument; and that he/she signed his/her name thereto by authority of the Board of Directors of the corporation. ______________________________________ Notary Public, State of _____ at Large Print Name: __________________________ STATE OF _______ ) ) ss: COUNTY OF ______ ) On this _____ day of ______, 2002, before me personally appeared _________ to me known, who, being by me duly sworn, did depose and say that he is the ________ of Merrill Lynch Mortgage Lending, Inc., a Delaware corporation, described in and which executed the foregoing instrument; and that he/she signed his/her name thereto by authority of the Board of Directors of the corporation. ______________________________________ Notary Public, State of _____ at Large Print Name: __________________________ [Notarizations continued on following page] STATE OF _______ ) ) ss: COUNTY OF ______ ) The foregoing instrument was acknowledged before me this _____ day of _____, 2002 by Joyce A. Bristow, as Personal Representative of the estate of Dorothy H. Herr. Personally Known ______ OR Produced Identification _______ Type of Identification Produced ___________________ ______________________________________ Print or Stamp Name: Notary Public, State of _____ at Large Commission No.: Commission Expires: STATE OF _______ ) ) ss: COUNTY OF ______ ) On this _____ day of _____, 2002, before me personally appeared _____ to me known, who being by me duly sworn, did depose and say that he is the _____ of AMI Operating Partners, L. P., described in and which executed the foregoing instrument; and that he/she signed his/her name thereto by authority of the Board of Directors of _____. ______________________________________ Notary Public, State of _____ at Large Print Name:___________________________ EXHIBIT "A" LEASE a. Lease Agreement, dated January 30, 1969, between Paul A. Herr and Dorothy H. Herr, as lessor, Republic Motor Inns, Inc., as lessee, and American Motor Inns, Inc., as guarantor, recorded with the Recorded of Deeds, Lancaster, PA in Record Book W59, Page 755. b. Addendum dated January 16, 1971 and recorded with the Recorder of Deeds, Lancaster, PA in Record Book R60, Page 233, c. Amendment dated March 15, 1985 and recorded with the recorder of Deeds, Lancaster, PA in Record Book W91, Page 434, d. Amendment to Lease dated December 20, 1986 and recorded with the Recorder of Deeds, Lancaster, PA in Record Book Y96, Page 660, e. Assignment of Lease and Indemnification Agreement, December 23, 1986, between Republic Motor Inns, Inc. and AMI Operating Partners, LP, recorded with the Recorder of Deeds, Lancaster, PA in Record Book Y96, Page 669, f. Assignment and Assumption of Lessee's Interest in Ground Lease, dated November 24, 1998, between AMI Operating Partners, LP and Lodgian AMI Inc., Page 638, and g. Acknowledgment, Estoppel Certificate and Agreement, dated November 24, 1998, between Dorothy H. Herr and AMI Operating Partners LP, recorded with the Recorder of Deeds, Lancaster, PA in Record Book 6045, Page 1. EXHIBIT "B" LEASED PREMISES GROUND LESSOR ESTOPPEL (MEMPHIS FRENCH QUARTER HOTEL) WHEREAS, BILL SUTTON and MARTHA SUTTON, having an address at 1405 Yucca, McAllen, Texas 78504 (hereinafter "Landlord"), are the holders of the landlord's interest and IMPAC HOTELS I, LLC, a Georgia limited liability company, having an address at Two Live Oak Center, 3445 Peachtree Road, Suite 700, Atlanta, Georgia 30326 (hereinafter "Tenant") is the holder of the tenant's interest, respectively, in, to and under that certain lease and amendments thereto and assignments thereof (the "Lease") described on Exhibit A annexed hereto and made a part hereof, which Lease covers the land and improvements therein described (the "Premises"), WHEREAS, Tenant is desirous of obtaining from Merrill Lynch Mortgage Lending, Inc., in its capacity as mortgage lender and mezzanine lender (together with its respective successors and assigns, collectively, "Lender"), having an office at 4 World Financial Center, New York, New York, 10080, a loan (the "Loan") secured by, among other things, a first leasehold mortgage upon Tenant's interest as tenant in the Lease (the "Leasehold Mortgage"); WHEREAS, Lender is unwilling to make the Loan unless Landlord executes an estoppel certificate as required under the Lease; NOW THEREFORE, Landlord hereby certifies to Lender as follows: 1. Landlord is the Landlord under the Lease. 2. The Lease constitutes the entire agreement between the Landlord and the Tenant thereunder and has not been further modified or amended. 3. The Lease is in full force and effect. 4. As of the date hereof, no basic rent or additional rent is due and payable from Tenant under the lease. The amount of the monthly basic rent is $1,600.00 and there is no additional rent. The rent due for the period _____ through ______ in the amount of $ _____ has been paid by Tenant. 5. The commencement date for the Lease was April 26, 1972 and the expiration date for the current lease term is September 30, 2038. 6. To Landlord's knowledge, the Tenant under the Lease is not in default thereunder. 7. Unless otherwise notified by Lender, copies of any notices to Lender shall be sent to the following address: Merrill Lynch Mortgage Lending, Inc. c/o Merrill Lynch & Co. Global Principal Investments 4 World Financial Center New York, NY 10080 Attention: Steven Glassman Facsimile: (212) 738-1013 Attention: John Gluszak Facsimile: (212) 738-2053 Attention: John Katz Facsimile: (212) 738-8094 with a copy to: Sidley Austin Brown & Wood, LLP 787 Seventh Avenue New York, NY 10019 Attn: Alan S. Weil, Esq. Facsimile: (212) 839-5599 8. Landlord acknowledges that Lender has requested that Landlord execute this Agreement in connection with the Loan, and that Lender has agreed to make the Loan in reliance on the matters set forth herein. This certificate and the representations made herein shall inured to the benefit to Lender, its successors and assigns and shall be binding on the Landlord, its successors and assigns. Executed this 11 day of Nov, 2002. LANDLORD: By: /s/ Bill Sutton --------------------- Bill Sutton By: /s/ Martha Sutton --------------------- Martha Sutton [Acknowledgement on Following Page] State of Texas County of Hidalgo On this 11 day of Nov, 2002, personally appeared the above named Bill Sutton and Martha Sutton, and they each acknowledged the foregoing instrument to be their free act and deed. Before me, [ILLEGIBLE] Notary Public [SEAL OF KRISTINA K. MION] EXHIBIT A That certain Lease dated April 26, 1972 between J. Murry Davis and wife, Mary Alice Davis as Lessor and W. H. Welch, Jr., Meredith L. McCullar, Fred Don Alfonso and Ernie Barrasso, as Lessee, recorded as Instrument No. H3 3366 in the Register's Office of Shelby County, Tennessee (the "Register's Office"); as amended by Agreement Assigning, Modifying and Extending Lease and Granting Certain Rights, dated as of February 29, 1976 between J. Murry Davis as Lessor and Waymon H. Welch, Jr. and Waymon H. Welch Sr. as Existing Lessee and The Group, Inc. as New Lessee, recorded in said Register's Office as Instrument No. L1 8178; as amended by Agreement Modifying and Extending Lease dated January 19, 1983 between Bill Sutton and Martha Sutton as Lessor and J. Garnett Murphy as Lessee, recorded in said Register's Office as Instrument No. U6 8978; as amended by Lease Modification Agreement dated June 4, 1983 by Bill Sutton and Martha Sutton as Lessor and J. Garnett Murphy as Lessee, recorded in said Register's Office as Instrument No. U3 3420; as amended by Lease Modification and Extension Agreement dated October 6, 1983 between Martha Sutton as Lessor and M. K. Partners, a partnership composed of J. Garnett Murphy and Ronald L. Kirkpatrick as Lessee, recorded in said Register's Office as Instrument No. U6 8978; as amended by Warranty Deed dated November 29, 1983 by M. K. Partners to French Quarter Inn of Memphis, recorded in said Register's Office as Instrument No. U8 0878; as amended by Assignment of Ground Leases dated January 15, 1991 by Middlesex Development Corporation, a California corporation d/b/a "French Quarter Inn of Memphis", as Assignor and Memphis Lodging Associates, Inc., a Florida corporation as Assignee, recorded in said Register's Office as Instrument No. CA 3996; as assigned by Assignment of Ground Leases dated March 12, 1997 by Memphis Lodging Associates, Inc., a Florida corporation, as Assignor to Impac Hotels, I. LLC, a Georgia limited liability company, as Assignee, recorded in said Register's Office as Instrument No. GM 0294; and further amended by Amendment of Ground Lease dated September 17, 1997, by Bill Sutton and Martha Sutton, as Landlord and Impac Hotels, I, LLC, a Georgia limited liability company, as Tenant, recorded in said Register's Office as Instrument No. HC 9439. GROUND LESSOR ESTOPPEL (MEMPHIS FRENCH QUARTER HOTEL) WHEREAS, HORACE PROCTOR and ANN PROCTOR, having an address at 6555 Brunswick Road, Arlington, Tennessee 38802 (hereinafter "Landlord"), are the holders of the landlord's interest and IMPAC HOTELS I, LLC, a Georgia limited liability company, having an address at Two Live Oak Center, 3445 Peachtree Road, Suite 700, Atlanta, Georgia 30326 (hereinafter "Tenant") is the holder of the tenant's interest, respectively, in, to and under that certain lease and amendments thereto and assignments thereof (the "Lease") described on Exhibit A annexed hereto and made a part hereof, which Lease covers the land and improvements therein described (the "Premises"). WHEREAS, Tenant is desirous of obtaining from Merrill Lynch Mortgage Lending, Inc., in its capacity as mortgage lender and mezzanine lender (together with its respective successors and assigns, collectively, "Lender"), having an office at 4 World Financial Center, New York, New York, 10080, a loan (the "Loan") secured by, among other things, a first leasehold mortgage upon Tenant's interest as tenant in the Lease (the "Leasehold Mortgage"); WHEREAS, Lender is unwilling to make the Loan unless Landlord executes an estoppel certificate as required under the Lease; NOW THEREFORE, Landlord hereby certifies to Lender as follows: 1. Landlord is the owner of the fee simple estate in the Premises, subject to covenants, easements and restrictions of record, and is the Landlord under the Lease. 2. The Lease constitutes the entire agreement between the Landlord and the Tenant thereunder and has not been further modified or amended. 3. The Lease is in full force and effect. 4. The Tenant has taken possession of the ground on a rent-paying basis. 5. As of the date hereof, no basic rent or additional rent is due and payable from Tenant under the lease. The amount of the monthly basic rent is $1,000.00 and there is no additional rent. The rent due for the period ______ through ______ in the amount of $ ______ has been paid by Tenant. 6. The commencement date for the Lease was August 24, 1972 and the expiration date for the current lease term is September 30, 2038. 7. To the best of Landlord's knowledge, all material obligations under the Lease which have accrued prior to the date hereof have been fully performed. 8. To the best of Landlord's knowledge, neither the Landlord nor the Tenant under the Lease is in default under any of the terms, covenants or provisions of the Lease and the Landlord knows of no event which, but for the passage of time or the giving of notice, or both, would constitute an event of default under the Lease by the Landlord or the Tenant thereunder. 9. Upon the Recording of the Leasehold Mortgage, Landlord hereby recognizes Lender as a Leasehold Mortgagee as defined in Section 2(h) of the September 24, 1997 Amendment of Ground Lease, for all purposes under the Lease. 10. All of the Leasehold Mortgage provisions contained in the Lease, including but not limited to those contained in the September 24, 1997 Amendment of Ground Lease, and all other provisions inuring to the benefit of Leasehold Mortgagees or their successors and assigns are hereby incorporated into this estoppel by reference and restated and confirmed by Landlord for the benefit of Lender, its successors and assigns. 11. Unless otherwise notified by Lender, copies of any notices to Lender shall be sent to the following address: Merrill Lynch Mortgage Lending, Inc. c/o Merrill Lynch & Co. Global Principal Investments 4 World Financial Center New York, NY 10080 Attention: Steven Glassman Facsimile: (212) 738-1013 Attention: John Gluszak Facsimile: (212) 738-2053 Attention: John Katz Facsimile: (212) 738-8094 with a copy to: Sidley Austin Brown & Wood, LLP 787 Seventh Avenue New York, NY 10019 Attn: Alan S. Weil, Esq. Facsimile: (212) 839-5599 12. Landlord acknowledges that Lender has requested that Landlord execute this Agreement in connection with the Loan, and that Lender has agreed to make the Loan in reliance on the matters set forth herein. 13. To the best of Landlord's knowledge, neither the Landlord nor the Tenant has commenced any action or given or received any notice for the purpose of terminating the Lease. 14. To the best of Landlord's knowledge, there are no offsets or defenses to the payment of the rent or other sums payable under the Lease. This certificate and the representations made herein shall inure to the benefit of Lender, its successors and assigns and shall be binding on the Landlord, its successors and assigns. [Signatures On Following Page] Executed this _____ day of _______, 2002. LANDLORD: By: ___________________________________ Horace Proctor By: ___________________________________ Ann Proctor [Acknowledgement on Following Page] State of Tennessee County of Shelby On this _____ day of _____, 2002, personally appeared the above named Horace Proctor and Ann Proctor, and they each acknowledged the foregoing instrument to be their free act and deed. Before me,_______________________ Notary Public EXHIBIT F ACCEPTABLE FRANCHISORS Exhibit F EXHIBIT F Acceptable Franchisors & Franchise Names
- ------------------------------------------------------ TIER 1 - ------------------------------------------------------ Six Continents Crowne Plaza Hilton Hotels Corp. Hilton Hilton Hotels Corp. Doubletree Hilton Hotels Corp. Homewood Suites Starwood Hotels & Resorts Weslin Starwood Hotels & Resorts Sheraton Starwood Hotels & Resorts W US Franchise Systems, Inc. Hawthorn Marriott International, Inc. Marriott Marriott International, Inc. Renaissance Marriott International, Inc. Courtyard Marriott International, Inc. Residence Inn Wyndham International Wyndham Hotel Carlson Hotels Worldwide Radisson

- --------------------------------------------------------- TIER 2 (WITH FOOD AND BEVERAGE) - --------------------------------------------------------- Six Continents Holiday Inn Six Continents Holiday Inn Select Six Continents Holiday Inn SunSpree Resort Hilton Hotels Corp. Hilton Garden Inn Choice Hotels International Clarion Best Western International, Inc. Best Western Cendant Corporation Ramada Starwood Hotels & Resorts Four Points Choice Hotels International Quality Wyndham International Wyndham Gardens

- --------------------------------------------------------- TIER 3 (WITHOUT FOOD AND BEVERAGE - --------------------------------------------------------- Six Continents Holiday Inn Express Hilton Hotels Corp. Hampton Inn Marriott International, Inc. Fairfield Choice Hotels International Comfort Inn Choice Hotels International Comfort Suites
I-1 EXHIBIT G [RESERVED] Exhibit G EXHIBIT H CAPITAL IMPROVEMENTS Exhibit H EXHIBIT H CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ----------------------------------------------------------------------------------------------------------------------------------- IMMEDIATE REPAIRS TO BE COMPLETED PROPERTY WITHIN 6 # CHAIN/NAME CITY STATE MONTHS PURPOSE - ----------------------------------------------------------------------------------------------------------------------------------- 0220 Holiday Inn Dothan AL $ 0 - ----------------------------------------------------------------------------------------------------------------------------------- 0230 Hampton Inn Dothan AL $ 0 - ----------------------------------------------------------------------------------------------------------------------------------- 0240 Holiday Inn Gadsden AL $ 164,600 Immediate Needs Express Identified in the EMG report: ADA accessibility $2,600; Foundation and sidewalk settlement on NE side of Bldg. D, $1,500, Asphalt repair overlay $142,500; Roof covering, built-up system replacement on Building D, $18,000. - ----------------------------------------------------------------------------------------------------------------------------------- 0210 Holiday Inn Sheffield AL $ 6,000 Immediate Needs: $6,000 of ADA accessibility upgrades. - ----------------------------------------------------------------------------------------------------------------------------------- 0505 Courtyard Bentonville AR $ 0 by Marriott - ----------------------------------------------------------------------------------------------------------------------------------- 0560 Residence Inn Little Rock AR $ 0 EMG PSA notes that - -----------------------------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------- YR 1 REPAIRS TO BE COMPLETED PROPERTY PRIOR TO FIRST # ANNIVERSARY PURPOSE - ------------------------------------------------------------------------------------------- 0220 $ 0 - ------------------------------------------------------------------------------------------- 0230 $ 74,530 Common area, carpet ($1080) Guestroom: carpet (limited service) ($45,200) Guestroom: soft goods (limited service) ($28,250) - ------------------------------------------------------------------------------------------- 0240 $ 60,750 Roof covering, built-up system replacement ($35,000) HVAC, thru-the-wall units (older units) ($9,913) DHW heaters, > 150 gal. Building D ($3,500) Guestroom: carpet ($9,400) Guestroom: paint and wallcovering ($2,938) - ------------------------------------------------------------------------------------------- 0210 $ 136,162 Exterior walls, painting & coating ($40,200) HVAC, thru-the-wall units ($10,238) Elevator, machinery ($60,000) Guestroom: carpet ($20,100) Commercial laundry: washers ($5,625) - ------------------------------------------------------------------------------------------- 0505 $ 0 - ------------------------------------------------------------------------------------------- 0560 $ 0 - -------------------------------------------------------------------------------------------
EXHIBIT H CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------ IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ------------------------------------------------------------------------------------------------------------------------------------ the last lifesafety service/inspection was March, 2000. Need to confirm date of last inspection - ------------------------------------------------------------------------------------------------------------------------------------ 0850 Holiday Inn East CT $ 1,000 Immediate Needs: $70,500 Asphalt pavement ($9,000) Hartford $1,000 to repair a Rooftop package unit per ton leaking hydraulic ($8,000) Elevator, machinery elevator. ($19,000) Guestroom: soft goods ($32,500) Commercial kitchen: ice machine ($2,000) - ------------------------------------------------------------------------------------------------------------------------------------ 1168 Hampton Inn Pensacola FL $ 0 $ 0 - ------------------------------------------------------------------------------------------------------------------------------------ 1113 Holiday Inn Pensacola FL $ 30,000 Immediate Needs: $ 0 Express replace the roof on the building at the southwest corner of the property adjacent to the "L"-shaped building due to leaks and ponding, $30,000. - ------------------------------------------------------------------------------------------------------------------------------------ 1116 Holiday Inn Pensacola FL $ 87,351 Engineering Report $ 0 (University Immediate Needs: ADA Mall) Accessibility $10,700, Roof covering replacement $45,401; Soffits - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT H CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------ IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ------------------------------------------------------------------------------------------------------------------------------------ replacement/repair $7,000; Mansard roofing shingles replacement $2,250; Bay window replacement and lounge restoration $20,000; Down unit restoration $3,000. - ------------------------------------------------------------------------------------------------------------------------------------ 1108 Crowne West Palm FL $ 17,400 Immediate Needs: $ 0 Plaza Beach Damaged hollow metal exterior doors to be replaced, $2,400; Repair leaks at lobby skylights $10,000; Replace insulation at roof top piping for the chilled water, $5,000. - ------------------------------------------------------------------------------------------------------------------------------------ 1132 Holiday Inn Winter FL $ 0 $ 0 Haven - ------------------------------------------------------------------------------------------------------------------------------------ 1212 Courtyard Atlanta GA $ 186,950 Engineering Report $ 0 by Marriott Immediate Needs: $108,600 guestroom carpet replacement; $63,800 guestroom - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT H CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ------------------------------------------------------------------------------------------------------------------------------------ paint and wallcovering replacement; $15,000 in Lobby case good and furniture replacement. - ------------------------------------------------------------------------------------------------------------------------------------ 1206 Holiday Inn Brunswick GA $ 39,513 Immediate Repair needs $ 418,840 Asphalt pavement (seal coat are 3,100 sq.ft. of over term)($8,890) Sidewalk Concrete Curbing, concrete ($2,500) Repair, $7,813; Swimming pool equipment Kitchen and laundry ($4,000) floor tile repairs to Swimming pool relining prevent tripping ($3,500) hazards, $6,500; and, Exterior walls, EIFS minor Guestroom bathroom tub patching, cleaning, caulking surroundings need and recoating ($54,000) replacement to due Common area floors, improper prepping for carpet-lobby, refinishing, 126 need meeting rooms, rooms, $25,200. rest. & lounge ($22,770) Guestroom: carpet (full service)($75,600) Guestroom: soft goods (full service)(newer)($13,300) Guestroom: television sets (older) ($22,880) Guestroom: case goods & furniture (full service-older) ($105,600) Guestroom: soft goods (full service) (older) ($30,800) Commercial kitchen: range ($8,500) Commercial kitchen: refrigerator ($4,500) Commercial kitchen: walk in cooler/freezer ($28,500) - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT H CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------ IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ------------------------------------------------------------------------------------------------------------------------------------ Guest laundry equipment ($1,000) Ice machines ($4,000) Lobby: case goods & furniture ($13,500) Meeting room: case goods & furniture ($15,000) - ------------------------------------------------------------------------------------------------------------------------------------ 1255 Holiday Inn Marietta GA $0 Engineering Report $119,600 Asphalt pavement (scal coat (hotel & references on-going over term, striping, minor suites) capital construction repair)($27,000) and significant room Rooftop package unit per renovations. ton ($24,000) Guestroom: soft goods (full service)($68,600) - ------------------------------------------------------------------------------------------------------------------------------------ 1280 Fairfield Valdosta GA $0 $ 78,465 Asphalt pavement (seal coat Inn over term) ($5,565) Common area floors, carpet ($2,700) Guestroom: carpet (limited service)($43,200) Guestroom: soft goods (limited service) ($27,000) - ------------------------------------------------------------------------------------------------------------------------------------ 1285 Holiday Inn Valdosta GA $0 $237,850 Asphalt pavement (seal coat over term) ($7,700) Roof covering, rubber membrane ($63,600) Roof covering, metal ($7,200) Common area floors, carpet ($18,900) Rooftop package unit per ton ($30,400) Hot and cold water distribution ($1,500) - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT H CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------ IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ------------------------------------------------------------------------------------------------------------------------------------ Guestroom: carpet (limited service) ($66,800) Guestroom: soft goods (limited service) ($41,750) - ------------------------------------------------------------------------------------------------------------------------------------ 1840 Crowne Cedar IA $ 401,000 Immediate Needs: $0 Plaza Rapids Repair leaks in the pool skylight $1,000; Metal Frames of Window units to be adjusted, seals replaced and/or caulked to prevent leaks $40,000; Replacement of a fire damaged hot water boiler/storage tank $150,000; Replace obsolete and malfunctioning components of the fire monitoring panel and related alarm system components $200,000; Replace in adequate kitchen range hood fire suppression systems $10,000. - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT H CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------ IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ------------------------------------------------------------------------------------------------------------------------------------ 1310 Holiday Inn Rolling IL $ 15,000 Immediate Needs: $ 396,040 ADA Survey ($6,000) Meadows $15,000 to bring pool Asphalt repair (cut & patch, up to code. full-depth) ($65,625) Asphalt pavement (seal coat over term)($13,125) Curbing, concrete - Replace sections in various locations ($1,500) Retaining walls, wood timber south and west property ($8,000) Roof covering, built-up system, ballast-five story sect. ($25,000) Roof covering, rubber membrane, ballast-nine-story section ($16,500) Window glazing and seal-replace-5 and 9 story building ($17,400) Concrete balcony repair-5 story building front elevation ($8,640) Rooftop make-up air unit ($54,000) Holding tank-2 story building ($15,000) Emergency generator-replace 730KVA-9-story building ($20,000) Guestroom: carpet (limited service) ($84,400) Guestroom: soft goods (limited service) ($52,750) Commercial laundry: dryers-50 lb ($2,100) - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT H CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------ IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ------------------------------------------------------------------------------------------------------------------------------------ Commercial laundry: washers - 75 lb ($4,000) Guest laundry equipment - coin washers and dryers ($2,000) - ------------------------------------------------------------------------------------------------------------------------------------ 2035 Courtyard Florence KY $ 0 0 $ 61,770 ADA Accessibility ($50) by Marriott Asphalt pavement (seal over term)($3,220) Guestroom: carpet (limited service) ($31,200) Guestroom: soft goods (limited service) ($27,300) - ------------------------------------------------------------------------------------------------------------------------------------ 2040 Hurstbourne Louisville KY $ 403,000 Immediate Needs from $741,000 ADA Accessibility ($20,100) Hotel EMG PSA are as Common area floors, carpet follows: 4 City ($99,000) HVAC, thru-the-wall mandated Backflow units protectors, $40,000; ($228,800) DHW heaters,>150 Pool area ceiling gal. repair, $30,000; Pool ($12,000) Fire alarm, horn de-humidification and strobe equipment $333,000. lights ($3,000) Guestroom: carpet (full service) ($238,800) Guestroom: soft goods (full service)($139,300) - ------------------------------------------------------------------------------------------------------------------------------------ 2007 Courtyard Paducah KY $ 0 $ 0 by marriott - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT H CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------ IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ------------------------------------------------------------------------------------------------------------------------------------ 1502 Quality Metairie LA $ 60,600 Immediate Need in the $ 0 Hotel PSA are as follows: $9,000 of misc. roof repairs to counter leaks, ponding and lack of ventilation; $5,000 in repairs to the rusting exterior stairs; $1,600 replace corroded metal exterior doors and reseal same; re-sealing and caulking of the windows, $30,000; repair the damaged exit stairwell doors and replace inoperable hardware and closers in compliance with code, 2 per floor, $15,000; replace penthouse roof vent, $2,000. - ------------------------------------------------------------------------------------------------------------------------------------ 2777 Residence Dedham MA $ 0 $52,650 Guestroom: carpet (limited Inn service) ($32,400) Guestroom: soft goods (limited service) ($20,250) - ------------------------------------------------------------------------------------------------------------------------------------ 1775 Holiday Inn Baltimore- MD $ 6,000 Immediate Needs: Seal, $ 0 - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT H CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------ IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ------------------------------------------------------------------------------------------------------------------------------------ BWI patch and layer Airport asphalt cracks and depressions in the parking lot ($6,000). - ------------------------------------------------------------------------------------------------------------------------------------ 1785 Holiday Inn Baltimore MD $ 26,400 Immediate Needs: $ 137,929 Sidewalk maintenance program West Replace 2, 12.5-ton in ($845) (Belmont) operable and failing Roof covering, Roof covering, units serving the Roof covering, overlay cocktail lounge, (Commercial Building) restaurant and lobby ($36,000) to maintain Roof drainage, provide temperature and adequate slope climate control (Buildings A & C) ($39,000) $20,000; Replace two Gas distribution system leaking water storage ($1,500) tanks, $6,400. Guestroom: soft goods ($11,333) Commercial kitchen equipment ($3,500) Commercial laundry: dryers ($18,000) Commercial laundry: washers ($27,750) - ------------------------------------------------------------------------------------------------------------------------------------ 1765 Holiday Inn Baltimore, MD $ 0 $ 0 Inn Harbor - ------------------------------------------------------------------------------------------------------------------------------------ 1710 Hilton Columbia MD $ 30,000 Immediate Repair $ 219,710 ADA Accessibility ($23,110) Needs are as follows: Asphalt pavement (seal coat $10,000 in Mold over term) ($7,525) remediation mentioned Curbing, concrete ($1,000) above; Asphalt repair Compactor/coling tower $7,500; Repair of enclosures, various ($4,000) compactor/cooling Swimming pool equipment $0 tower pad and gas Level pre-cast concrete plank floor joints ($3,000) - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT H CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------ IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ------------------------------------------------------------------------------------------------------------------------------------ meter pad, $2,000; Roof covering, asphalt Repair damaged shingles ($1,875) sidewalk concrete, Exterior walls, caulking and $2,000; Repair damaged sealants ($45,000) face bring and Exterior walls, EIFS patch spalling concrete on and repair $0 Exterior doors, exterior walls, hollow metal ($1,600) $3,250, $1,500 in roof Common area floors, carpet and soffit repair in ($41,000) the pool area; and, Common area walls, refinish repair/replace $0 leaking pipe for the Cooling tower $0 Heat pumps, hot water distribution, air to air $0 $3,750. Guestroom: carpet (full service) ($91,200) - ------------------------------------------------------------------------------------------------------------------------------------ 1776 Holiday Inn Frederick MD $ 0 Immediate Needs: $ 49,000 Concrete balconies ($1,000) $2,000 to patch roof Elevator, machinery ($48,000) leaks. - ------------------------------------------------------------------------------------------------------------------------------------ 1770 Holiday Inn Glen MD $ 53,500 Immediate Needs of $ 0 Burnie $53,000 are as follows: Asphalt repair, $2,500; repair damaged concrete pavement in service area, $1,500; repair damaged concrete retaining wall, $3,500; repair damaged - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT H CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------ IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ------------------------------------------------------------------------------------------------------------------------------------ masonry retaining wall, $2,000; repair cracking and spalling pool deck, $1,000; and, replace three rooftop package units servicing the common corridors, they are currently inoperable, $42,000. - ------------------------------------------------------------------------------------------------------------------------------------ 1720 Holiday Inn Silver MD $126,000 Two Chillers are down $0 Spring Loss of 110T capacity, needs replacement,$121K. (mold concern). Lodgian has a temporary HVAC system in place to provide AC. Sprinkler heads will need replacement. Confirm that the hydraulic elevator is being repaired. - ------------------------------------------------------------------------------------------------------------------------------------ 1780 Holiday Inn Towson MD $6,800 Immediate Needs are as $0 (Cromwell follows: Asphalt repair Bridge) $2,500; review - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT H CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------ IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ------------------------------------------------------------------------------------------------------------------------------------ and repair subsidence at drainage inlet to prevent retaining wall failure $3,500; patch and repair damaged EIFS at rear overhang adjacent to banquet room $800. - ------------------------------------------------------------------------------------------------------------------------------------ 3970 Holiday Inn Lansing MI $14,600 Immediate Needs are ADA $65,000 Asphalt overlay upgrades of $2,100 and ($65,000) Asphalt repairs of $12,500. - ------------------------------------------------------------------------------------------------------------------------------------ 3930 Hilton Troy MI $7,800 Immediate Needs include $0 (Northfield) ADA accessibility $4,800; and, $3,000 in roofing repairs. - ------------------------------------------------------------------------------------------------------------------------------------ 1910 Holiday Inn Arden MN $15,000 ADA Upgrades to the $214,200 Lobby floors; carpet Hills/St. Elevators totaling ($10,800) Paul $15,000 are the only Common area floors; immediate needs. carpet ($45,000) Meeting room floors; carpet ($27,000) Restaurant/lounge floors; carpet ($13,500) Guestroom: carpet (limited service) ($62,400) Guestroom: soft goods (limited service) ($39,000) Commercial laundry: washers ($16,500) - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT H CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------ IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ------------------------------------------------------------------------------------------------------------------------------------ 2222 Holiday Inn St. Louis MO $2,500 Preliminary inspection $0 North revealed cracks in the balcony's that might need review by a structural engineer. In addition the hotel has a adjacent vacant office building that is used for storage. Immediate Needs $2,500 in structural engineering review of the A Building balcony's. - ------------------------------------------------------------------------------------------------------------------------------------ 3311 Crowne Plaza Albany NY $3,600 Immediate Needs: $1,600 $0 in masonry and concrete repair on an exterior retaining wall with visible displacement and cracks; $2,000 in concrete repair on the exterior stairs at the loading dock area. - ------------------------------------------------------------------------------------------------------------------------------------ 3345 Holiday Inn Grand NY $4,000 Immediate Needs: $4,000 $0 Island in fencing - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT H CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------ IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ------------------------------------------------------------------------------------------------------------------------------------ repair/ replacement and fencing for shored up fence in the service area; $1,000 in soffit repair on the mansard roofing at the pool area; and, $500 in bathroom vent repairs, some bathroom fans were not working and led to mold problems. - ------------------------------------------------------------------------------------------------------------------------------------ 3330 Holiday Inn Jamestown NY $20,200 Immediate Repair Needs: $0 $12,500; Concrete Entrance Apron Repair, $2,000; Sidewalk Concrete Repair, $1,000; Elevated pedestrian walkway skylight leakage, $4,700. - ------------------------------------------------------------------------------------------------------------------------------------ 3314 Holiday Inn Niagara NY $6,400 $151,730 Planters, brick Select Falls ($1,500) Skylights ($4,000) Window units, metal frame ($40,000) Corridor area floors, carpet ($36,000) Common area floors, carpet ($43,200) - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT H CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------ IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ------------------------------------------------------------------------------------------------------------------------------------ Commercial laundry: dryers ($27,030) - ------------------------------------------------------------------------------------------------------------------------------------ 3326 Four Points Niagara NY $0 Immediate Repairs: $0 Falls replacement and repair of brick pavers $3,500; concrete stoop adjacent to the loading dock area is in poor condition with cracking, misalignment, spalling and missing handrails, $1,200; and, repair of spalling concrete on the loading dock $1,700. - ------------------------------------------------------------------------------------------------------------------------------------ 3515 Holiday Inn Strongsville OH $2,000 Immediate Needs are only $108,300 ADA Accessibility Select $2,000 for asphalt repair ($39,300) Commercial work laundry: washers ($69,000) - ------------------------------------------------------------------------------------------------------------------------------------ 3802 Holiday Inn Greentree PA $10,400 Immediate Needs: $2,500 $0 for engineering review of spalling loading dock - ------------------------------------------------------------------------------------------------------------------------------------ 3890 Holiday Inn Lancaster PA $17,500 Immediate Needs are $79,000 Rooftop package unit $17,500 in asphalt per ton ($24,000) Commercial laundry: dryers ($25,000) - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT H CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------ IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ------------------------------------------------------------------------------------------------------------------------------------ repair for alligatored Commerciallaundry: areas in the parking lot. washers ($30,000) - ------------------------------------------------------------------------------------------------------------------------------------ 3838 Doubletree Philadelphia PA $4,000 EMG noted $4,000 of $0 Club Immediate Needs in the form of roofing repairs for the mansard and membrane roofing. The Philadelphia Building Department has the following building and fire code violation on file: Storm water should be conducted to the public storm water system; secure annual electric permit; submit annual fire test records. - ------------------------------------------------------------------------------------------------------------------------------------ 3804 Holiday Inn Pittsburgh PA $12,900 Immediate Needs: ADA $85,000 Epoxy traffic (Pkwy East) upgrades, $10,400 and a surface at roof of engineering review of garage area Repairs to underside of ($35,000) deck the spalling Repairs to underside concrete on at loading of deck at loading dock ($50,000) the dock ($50,000) underside of the loading dock floor structure ($2,500). - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT H CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------ IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ------------------------------------------------------------------------------------------------------------------------------------ 3875 Holiday Inn York PA $0 $0 - ------------------------------------------------------------------------------------------------------------------------------------ 4021 Clarion Charleston SC $0 $0 - ------------------------------------------------------------------------------------------------------------------------------------ 4040 Holiday Inn Myrtle SC $0 $614,540 Common area floors, SunSpree Beach carpet ($207,000) Rooftop package unit per ton ($5,040) Boiler ($2,500) Elevator, machinery ($400,000) - ------------------------------------------------------------------------------------------------------------------------------------ 4215 French Memphis TN $18,020 Immediate Needs: ADA $0 Quarter Deficiencies - One car Suites and one van stall with signage $350, Signage indicating accessible parking spaces $100, exterior accessible route from access aisles adjacent to parking space, crossing hazardous vehicle areas, from main roadways and public transportation stops to the building sidewalks and entrances $100, Signage (4 signs) indicating accessible - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT H CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ------------------------------------------------------------------------------------------------------------------------------------ IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ------------------------------------------------------------------------------------------------------------------------------------ Restrooms $100, restroom modifications $1,370. ($2,020 in total ADA Upgrades) There are also a number of PTAC units that are not in service. Termite infested meeting room doors to be replaced, $8,000. Repair mold damaged meeting rooms, $8,000. - ------------------------------------------------------------------------------------------------------------------------------------ 4343 Courtyard Abilene TX $0 $96,300 Asphalt pavement by Marriott (seal coat over term) ($5,250) Guestroom: carpet (full service) ($29,700) Guestroom: soft goods (full service) ($34,650) Common area floors, carpet ($26,730) - ------------------------------------------------------------------------------------------------------------------------------------ 4375 Holiday Inn Austin TX $50,000 Repair Inoperable $0 irrigation system allowance ($20,000), Paint metal mansards ($25,000), Replace tower coping ($5,000) - ------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT H CAPITAL IMPROVEMENT PLAN REQUIRED CAPITAL IMPROVEMENTS
- ----------------------------------------------------------------------------------------------------------------------------------- IMMEDIATE REPAIRS YR 1 REPAIRS TO BE TO BE COMPLETED COMPLETED PROPERTY WITHIN 6 PRIOR TO FIRST # CHAIN/NAME CITY STATE MONTHS PURPOSE ANNIVERSARY PURPOSE - ----------------------------------------------------------------------------------------------------------------------------------- 4388 Holiday Inn Dallas TX $ 0 $ 321,907 Asphalt pavement (seal coat over term) Select (DFW ($14,875) Airport) Curbing, concrete ($4,000) Exterior walls, painting & coating ($112,800) Common area floors, carpet ($30,600) Common area floors, VCT ($1,350) Common area walls, refinish ($51,000) Public restroom finishes ($12,000) Rooftop package unit per ton ($12,032) Boilers - package unit ($32,000) Elevator, cab interiors ($1,500) Commercial laundry: dryers ($11,000) Commercial laundry: washers ($11,250) Ice, machines ($2,500) Meeting room: case goods & furniture ($25,000) - ----------------------------------------------------------------------------------------------------------------------------------- 4380 Holiday Inn Dallas (Mkt TX $ 40,000 Immediate Needs: $ 0 Center) Roof is leaking and requires repair to avoid further interior damage to the meeting rooms and lobby areas where water intrusion was evident, $40,000. - ----------------------------------------------------------------------------------------------------------------------------------- 4310 Crowne Plaza Houston TX $ 0 $ 0 - ----------------------------------------------------------------------------------------------------------------------------------- Totals $1,892,534 $ 4,590,773 - -----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT I FRANCHISE AGREEMENTS Exhibit I EXHIBIT I FRANCHISE AGREEMENTS
PROPERTY NAME STATE FRANCHISOR - ---------------------------------------------------------------------- Clarion Charleston SC Choice Quality Hotel Metairie LA Choice Doubletree Club Philadelphia PA Hilton Hampton Inn Dothan AL Hilton Hampton Inn Pensacola FL Hilton Hilton Inn Columbia MD Hilton Hilton Inn Northfield MI Hilton Courtyard by Marriott - Abilene TX Marriott Courtyard by Marriott - Atlanta GA Marriott Courtyard by Marriott - Bentonville AR Marriott Courtyard by marriott - Florence KY Marriott Courtyard by Marriott - Paducah KY Marriott Fairfield Inn Valdosta GA Marriott Residence Inn Dedham MA Marriott Residence Inn Little Rock AR Marriott Crowne Plaza Albany NY Six Continents Crowne Plaza Cedar Rapids IA Six Continents Crowne Plaza Houston TX Six Continents Crowne Plaza West Palm Beach FL Six Continents Holiday Inn Arden Hills/St. Paul MN Six Continents Holiday Inn Austin TX Six Continents Holiday Inn Belmont MD Six Continents Holiday Inn Brunswick GA Six Continents Holiday Inn BWI Airport MD Six Continents Holiday Inn Cromwell Bridge MD Six Continents Holiday Inn Dothan AL Six Continents Holiday Inn East Hartford CT Six Continents Holiday Inn Express Gadsden AL Six Continents Holiday Inn Express Pensacola FL Six Continents Holiday Inn Frederick MD Six Continents Holiday Inn Glen Burnie North MD Six Continents Holiday Inn Grand Island NY Six Continents Holiday Inn Greentree PA Six Continents Holiday Inn Hotel & Suites Marietta GA Six Continents Holiday Inn Inner Harbor MD Six Continents Holiday Inn Jamestown NY Six Continents Holiday Inn Jekyll Island GA Six Continents Holiday Inn Lancaster PA Six Continents Holiday Inn Market Center Dallas TX Six Continents Holiday Inn Parkway East PA Six Continents Holiday Inn Rolling Meadows IL Six Continents Holiday Inn Select DFW Airport TX Six Continents Holiday Inn Select Niagara Falls NY Six Continents Holiday Inn Select Strongsville OH Six Continents Holiday Inn Sheffield AL Six Continents Holiday Inn Silver Spring MD Six Continents Holiday Inn St. Louis North MO Six Continents Holiday Inn Sunspree Myrtle Beach SC Six Continents Holiday Inn University Mall FL Six Continents Holiday Inn Valdosta GA Six Continents Holiday Inn West Lansing MI Six Continents Holiday Inn Winter Haven FL Six Continents Holiday Inn York PA Six Continents Four Points Niagara Falls NY Starwood French Quarter Suites Memphis TN Hurtsbourne Hotel KY
SCHEDULE 3.1(A) LIST OF LOAN DOCUMENTS 1. Loan Agreement 2. Note 3. Pledge Agreement 4. Guaranty 5. Environmental Indemnity 6. Assignment of Rate Cap 7. Financing Statements 8. Cash Management Agreement 9. Conditional Assignment of Hotel Management Agreement 10. The Jekyll Island Mortgage/Deed to Secure Debt 11. The Jekyll Island Assignment of Leases and Rents 12. The Jekyll Island Assignment of Agreements, Licenses, Permits and Contracts 13. The Jekyll Island Cash Management Agreement 14. The Jekyll Island Conditional assignment of Hotel Management Agreement. 15. Post Closing Agreement Schedule 3.1(A) SCHEDULE 4.1(C) ORGANIZATIONAL CHART FOR BORROWER PARTIES Schedule 4.1(C) [LODGIAN STRUCTURE CHART] [LODGIAN STRUCTURE CHART] [LODGIAN STRUCTURE CHART]
PROPERTY OWNER PROPERTY - ------------------------------------------------------------------------------------------------------------ ALBANY HOTEL, INC. Crowne Plaza Albany Hotel, Albany, NY AMI OPERATING PARTNERS, L.P. Holiday Inn East Hartford, CT Holiday Inn Frederick, MD Holiday Inn Cromwell Bridge, MD Holiday Inn Belmont, MD Holiday Inn York, PA - ------------------------------------------------------------------------------------------------------------ APICO HILLS, INC. Holiday Inn, Parkway East, Pittsburgh, PA - ------------------------------------------------------------------------------------------------------------ APICO INNS OF GREEN TREE, INC. Holiday Inn Green Tree, Pittsburgh, PA - ------------------------------------------------------------------------------------------------------------ BRUNSWICK MOTEL ENTERPRISES, INC. Brunswick Holiday Inn, Brunswick, GA - ------------------------------------------------------------------------------------------------------------ DEDHAN LODGING ASSOCIATES I, LIMITED PARTNERSHIP Residence Inn, Dedham, MA - ------------------------------------------------------------------------------------------------------------ DOTHAN HOSPITALITY 3053, INC. Holiday Inn West, Dothan, AL - ------------------------------------------------------------------------------------------------------------ DOTHAN HOSPITALITY 3071, INC. Hampton Inn, Dothan, AL - ------------------------------------------------------------------------------------------------------------ GADSDEN HOSPITALITY, INC. Holiday Inn Express Gadsden-Attalia, AL - ------------------------------------------------------------------------------------------------------------ IMPAC HOTELS I, L.L.C. Marriott Courtyard, Buckhead, Atlanta, GA Marriott Courtyard, Abilene, TX Marriott Courtyard, Florence, KY Marriott Courtyard, Bentonville, AR Double Tree Club, Philadelphia, PA The Hurstbourne Hotel, Louisville, KY Fairfield Inn, Valdosta, GA Holiday Inn, Valdosta, GA Holiday Inn Select, Dallas/Fort Worth Airport, TX Holiday Inn, North St. Louis, MO Holiday Inn, Surfside Beach, SC Holiday Inn Select, Strongsville, OH Holiday Inn Suites, Marietta, GA Marriott Courtyard, Paducah, KY - ------------------------------------------------------------------------------------------------------------ LITTLE ROCK LODGING ASSOCIATES I, Residence Inn, Little Rock, AK LIMITED PARTNERSHIP - ------------------------------------------------------------------------------------------------------------ LODGIAN AMI, INC. Holiday Inn, Inner Harbor, MD Holiday Inn, Glen Burnie, MD Holiday Inn, BWI Airport, Baltimore, MD Holiday Inn, Lancaster East, PA - ------------------------------------------------------------------------------------------------------------ LODGIAN MEMPHIS PROPERTY OWNER, LLC French Quarter Suites, Memphis, TN - ------------------------------------------------------------------------------------------------------------ MINNEAPOLIS MOTEL ENTERPRISES, INC. Holiday Inn St. Paul, St. Paul, MN - ------------------------------------------------------------------------------------------------------------ NH MOTEL ENTERPRISES, INC. Hilton Northfield in Troy, MI - ------------------------------------------------------------------------------------------------------------ SERVICO AUSTIN, INC. Holiday Inn, Austin South, TX - ------------------------------------------------------------------------------------------------------------ SERVICO CEDAR RAPIDS, INC. Crowne Plaza Five Seasons Hotel, Cedar Rapids, IA - ------------------------------------------------------------------------------------------------------------ SERVICO CENTRE ASSOCIATES, LTD. Crowne Plaza and Separate Office Space, West Palm Beach, FL - ------------------------------------------------------------------------------------------------------------ SERVICO COLUMBIA, INC. Hilton Columbia, MD - ------------------------------------------------------------------------------------------------------------ SERVICO GRAND ISLAND, INC. Holiday Inn Grand Island, Grand Island, NY - ------------------------------------------------------------------------------------------------------------ SERVICO HOUSTON, INC. Crowne Plaza Houston, Houston, Texas - ------------------------------------------------------------------------------------------------------------ SERVICO JAMESTOWN, INC. Holiday Inn Jamestown, NY - ------------------------------------------------------------------------------------------------------------ SERVICO LANSING, INC. Holiday Inn Lansing, MI - ------------------------------------------------------------------------------------------------------------ SERVICO MARKET CENTER, INC. Holiday Inn Market Center, Dallas, TX - ------------------------------------------------------------------------------------------------------------ SERVICO MARYLAND, INC. Holiday Inn, Silver Springs, MD - ------------------------------------------------------------------------------------------------------------ SERVICO METAIRIE, INC. Quality Hotel, metairie, LA - ------------------------------------------------------------------------------------------------------------ SERVICO NEW YORK, INC. Holiday Inn Select Niagara Falls, Niagara Falls, NY - ------------------------------------------------------------------------------------------------------------ SERVICO NIAGARA FALLS, INC. Four Points Sheraton Niagara Falls, Niagara Falls, NY - ------------------------------------------------------------------------------------------------------------ SERVICO NORTHWOODS, INC. Clarion Charleston International Airport, North Charleston, SC - ------------------------------------------------------------------------------------------------------------ SERVICO PENSACOLA 7200, INC. Holiday Inn University Mall-Pensacola, FL - ------------------------------------------------------------------------------------------------------------ SERVICO PENSACOLA 7330, INC. Hampton Inn Pensacola, Pensacola, FL - ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------ SERVICO PENSACOLA, INC. Holiday Inn Express, Pensacola, FL - ------------------------------------------------------------------------------------------------------------ SERVICO ROLLING MEADOWS, INC. Holiday Inn Rolling Meadows - Rolling Meadows, IL - ------------------------------------------------------------------------------------------------------------ SERVICO WINTER HAVEN, INC. Holiday Inn, Winter Haven, FL - ------------------------------------------------------------------------------------------------------------ SHEFFIELD MOTEL ENTERPRISES, INC. Holiday Inn, Sheffield, AL - ------------------------------------------------------------------------------------------------------------

2 SCHEDULE 4.2 CONSENTS NONE. Schedule 4.2 SCHEDULE 4.4 CONTINGENT OBLIGATIONS NONE. Schedule 4.4 SCHEDULE 4.6 ZONING NONE. Schedule 4.6 SCHEDULE 4.7(B) RENT ROLL Schedule 4.7(B) MATERIAL LEASES
- ---------------------------------------------------------------------------------------------------------- PROPERTY STATE PROPERTY LEASES LANDLORD TENANT AREA (sf) - ---------------------------------------------------------------------------------------------------------- MD Holiday Inn - a) Parking a) Lodgian a) PMS a) 193 parking Inner Harbor License AMI, Inc. Parking, Inc. spaces Baltimore Agreement b) Parking space for maximum of 20 b) Parking b) Lodgian b) Mayor and vehicles AMI, Inc. City Council of Baltimore - ---------------------------------------------------------------------------------------------------------- MI Holiday Inn Management Rado-Mat TGI Friday's Inc. 8,000 sf West, Agreement Holdings U.S. 250 parking spaces. Lansing Inc. - ---------------------------------------------------------------------------------------------------------- MI Hilton Hotel, Restaurant NH Motel C.A. Muer 10,000 sf Troy Enterprises, Corporation Inc. - ---------------------------------------------------------------------------------------------------------- NY Holiday Inn Parking City of Oakdale 125 parking spaces Jamestown Jamestown Corporation 24/7; and 75 parking spaces between 5:00 pm and 7:00 am 7 days a week. - ---------------------------------------------------------------------------------------------------------- NY Holiday Inn Post Office Servico New United States 4,409 sf Select York, Inc. Postal Service Niagara Falls - ----------------------------------------------------------------------------------------------------------

- --------------------------------------------------------------------------------------- BASE RENT AND PERCENTAGE RENT, STATE TERM IF ANY - --------------------------------------------------------------------------------------- MD a) Commencing 5/1/2000, a) $11,500 per month expiring 4/30/10 b) 5 year term commencing 12/12/01; Option to renew b) $625 per month for one additional period of 5 years. - --------------------------------------------------------------------------------------- MI 10 years from the date the Fridays receives 7% gross sales restaurant opens (Lease is profit; landlord receives 12% dated 5/30/91); Option to gross sales, to extent of gross renew for four 5-year operating profit; remainder of terms. gross operating profit is split equally - --------------------------------------------------------------------------------------- MI 20 years, commencing $8,368.33 per month 9/15/76; Option to renew for 3 additional 5-year terms. 2 renewal options exercised, Lease expires 9/15/06. - --------------------------------------------------------------------------------------- NY 25 years, commencing when $1,233.33 per month Lessee notifies city that it is ready to accept use, which is no later than 30 days after occupancy of the hotel (Lease executed 10/5/77). Option to renew for one additional 25-year period. - --------------------------------------------------------------------------------------- NY Current term expires on $20,000.00 per year, payable in 5/31/03; no further option to equal installments at the end of renew. each calendar month. - ---------------------------------------------------------------------------------------
SCHEDULE 4.7(E) MATERIAL DEFAULTS UNDER JEKYLL ISLAND FRANCHISE AGREEMENT NONE Schedule 4.7(E) SCHEDULE 4.9 LITIGATION NONE Schedule 4.9 SCHEDULE 4.10 PRE-PETITION TAX LIABILITIES Schedule 4.10 SCHEDULE 4.10 PRE-PETITION TAX LIABILITIES Page 1 of 1 SCHEDULE 4.20 INSURANCE Schedule 4.20 CURRENT INSURANCE SCHEDULE For: LODGIAN, INC. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 1 of 14
- -------------------------------------------------------------------------------------------------------------------- POLICY COVERAGE AMOUNT OR LIMITS TERM COMPANY NUMBER - -------------------------------------------------------------------------------------------------------------------- WORKERS' COMPENSATION Statutory Workers' Comp. 09/01/02 Zurich American WC2346989-03 DEDUCTIBLE to Insurance Company Employers liability Limits: 0901/03 $1,000,000 Each Accident $1,000,000 Each Employee $1,000,000 Policy Limit Deductibles: Excludes ALAE $250,000 - WC-BI by Accident $250,000 - WC BI by Disease $250,000 - EL BI by Accident $250,000 - EL BI by Disease - -------------------------------------------------------------------------------------------------------------------- WORKERS' COMPENSATION Statutory WC 09/01/02 Zurich American WC2346990-03 - - RETRO Employers Liability: to Insurance Company (MASSACHUSETTS) $1,000,000 Each Accident 0901/03 $1,000,000 Each Employee $1,000,000 Policy Limit Stop Gap Liability $1,000,000 Each Accident $1,000,000 Each Employee $1,000,000 Policy Limit - --------------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------- COVERAGE PREMIUM COMMENTS - ------------------------------------------------------------------------------------------------- WORKERS' COMPENSATION $990,516 Plus $200 Policy provides medical, disability DEDUCTIBLE (Expense Constant and death benefits to injured $93,685 (Surcharges) employees pursuant to the WC Estimated Premium statutory requirements of states schedule in subject to audit the policy except Monopolistic States. Includes Executive Officers - ------------------------------------------------------------------------------------------------- WORKERS' COMPENSATION $77,554 Plus $220 Policy provides medical, disability - RETRO Expense Constant & and death benefits to injured employees (MASSACHUSETTS) $3,230 Surcharge pursuant to the WC statutory requirements of Estimated premium states scheduled in the policy - Executive subject to audit Officers are covered - -------------------------------------------------------------------------------------------------
MCQUEARY HENRY BOWLES TROY, L.L.P CURRENT INSURANCE SCHEDULE For: LODGIAN, INC. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 2 of 14
- -------------------------------------------------------------------------------------------------------------------- POLICY COVERAGE AMOUNT OR LIMITS TERM COMPANY NUMBER - -------------------------------------------------------------------------------------------------------------------- GENERAL LIABILITY $9,750,000 General Aggregate 09/01/02 Zurich American GLO23456985-03 $1,750,000 Products & Completed to Insurance Company Operations Aggregate 09/01/03 $1,750,000 Each Occurrence $1,750,000 Personal Injury & Advertising $ $1,750,000 Tenants Legal Liability. N/A Medical Expense 750,000 Employee Benefits Each Claim/Aggregate 750,000 Hospitality Professional Liability Each Occurrence/Aggregate 750,000 Hotel Safe Deposit Legal Liability Each Occurrence/Aggregate Self Insured Retention $250,000 Cov A BI&PD Each Claim $250,000 Cov B-Personal & Adv Injury $250,000 Cov.C.-Medical Payment $250,000 Hotel Safe Deposit/Legal Liab 250,000 Employee Benefit Liability - -------------------------------------------------------------------------------------------------------------------- LIQUOR LIABILITY POLICY $1,000,000 Liquor Liability Each 09-01-2002 Zurich American GLO9298953-02 Common Cause to Insurance Co. Aggregate 09-01-2003 $250,000 Deductible Each Claim - --------------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------------ COVERAGE PREMIUM COMMENTS - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ GENERAL LIABILITY $721,500 Est. Annual Policy provides legal liability coverage for bodily injury and property damage claims from the public Broad Form Named Insured Aggregate Limits per Location Notice of Occurrence Knowledge of Occurrence(Risk Mgt Dept-Dan Ellis) Pesticide or herbicide applicator Coverage Unintentional Errors & Omissions Employee Benefits Liability - (Claims Made Form) Notice of Error in Claims Reporting Policy Covers Specific Managed Properties Extended BI 60 Day NOC Excludes: Asbestos Total Pollution w/hostile fire exception Employment Related Practices Medical Payments Abuse & Molestation - ------------------------------------------------------------------------------------------------------------------------------------ LIQUOR LIABILITY POLICY $5,000 Estimated Policy provides legal liability coverage for injury is imposed on insured premium subject to audit by reason of the selling, serving or furnishing of any alcoholic beverage - ------------------------------------------------------------------------------------------------------------------------------------
McQUEARY HENRY BOWLES TROY, L.L.P CURRENT INSURANCE SCHEDULE For: LODGIAN, INC.. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 3 of 14
- ------------------------------------------------------------------------------------------------------------------------------------ POLICY COVERAGE AMOUNT OR LIMITS TERM COMPANY NUMBER PREMIUM COMMENTS - ------------------------------------------------------------------------------------------------------------------------------------ BUSINESS AUTO Automobile Liability 09/01/02 Zurich TAP2346986-03 $20,106 plus Policy Provides Liability POLICY (TEXAS) $2,000,000 BI/PD CSL 09/01/03 American $9.00 to the public arising $5,000 PIP Insurance Co. Surcharge from Owned, Non-Auto $1,000,000 UM/UIM Estimated Liability: (Texas Only) Deductible: $250,000 Each Annual (Extensions/Endorsements Accident Premium See BAP2346987-03) subject to Physical Damage: audit Comprehensive $250,000 deductible Collision $250,000 deductible Garage Keepers Legal Each Location $500,000 less $250,000 Deductible Each Accident excludes ALAE - ------------------------------------------------------------------------------------------------------------------------------------ BUSINESS AUTO Automobile Liability 09/01/02 Zurich BAP2346987-03 $283,718 Plus Policy Provides Liability POLICY- O/S $2,000,000 BI/PD CSL 09/01/03 American $956.83 to the public arising (EXCEPT TX) $5,000 MEDICAL Insurance Co Surcharge from Owned, Non-Auto Basic PIP Estimated Liability: All states &1,000,000 UM/UIM Annual Premium except TX & MA 500,000 Garage Keepers subjects to Deductible: $250,000 Each audit. Extensions/Endorsements Accident Additional Insured Exluces ALAE Broad Form Insured Physical Damage: Drive Other Car- Comprehensive $250,000 Designated Person deductible Employees as Insureds Collision $250,000 Fellow Employee Coverage deductible Auto Hired Autos-Specified as Covered Autos owned Long- term leased Auto Unintentional errors & Omissions Knowledge of Occurrence- (Risk Mgt Dept-Dan Ellis) 60 Days Notice of Cancellation Limited Mexico Coverage Waiver of Subrogation- - ------------------------------------------------------------------------------------------------------------------------------------
McQUEARY HENRY BOWLES TROY, L.L.P CURRENT INSURANCE SCHEDULE For: LODGIAN, INC.. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 4 of 14
- ------------------------------------------------------------------------------------------------------------------------------------ POLICY COVERAGE AMOUNT OR LIMITS TERM COMPANY NUMBER PREMIUM COMMENTS - ------------------------------------------------------------------------------------------------------------------------------------ BUSINESS AUTO Automobile Liability 09-01-02 Zurich MA2346988-03 $11,176 Policy Provides POLICY - (MA) $2,000,000 BI/PD CSL 09-01-03 American Estimated Liability to the public $5,000 MEDICAL PAYMENT Insurance Co. Annual premium arising from Owned, Basic PIP subject to Non-Auto Liability: $1,000,000 UM/UIM audit (Massachusetts) For Deductible: $250,000 Each Accident Extension/Endorsements- Physical Damage: See BAP2646987 Comprehensive $250,000 deductible Collision $250,000 deductible - ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL $1,000,000 Products & Completed 09-01-02 Zurich 8830042 $10,000 plus Policy provides legal GENERAL Operations Aggregate 09-01-03 American 826.80 liability coverage for LIABILITY $1,000,000 Occurrence Insurance Co. (Canadian Tax) bodily injury and CANADA $1,000,000 Personal Injury & Premium in US property damage claims Advertising Dollars from the public for $1,000,000 Liquor Liability Each Estimated Canadian Location Only. Common Cause Annual premium Aggregate subject to $1,000,000 Tenants Legal Liability. audit $20,000 Medical Expense $1,000,000 Employee Benefits 1,000,000 Hired-Non-Owned Auto Each Claim - ------------------------------------------------------------------------------------------------------------------------------------
McQUEARY HENRY BOWLES TROY, L.L.P CURRENT INSURANCE SCHEDULE For: LODGIAN, INC.. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 5 of 14
- ----------------------------------------------------------------------------------------------------------------------------------- POLICY COVERAGE AMOUNT OR LIMITS TERM COMPANY NUMBER PREMIUM COMMENTS - ------------------------------------------------------------------------------------------------------------------------------------ EXCESS $25,000,000 Occurrence 09-01-02 Lumbermans 9SX192024-03 $289,000 Policy provides liability limits to the LIABILTIY $25,000,000 General 09-01-03 Mutual public for injury or property damage in Aggregate Casualty excess of Employers Liability, General $25,000,000 Products/ (Kemper) Liability & Automobile Liability as shown Completed Operations on Schedule of Underlying Information. 10,000 SIR Follow Form: Automobile; Employee Benefits; Foreign Operations; Liquor Liability Excludes: ERISA; Nuclear Energy; Asbestos; Pollution; UM/UIM/No Fault; Securities & Financial Interest Employment Related Practices; Abuse of Molestation; Professional Services; Care Custody or Control; Year 2000 Mold Not Subject to Audit - ------------------------------------------------------------------------------------------------------------------------------------ EXCESS $25,000,000 Excess of 09-01-02 Great TUU3577779-02 $63,848 Policy provides excess of the underlying LIABILITY $25,000,000 to American limits with respects to Umbrella Policy 09-01-03 Insurance Co. #9SX192024-03 Exclusions: Asbestos Pollution (Except Named Perils & Time Element Professional Services Nuclear - ------------------------------------------------------------------------------------------------------------------------------------
McQUEARY HENRY BOWLES TROY, L.L.P CURRENT INSURANCE SCHEDULE For: LODGIAN, INC.. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 6 of 14
- ------------------------------------------------------------------------------------------------------------------------------- POLICY COVERAGE AMOUNT OR LIMITS TERM COMPANY NUMBER PREMIUM COMMENTS - ------------------------------------------------------------------------------------------------------------------------------- EXCESS $25,000,000 excess of 09-01-02 Zurich Insurance AEC2921558-03 $50,000 Excess Liability LIABILITY $50,000,000 to Company 09-01-03 Exclusions: Asbestos Pollution (Except Named Perils & Time Element Professional Services Nuclear - ------------------------------------------------------------------------------------------------------------------------------- EXCESS $25,000,000 excess of 09-01-02 Gulf Insurance GA2857860 $37,500 Excess Liability LIABILITY $75,000,000 to Group 09-01-03 Other Endorsements: Aggregate Dropdown Pay on Behalf Of State Amendatory Exclusions: Asbestos; Aircraft; Maritime; EPL; USL&H; Cross Suits; Discrimination:Intellectual Property Temp/Leasing Employee Terrorism; Mold; Absolute Lead Pending/Prior Litigation Designated Premises Professional; Pollution (Except Named Perils & Time Element Nuclear - -------------------------------------------------------------------------------------------------------------------------------
McQUEARY HENRY BOWLES TROY, L.L.P CURRENT INSURANCE SCHEDULE For: LODGIAN, INC.. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 7 of 14
- ------------------------------------------------------------------------------------------------------------------------------------ POLICY COVERAGE AMOUNT OR LIMITS TERM COMPANY NUMBER PREMIUM COMMENTS - ------------------------------------------------------------------------------------------------------------------------------------ EXCESS $50,000,000 Excess of 09-01-02 Firemans' Fund XXK00084285352 $ 50,000 Excess Liability LIABILITY $100,000,000 to Insurance 09-01-03 Company Exclusions: Asbestos Pollution (Except Named Perils & Time Element Professional Services Nuclear - ------------------------------------------------------------------------------------------------------------------------------------
McQUEARY HENRY BOWLES TROY, L.L.P CURRENT INSURANCE SCHEDULE For: LODGIAN, INC.. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 8 of 14 - ------------------------------------------------------------------------------------------------------------------------------------ POLICY COVERAGE AMOUNT OR LIMITS TERM COMPANY NUMBER PREMIUM COMMENTS - ------------------------------------------------------------------------------------------------------------------------------------ PROPERTY $5,000,000 Blanket Real & 09-01-02 Crum & 2450017341 $1,100,000 Per Schedule of Locations on File Personal Property 09-01-03 Forester (US Includes (See Attached) $5,000,000 Annual Fire & Canada ISO Special Property Form, Risk of Aggregate-Earth Insurance Location Direct Physical loss or damage Movement Company) including Flood & EQ - Excludes 5,000,000 Annual Aggregate- Wind in Florida and 1st Tier Flood Locations of GA & SC Replacement 5,000,000 Wind except State Cost Review Coverage Forms for of Florida and Additional Coverage Forms for 1st Tier GA & SC Additional Coverage & Limits locations. Which are applicable. Deductibles: Policy Excludes Terrorism, Y2K, $ 100,000 Occurrence all Mold, Pollution & Boiler & perils except Machinery Flood excess of Max NFIP in Zone A or V Earthquake 5% of Values at risk at time of loss minimum of $100,000 as respects to California Earthquake Wind 2% of values at risk at time of loss at affected locations with a minimum of $100,000 per occurrence as respects to named Storm at 1st Tier locations in TX & Louisiana - Wind excluded in the state of Florida & 1st Tier GA & AC - ------------------------------------------------------------------------------------------------------------------------------------
McQUEARY HENRY BOWLES TROY, L.L.P CURRENT INSURANCE SCHEDULE For: LODGIAN, INC.. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 9 of 14
- ------------------------------------------------------------------------------------------------------------------------------------ POLICY COVERAGE AMOUNT OR LIMITS TERM COMPANY NUMBER PREMIUM COMMENTS - ------------------------------------------------------------------------------------------------------------------------------------ EXCESS $20,000,000 Each Occurrence 9-1-02/03 Sheffield EAF101029 $400,000 Special Form Covering Building, PROPERTY and in the annual aggregate Insurance Plus Personal Property, BI/EE, for flood & earthquake P/O Corporation $16,000 GA including Flood & Earthquake but Limits; $20,000,000 per Surplus excluding CA Earthquake occurrence and in annual Lines Tax aggregate on flood and Valuation: Replacement Cost/BI earthquake Actual Loss Deductible Excess of Exclusion: Fungus, Terrorism, $5,000,000 Primary plus Cyber primary deductibles. - ------------------------------------------------------------------------------------------------------------------------------------ EXCESS $500,000,000 per occurrence 9-1-02/03 Royal RHD329335 95,000 Valuation: Replacement cost except PROPERTY excess of Indemnity Actual Loss sustained as respects $25,000,000 per occurrence Company to BI which in turn, excess of Underlying Deductible. - ------------------------------------------------------------------------------------------------------------------------------------ WINDSTORM $5,000,000 Primary for 9-01-02/03 First CAT000036 $465,000 Primary Wind in Florida and Florida and 1st Tier GA & SC Specialty Plus scheduled locations in SC & GA. Per schedule on file with Insurance Co. $16,035 GA Co. Deductible 2% each Surplus occurrence per site Lines Tax Replacement Cost - Actual Loss Sustained for BI if Applicable - ------------------------------------------------------------------------------------------------------------------------------------
McQUEARY HENRY BOWLES TROY, L.L.P CURRENT INSURANCE SCHEDULE For: LODGIAN, INC.. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 10 of 14
- ------------------------------------------------------------------------------------------------------------------------------------ POLICY COVERAGE AMOUNT OR LIMITS TERM COMPANY NUMBER PREMIUM COMMENTS - ------------------------------------------------------------------------------------------------------------------------------------ EXCESS DIC $4,030,000 Each occurrence 9-01-02/03 Ins. Co of the XHO185154401 10,000 DIC Including Flood & Earthquake CALIFORNIA not to exceed West At Location: TIV $9,030,000 EQ 4,030,000 in any one 74675 Hwy 111, Palm Desert, CA policy year 92260 separately as respects to Flood & EQ part of 4,030,000 Per Occurrence not to exceed 4,030,000 in any one policy year separately as respects Flood and EQ excess of 5,000,000 Each Occurrence which in turn excess of Underlying Deductibles 5,000,000 in any one policy year separately as respect Flood and EQ which in turn excess of Underlying Deductible. - ------------------------------------------------------------------------------------------------------------------------------------ PROPERTY $25,000,000 Each and Every 9-1-02/03 Price Forbes L2PX114 $243,170 Buildings & Business Interruption- TERRORISM Occurrence and in the Limited $9,726.80 all as more fully defined in the Aggregate only to pay the (Lloyds Tax Underlying Policy Wording. excess of the $150,000 Each Underwriters) and Every Occurrence in Insureds locations in US & Canada respect of property TIV $1,296,905,888 or to be damage/7 days waiting agreed by insurers. period each and every occurrence in respects of business interruption - ------------------------------------------------------------------------------------------------------------------------------------ EXCESS $10,000,000 each and every 9-1-02/03 Price Forbes L2PX131 $60,000 PROPERTY occurrence and in the Limited $2,400 Tax TERRORISM Aggregate only to pay the (Lloyds excess of the $25,000,000 Underwriters) each and every occurrence and in the Aggregate - ------------------------------------------------------------------------------------------------------------------------------------
McQUEARY HENRY BOWLES TROY, L.L.P CURRENT INSURANCE SCHEDULE For: LODGIAN, INC.. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 11 of 14
- ------------------------------------------------------------------------------------------------------------------------------------ POLICY COVERAGE AMOUNT OR LIMITS TERM COMPANY NUMBER PREMIUM COMMENTS - ------------------------------------------------------------------------------------------------------------------------------------ BOILER & Equipment Breakdown 09-01-02 Travelers BMG302D6931TI $80,479 Policy provides Comprehensive MACHINERY $100,000,000 Property to Property & L-02 Equipment Coverage including Damage, BI, EE 09-01-03 Casualty production machines 250,000 Off Premises Direct damage & BI caused by Service sudden & accidental breakdown of Interruption Pressure vessel & refrigeration 250,000 Spoilage systems, mechanical objects and 100,000 Media electrical objects. 250,000 Ammonia Contamination 250,000 Water Damage 500,000 Demolition & ICC 250,000 Expediting 60 Days Notice of Cancellation Expense 250,000 Hazardous Substances 100,000 Ordinance of Law 1,000,000 Error in Design 1,000,000 Newly Acquired Locations Deductible: 25,000 Damage to covered property 24 Hours BI & EE 24 Hours Service Interruption - ------------------------------------------------------------------------------------------------------------------------------------
MCQUEARY HENRY BOWLES TROY, L.L.P CURRENT INSURANCE SCHEDULE For: LODGIAN, INC.. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 12 of 14
- ------------------------------------------------------------------------------------------------------------------------------------ POLICY COVERAGE AMOUNT OR LIMITS TERM COMPANY NUMBER PREMIUM COMMENTS - ------------------------------------------------------------------------------------------------------------------------------------ FIDUCIARY Limit of Liability: $2,000,000 09-01-02 Chubb Insurance 8158 25 39B DAL $ 8,316 Claims Made Policy LIABILITY Defense outside the Limit of 09-01-03 Group - Federal Provides coverage for claims Liability Insurance Co arising from breach of Deductible: $25,000 Fiduciary Duty while acting as trustee for named employee pension and welfare plans. Extended Reporting Period (1 Year for 75% of Annual Premium) Prior and Pending Date -8-5-92 Continuity Date 8-5-92 - ------------------------------------------------------------------------------------------------------------------------------------ CRIME $1,000,000 Employee Theft 12-15-01 (American 008747810 11,918 Crime Employee Theft: $1,000,000 Premises Coverage 12-15-02 International) (Applicable only to employees $1,000,000 Depositors Forgery National Union at the corporate office 3445 $1,000,000 Funds Transfer Fraud Fire Insurance Peachtree Rd., Atlanta, GA) $ 50,000 Deductible Co. - ------------------------------------------------------------------------------------------------------------------------------------
MCQUEARY HENRY BOWLES TROY, L.L.P CURRENT INSURANCE SCHEDULE For: LODGIAN, INC.. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 13 of 14
- ------------------------------------------------------------------------------------------------------------------------------------ POLICY COVERAGE AMOUNT OR LIMITS TERM COMPANY NUMBER PREMIUM COMMENTS - ------------------------------------------------------------------------------------------------------------------------------------ D&O (CLAIMS MADE) $20,000,000 Each Loss 12-11-01- XL Specialty DO 71 00 09 99 $430,000 Straight Retention for MANAGEMENT $20,000,000 Each Policy Year 12-11/02 Insurance (90% Minimum Securities Claims LIABILITY Retention: $200,000 Company Earned) Prior Acts Exclusion (12-11-01) General E&O Exclusion (excludes services for other for a fee) One Year Run Off Change in Condition Prior & Pending Litigation Exclusion date: 12-11-01 - ------------------------------------------------------------------------------------------------------------------------------------ EXCESS D&O $10,000,000 Each Loss Excess 12-11-01/ RLI EPG 0002582 $170,000 Prior & Pending Litigation (CLAIMS MADE) of $20,000,000 Each Loss/ 12-11-02 Insurance Exclusion Date: 12-11-01 $10,000,000 each policy year Company Subject to: excess of $20,000,000 each No bankruptcy prior to policy year. 12-11-01 - ------------------------------------------------------------------------------------------------------------------------------------ EXCESS D&O - $15,000,000 12-11-01/ AIG-National 00857 48 89 $136,689 One Year Discovery CLAIMS MADE 12-11-02 Union Fire Limit is part of and not in (RUN OFF) Insurance Co addition to limit of of PA liability under 12-11-98 to 12-11-01 policy period. - ------------------------------------------------------------------------------------------------------------------------------------ EXCESS D&O - $15,000,000 excess of 12-11-01/ Chubb- 8158 25 83 $ 70,500 One Year Discovery CLAIMS MADE- $15,000,000 12-11-02 Federal Limit is part of and not in (RUN OFF) Insurance addition to limit of Company liability under 12-11-98 to 12-11-01 policy period. - ------------------------------------------------------------------------------------------------------------------------------------ EXCESS D&O - $10,000,000 excess of 12-11-01/ Gulf GA0431469 24,000 One Year Discovery CLAIMS MADE $30,000,000 12-11-02 Insurance Limit is part of and not in (RUN OFF) Company addition to limit of liability under 12-11-98 to 12-11-01 policy period. - ------------------------------------------------------------------------------------------------------------------------------------
MCQUEARY HENRY BOWLES TROY, L.L.P CURRENT INSURANCE SCHEDULE For: LODGIAN, INC.. Date Prepared: September 2002 Prepared By: McQueary Henry Bowles Troy, L.L.P. Michele Mariano Page 14 of 14
- -------------------------------------------------------------------------------- POLICY COVERAGE AMOUNT OR LIMITS TERM COMPANY NUMBER PREMIUM COMMENTS - --------------------------------------------------------------------------------
We present this schedule so you may get an overall picture of your insurance protection. For details of coverage please refer to your policies or contact McQueary Henry Bowles Troy, L.L.P. Please examine this schedule with particular reference to the amount or limits of your insurance. Today's property values and liability judgments are higher and insurance should be adjusted to cover. Homedir/CSR4/United Schedule MCQUEARY HENRY BOWLES TROY, L.L.P SCHEDULE 4.28 COLLECTIVE BARGAINING AGREEMENTS Schedule 4.28 SCHEDULE 4.28 COLLECTIVE BARGINING AGREEMENTS
HOTEL BORROWER UNION DATE OF AGREEMENT ----- -------- ----- ----------------- Holiday Inn - Windsor Servico Windsor, Inc. United Food and Commercial Workers International, Local 175 12/1/2000 Holiday Inn - Rolling Meadows, IL Servico Rolling Meadows, Inc. Hotel, Motel, Club, Cafeteria, Restaurant Employees & Bartenders Union, Local 450 1/1/2002 Hilton - Northfield, MI NH Motel Enterprises, Inc. Hotel Employees and Restaurant Employees Union Local 24 8/1/2002 Hilton - Northfield, MI NH Motel Enterprises, Inc. The International Union of Operating Engineers, Local 547 10/1/2000 Holiday Inn - Niagara Falls, NY Servico New York, Inc. Hotel Employees and Restaurant Employees Union Local 4 2/10/1999 Holiday Inn - Jamestown, NY Servico Jamestown, Inc. Hotel Employees and Restaurant Employees Union, Local 4 5/1/2000 Doubletree Hotel - Philadelphia, PA Impac Hotels, I, LLC Hotel Employees and Restaurant Employees Union, Local 274 10/1/2000 Crowne Plaza - Albany, NY Albany Hotel, Inc. Hotel, Motel & Restaurant Employees & Bartenders Union, Local 471 2/1/2000 Holiday Inn - St. Paul, IL Minneapolis Motel Enterprises, Inc. Hotel Employees and Restaurant Employees, Local 17 1/1/2002
SCHEDULE 4.30 GROUND LEASE AMENDMENTS Schedule 4.30 SCHEDULE OF GROUND LEASE AMENDMENTS ISLAND MOTEL ENTERPRISES, INC. AND PENMOCO, INC. HOLIDAY INN, LOCATED AT 200 SOUTH BEACHVIEW DRIVE, JEKYLL ISLAND, GA Declaration of Lease Agreement for Recordation from Jekyll Island-State Park Authority, dated October 23, 1972, filed December 28, 1972, and recorded in Mortgage Book 127, Page 621 of the records of the Superior Court of Glynn County, Georgia as modified by that certain Modification Agreement, dated October 8, 1973 and recorded in Deed Book 17-T, Page 1 of the aforesaid records, as further modified by that certain Modification Agreement, dated October 3, 1974 and recorded October 24, 1974 in Deed Book 18-F, Page 187 of the aforesaid records, as re-recorded October 24, 1974 in Deed Book 18-F, Page 236, of the aforesaid records; as further modified by that certain Third Modification Agreement, dated October 16, 1976 and recorded December 5, 1977 in Deed Book 20-C, Page 142 of the aforesaid records, as affected by that certain Estoppel Certificate by Jekyll Island-State Park Authority, dated November 20, 1998 and recorded on December 15, 1998 in Deed Book 529, Page 462 of the aforesaid records. Schedule 5.14 Material Agreements
- ------------------------------------------------------------------------------------------------------------------- BORROWER/GUARANTOR VENDOR AGREEMENT TYPE REASON FOR MATERIALITY - ------------------------------------------------------------------------------------------------------------------- Lodgian, Inc. IDC Construction General Contractor/Renovation of Payment in excess of $1 million LLC Philadelphia Hotel - ------------------------------------------------------------------------------------------------------------------- Lodgian, Inc. Harbor Linen Linen Requirements Agreement Payment in excess of $1 million - -------------------------------------------------------------------------------------------------------------------
EX-10.3.2 17 g87458exv10w3w2.txt EX-10.3.2 PROMISSORY NOTE EXHIBIT 10.3.2 MEZZANINE NOTE $78,671,201.00 NOVEMBER 25, 2002 FOR VALUE RECEIVED, the undersigned, each having an address c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326 (each, a "MEZZANINE BORROWER" and collectively, "MEZZANINE BORROWERS"), jointly and severally, promise to pay to the order of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (together with its successors and assigns, "MEZZANINE LENDER"), at 4 World Financial Center, New York, New York 10080, or such other place as Mezzanine Lender may designate in writing, the principal sum of SEVENTY-EIGHT MILLION SIX HUNDRED SEVENTY-ONE THOUSAND TWO HUNDRED ONE AND 00/100 DOLLARS ($78,671,201.00), with interest on the unpaid principal balance from the date of this Mezzanine Note, until paid, at the Interest Rate in effect from time to time hereunder. This Mezzanine Note may be referred to herein as the "MEZZANINE NOTE," and the loan evidenced hereby may be referred to herein as the "MEZZANINE LOAN." Capitalized terms used but not otherwise defined herein shall have the respective meanings given thereto in the Mezzanine Loan Agreement (hereinafter defined). PAYMENTS OF PRINCIPAL AND INTEREST. Mezzanine Borrowers shall make payments of principal and interest on the outstanding principal balance of this Mezzanine Note in accordance with the terms and provisions of Section 2.4 of the Mezzanine Loan Agreement. The entire outstanding principal balance of the Mezzanine Loan, all accrued and unpaid interest thereon (including interest through the end of the Interest Accrual Period then in effect) and all other amounts due hereunder and under the other Mezzanine Loan Documents (collectively, the "DEBT") if not sooner paid (and unless Mezzanine Borrowers shall extend the term of the Mezzanine Loan for the First Extension Term, the Second Extension Term, or all Extension Terms) shall be due and payable on November 30, 2004 (the "SCHEDULED MATURITY DATE"). Subject to the terms and conditions of Section 2.5(B) of the Mezzanine Loan Agreement, Mezzanine Borrowers may extend the term of the Mezzanine Loan for the Extension Terms. The Scheduled Maturity Date, as the same may be extended for the First Extension Term, the Second Extension Term, or the Third Extension Term (subject to the terms and conditions of Section 2.5(B) of the Mezzanine Loan Agreement), or such other date on which the final payment of the Debt becomes due hereunder or under the Mezzanine Loan Agreement or the other Mezzanine Loan Documents, whether at such stated maturity date, by acceleration, or otherwise, shall be referred to herein as the "MATURITY DATE". Interest on the principal sum of this Mezzanine Note shall be calculated on the basis of a 360 day year, and shall be charged for the actual number of days elapsed during any month or other accrual period. SECURITY; MEZZANINE LOAN DOCUMENTS. This Mezzanine Note is being executed and delivered pursuant to that certain Mezzanine Loan Agreement, dated as of the date hereof (as amended, modified or restated from time to time, the "MEZZANINE LOAN AGREEMENT"), among Mezzanine Borrowers and Mezzanine Lender, to which reference is hereby made for the terms and conditions governing this Mezzanine Note, including the terms Mezzanine Note and conditions under which this Mezzanine Note may be prepaid or its maturity accelerated. This Mezzanine Note is secured by, among other things, (i) that certain Pledge and Security Agreement, dated as of the date hereof (as amended, modified or restated from time to time, the "PLEDGE AGREEMENT"), executed by certain of the Mezzanine Borrowers named therein, pledging such Mezzanine Borrowers' legal and beneficial interest in and to certain stock, limited liability company membership interests and limited and general partnership interests, as applicable, as more particularly described therein (collectively, the "PLEDGED INTERESTS") in favor of Mezzanine Lender and (ii) that certain Leasehold Deed to Secure Debt, Assignment of Leases and Rents and Security Agreement, dated as of the date hereof (together with all extensions, renewals, modifications, substitutions and amendments thereof, the "SECURITY INSTRUMENT"), made by Island Motel Enterprises, Inc. and Penmoco, Inc. for the benefit of Lender and covering the property as more particularly described therein. This Mezzanine Note, the Mezzanine Loan Agreement, the Pledge Agreement, the Security Instrument and all other documents or instruments given by Mezzanine Borrowers or any one of them or any guarantor and accepted by Mezzanine Lender for purposes of evidencing, securing, perfecting, or guaranteeing the indebtedness evidenced by this Mezzanine Note may be referred to as the "MEZZANINE LOAN DOCUMENTS." PREPAYMENT; PREPAYMENT CONSIDERATION. Mezzanine Borrowers shall have no right to prepay the Mezzanine Loan in whole or in part except as expressly provided in Section 2.6 of the Mezzanine Loan Agreement. EVENTS OF DEFAULT; ACCELERATION. Upon the occurrence and during the continuance of any Event of Default, at the option of Mezzanine Lender and without notice, the entire principal amount and all interest accrued and outstanding hereunder and all other amounts outstanding under any of the Mezzanine Loan Documents shall at once become due and payable, and Mezzanine Lender may exercise any and all of its rights and remedies under any of the Mezzanine Loan Documents or pursuant to applicable law. Mezzanine Lender may so accelerate such obligations and exercise such remedies at any time after the occurrence of any Event of Default, regardless of any prior forbearance. LATE CHARGES; DEFAULT INTEREST. If an Event of Default relating to non-payment of any principal, interest or other sums due under this Mezzanine Note or under any of the other Mezzanine Loan Documents shall occur, then Mezzanine Borrowers shall pay to Mezzanine Lender, in addition to all sums otherwise due and payable, a late charge in an amount equal to five percent (5.0%) of such principal, interest or other sums due hereunder or under any other Mezzanine Loan Document (or, in the case of a partial payment, the unpaid portion thereof), such late charge to be immediately due and payable without demand by Mezzanine Lender. Upon the occurrence and during the continuance of an Event of Default and in any event from and after the Maturity Date of the Mezzanine Loan, the outstanding principal balance of this Mezzanine Note and all other Obligations shall bear interest until paid in full at a rate per annum (the "DEFAULT RATE") equal to the sum of (i) five percent (5.0%) and (ii) the Interest Rate otherwise applicable under this Mezzanine Note. Mezzanine Note 2 Mezzanine Borrowers agree that such late charge and Default Rate of interest are reasonable and do not constitute a penalty. INTEREST LAWS. Notwithstanding any provision to the contrary contained in this Mezzanine Note, the Mezzanine Loan Agreement or the other Mezzanine Loan Documents, Mezzanine Borrowers shall not be required to pay, and Mezzanine Lender shall not be permitted to collect, any amount of interest in excess of the maximum amount of interest permitted by law ("EXCESS INTEREST"). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Mezzanine Note, the Mezzanine Loan Agreement or in any of the other Mezzanine Loan Documents, then in such event: (i) the provisions of this subsection shall govern and control; (ii) Mezzanine Borrowers shall not be obligated to pay any Excess Interest; (iii) any Excess Interest that Mezzanine Lender may have received hereunder shall be, at Mezzanine Lender's option, (a) applied as a credit against either or both of the outstanding principal balance of the Mezzanine Loan or accrued and unpaid interest thereunder (not to exceed the maximum amount permitted by law), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (iv) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "MAXIMUM RATE"), and this Mezzanine Note, the Mezzanine Loan Agreement and the other Mezzanine Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (v) Mezzanine Borrowers shall not have any action against Mezzanine Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Obligation is calculated at the Maximum Rate rather than the applicable rate under this Mezzanine Note, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Obligations shall, to the extent permitted by law, remain at the Maximum Rate until Mezzanine Lender shall have received or accrued the amount of interest which Mezzanine Lender would have received or accrued during such period on Obligations had the rate of interest not been limited to the Maximum Rate during such period. If the Default Rate shall be finally determined to be unlawful, then the Interest Rate shall be applicable during any time when the Default Rate would have been applicable hereunder, provided however that if the Maximum Rate is greater or lesser than the Interest Rate, then the foregoing provisions of this paragraph shall apply. CERTAIN RIGHTS AND WAIVERS. From time to time, without affecting the obligation of Mezzanine Borrowers or their successors or assigns to pay the outstanding principal balance of this Mezzanine Note, interest thereon and other amounts due hereunder and to observe the covenants contained herein, in the Mezzanine Loan Agreement, the Pledge Agreement or in any other Mezzanine Loan Document, without affecting the guaranty of any person or entity for payment of the outstanding principal balance of this Mezzanine Note, without giving notice to or obtaining the consent of any Mezzanine Borrower or its successors or assigns or any guarantors or indemnitor, and without liability on the part of Mezzanine Lender, Mezzanine Lender may, at its option, extend the time for payment of the outstanding principal balance of this Mezzanine Note or any part thereof, reduce the payments thereon, release anyone liable for payment of all or a portion of said indebtedness, accept a renewal of this Mezzanine Note, modify the terms and time of payment of said outstanding principal balance, join in any extension or subordination agreement, release any security given herefor, take or release other or additional security, and agree in writing with the undersigned to modify the rate of interest or Mezzanine Note 3 period of amortization of this Mezzanine Note or change the amount of the monthly installments payable hereunder. Presentment, notice of dishonor, and protest are hereby waived by Mezzanine Borrowers and all makers, sureties, guarantors and endorsers hereof. This Mezzanine Note shall be binding upon Mezzanine Borrowers and their respective successors and assigns. EACH MEZZANINE BORROWER AND MEZZANINE LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THIS MEZZANINE NOTE, THE PLEDGE AGREEMENT, ANY OTHER MEZZANINE LOAN DOCUMENT, ANY OTHER AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. ASSIGNMENT AND TRANSFER OF MEZZANINE NOTE. Mezzanine Lender shall have the right to assign or transfer, in whole or in part (including the right to grant participation interests in) any or all of its obligations under this Mezzanine Note, the Mezzanine Loan Agreement, the Pledge Agreement and any or all of the other Mezzanine Loan Documents, subject to the terms of the Mezzanine Loan Agreement. Mezzanine Lender shall be released of any obligations accruing after the date of such assignment or transfer to the extent that the same are so assigned or transferred, and the rights and obligations of "MEZZANINE LENDER" hereunder shall become the rights and obligations of the transferee holder. Mezzanine Lender agrees to provide Mezzanine Borrowers with notice of any such assignment; provided, however, that no Mezzanine Borrower's consent shall be required in connection with any such assignment and no failure or delay by Mezzanine Lender in delivering such notice shall limit the effectiveness of such assignment. LIMITATION ON RECOURSE. The obligations of Mezzanine Borrowers hereunder are subject to limitations on recourse as provided in Article XII of the Mezzanine Loan Agreement. ATTORNEYS' FEES, COSTS OF COLLECTION. Mezzanine Borrowers shall pay to Mezzanine Lender on demand all reasonable out-of-pocket costs and expenses, including reasonable attorneys' fees and expenses, incurred by Mezzanine Lender in collecting the indebtedness arising hereunder or under any other Mezzanine Loan Documents or secured thereby or otherwise exercising any rights or remedies of Mezzanine Lender hereunder or thereunder or at law or in equity or enforcing the obligations of any parties hereto or thereto, or as a consequence of any breach or default by any Mezzanine Borrower or any guarantor hereunder or thereunder, or otherwise as a consequence of any right evidenced or secured by this Mezzanine Note or the Mezzanine Loan Documents. Without limitation, such costs and expenses to be reimbursed by Mezzanine Borrowers shall include reasonable attorneys' fees and expenses incurred in any bankruptcy case or proceeding and in any appeal. APPLICABLE LAW. This Mezzanine Note shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and performed in the State of New York and any applicable laws of the United States of America. Mezzanine Note 4 TIME OF ESSENCE. Subject to the terms of the Mezzanine Loan Agreement, time shall be of the essence as to all of the terms, covenants and conditions of this Mezzanine Note. If the due date of any payment due hereunder or under any of the other Mezzanine Loan Documents shall fall on a day other than a Business Day, Mezzanine Borrowers shall be required to make such payment on the next succeeding Business Day. [NO ADDITIONAL TEXT ON THIS PAGE] Mezzanine Note 5 IN WITNESS WHEREOF, the undersigned Mezzanine Borrowers have executed this Mezzanine Note as of the date first written above. MEZZANINE BORROWERS: IMPAC HOTEL GROUP MEZZANINE, LLC, a Delaware limited liability company By: /s/ Daniel E. Ellis ----------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary SERVICO OPERATIONS MEZZANINE, LLC, a Delaware limited liability company By: /s/ Daniel E. Ellis ----------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary LODGIAN FINANCING MEZZANINE, LLC, a Delaware limited liability company By: /s/ Daniel E. Ellis ----------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary ISLAND MOTEL ENTERPRISES, INC., a Georgia corporation By: /s/ Daniel E. Ellis ----------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary PENMOCO, INC., a Michigan corporation By: /s/ Daniel E. Ellis ----------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary Mezzanine Note EX-10.3.3 18 g87458exv10w3w3.txt EX-10.3.3 GUARANTY OF RESOURCE OBLIGATIONS EXHIBIT 10.3.3 GUARANTY OF RECOURSE OBLIGATIONS This GUARANTY OF RECOURSE OBLIGATIONS (this "GUARANTY"), dated as of November 25, 2002, made by LODGIAN, INC., a Delaware corporation ("GUARANTOR"), having an address at 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326, in favor of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation, having an office at 4 World Financial Center, New York, New York 10080 (together with its successors, transferees and assigns, "MEZZANINE LENDER"). RECITALS: A. Pursuant to that certain Mezzanine Loan Agreement, dated as of the date hereof (as the same may be amended, modified, supplemented or restated from time to time, the "MEZZANINE LOAN AGREEMENT"), among the Borrowers named therein (each, a "MEZZANINE BORROWER", and collectively, the "MEZZANINE BORROWERS"), and Mezzanine Lender, Mezzanine Lender has agreed to make a loan to the Mezzanine Borrowers in the aggregate original principal amount of up to $78,671,201.00 (the "LOAN"), subject to the terms and conditions of the Mezzanine Loan Agreement; B. As a condition to Mezzanine Lender's making the Loan, Mezzanine Lender is requiring that Guarantor execute and deliver to Mezzanine Lender this Guaranty; and C. Guarantor hereby acknowledges that Guarantor holds a direct and/or indirect ownership interest in each Mezzanine Borrower and that Guarantor will materially benefit from Mezzanine Lender's agreeing to make the Loan. NOW, THEREFORE, in consideration of the premises set forth herein and as an inducement for and in consideration of the agreement of Mezzanine Lender to make the Loan pursuant to the Mezzanine Loan Agreement and the other Loan Documents, Guarantor hereby agrees, covenants, represents and warrants to Mezzanine Lender as follows: SECTION 1. DEFINITIONS. All capitalized terms used and not defined herein shall have the respective meanings given such terms in the Mezzanine Loan Agreement. SECTION 2. GUARANTY. (a) Guarantor (but not its members, partners, employees, shareholders, agents, directors or officers) hereby irrevocably, absolutely and unconditionally assumes liability for, guarantees payment to Mezzanine Lender of, and agrees to pay, protect, defend, indemnify and save harmless Mezzanine Lender from and against any and all Guaranteed Recourse Obligations of Mezzanine Borrowers (as hereinafter defined). The obligations which are the subject of the guaranty referred to in this Section 2 are hereinafter collectively referred to as the "GUARANTEED OBLIGATIONS". (b) The term "GUARANTEED RECOURSE OBLIGATIONS OF MEZZANINE BORROWERS" as used in this Guaranty shall mean all obligations and liabilities for which Mezzanine Borrowers shall be personally liable under the provisions of Section 12.2 of the Mezzanine Loan Agreement. (c) All sums payable to Mezzanine Lender under this Guaranty shall be payable on demand and without reduction for any offset, claim, counterclaim or defense. SECTION 3. REPRESENTATIONS AND WARRANTIES. Guarantor hereby represents and warrants to Mezzanine Lender as follows (which representations and warranties shall be given as of the date hereof and shall survive the execution and delivery of this Guaranty): (a) DUE EXECUTION. This Guaranty has been duly executed and delivered by Guarantor. (b) ENFORCEABILITY. This Guaranty constitutes a legal, valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally, or application of general principles of equity in any legal proceeding. (c) NO VIOLATION. The execution, delivery and performance by Guarantor of its obligations under this Guaranty do not violate any law, regulation, order, writ, injunction or decree of any court or governmental body, agency or other instrumentality applicable to Guarantor, or result in a breach of any of the terms, conditions or provisions of, or constitute a default under, or result in the creation or imposition of any mortgage, lien, charge or encumbrance of any nature whatsoever upon any of the assets of Guarantor pursuant to the terms of any mortgage, indenture, agreement or instrument to which Guarantor is a party or by which it or any of its properties is bound. Guarantor is not in default under any other guaranty which it has provided to Mezzanine Lender. (d) NO LITIGATION. Except as disclosed on Schedule 4.9 to the Mezzanine Loan Agreement, there are no actions, suits or proceedings at law or at equity, pending or, to Guarantor's knowledge, threatened against or affecting Guarantor or which involve or could reasonably be expected to involve the validity or enforceability of this Guaranty or which might materially adversely affect the financial condition of Guarantor or the ability of Guarantor to perform any of its obligations under this Guaranty. Guarantor is not in default beyond any applicable grace or cure period with respect to any order, writ, injunction, decree or demand of any Governmental Authority which might materially adversely affect the financial condition of Guarantor or the ability of Guarantor to perform any of its obligations under this Guaranty. (e) CONSENTS. All consents, approvals, orders or authorizations of, or registrations, declarations or filings with, all Governmental Authorities (collectively, the "CONSENTS") that are required in connection with the valid execution, delivery and performance by Guarantor of this Guaranty have been obtained and Guarantor agrees that all Consents required in connection with the carrying out or performance of any of Guarantor's obligations under this Guaranty will be obtained when required. 2 (f) FINANCIAL STATEMENTS AND OTHER INFORMATION. All financial statements of Guarantor heretofore delivered to Mezzanine Lender fairly present the financial condition of Guarantor as of the respective dates thereof, and no materially adverse change has occurred in the financial conditions reflected therein since the respective dates thereof. None of the aforesaid financial statements or any certificate or statement furnished to Mezzanine Lender by or on behalf of Guarantor in connection with the transactions contemplated hereby, and none of the representations and warranties in this Guaranty contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein or herein not materially misleading. Guarantor is not insolvent within the meaning of the Bankruptcy Code or any other applicable law, code or regulation and the execution, delivery and performance of this Guaranty will not render Guarantor insolvent. SECTION 4. FINANCIAL STATEMENTS. Guarantor hereby agrees for the benefit of Mezzanine Lender that Guarantor will deliver to Mezzanine Lender each of the financial statements required to be delivered pursuant to Section 5.1 of the Mezzanine Loan Agreement. SECTION 5. NET WORTH COVENANT. Guarantor hereby covenants to maintain a Net Worth of at least $10,000,000 in the aggregate from the date hereof until such time as all obligations of Mezzanine Borrowers under the Loan Documents shall have been fully satisfied and all sums due and owing under the Loan Documents and this Guaranty shall have been fully paid to Mezzanine Lender. For purposes hereof, "NET WORTH" means (x) the assets of Guarantor minus (y) the liabilities of Guarantor, all determined in accordance with GAAP; provided, however, notwithstanding the foregoing, for so long as any preferred stock outstanding as of the Closing Date remains outstanding, such preferred stock shall be excluded from liabilities and shall be deemed to constitute equity for the purpose of determining Guarantor's Net Worth. From time to time, at Mezzanine Lender's request, Guarantor shall provide to Mezzanine Lender, within twenty (20) days after written request by Mezzanine Lender, such evidence of Guarantor's compliance with the terms of this Section 5 as Mezzanine Lender shall reasonably require. SECTION 6. UNCONDITIONAL CHARACTER OF OBLIGATIONS OF GUARANTOR. (a) The obligations of Guarantor hereunder shall be irrevocable, absolute and unconditional, irrespective of the validity, regularity or enforceability, in whole or in part, of the Note, the Mezzanine Loan Agreement, the Pledge Agreement or the other Loan Documents or any provision thereof, or the absence of any action to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any Mezzanine Borrower, Guarantor or any other Person or any action to enforce the same, any failure or delay in the enforcement of the obligations of Mezzanine Borrowers under the Note, the Mezzanine Loan Agreement, the Pledge Agreement, the Jekyll Island Mortgage or any other Loan Documents or Guarantor under this Guaranty, or any setoff, counterclaim, and irrespective of any other circumstances which might otherwise limit recourse against Guarantor by Mezzanine Lender or constitute a legal or equitable discharge or defense of a guarantor or surety. Mezzanine Lender may enforce the obligations of Guarantor under this Guaranty by a proceeding at law, in equity or otherwise, independent of any loan foreclosure or similar proceeding or any deficiency action against Mezzanine Borrowers or any other Person at any time, either before or after an action against the Properties or any of them or any part thereof, Mezzanine Borrowers or any other Person. THIS GUARANTY IS A GUARANTY OF PAYMENT AND PERFORMANCE AND NOT MERELY A 3 GUARANTY OF COLLECTION. Guarantor waives diligence, notice of acceptance of this Guaranty, filing of claims with any court, any proceeding to enforce any provision of the Note, the Mezzanine Loan Agreement, the Pledge Agreement, the Jekyll Island Mortgage or any other Loan Documents, against Guarantor, Mezzanine Borrowers or any other Person, any right to require a proceeding first against Mezzanine Borrowers or any other Person, or to exhaust any security (including, without limitation, the Collateral or Properties or any of them or any part thereof) for the performance of the Guaranteed Obligations or any other obligations of Mezzanine Borrowers or any other Person, or any protest, presentment, notice of default (except as may be expressly required under the Loan Documents) or other notice or demand whatsoever, and Guarantor hereby covenants and agrees that Guarantor shall not be discharged of its obligations hereunder. (b) The obligations of Guarantor under this Guaranty, and the rights of Mezzanine Lender to enforce the same by proceedings, whether by action at law, suit in equity or otherwise, shall not be in any way affected by any of the following: (i) any insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, receivership, conservatorship, winding up or other similar proceeding involving or affecting any Mezzanine Borrower, any Property or any part thereof, Guarantor or any other Person; (ii) any failure by Mezzanine Lender or any other Person, whether or not without fault on its part, to perform or comply with any of the terms of the Mezzanine Loan Agreement, or any other Loan Documents, or any document or instrument relating thereto; (iii) except (A) with respect to activities occurring after the date of a Permitted Assumption or, (B) activities relating to a Collateral Release after the date thereof, the sale, transfer or conveyance of any Collateral or Property or any interest therein to any Person, whether now or hereafter having or acquiring an interest in any Collateral or Property or any interest therein and whether or not pursuant to any foreclosure, trustee sale or similar proceeding against any Mezzanine Borrower or any Collateral or Property or any interest therein; (iv) the conveyance to Mezzanine Lender, any Affiliate of Mezzanine Lender or Mezzanine Lender's nominee of any Property or any interest therein by a deed-in-lieu of foreclosure; (v) the release of any Mezzanine Borrower or any other Person from the performance or observance of any of the agreements, covenants, terms or conditions contained in any of the Loan Documents by operation of law or otherwise; (vi) the release in whole or in part of any collateral for any or all Guaranteed Obligations or for the Loan or any portion thereof; or (vii) the exercise by Mortgage Lender of any remedies made available to Mortgage Lender pursuant to the terms of the Mortgage Loan Documents, including, without limitation, foreclosure or similar remedies under any Deeds of Trust encumbering Mortgage Borrower's interest in any Property except with respect to actions taken by the 4 Mortgage Lender following the Mortgage Lender succeeding to the interests of the Mortgage Borrowers in and to the Properties. (c) Except as otherwise specifically provided in this Guaranty, Guarantor hereby expressly and irrevocably waives all defenses in an action brought by Mezzanine Lender to enforce this Guaranty based on claims of waiver, release, surrender, alteration or compromise and all setoffs, reductions, or impairments, whether arising hereunder or otherwise. (d) Mezzanine Lender may deal with Mezzanine Borrowers and Affiliates of Mezzanine Borrowers in the same manner and as freely as if this Guaranty did not exist and shall be entitled, among other things, to grant Mezzanine Borrowers or any other Person such extension or extensions of time to perform any act or acts as may be deemed advisable by Mezzanine Lender, at any time and from time to time, without terminating, affecting or impairing the validity of this Guaranty or the obligations of Guarantor hereunder. (e) No compromise, alteration, amendment, modification, extension, renewal, release or other change of, or waiver, consent, delay, omission, failure to act or other action with respect to, any liability or obligation under or with respect to, or of any of the terms, covenants or conditions of, the Note, the Mezzanine Loan Agreement, the Pledge Agreement, the Jekyll Island Mortgage or the other Loan Documents or any amendment, modification or other change of any legal requirement shall in any way alter, impair or affect any of the obligations of Guarantor hereunder, and Guarantor agrees that if any Loan Documents are modified with Mezzanine Lender's consent, the Guaranteed Obligations shall automatically be deemed modified to include such modifications. (f) Mezzanine Lender may proceed to protect and enforce any or all of its rights under this Guaranty by suit in equity or action at law, whether for the specific performance of any covenants or agreements contained in this Guaranty or otherwise, or to take any action authorized or permitted under applicable law, and shall be entitled to require and enforce the performance of all acts and things required to be performed hereunder by Guarantor. Each and every remedy of Mezzanine Lender shall, to the extent permitted by law, be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity. (g) No waiver shall be deemed to have been made by Mezzanine Lender of any rights hereunder unless the same shall be in writing and signed by Mezzanine Lender, and any such waiver shall be a waiver only with respect to the specific matter involved and shall in no way impair the rights of Mezzanine Lender or the obligations of Guarantor to Mezzanine Lender in any other respect or at any other time. (h) At the option of Mezzanine Lender, Guarantor may be joined in any action or proceeding commenced by Mezzanine Lender against Mezzanine Borrowers in connection with or based upon the Note, the Mezzanine Loan Agreement, the Pledge Agreement, the Jekyll Island Mortgage or any other Loan Documents and recovery may be had against Guarantor in such action or proceeding or in any independent action or proceeding against Guarantor to the extent of Guarantor's liability hereunder, without any requirement that Mezzanine Lender first assert, prosecute or exhaust any remedy or claim against Mezzanine Borrowers or any other Person, or any security for the obligations of Mezzanine Borrowers or any other Person. 5 (i) Guarantor agrees that this Guaranty shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment is made by Mezzanine Borrowers or Guarantor to Mezzanine Lender and such payment is rescinded or must otherwise be returned by Mezzanine Lender (as determined by Mezzanine Lender in its sole and absolute discretion) upon insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, receivership, conservatorship, winding up or other similar proceeding involving or affecting any Mezzanine Borrower or Guarantor, all as though such payment had not been made. (j) In the event that Guarantor shall advance or become obligated to pay any sums under this Guaranty or in connection with the Guaranteed Obligations or in the event that for any reason whatsoever any Mezzanine Borrower or any subsequent owner of any Property or Collateral or any part thereof is now, or shall hereafter become, indebted to Guarantor, Guarantor agrees that (i) the amount of such sums and of such indebtedness and all interest thereon shall at all times be subordinate as to the lien, the time of payment and in all other respects to all sums, including principal and interest and other amounts, at any time owed to Mezzanine Lender under the Loan Documents, and (ii) Guarantor shall not be entitled to enforce or receive payment thereof until all principal, interest and other sums due pursuant to the Loan Documents have been paid in full. Nothing herein contained is intended or shall be construed to give Guarantor any right of subrogation in or under the Loan Documents or any right to participate in any way therein, or in the right, title or interest of Mezzanine Lender in or to any collateral for the Loan, notwithstanding any payments made by Guarantor under this Guaranty, until the actual and irrevocable receipt by Mezzanine Lender of payment in full of all principal, interest and other sums due with respect to the Loan or otherwise payable under the Loan Documents. If any amount shall be paid to Guarantor on account of such subrogation rights at any time when any such sums due and owing to Mezzanine Lender shall not have been fully paid, such amount shall be paid by Guarantor to Mezzanine Lender for credit and application against such sums due and owing to Mezzanine Lender. The foregoing shall not prohibit Mezzanine Borrowers from using the proceeds of the Loan for any permitted use under the Mezzanine Loan Agreement, including, without limitation, the making of distributions to Guarantor. (k) Guarantor's obligations hereunder shall survive a foreclosure, delivery of a deed-in-lieu of foreclosure, the exercise of any power of sale or similar proceeding involving any Collateral or any part thereof and the exercise by Mezzanine Lender of any or all of its remedies pursuant to the Loan Documents. Notwithstanding the foregoing to the contrary, the obligations and liabilities of Guarantor under this Guaranty shall survive for a period of two (2) years following payment in full of the Obligations in accordance with the terms of the Loan Documents, provided, however, in the event that any Guaranteed Obligations or liabilities of the Guarantor under this Guaranty shall have arisen prior to the expiration of such period, then in any such event the foregoing survival period shall not apply and the obligations and liabilities of Guarantor hereunder shall survive. SECTION 7. ENTIRE AGREEMENT/AMENDMENTS. THIS INSTRUMENT REPRESENTS THE ENTIRE AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF. THE TERMS OF THIS GUARANTY SHALL NOT BE WAIVED, ALTERED, MODIFIED, AMENDED, SUPPLEMENTED OR 6 TERMINATED IN ANY MANNER WHATSOEVER EXCEPT BY WRITTEN INSTRUMENT SIGNED BY MEZZANINE LENDER AND GUARANTOR. SECTION 8. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon Guarantor, and its successors and assigns, may not be assigned or delegated by Guarantor and shall inure to the benefit of Mezzanine Lender and its successors and assigns. Mezzanine Lender shall have the right to assign this Guaranty and the obligations hereunder in connection with any assignment or transfer of all or any portion of the Loan or any interest therein. All references to "Mezzanine Lender" hereunder shall be deemed to include the successors and assigns of Mezzanine Lender and the parties hereto acknowledge that actions taken by Mezzanine Lender hereunder may be taken by Mezzanine Lender's agents and by the agents of the successors and assigns of Mezzanine Lender. SECTION 9. APPLICABLE LAW AND CONSENT TO JURISDICTION. This Guaranty shall be governed by, and construed in accordance with, the substantive laws of the State of New York. Guarantor irrevocably (a) agrees that any suit, action or other legal proceeding arising out of or relating to this Guaranty may be brought in a court of record in the City and County of New York or in the Courts of the United States of America located in the Southern District of New York, (b) consents to the jurisdiction of each such court in any such suit, action or proceeding and (c) waives any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient forum. Guarantor irrevocably consents to the service of any and all process in any such suit, action or proceeding by service of copies of such process to Guarantor at its address set forth on the first page hereof. Nothing in this Section 9, however, shall affect the right of Mezzanine Lender to serve legal process in any other manner permitted by law or affect the right of Mezzanine Lender to bring any suit, action or proceeding against Guarantor or its property in the courts of any other jurisdictions. SECTION 10. SECTION HEADINGS. The headings of the sections and paragraphs of this Guaranty have been inserted for convenience of reference only and shall in no way define, modify, limit or amplify any of the terms or provisions hereof. SECTION 11. SEVERABILITY. Any provision of this Guaranty which may be determined by any competent authority to be 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 provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, Guarantor hereby waives any provision of law which renders any provision hereof prohibited or unenforceable in any respect. SECTION 12. WAIVER OF TRIAL BY JURY. EACH OF GUARANTOR AND MEZZANINE LENDER HEREBY WAIVES THE RIGHT OF TRIAL BY JURY IN ANY LITIGATION, ACTION OR PROCEEDING ARISING HEREUNDER OR IN CONNECTION THEREWITH. 7 SECTION 13. OTHER GUARANTIES; SINGULAR AND PLURAL; JOINT AND SEVERAL LIABILITY. (a) The obligations of Guarantor hereunder are separate and distinct from, and in addition to, the obligations of Guarantor now or hereafter arising under the other guaranties pursuant to which Guarantor has guaranteed the payment and performance of certain other obligations of Mezzanine Borrowers described therein. (b) If there is more than one entity comprising Guarantor, all references to Guarantor herein shall be to Guarantor (but not its members, partners, employees, shareholders, agents, directors or officers) or any one or more of them. All obligations and liabilities of Guarantor hereunder are in addition to, not in lieu of and are independent of: (i) all obligations of Mezzanine Borrowers under any other Loan Document, including the Note and the Mezzanine Loan Agreement; and (ii) any obligation of Guarantor under any other Loan Document to which Guarantor is a party. (c) If there is more than one entity comprising Guarantor, all obligations of Guarantor hereunder shall be joint and several. SECTION 14. NOTICES. All notices, demands, requests, consents, approvals or other communications required or permitted to be given hereunder to Mezzanine Lender or Guarantor or which are given to Mezzanine Lender or Guarantor with respect to this Guaranty shall be in writing and shall be delivered to Mezzanine Lender at the address set forth in Section 14.5 of the Mezzanine Loan Agreement and to Guarantor at the address set forth on the first page hereof, each in the manner provided in Section 14.5 of the Mezzanine Loan Agreement. Guarantor agrees to give Mezzanine Lender not less than ten (10) days' prior written notice of any change in the location of Guarantor's principal place of business. SECTION 15. GUARANTOR'S RECEIPT OF LOAN DOCUMENTS. Guarantor by its execution hereof acknowledges receipt of true copies of all of the Loan Documents, the terms and conditions of which are hereby incorporated herein by reference. SECTION 16. INTEREST; EXPENSES. (a) If Guarantor fails to pay all or any sums due hereunder within ten (10) days of demand by Mezzanine Lender, the amount of such sums payable by Guarantor to Mezzanine Lender shall bear interest from the date of demand until paid at the Default Rate in effect from time to time. (b) Guarantor hereby agrees to pay all reasonable out of pocket costs, charges and expenses, including, without limitation, reasonable attorneys' fees and disbursements, that may be incurred by Mezzanine Lender in enforcing the covenants, agreements, obligations and liabilities of Guarantor under this Guaranty. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] 8 IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date first above written. GUARANTOR: LODGIAN, INC., a Delaware corporation By: /s/ Daniel E. Ellis ------------------------------------ Name: Daniel E. Ellis Title: Vice President and Secretary EX-10.3.4 19 g87458exv10w3w4.txt EX-10.3.4 MODIFICATION OF LOAN AGREEMENT EXHIBIT 10.3.4 MODIFICATION OF LOAN AGREEMENT AND OTHER LOAN DOCUMENTS by and between IMPAC HOTEL GROUP MEZZANINE, LLC, SERVICO OPERATIONS MEZZANINE, LLC, LODGIAN FINANCING MEZZANINE, LLC, ISLAND MOTEL ENTERPRISES, INC., and PENMOCO, INC. as Mezzanine Borrowers and MERRILL LYNCH MORTGAGE LENDING, INC. as Mezzanine Lender Dated as of March 31, 2003 Modification Agreement(Mezzanine) THIS MODIFICATION OF LOAN AGREEMENT AND OTHER LOAN DOCUMENTS (this "AGREEMENT"), is made as of March 31, 2003, by the undersigned, each having an address c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326 (each, a "MEZZANINE BORROWER" and collectively, "MEZZANINE BORROWERS"), in favor of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (together with its successors and assigns, "MEZZANINE LENDER"), having an address at 4 World Financial Center, New York, New York 10080. RECITALS: WHEREAS, Mezzanine Lender previously made a loan in the principal sum of $78,671,201 (the "ORIGINAL MEZZANINE LOAN") to the Mezzanine Borrowers, which Original Mezzanine Loan (i) is evidenced by and advanced pursuant to the terms and provisions of that certain Mezzanine Note dated as of November 25, 2002, made by the Mezzanine Borrowers to Mezzanine Lender (the "ORIGINAL MEZZANINE NOTE") and the Mezzanine Loan Agreement dated as of November 25, 2002, among the Mezzanine Borrowers and Mezzanine Lender (the "MEZZANINE LOAN AGREEMENT") and (ii) is secured by, among other things, the Mezzanine Loan Documents (hereinafter defined); WHEREAS, Mortgage Lender (as defined in the Mezzanine Loan Agreement) previously made a loan in the principal sum of $224,036,325 (the "ORIGINAL MORTGAGE LOAN") to the Mortgage Borrowers (as defined in the Mezzanine Loan Agreement), which Original Mortgage Loan (i) is evidenced by and advanced pursuant to the terms and provisions of that certain Promissory Note dated as of November 25, 2002, made by the Mortgage Borrowers to Mortgage Lender (the "ORIGINAL MORTGAGE NOTE") and the Loan and Security Agreement dated as of November 25, 2002, among the Mortgage Borrowers and Mortgage Lender; WHEREAS, in connection with the Original Mezzanine Loan, Guarantor (as defined in the Mezzanine Loan Agreement) guaranteed to Mezzanine Lender repayment of the Original Mezzanine Loan and certain recourse obligations pursuant to and to the extent as described in the terms and provisions of the Guaranty (as defined in the Mezzanine Loan Agreement); WHEREAS, in connection with the Original Mezzanine Loan, Guarantor agreed to indemnify and hold Mezzanine Lender harmless from and against certain claims and obligations pursuant to and as described in the provisions of the Environmental Indemnity (as defined in the Mezzanine Loan Agreement); WHEREAS, at the time of origination of the Original Mezzanine Loan and the Original Mortgage Loan, each of the Mezzanine Borrowers and the Mortgage Borrowers agreed, in consideration of making the Mezzanine Loan and the Mortgage Loan prior to the final determination of sizing of the Original Mezzanine Loan and the Original Mortgage Loan, that prior to a Securitization the principal balance of the Original Mortgage Loan and the Original Mezzanine Loan may be adjusted in the sole discretion of Mortgage Lender and Mezzanine Lender (the "RESIZING"), subject to certain limitations with respect to, among other things, (i) changes in the weighted average interest rate and aggregate debt service payable on the Original Mezzanine Loan and the Original Mortgage Loan, and (ii) material changes to the rights or Modification Agreement(Mezzanine) obligations of the Mezzanine Borrowers and the Mortgage Borrowers under the Mezzanine Loan Documents and the Mortgage Loan Documents; WHEREAS, Mezzanine Lender and Mortgage Lender have elected to cause the Resizing to be effectuated pursuant to the terms hereof, and pursuant to certain additional documents executed and delivered by the Mezzanine Borrowers, the Mortgage Borrowers, Mezzanine Lender and Mortgage Lender, as applicable; WHEREAS, in connection with the Resizing, pursuant to the terms of that certain Note Severance Agreement dated as of the date hereof among the Mortgage Borrowers and Mortgage Lender, the Original Mortgage Note has been severed into two notes in the respective amounts of $218,127,000 (the "AMENDED AND RESTATED PROMISSORY NOTE A"), and $5,539,275 (the "ASSUMED NOTE"); WHEREAS, in connection with the Resizing, the Mezzanine Borrowers have assumed the repayment obligations under and pursuant to the terms of the Assumed Note; WHEREAS, in connection with the Resizing, Mortgage Lender has assigned all of its right, title and interest in and to the Assumed Note, but not the Amended and Restated Promissory Note A, to Mezzanine Lender and Mezzanine Lender has succeeded to all right, title and interest in and to the Assumed Note; WHEREAS, pursuant to the terms of that certain Amended, Restated and Consolidated Restated Mezzanine Note dated as of the date hereof, in the original principal amount of $84,080,526 made by the Mezzanine Borrowers in favor of Mezzanine Lender (the "RESTATED MEZZANINE NOTE"), the indebtedness under the Original Mezzanine Note and the Assumed Note have been combined, consolidated, coordinated, amended and restated in accordance with the terms of the Restated Mezzanine Note; WHEREAS, Mezzanine Lender is now the owner and holder of (i) that certain Pledge and Security Agreement, dated as of November 25, 2002 (as amended, modified or restated from time to time, the "PLEDGE AGREEMENT"), executed by certain of the Mezzanine Borrowers named therein, pledging such of the Mezzanine Borrowers' legal and beneficial interest in and to certain stock, limited liability company membership interests and limited and general partnership interests, as applicable, as more particularly described therein in favor of Mezzanine Lender, (ii) that certain Leasehold Deed to Secure Debt, Assignment of Leases and Rents and Security Agreement, dated as of November 25, 2002 (together with all extensions, renewals, modifications, substitutions and amendments thereof, the "SECURITY INSTRUMENT"), made by Island Motel Enterprises, Inc. and Penmoco, Inc. for the benefit of Lender and covering the property as more particularly described therein, and (iii) the Restated Mezzanine Note; WHEREAS, the Mezzanine Borrowers and Mezzanine Lender have agreed in the manner hereinafter set forth to modify the terms and provisions of the Mezzanine Loan Agreement, the Pledge Agreement, that certain Mezzanine Cash Management Agreement (the "CASH MANAGEMENT AGREEMENT") dated as of November 25, 2002, among the Mezzanine Borrowers, Mezzanine Lender and Wachovia Bank, National Association, and such other documents as are set forth on SCHEDULE 1 (such other documents, together with the Cash Management Agreement, 2 Modification Agreement(Mezzanine) collectively, the "OTHER LOAN DOCUMENTS", and together with the Mezzanine Loan Agreement, the Restated Mezzanine Note, the Pledge Agreement, and the Security Instrument, collectively, the "MEZZANINE LOAN DOCUMENTS") in the manner hereinafter set forth. NOW THEREFORE, in pursuance of said agreement and in consideration of ten dollars and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the Mezzanine Borrowers and Mezzanine Lender hereby agree as follows: A. The Recitals are hereby incorporated herein by this reference. B. The Mezzanine Loan Agreement shall be deemed modified and amended in the following respects: (i) The term "NOTE" as used in the Mezzanine Loan Agreement shall refer to the Restated Mezzanine Note. (ii) The term "LOAN" as used in the Mezzanine Loan Agreement shall refer to a loan in the original principal amount of $84,080,526 as the same may be decreased from time to time. (iii) The definition of "APPLICABLE SPREAD" set forth in Section 1.1 of the Mezzanine Loan Agreement shall be deemed deleted in its entirety and replaced with the following: "APPLICABLE SPREAD" means 8.2546%; provided, however, if the Borrowers have not made the Reserve Principal Payment on or prior to the Payment Date in November 2003, the "APPLICABLE SPREAD" shall mean 8.7937% throughout the remainder of the term of the Loan, including any Extension Terms. (iv) The definition of "MEZZANINE LENDER'S PERCENTAGE" set forth in Section 1.1 of the Mezzanine Loan Agreement shall be deemed deleted in its entirety and replaced with the following: "MEZZANINE LENDER'S PERCENTAGE" shall mean, if the Mortgage Loan remains outstanding at the time of determination, the ratio, expressed as a percentage, that the then outstanding principal balance of the Mezzanine Loan bears to the Aggregate Outstanding Principal Balance, and following satisfaction of the Mortgage Loan, 100%. As of the date hereof Mezzanine Lender's Percentage is 27.82%. (v) The definition of "MORTGAGE LENDER'S PERCENTAGE" set forth in Section 1.1 of the Mezzanine Loan Agreement shall be deemed deleted in its entirety and replaced with the following: "MORTGAGE LENDER'S PERCENTAGE" shall mean, at the time of determination, the ratio, expressed as a percentage, that the outstanding 3 Modification Agreement(Mezzanine) principal balance of the Mortgage Loan bears to the Aggregate Outstanding Principal Balance. As of the date hereof, Mortgage Lender's Percentage is 72.18%. (vi) The definition of "MORTGAGE LOAN" set forth in Section 1.1 of the Mezzanine Loan Agreement shall be deemed deleted in its entirety and replaced with the following: "MORTGAGE LOAN" means that certain loan in the amount of $218,127,000 from Mortgage Lender to the Mortgage Borrowers. (vii) The definition of "SCHEDULED MEZZANINE PRINCIPAL PAYMENTS" set forth in Section 1.1 of the Mezzanine Loan Agreement shall be deemed deleted in its entirety and replaced with the following: "SCHEDULED MEZZANINE PRINCIPAL PAYMENTS" shall mean (x) $69,550 through and including the Payment Date in November 2003, (y) $104,325 following the Payment Date in November 2003, through and including the Payment Date in November 2004, and (z) $139,100 thereafter through the Maturity Date. (viii) The definition of "SCHEDULED MORTGAGE PRINCIPAL PAYMENTS" set forth in Section 1.1 of the Mezzanine Loan Agreement shall be deemed deleted in its entirety and replaced with the following: "SCHEDULED MORTGAGE PRINCIPAL PAYMENTS" shall mean (x) $180,450 through and including the Payment Date in November 2003, (y) $ 270,675 following the Payment Date in November 2003, through and including the Payment Date in November 2004, and (z) $360,900 thereafter through the Maturity Date. (ix) Section 2.1(A) and (B) of the Mezzanine Loan Agreement shall be deemed modified and amended by replacing all references therein to the figure "$78,671,201" with the figure "$84,080,526." (x) Sections 2.4(A)(iv) and 2.6(C) of the Mezzanine Loan Agreement shall be deemed modified and amended by replacing all references therein to the word "prior" with the words "on or prior". (xi) Section 2.6(B) of the Mezzanine Loan Agreement shall be deemed modified and amended by deleting the final sentence thereof and inserting the following: "PREPAYMENT CONSIDERATION" shall mean an amount equal to (i) prior to the Payment Date in December 2003, three percent (3%) of the amount prepaid, and (ii) on and after the Payment Date in December 2003, but prior to the Payment Date in May 2004, two percent (2%) of the amount 4 Modification Agreement(Mezzanine) prepaid, and (iii) thereafter through the Scheduled Maturity Date one percent (1%) of the amount prepaid. (xii) EXHIBIT A captioned "Allocated Loan Amount/Aggregate Allocated Loan Amount" of the Mezzanine Loan Agreement shall be deemed deleted in its entirety and replaced with EXHIBIT A annexed hereto and made a part hereof C. The Other Loan Documents shall each be deemed modified and amended in the following respects: (i) The terms "NOTE" and "MEZZANINE NOTE" as used in the Other Loan Documents shall be deemed to refer to the Restated Mezzanine Note. (ii) The terms "LOAN" and "MEZZANINE LOAN" as used in the Other Loan Documents shall be deemed to refer to a loan in the original principal amount of $84,080,526 as the same may be decreased from time to time. (iii) All references in the Other Loan Documents to the figure "$78,671,526" shall be deemed to refer to the figure "$84,080,526". (iv) All references in the Other Loan Documents to the figure "$224,036,325" shall be deemed to refer to the figure "$218,127,000". D. The Cash Management Agreement shall be deemed further modified and amended in the following respects: (i) The definition of "MONTHLY FF&E PAYMENT" set forth in Article I of the Cash Management Agreement shall be deemed deleted in its entirety and replaced with the following: "MONTHLY FF&E PAYMENT" shall mean the monthly deposit required to be made to the FF&E Reserve pursuant to Section 6.4 of the Mortgage Loan Agreement; provided that if at the time of determination thereof the actual Operating Revenues utilized in calculating the Monthly FF&E Payment have not been determined for the applicable month, such calculation shall be based upon the Operating Revenues set forth for such month in the applicable Operating Budget, and, upon determination of the actual Operating Revenues for such month, any deficit or excess deposits with respect to the FF&E Reserve shall be adjusted within five (5) Business Days of such determination, with any deficit being satisfied, and any excess being allocated and deposited, in accordance with Section 3.3(a) hereof. (ii) The definition of "MONTHLY OPERATING EXPENSE BUDGET AMOUNT" set forth in Article I of the Cash Management Agreement shall be deemed deleted in its entirety and replaced with the following: 5 Modification Agreement(Mezzanine) "MONTHLY OPERATING EXPENSE BUDGET AMOUNT" shall mean, with respect to each month, an amount equal to the Operating Expenses plus estimated sales and similar taxes relating to the Properties (excluding therefrom Impositions, Insurance Premiums, FF&E expenditures, and management fees payable to any Manager that is an Affiliate of the Borrowers) set forth in the Approved Operating Budget for the applicable month of determination. (iii) Section 2.1(f) of the Cash Management Agreement shall be deemed modified and amended by replacing all references therein to "Section 3.3(a)(iv)" with the reference to "Section 3.3(a)(iii)". (iv) Section 3.3(a) of the Cash Management Agreement shall be deemed deleted in its entirety and replaced with the following: (a) At any time other than after the occurrence and during the continuance of an Event of Default, Agent shall allocate and distribute, as applicable, all available funds on deposit in the Mezzanine Lock Box Account on each Business Day of each calendar month (or such other period of time as set forth below) in the following amounts and order of priority: (i) First, but only from and after the Termination Date, to the Impositions and Insurance Reserve Sub-Account, the Monthly Impositions and Insurance Amount for the next Monthly Payment Date (as if the Mortgage Loan Agreement remained in full force and effect with Lender as the lender thereunder); (ii) Second, but only to the extent not deposited in the Mezzanine Loan Debt Service Sub-Account established under the Mortgage Loan Cash Management Agreement, to the Mezzanine Debt Service Sub-Account, the Monthly Debt Service Payment Amount, less Mezzanine Lender's Percentage of the Excess Cash Flow Amortization Payment and the Excess Cash Flow Supplemental Payment for the next Monthly Payment Date; (iii) Third, but only from and after the Termination Date, to the FF&E Reserve Account, the Monthly FF&E Payment for the next Monthly Payment Date (as if the Mortgage Loan Agreement remained in full force and effect with Lender as the lender thereunder); (iv) Fourth, but only from and after the Termination Date, to the Operating Expense Sub-Account funds sufficient to pay the 6 Modification Agreement(Mezzanine) Monthly Operating Expense Budget Amount for the next calendar Month; (v) Fifth, but only from and after the Termination Date, to the Operating Expense Sub-Account, funds in an amount necessary to pay Extraordinary Expenses approved by Lender, if any; (vi) Sixth, but only from and after the Termination Date, to the Operating Expense Sub-Account, subject to the terms and conditions of the Assignment of Management Agreement (as defined in the Mortgage Loan Agreement, and as if such agreement continued in full force and effect with the Lender as lender thereunder), any management fees due and owing to Manager which have not previously been paid to Manager, together with any fees payable to Manager for the next calendar month pursuant to the Management Agreement (including those with respect to the Jekyll Island Property) not otherwise paid pursuant to (iv) above; (vii) Seventh, but only to the extent not deposited in the Mezzanine Loan Debt Service Sub-Account established under the Mortgage Loan Cash Management Agreement, to the Mezzanine Debt Service Sub-Account, Mezzanine Lender's Percentage of the Excess Cash Flow Amortization Payment and the Excess Cash Flow Supplemental Payment for the next Monthly Payment Date; (viii) Eighth, but only from and after the Termination Date, if a Cash Trap Event shall have occurred and is continuing, any amounts remaining in the Mezzanine Lock Box Account after deposits for items (i) through (vii) above shall be deposited into the Cash Trap Reserve Sub-Account; and (ix) Ninth, if no Cash Trap Event shall have occurred and is continuing, any amounts remaining in the Mezzanine Lock Box Account after deposits for items (i) through (vii) above shall be (x) first deposited into the Jekyll Island Lock Box Account, if the Jekyll Island Mortgage remains a lien on the Jekyll Island Property, until all deposits required to be made on such Monthly Payment Date for items (i) through (iv) of Section 3.3(a) of the Jekyll Island Cash Management Agreement have been deposited in the Jekyll Island Lock Box Account, and (y) thereafter, paid within one (1) Business Day of the date such funds become available, to, or as directed by, the Borrowers. 7 Modification Agreement(Mezzanine) (v) Sections 3.3(c) and 3.3(d) of the Cash Management Agreement shall be deemed deleted in their entirety and replaced with the following: (c) The Borrowers shall use, or caused to be used, all disbursements made to it under Sections 3.3(a)(iv) and (v) solely to pay Operating Expenses in accordance with the Approved Operating Budget and to pay Extraordinary Expenses for which Lender has approved disbursements under Section 3.3(a)(v) above. (d) Notwithstanding anything to the contrary contained herein, Lender shall not be obligated to make any disbursement from the Mezzanine Lock Box Account (under Sections 3.3(a)(iv) and (v) or otherwise) to pay for any costs or expenses (including legal fees) in connection with any dispute or defense of the Borrowers under any of the Loan Documents. (vi) Section 3.4 of the Cash Management Agreement shall be deemed deleted in its entirety and replaced with the following: SECTION 3.4 DISBURSEMENTS FOR OPERATING EXPENSE AMOUNTS. The Borrowers shall provide on a monthly basis (a) a reasonably detailed explanation of any variances of ten percent (10%) or more between budgeted (as set forth in the Approved Operating Budget) and actual Operating Expense amounts for any month in the aggregate, and (b) with respect to any individual item with a cost of $10,000 or more and not otherwise covered by the Approved Operating Budget, all invoices or other backup requested by Lender to substantiate the amount disbursed to the Borrowers pursuant to Section 3.3(a)(iv) and (v). (vii) Section 4.1(c) the Cash Management Agreement shall be deemed deleted in its entirety and replaced with the following: (c) Operating Expense Sub-Account. Funds deposited into the Operating Expense Sub-Account pursuant to Sections 3.3(a)(iv) through (vi) shall be distributed to the Borrowers on each Business Day. (viii) Section 8.4 of the Cash Management Agreement shall be deemed modified and amended by inserting as the first sentence thereof the following: Agent shall deduct for its own account the monthly Servicing Fee for which the Borrowers are responsible pursuant to Section 2.11 of the Mezzanine Loan Agreement from the Lock Box Account prior to making any disbursements pursuant to Section 3.3(a)(ii) hereof. E. The Mezzanine Borrowers and Mezzanine Lender acknowledge and agree that Mezzanine Lender has waived any amortization payment required pursuant to Section 2.4(A) of the Mezzanine Loan Agreement for the Payment Date in March 2003 only. Notwithstanding the 8 Modification Agreement(Mezzanine) foregoing to the contrary, the Mezzanine Borrowers acknowledge and agree that the aggregate amount of the Scheduled Mezzanine Principal Payments (with the Scheduled Mezzanine Principal Payment for the Payment Date in March 2003 being deemed to be $64,975) through the Payment Date in March 2003 is $259,900, and further acknowledge and agree that the aggregate of all principal payments made by the Mezzanine Borrowers through the Payment Date in March 2003 is $129,950, and therefore the aggregate Amortization Deficiency through the Payment Date in March 2003 shall be deemed to be $129,950. Further, the Mezzanine Borrowers shall cause the Mortgage Borrowers to retain any Excess Cash Flow accruing during the month of March 2003, which such amounts shall be (i) included in calculating Excess Cash Flow for the month of April 2003 for all intents and purposes under the Mezzanine Loan Documents, and (ii) applied (together with any Excess Cash Flow accruing during the month of April 2003) in accordance with Section 2.4(A) of the Mezzanine Loan Agreement. F. The Mezzanine Borrowers acknowledge and agree that the Mezzanine Loan shall continue to be evidenced by and payable in accordance with the provisions of the Restated Mezzanine Note and the Mezzanine Loan Agreement, as hereby confirmed, modified and amended. The Mezzanine Borrowers hereby agree to perform all of the terms, covenants and provisions contained in the Restated Mezzanine Note and the Mezzanine Loan Agreement, as hereby confirmed, modified and amended. G. The Mezzanine Borrowers represent and warrant that, to the Mezzanine Borrowers' Knowledge, as of the date hereof, there are no Events of Default under any of the terms, covenants or provisions of the Mezzanine Loan Documents and the Mezzanine Borrowers know of no event which, but for the passage of time or the giving of notice or both, would constitute an Event of Default under the Mezzanine Loan Documents. H. The Mezzanine Borrowers represent, warrant and covenant that, to the Mezzanine Borrowers' Knowledge, there are no offsets, counterclaims or defenses to the Obligations, this Agreement, or the Mezzanine Loan Documents and that the Mezzanine Borrowers (and the undersigned representatives of the Mezzanine Borrowers) have full power, authority and legal right to execute this Agreement and keep and observe all of the terms of this Agreement on the Mezzanine Borrowers' part to be observed or performed. I. Except as expressly modified pursuant to this Agreement, all of the terms, covenants and provisions of the Mezzanine Loan Documents shall continue in full force and effect. In the event of any conflict between any of the terms, covenants and provisions of this Agreement and those of the Mezzanine Loan Documents, the terms, covenants and provisions of this Agreement shall control. J. No amendment or waiver of any term, covenant or provision of this Agreement nor consent to any departure by the Mezzanine Borrowers from the terms, covenants or provisions of this Agreement shall be effective unless the same shall be in writing and signed by Mezzanine Lender and, in the case of an amendment, the Mezzanine Borrowers and any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 9 Modification Agreement(Mezzanine) K. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. L. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart. M. All capitalized terms not otherwise defined herein shall have the meaning set forth in the Mezzanine Loan Agreement. N. THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW YORK AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. [NO ADDITIONAL TEXT ON THIS PAGE] 10 Modification Agreement(Mezzanine) IN WITNESS WHEREOF, the undersigned Mezzanine Borrowers and Mezzanine Lender have executed this Agreement as of the day and year first written above. MEZZANINE BORROWERS: IMPAC HOTEL GROUP MEZZANINE, LLC, a Delaware limited liability company By: /s/ Daniel E. Ellis -------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary SERVICO OPERATIONS MEZZANINE, LLC, a Delaware limited liability company By: /s/ Daniel E. Ellis -------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary LODGIAN FINANCING MEZZANINE, LLC, a Delaware limited liability company By: /s/ Daniel E. Ellis -------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary ISLAND MOTEL ENTERPRISES, INC., a Georgia corporation By: /s/ Daniel E. Ellis -------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary Modification Agreement(Mezzanine) PENMOCO, INC., a Michigan corporation By: /s/ Daniel E. Ellis -------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary MEZZANINE LENDER: MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation By: /s/ Steven Glassman -------------------------------------- Name: Steven Glassman Title: Authorized Signatory Modification Agreement(Mezzanine) CONSENT OF GUARANTOR The undersigned has executed this Agreement in order to signify its consent to the execution and delivery of this Agreement and the Restated Mezzanine Note by the Mezzanine Borrowers and its agreement to be bound by the terms hereof to the extent applicable. The undersigned hereby ratifies and confirms the Guaranty and the Environmental Indemnity, as each have been amended and modified by this Agreement, and acknowledges that to its Knowledge there are no offsets, counterclaims or defenses of any nature whatsoever to its obligations and liabilities under either of the Guaranty or the Environmental Indemnity, as each have been amended and modified by this Agreement. Dated: March 31, 2003 GUARANTOR: LODGIAN, INC. a Delaware corporation By: /s/ Daniel E. Ellis -------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary Modification Agreement(Mezzanine) ACKNOWLEDGEMENT OF PLEDGED SUBSIDIARIES The undersigned hereby acknowledge receipt of a copy of the foregoing Agreement, and acknowledge that the Acknowledgement given pursuant to the Pledge Agreement remains in full force and effect and unmodified and that, to the extent required by applicable law, the security interests granted under such Pledge Agreement have been noted in each of the undersigned's books, and agrees that it will comply with instructions originated by the Mezzanine Lender without further consent by Pledgor, and waives any rights or requirement at any time hereafter to receive a copy of such Pledge and Security Agreement in connection with the registration of any Collateral in the name of the Lender or its nominee or the exercise of voting rights by the Mezzanine Lender or its nominee. ALBANY HOTEL, INC., a Florida corporation, APICO HILLS, INC., a Pennsylvania corporation, APICO INNS OF GREEN TREE, INC., a Pennsylvania corporation, BRUNSWICK MOTEL ENTERPRISES, INC., a Georgia corporation, DOTHAN HOSPITALITY 3053, INC., an Alabama corporation, DOTHAN HOSPITALITY 3071, INC., an Alabama corporation, GADSDEN HOSPITALITY, INC., an Alabama corporation, LODGIAN AMI, INC., a Maryland corporation, MINNEAPOLIS MOTEL ENTERPRISES, INC., a Minnesota corporation, NH MOTEL ENTERPRISES, INC., a Michigan corporation, SERVICO AUSTIN, INC., a Texas corporation, SERVICO CEDAR RAPIDS, INC., an Iowa corporation, Modification Agreement(Mezzanine) SERVICO COLUMBIA, INC., a Maryland corporation, SERVICO GRAND ISLAND, INC., a New York corporation, SERVICO HOUSTON, INC., a Texas corporation, SERVICO JAMESTOWN, INC., a New York corporation, SERVICO LANSING, INC., a Michigan corporation, SERVICO MARKET CENTER, INC., a Texas corporation, SERVICO MARYLAND, INC., a Maryland corporation, SERVICO METAIRIE, INC., a Louisiana corporation, SERVICO NEW YORK, INC., a New York corporation, SERVICO NIAGARA FALLS, INC., a New York corporation, SERVICO NORTHWOODS, INC., a Florida corporation, SERVICO PENSACOLA 7200, INC., a Delaware corporation, SERVICO PENSACOLA 7330, INC., a Delaware corporation, SERVICO PENSACOLA, INC., a Delaware corporation, SERVICO ROLLING MEADOWS, INC., an Illinois corporation, Modification Agreement(Mezzanine) SERVICO WINTER HAVEN, INC., a Florida corporation, SHEFFIELD MOTEL ENTERPRISES, INC., an Alabama corporation, IMPAC HOTELS I, L.L.C., a Georgia limited liability company, and LODGIAN MEMPHIS PROPERTY OWNER, LLC, a Delaware limited liability company By: /s/ Daniel E. Ellis -------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary or authorized signatory of the above entities AMI OPERATING PARTNERS, L.P., a Delaware limited partnership By: AMIOP ACQUISITION GENERAL PARTNER SPE CORP., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis ---------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary DEDHAM LODGING ASSOCIATES I, LIMITED PARTNERSHIP, a Georgia limited partnership By: DEDHAM LODGING SPE, INC., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis ---------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary LITTLE ROCK LODGING ASSOCIATES I, LIMITED PARTNERSHIP, a Georgia limited partnership Modification Agreement(Mezzanine) By: LODGIAN LITTLE ROCK SPE, INC., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis ---------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary ISLAND MOTEL ENTERPRISES, INC., a Georgia corporation By: /s/ Daniel E. Ellis -------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary PENMOCO, INC., a Michigan corporation By: /s/ Daniel E. Ellis -------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary IMPAC HOTELS MEMBER SPE, INC., a Delaware corporation By: /s/ Daniel E. Ellis -------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary LODGIAN LITTLE ROCK SPE, INC., a Delaware corporation By: /s/ Daniel E. Ellis -------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary SERVICO COLUMBIA II, INC., a Maryland corporation Modification Agreement(Mezzanine) By: /s/ Daniel E. Ellis -------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary IMPAC HOTELS I, L.L.C., a Georgia limited liability company By: /s/ Daniel E. Ellis -------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary SERVICO PALM BEACH MOTEL GENERAL PARTNER SPE, INC., a Delaware corporation, By: /s/ Daniel E. Ellis -------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary AMIOP ACQUISITION GENERAL PARTNER SPE CORP., a Delaware corporation By: /s/ Daniel E. Ellis -------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary Modification Agreement(Mezzanine) ACKNOWLEDGEMENT OF CERTAIN LIMITED PARTNERSHIP AND LIMITED LIABILITY COMPANY PLEDGED SUBSIDIARIES The undersigned have executed this Agreement in order to ratify and confirm that each Control Acknowledgement dated as of November 25, 2002, executed by the undersigned remains in full force and effect following the execution and delivery of this Agreement. IMPAC HOTELS I, L.L.C. a Georgia limited liability company By: /s/ Daniel E. Ellis -------------------------------------- Name: Daniel E. Ellis Title: VP and Secretary LODGIAN MEMPHIS PROPERTY OWNER, LLC a Delaware limited liability company By: /s/ Daniel E. Ellis -------------------------------------- Name: Daniel E. Ellis Title: VP and Secretary AMI OPERATING PARTNERS, L.P. a Delaware limited partnership By: AMIOP ACQUISITION GENERAL PARTNER SPE CORP., a Delaware corporation, its General Partner. By: /s/ Daniel E. Ellis ---------------------------------- Name: Daniel E. Ellis Title: VP and Secretary LITTLE ROCK LODGING ASSOCIATES, LIMITED PARTNERSHIP, a Georgia limited partnership By: LODGIAN LITTLE ROCK SPE, INC., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis ---------------------------------- Name: Daniel E. Ellis Title: VP and Secretary Modification Agreement(Mezzanine) DEDHAM LODGING ASSOCIATES I, LIMITED PARTNERSHIP, a Georgia limited liability company By: /s/ Daniel E. Ellis ------------------------------------- Name: Daniel E. Ellis Title: VP and Secretary Modification Agreement(Mezzanine) ACKNOWLEDGEMENT OF AGENT The undersigned has executed this Agreement in order to signify its agreement to be bound by the terms hereof to the extent applicable with respect to the Cash Management Agreement and the Jekyll Island Cash Management Agreement only, and for no other purpose. Dated: March 31, 2003 AGENT: WACHOVIA BANK, NATIONAL ASSOCIATION By: /s/ David F. Sisom ------------------------------------- Name: David F. Sisom Title: Vice President Modification Agreement(Mezzanine) ACKNOWLEDGEMENT OF MANAGER The undersigned has executed this Agreement in order to signify its agreement to be bound by the terms hereof to the extent applicable with respect to the Cash Management Agreement, the Jekyll Island Cash Management Agreement, the Assignments of Management Agreements, and any of the other Mezzanine Loan Documents to which Manager is a party. Dated: March 31, 2003 MANAGER: LODGIAN MANAGEMENT CORP. By: /s/ Daniel E. Ellis ------------------------------------- Name: Daniel E. Ellis Title: Vice President Modification Agreement(Mezzanine) SCHEDULE 1 OTHER LOAN DOCUMENTS 1. Pledge Agreement 2. Guaranty 3. Environmental Indemnity 4. Conditional Assignment of Hotel Management Agreement (Mezzanine Loan) by Manager the Mezzanine Borrowers in favor of Mezzanine Lender 5. Jekyll Island Mortgage 6. Jekyll Island Assignment of Leases and Rents 7. Assignment of Agreements, Licenses, Permits and Contracts (Jekyll Island) by Penmoco, Inc. and Island Motel Enterprises, Inc. to Mezzanine Lender 8. Mezzanine Cash Management Agreement (Jekyll Island) among Penmoco, Inc., Island Motel Enterprises, Inc., Manager and Mezzanine Lender 9. Conditional Assignment of Hotel Management Agreement (Jekyll Island Property) among Penmoco, Inc., Island Motel Enterprises, Inc., Manager and Mezzanine Lender 10. Post-Closing Agreement given by the Mezzanine Borrowers Modification Agreement(Mezzanine) EXHIBIT A ALLOCATED LOAN AMOUNT/AGGREGATE ALLOCATED LOAN AMOUNT
AGGREGATE PROPERTY ALLOCATED LOAN ALLOCATED NUMBER CHAIN/NAME CITY STATE AMOUNT LOAN AMOUNT - -------------------------------------------------------------------------------------------------------------------- 210 Holiday Inn Sheffield AL $ 835,105.69 $ 3,037,891 220 Holiday Inn Dothan AL $ 252,473.82 $ 918,432 230 Dothan Plaza Hotel Dothan (Ex Hampton) AL $ 603,123.65 $ 2,194,003 240 Holiday Inn Express Attalla (Gadsden) AL $ 466,105.50 $ 1,695,567 505 Courtyard by Marriott Bentonville AR $ 1,553,685.00 $ 5,651,891 560 Residence Inn Little Rock AR $ 1,242,948.00 $ 4,521,513 850 Holiday Inn East Hartford CT $ 640,895.05 $ 2,331,405 1108 Crowne Plaza West Palm Beach FL $ 1,942,106.24 $ 7,064,863 1113 Holiday Inn Express Pensacola FL $ 602,052.94 $ 2,190,108 1116 Holiday Inn Pensacola (University Mall) FL $ 971,053.13 $ 3,532,432 1132 Holiday Inn Winter Haven FL $ 1,320,632.25 $ 4,804,107 1168 Holiday Inn Express Pensacola (Ex Hampton) FL $ 1,137,336.71 $ 4,137,327 1206 Holiday Inn Brunswick GA $ 757,421.44 $ 2,755,297 1212 Courtyard by Marriott Atlanta GA $ 3,665,316.68 $ 13,333,442 1255 Holiday Inn Marietta (hotel & suites) GA $ 427,263.38 $ 1,554,270 1280 Fairfield Inn Valdosta GA $ 971,053.13 $ 3,532,432 1285 Holiday Inn Valdosta GA $ 640,895.05 $ 2,331,405 1310 Holiday Inn Rolling Meadows IL $ 1,825,579.88 $ 6,640,972 1502 Quality Hotel Metairie LA $ 718,579.32 $ 2,613,999 1710 Hilton Columbia MD $ 2,136,316.88 $ 7,771,350 1720 Holiday Inn Silver Spring MD $ 4,592,709.47 $ 16,707,049 1765 Holiday Inn Baltimore, Inner Harbor MD $ 6,408,950.62 $ 23,314,049 1770 Holiday Inn Glen Burnie MD $ 1,029,316.32 $ 3,744,378 1775 Holiday Inn Baltimore - BWI Airport MD $ 4,466,844.37 $ 16,249,186 1776 Holiday Inn Frederick MD $ 990,474.19 $ 3,603,080 1780 Holiday Inn Towson (Cromwell Bridge) MD $ 1,359,474.37 $ 4,945,404 1785 Holiday Inn Baltimore West (Belmont) MD $ 466,105.50 $ 1,695,567 1840 Crowne Plaza Cedar Rapids IA $ 1,398,316.50 $ 5,086,702 1910 Holiday Inn Arden Hills/St. Paul MN $ 1,340,053.31 $ 4,874,756 2007 Courtyard by Marriott Paducah KY $ 1,107,000.57 $ 4,026,972 2035 Courtyard by Marriott Florence KY $ 738,000.37 $ 2,684,648 2040 Hurstbourne Hotel Louisville KY $ 758,224.48 $ 2,758,218 2222 Holiday Inn St. Louis North MO $ 1,553,685.00 $ 5,651,891 2777 Residence Inn Dedham MA $ 1,942,106.24 $ 7,064,863 3311 Crowne Plaza Albany NY $ 4,792,392.49 $ 17,433,443 3314 Holiday Inn Select Niagara Falls NY $ 1,456,579.69 $ 5,298,648 3326 Four Points Niagara Falls NY $ 485,526.55 $ 1,766,216 3330 Holiday Inn Jamestown NY $ 1,048,737.37 $ 3,815,026 3345 Holiday Inn Grand Island NY $ 252,473.82 $ 918,432 3515 Holiday Inn Select Strongsville OH $ 1,942,106.24 $ 7,064,863 3802 Holiday Inn Greentree PA $ 1,398,316.50 $ 5,086,702 3804 Holiday Inn Pittsburgh (Pkwy East) PA $ 524,368.70 $ 1,907,513 3838 Doubletree Club Philadelphia PA $ 2,494,699.37 $ 9,075,049 3875 Holiday Inn York PA $ 718,579.32 $ 2,613,999 3890 Holiday Inn Lancaster PA $ 990,474.19 $ 3,603,080 3930 Hilton Troy (Northfield) MI $ 2,196,513.22 $ 7,990,328 3970 Holiday Inn Lansing MI $ 2,563,580.25 $ 9,325,620 4021 Clarion Charleston SC $ 330,158.05 $ 1,201,027 4040 Holiday Inn SunSpree Myrtle Beach SC $ 1,087,579.49 $ 3,956,324 4215 French Quarter Suites Memphis TN $ 559,641.87 $ 2,035,828 4310 Crowne Plaza Houston TX $ 4,078,423.12 $ 14,836,213 4343 Courtyard by Marriott Abilene TX $ 1,145,842.69 $ 4,168,269 4375 Holiday Inn Austin TX $ 1,048,737.37 $ 3,815,026 4380 Holiday Inn Dallas (Mkt Center) TX $ 388,421.25 $ 1,412,973 4388 Holiday Inn Select Dallas (DFW Airport) TX $ 2,330,527.50 $ 8,477,836 Jekyll Island $ 1,385,641.92 $ 1,385,642 TOTAL 56 PROPERTIES $84,080,526.00 $302,207,526
Modification Agreement(Mezzanine) EX-10.3.5 20 g87458exv10w3w5.txt EX-10.3.5 $84,080,526 AMENDED, RESTATED EXHIBIT 10.3.5 AMENDED, RESTATED AND CONSOLIDATED MEZZANINE NOTE $84,080,526 MARCH 31, 2003 THIS AMENDED, RESTATED AND CONSOLIDATED PROMISSORY NOTE (this "RESTATED MEZZANINE NOTE"), is made as of March 31, 2003, by the undersigned, each having an address c/o Lodgian, Inc., 3445 Peachtree Road, NE, Suite 700, Atlanta, Georgia 30326 (each, a "MEZZANINE BORROWER" and, collectively, "MEZZANINE BORROWERS"), in favor of MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (together with its successors and assigns, "MEZZANINE LENDER"), having an address at 4 World Financial Center, New York, New York 10080. RECITALS WHEREAS Mezzanine Borrowers are the obligors under that certain promissory note (the "ORIGINAL MEZZANINE NOTE") described on Exhibit A annexed hereto and made a part hereof in the outstanding principal amount as of the date hereof of $78,541,251 (the "EXISTING INDEBTEDNESS"); WHEREAS Mezzanine Borrowers have assumed the obligations of the original makers of, and are now the obligors under, that certain promissory note described on Exhibit B annexed hereto and made a part hereof in the outstanding principal amount as of the date hereof of $5,539,275 (the "ASSUMED NOTE"), and together with the Original Mezzanine Note, collectively, the "EXISTING NOTES"); WHEREAS the Original Mezzanine Note is, and from and after the date hereof, the Assumed Note will be, secured by, among other things, that certain Pledge and Security Agreement, dated as of November 25, 2002 (as amended, modified or restated from time to time, the "PLEDGE AGREEMENT"), executed by certain of the Mezzanine Borrowers named therein, pledging such Mezzanine Borrowers' legal and beneficial interest in and to certain stock, limited liability company membership interests and limited and general partnership interests, as applicable, as more particularly described therein (collectively, the "PLEDGED INTERESTS") in favor of Mezzanine Lender, and (ii) that certain Leasehold Deed to Secure Debt, Assignment of Leases and Rents and Security Agreement, dated as of November 25, 2002 (together with all extensions, renewals, modifications, substitutions and amendments thereof, the "SECURITY INSTRUMENT"), made by Island Motel Enterprises, Inc. and Penmoco, Inc. for the benefit of Lender and covering the property as more particularly described therein; WHEREAS Mezzanine Lender is the holder of the Existing Notes, the Pledge Agreement and the Security Instrument; WHEREAS on the date hereof, Mezzanine Borrowers and Mezzanine Lender are consolidating, modifying and amending the Existing Indebtedness pursuant to a certain Modification of Loan Agreement and Other Loan Documents (as same may be amended, modified or supplemented, the "MODIFICATION AGREEMENT"); WHEREAS Mezzanine Borrowers and Mezzanine Lender desire to combine, consolidate, coordinate, amend and restate in its entirety the Existing Indebtedness evidenced by the Existing Notes on the terms and conditions provided in this Restated Mezzanine Note as hereinafter set forth; and WHEREAS this Restated Mezzanine Note evidences a loan (the "LOAN") in the principal amount of the Loan Amount (hereinafter defined). NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows: (i) The Recitals are hereby incorporated herein by this reference; (ii) Mezzanine Borrowers and Mezzanine Lender acknowledge and agree that the Existing Notes, as modified, constitute a single indebtedness in the principal amount of EIGHTY-FOUR MILLION EIGHTY THOUSAND FIVE HUNDRED AND TWENTY SIX AND 00/100 DOLLARS ($84,080,526.00) (the "LOAN AMOUNT") as evidenced by this Restated Mezzanine Note; (iii) From and after the date hereof, the terms, covenants and provisions of the Existing Notes are hereby modified, amended and restated in their entirety so that henceforth the terms, covenants and provisions of this Restated Mezzanine Note shall supersede those of the Existing Notes; (iv) Neither this Restated Mezzanine Note nor anything contained herein shall be construed as a substitution or novation of the indebtedness under the Existing Notes all of which shall remain in full force and effect, as hereby confirmed, modified, amended and restated in their entirety; (v) On the date hereof, the principal amount outstanding under the Existing Notes is the Loan Amount; and (vi) Mezzanine Borrowers represent, warrant and covenant to Mezzanine Lender that there are no offsets, counterclaims or defenses with respect to the obligations under the Existing Notes. NOW, THEREFORE, FURTHER, FOR VALUE RECEIVED, Mezzanine Borrowers do hereby covenant and promise to pay to the order of Mezzanine Lender, without any counterclaim, setoff or deduction whatsoever, on the Maturity Date (as hereinafter defined), in immediately available funds, at 4 World Financial Center, New York, New York 10080, or at such other place as Mezzanine Lender may designate to Mezzanine Borrowers in writing from time to time, in legal tender of the United States of America, the Loan Amount and all other amounts due or becoming due hereunder, to the extent not previously paid in accordance herewith. PAYMENTS OF PRINCIPAL AND INTEREST. Mezzanine Borrowers shall make payments of principal and interest on the outstanding principal balance of this Restated 2 Mezzanine Note in accordance with the terms and provisions of Section 2.4 of the Mezzanine Loan Agreement. The entire outstanding principal balance of the Mezzanine Loan, all accrued and unpaid interest thereon (including interest through the end of the Interest Accrual Period then in effect) and all other amounts due on each Component hereunder and under the other Mezzanine Loan Documents (collectively, the "DEBT") if not sooner paid (and unless Mezzanine Borrowers shall extend the term of the Mezzanine Loan for the First Extension Term, the Second Extension Term, or the Third Extension Term) shall be due and payable on November 30, 2004 (the "SCHEDULED MATURITY DATE"). Subject to the terms and conditions of Section 2.5(B) of the Mezzanine Loan Agreement, Mezzanine Borrowers may extend the term of the Mezzanine Loan for the Extension Terms. The Scheduled Maturity Date, as the same may be extended for the First Extension Term, the Second Extension Term, or the Third Extension Term (subject to the terms and conditions of Section 2.5(B) of the Mezzanine Loan Agreement), or such other date on which the final payment of the Debt becomes due hereunder or under the Mezzanine Loan Agreement or the other Mezzanine Loan Documents, whether at such stated maturity date, by acceleration, or otherwise, shall be referred to herein as the "MATURITY DATE". Interest on the principal sum of this Restated Mezzanine Note shall be calculated on the basis of a 360 day year, and shall be charged for the actual number of days elapsed during any month or other accrual period. SECURITY; MEZZANINE LOAN DOCUMENTS. This Restated Mezzanine Note is being executed and delivered pursuant to the Modification Agreement, dated as of the date hereof which amends, among other documents, that certain Mezzanine Loan Agreement dated as of November 25, 2002 (as so amended and as may be further amended, modified or restated from time to time, the "MEZZANINE LOAN AGREEMENT"), among Mezzanine Borrowers and Mezzanine Lender. Reference is hereby made to the Mezzanine Loan Agreement for the terms and conditions governing this Restated Mezzanine Note, including the terms and conditions under which this Restated Mezzanine Note may be prepaid or its maturity accelerated. This Restated Mezzanine Note is secured by, among other things the Pledge Agreement and the Security Instrument. This Restated Mezzanine Note, the Mezzanine Loan Agreement, the Pledge Agreement, the Security Instrument and all other documents or instruments given by Mezzanine Borrowers or any one of them or any guarantor and accepted by Mezzanine Lender for purposes of evidencing, securing, perfecting, or guaranteeing the indebtedness evidenced by this Restated Mezzanine Note, as same may be amended from time to time, may be referred to as the "MEZZANINE LOAN DOCUMENTS." PREPAYMENT; PREPAYMENT CONSIDERATION. Mezzanine Borrowers shall have no right to prepay the Mezzanine Loan in whole or in part except as expressly provided in Section 2.6 of the Mezzanine Loan Agreement. EVENTS OF DEFAULT; ACCELERATION. Upon the occurrence and during the continuance of any Event of Default, at the option of Mezzanine Lender and without notice, the entire principal amount and all interest accrued and outstanding hereunder and all other amounts outstanding under any of the Mezzanine Loan Documents shall at once become due and payable, and Mezzanine Lender may exercise any and all of its rights and remedies under any of the 3 Mezzanine Loan Documents or pursuant to applicable law. Mezzanine Lender may so accelerate such obligations and exercise such remedies at any time after the occurrence of any Event of Default, regardless of any prior forbearance. LATE CHARGES; DEFAULT INTEREST. If an Event of Default relating to non-payment of any principal, interest or other sums due under this Restated Mezzanine Note or under any of the other Mezzanine Loan Documents shall occur, then Mezzanine Borrowers shall pay to Mezzanine Lender, in addition to all sums otherwise due and payable, a late charge in an amount equal to five percent (5.0%) of such principal, interest or other sums due hereunder or under any other Mezzanine Loan Document (or, in the case of a partial payment, the unpaid portion thereof), such late charge to be immediately due and payable without demand by Mezzanine Lender. Upon the occurrence and during the continuance of an Event of Default and in any event from and after the Maturity Date of the Mezzanine Loan, the outstanding principal balance of this Restated Mezzanine Note and all other Obligations shall bear interest until paid in full at a rate per annum (the "DEFAULT RATE") equal to the sum of (i) five percent (5.0%) and (ii) the Interest Rate otherwise applicable under this Restated Mezzanine Note. Mezzanine Borrowers agree that such late charge and Default Rate of interest are reasonable and do not constitute a penalty. INTEREST LAWS. Notwithstanding any provision to the contrary contained in this Restated Mezzanine Note, the Mezzanine Loan Agreement or the other Mezzanine Loan Documents, Mezzanine Borrowers shall not be required to pay, and Mezzanine Lender shall not be permitted to collect, any amount of interest in excess of the maximum amount of interest permitted by law ("EXCESS INTEREST"). If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Restated Mezzanine Note, the Mezzanine Loan Agreement or in any of the other Mezzanine Loan Documents, then in such event: (i) the provisions of this subsection shall govern and control; (ii) Mezzanine Borrowers shall not be obligated to pay any Excess Interest; (iii) any Excess Interest that Mezzanine Lender may have received hereunder shall be, at Mezzanine Lender's option, (a) applied as a credit against either or both of the outstanding principal balance of the Mezzanine Loan or accrued and unpaid interest thereunder (not to exceed the maximum amount permitted by law), (b) refunded to the payor thereof, or (c) any combination of the foregoing; (iv) the interest rate(s) provided for herein shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "MAXIMUM RATE"), and this Restated Mezzanine Note, the Mezzanine Loan Agreement and the other Mezzanine Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (v) Mezzanine Borrowers shall not have any action against Mezzanine Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Obligation is calculated at the Maximum Rate rather than the applicable rate under this Restated Mezzanine Note, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Obligations shall, to the extent permitted by law, remain at the Maximum Rate until Mezzanine Lender shall have received or accrued the amount of interest which Mezzanine Lender would have received or accrued during such period on Obligations had the rate of interest not been limited to the Maximum Rate during such period. 4 If the Default Rate shall be finally determined to be unlawful, then the Interest Rate shall be applicable during any time when the Default Rate would have been applicable hereunder, provided however that if the Maximum Rate is greater or lesser than the Interest Rate, then the foregoing provisions of this paragraph shall apply. CERTAIN RIGHTS AND WAIVERS. From time to time, without affecting the obligation of Mezzanine Borrowers or their successors or assigns to pay the outstanding principal balance of this Restated Mezzanine Note, interest thereon and other amounts due hereunder and to observe the covenants contained herein, in the Mezzanine Loan Agreement, the Pledge Agreement or in any other Mezzanine Loan Document, without affecting the guaranty of any person or entity for payment of the outstanding principal balance of this Restated Mezzanine Note, without giving notice to or obtaining the consent of any Mezzanine Borrower or its successors or assigns or any guarantors or indemnitor, and without liability on the part of Mezzanine Lender, Mezzanine Lender may, at its option, extend the time for payment of the outstanding principal balance of this Restated Mezzanine Note or any part thereof, reduce the payments thereon, release anyone liable for payment of all or a portion of said indebtedness, accept a renewal of this Restated Mezzanine Note, modify the terms and time of payment of said outstanding principal balance, join in any extension or subordination agreement, release any security given herefor, take or release other or additional security, and agree in writing with the undersigned to modify the rate of interest or period of amortization of this Restated Mezzanine Note or change the amount of the monthly installments payable hereunder. Presentment, notice of dishonor, and protest are hereby waived by Mezzanine Borrowers and all makers, sureties, guarantors and endorsers hereof. This Restated Mezzanine Note shall be binding upon Mezzanine Borrowers and their respective successors and assigns. EACH MEZZANINE BORROWER AND MEZZANINE LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THIS RESTATED MEZZANINE NOTE, THE PLEDGE AGREEMENT, ANY OTHER MEZZANINE LOAN DOCUMENT, ANY OTHER AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. ASSIGNMENT AND TRANSFER OF RESTATED MEZZANINE NOTE. Mezzanine Lender shall have the right to assign or transfer, in whole or in part (including the right to grant participation interests in) any or all of its obligations under this Restated Mezzanine Note, the Mezzanine Loan Agreement, the Pledge Agreement and any or all of the other Mezzanine Loan Documents, subject to the terms of the Mezzanine Loan Agreement. Mezzanine Lender shall be released of any obligations accruing after the date of such assignment or transfer to the extent that the same are so assigned or transferred, and the rights and obligations of "MEZZANINE LENDER" hereunder shall become the rights and obligations of the transferee holder. Mezzanine Lender agrees to provide Mezzanine Borrowers with notice of any such assignment; provided, however, that no Mezzanine Borrower's consent shall be required in connection with any such assignment and no failure or delay by Mezzanine Lender in delivering such notice shall limit the effectiveness of such assignment. 5 LIMITATION ON RECOURSE. The obligations of Mezzanine Borrowers hereunder are subject to limitations on recourse as provided in Article XII of the Mezzanine Loan Agreement. ATTORNEYS' FEES, COSTS OF COLLECTION. Mezzanine Borrowers shall pay to Mezzanine Lender on demand all reasonable out-of-pocket costs and expenses, including reasonable attorneys' fees and expenses, incurred by Mezzanine Lender in collecting the indebtedness arising hereunder or under any other Mezzanine Loan Documents or secured thereby or otherwise exercising any rights or remedies of Mezzanine Lender hereunder or thereunder or at law or in equity or enforcing the obligations of any parties hereto or thereto, or as a consequence of any breach or default by any Mezzanine Borrower or any guarantor hereunder or thereunder, or otherwise as a consequence of any right evidenced or secured by this Restated Mezzanine Note or the Mezzanine Loan Documents. Without limitation, such costs and expenses to be reimbursed by Mezzanine Borrowers shall include reasonable attorneys' fees and expenses incurred in any bankruptcy case or proceeding and in any appeal. APPLICABLE LAW. This Restated Mezzanine Note shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and performed in the State of New York and any applicable laws of the United States of America. TIME OF ESSENCE. Subject to the terms of the Mezzanine Loan Agreement, time shall be of the essence as to all of the terms, covenants and conditions of this Restated Mezzanine Note. If the due date of any payment due hereunder or under any of the other Mezzanine Loan Documents shall fall on a day other than a Business Day, Mezzanine Borrowers shall be required to make such payment on the next succeeding Business Day. [NO ADDITIONAL TEXT ON THIS PAGE] 6 IN WITNESS WHEREOF, the undersigned Mezzanine Borrowers have executed this Amended, Restated and Consolidated Restated Mezzanine Note as of the date first written above. MEZZANINE BORROWERS: IMPAC HOTEL GROUP MEZZANINE, LLC, a Delaware limited liability company By: /s/ Daniel E. Ellis --------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary SERVICO OPERATIONS MEZZANINE, LLC, a Delaware limited liability company By: /s/ Daniel E. Ellis --------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary LODGIAN FINANCING MEZZANINE, LLC, a Delaware limited liability company By: /s/ Daniel E. Ellis --------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary ISLAND MOTEL ENTERPRISES, INC., a Georgia corporation By: /s/ Daniel E. Ellis --------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary PENMOCO, INC., a Michigan corporation By: /s/ Daniel E. Ellis --------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary EXHIBIT A ORIGINAL MEZZANINE NOTE That certain Restated Mezzanine Note dated as of November 25, 2002, made by Mezzanine Borrowers to Mezzanine Lender, in the original principal amount of $78,671,201. EXHIBIT B That certain Promissory Note B dated as of March 31, 2003, made by ALBANY HOTEL, INC., APICO HILLS, INC., APICO INNS OF GREEN TREE, INC., BRUNSWICK MOTEL ENTERPRISES, INC., DOTHAN HOSPITALITY 3053, INC., DOTHAN HOSPITALITY 3071, INC., GADSDEN HOSPITALITY, INC., LODGIAN AMI, INC., MINNEAPOLIS MOTEL ENTERPRISES, INC., NH MOTEL ENTERPRISES, INC., SERVICO AUSTIN, INC., SERVICO CEDAR RAPIDS, INC., SERVICO COLUMBIA, INC., SERVICO GRAND ISLAND, INC., SERVICO HOUSTON, INC., SERVICO JAMESTOWN, INC., SERVICO LANSING, INC., SERVICO MARKET CENTER, INC., SERVICO MARYLAND, INC., SERVICO METAIRIE, INC., SERVICO NEW YORK, INC., SERVICO NIAGARA FALLS, INC., SERVICO NORTHWOODS, INC., SERVICO PENSACOLA 7200, INC., SERVICO PENSACOLA 7330, INC., SERVICO PENSACOLA, INC., SERVICO ROLLING MEADOWS, INC., SERVICO WINTER HAVEN, INC., SHEFFIELD MOTEL ENTERPRISES, INC., IMPAC HOTELS I, L.L.C., LODGIAN MEMPHIS PROPERTY OWNER, LLC, AMI OPERATING PARTNERS, L.P., DEDHAM LODGING ASSOCIATES I, LIMITED PARTNERSHIP, LITTLE ROCK LODGING ASSOCIATES I, LIMITED PARTNERSHIP, and SERVICO CENTRE ASSOCIATES, LTD., to MERRILL LYNCH MORTGAGE LENDING, Inc., in the original principal amount of $5,539,275. EX-10.3.6 21 g87458exv10w3w6.txt EX-10.3.6 ASSIGNMENT AND ASSUMPTION AGREEMENT Exhibit 10.3.6 ASSIGNMENT AND ASSUMPTION AGREEMENT THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "ASSUMPTION") is made as of the 31st day of March, 2003 by and among the entities listed on Schedule 1 (collectively "ASSIGNORS") and IMPAC HOTEL GROUP MEZZANINE, LLC, SERVICO OPERATIONS MEZZANINE, LLC, LODGIAN FINANCING MEZZANINE, LLC, ISLAND MOTEL ENTERPRISES, INC., and PENMOCO, INC. (collectively, "ASSIGNEES"). RECITALS WHEREAS, Merrill Lynch Mortgage Lending, Inc. (in such capacity, "MEZZANINE LENDER") previously made a loan in the principal sum of $78,671,201 (the "ORIGINAL MEZZANINE LOAN") to the Assignees, which Original Mezzanine Loan is evidenced by and advanced pursuant to the terms and provisions of that certain Mezzanine Note dated as of November 25, 2002, made by the Assignees to Mezzanine Lender (the "ORIGINAL MEZZANINE NOTE") and the Mezzanine Loan Agreement dated as of November 25, 2002, among the Assignees and Mezzanine Lender; WHEREAS, Merrill Lynch Mortgage Lending, Inc. (in such capacity, "MORTGAGE LENDER") previously made a loan in the principal sum of $224,036,325 (the "ORIGINAL MORTGAGE LOAN") to the Assignors, which Original Mortgage Loan (i) is evidenced by and advanced pursuant to the terms and provisions of that certain Promissory Note dated as of November 25, 2002, made by the Assignors to Mortgage Lender (the "ORIGINAL MORTGAGE NOTE") and the Loan and Security Agreement dated as of November 25, 2002, among the Assignors and Mortgage Lender; WHEREAS, at the time of origination of the Original Mezzanine Loan and the Original Mortgage Loan, each of the Assignees and the Assignors agreed, in consideration of making the Mezzanine Loan and the Original Mortgage Loan prior to the final determination of sizing of the Original Mezzanine Loan and the Original Mortgage Loan, that prior to a Securitization the principal balance of the Original Mortgage Loan and the Original Mezzanine Loan may be adjusted in the sole discretion of Mortgage Lender and Mezzanine Lender (the "RESIZING"), subject to certain limitations with respect to, among other things, (i) changes in the weighted average interest rate and aggregate debt service payable on the Original Mezzanine Loan and the Original Mortgage Loan, and (ii) material changes to the rights or obligations of the Assignees and the Assignors under the Mezzanine Loan Documents and the Mortgage Loan Documents; WHEREAS, Mezzanine Lender and Mortgage Lender have elected to cause the Resizing to be effectuated; WHEREAS, in connection with the Resizing, pursuant to the terms of that certain Note Severance Agreement dated as of the date hereof among the Assignors and Mortgage Lender, the Original Mortgage Note has been severed into two notes in the respective amounts of $218,127,000 (the "AMENDED AND RESTATED PROMISSORY NOTE A"), and $5,539,275 (the "ASSUMED NOTE"); WHEREAS, in connection with the Resizing, the Assignees are to assume the repayment obligations under and pursuant to the terms of the Assumed Note; WHEREAS, in connection with the Resizing, Mortgage Lender will assign all of its right, title and interest in and to the Assumed Note, but not the Amended and Restated Promissory Note A, to Mezzanine Lender and Mezzanine Lender will succeed to all right, title and interest in and to the Assumed Note. NOW THEREFORE, in pursuance of said agreement and in consideration of ten dollars and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the Assignees and the Assignors hereby agree as follows: AGREEMENT SECTION 1. RECITALS. The Recitals are hereby incorporated herein by this reference. SECTION 2. DEFINITIONS. All terms used in this Assumption and not otherwise defined herein shall have the same meaning as set forth in the Mortgage Loan Agreement. SECTION 3. ASSIGNMENT BY ASSIGNORS; ASSUMPTION BY ASSIGNEES. The Assignors hereby assign to the Assignees all of the Assignors' obligations under the Assumed Note. The Assignees covenants, promises and agree (a) to accept, assume and perform each and all of the Assignors' obligations which have arisen, or which may hereafter arise, at the times, in the manner and in all respects as provided herein, in the Assumed Note, and (b) to be bound by each and all of the terms and provisions of the Assumed Note. The Assignor is hereby released from any obligations which first arise after the date hereof under the Assumed Note. On and after the date hereof, the Assignees shall be deemed to be the "BORROWERS" for all purposes of the Assumed Note. SECTION 4. REPRESENTATIONS AND WARRANTIES BY THE ASSIGNORS. The Assignors makes the following representations and warranties: (a) ORGANIZATION. Each of the Assignors (i) are duly organized and existing under the laws of their respective states of organization, (ii) have power and authority to enter into and execute and deliver this Assumption, which has been approved by all proper and necessary action by the Assignors. (b) BINDING AGREEMENT. This Assumption has been properly executed by the Assignors and constitutes the valid and legally binding obligations of the Assignors; and this Assumption and each of the other documents executed and delivered by the Assignors in connection therewith are enforceable against the Assignors in accordance with their respective terms. SECTION 5. REPRESENTATIONS AND WARRANTIES BY THE ASSIGNEES. The Assignees makes the following representations and warranties: (a) ORGANIZATION. Each of the Assignees (i) are duly organized and existing under the laws of their respective states of organization, (ii) have the power and authority to enter into and execute and deliver this Assumption, which has been approved by all proper and necessary action by the Assignees. 2 (b) BINDING AGREEMENT. This Assumption has been properly executed by the Assignees and constitutes the valid and legally binding obligations of the Assignees; and the Assumed Note, this Assumption, and each of the other documents executed and delivered by the Assignees are enforceable against the Assignees in accordance with their respective terms. (c) ADDITIONAL DOCUMENTS. The Assignees will execute and deliver such additional instruments and perform such additional acts as may be necessary, in the opinion of the Assignors to carry out the intent hereof. SECTION 6. GOVERNING LAW. THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW YORK AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. [REMAINDER OF PAGE LEFT BLANK] 3 IN WITNESS WHEREOF, the undersigned Assignees and Assignors have executed this Assumption as of the day and year first written above. ASSIGNEES: ALBANY HOTEL, INC., a Florida corporation, APICO HILLS, INC., a Pennsylvania corporation, APICO INNS OF GREEN TREE, INC., a Pennsylvania corporation, BRUNSWICK MOTEL ENTERPRISES, INC., a Georgia corporation, DOTHAN HOSPITALITY 3053, INC., an Alabama corporation, DOTHAN HOSPITALITY 3071, INC., an Alabama corporation, GADSDEN HOSPITALITY, INC., an Alabama corporation, LODGIAN AMI, INC., a Maryland corporation, MINNEAPOLIS MOTEL ENTERPRISES, INC., a Minnesota corporation, NH MOTEL ENTERPRISES, INC., a Michigan corporation, SERVICO AUSTIN, INC., a Texas corporation, SERVICO CEDAR RAPIDS, INC., an Iowa corporation, SERVICO COLUMBIA, INC., a Maryland corporation, SERVICO GRAND ISLAND, INC., a New York corporation, SERVICO HOUSTON, INC., a Texas corporation, 4 SERVICO JAMESTOWN, INC., a New York corporation, SERVICO LANSING, INC., a Michigan corporation, SERVICO MARKET CENTER, INC., a Texas corporation, SERVICO MARYLAND, INC., a Maryland corporation, SERVICO METAIRIE, INC., a Louisiana corporation, SERVICO NEW YORK, INC., a New York corporation, SERVICO NIAGARA FALLS, INC., a New York corporation, SERVICO NORTHWOODS, INC., a Florida corporation, SERVICO PENSACOLA 7200, INC., a Delaware corporation, SERVICO PENSACOLA 7330, INC., a Delaware corporation, SERVICO PENSACOLA, INC., a Delaware corporation, SERVICO ROLLING MEADOWS, INC., an Illinois corporation, SERVICO WINTER HAVEN, INC., a Florida corporation, SHEFFIELD MOTEL ENTERPRISES, INC., an Alabama corporation, IMPAC HOTELS I, L.L.C., a Georgia limited liability company, and 5 LODGIAN MEMPHIS PROPERTY OWNER, LLC, a Delaware limited liability company By: /s/ Daniel E. Ellis ---------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary or authorized signatory of the above entities AMI OPERATING PARTNERS, L.P., a Delaware limited partnership By: AMIOP ACQUISITION GENERAL PARTNER SPE CORP., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis ------------------------------------ Name: Daniel E. Ellis Title: Vice President and Secretary DEDHAM LODGING ASSOCIATES I, LIMITED PARTNERSHIP, a Georgia limited partnership By: DEDHAM LODGING SPE, INC., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis ------------------------------------ Name: Daniel E. Ellis Title: Vice President and Secretary LITTLE ROCK LODGING ASSOCIATES I, LIMITED PARTNERSHIP, a Georgia limited partnership By: LODGIAN LITTLE ROCK SPE, INC., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis ------------------------------------ Name: Daniel E. Ellis Title: Vice President and Secretary 6 SERVICO CENTRE ASSOCIATES, LTD., a Florida limited partnership By: SERVICO PALM BEACH GENERAL PARTNER SPE, INC., a Delaware corporation, its General Partner By: /s/ Daniel E. Ellis ------------------------------------ Name: Daniel E. Ellis Title: Vice President and Secretary ASSIGNEES: IMPAC HOTEL GROUP MEZZANINE, LLC, a Delaware limited liability company By: /s/ Daniel E. Ellis ---------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary SERVICO OPERATIONS MEZZANINE, LLC, a Delaware limited liability company By: /s/ Daniel E. Ellis ---------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary LODGIAN FINANCING MEZZANINE, LLC, a Delaware limited liability company By: /s/ Daniel E. Ellis ---------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary 7 ISLAND MOTEL ENTERPRISES, INC., a Georgia corporation By: /s/ Daniel E. Ellis ---------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary PENMOCO, INC., a Michigan corporation By: /s/ Daniel E. Ellis ---------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary 8 ACKNOWLEDGEMENT OF MORTGAGE LENDER The undersigned has executed this Assumption in order to signify its consent to the assignment and assumption of the Assumed Note, and the release of the Assignor from any obligations under the Assumed Note first arising after the date hereof. MORTGAGE LENDER: By: /s/ Steven Glassman ---------------------------------------- Name: Steven Glassman Title: Authorized Signatory EX-10.4.1 22 g87458exv10w4w1.txt EX-10.4.1 LOAN AGREEMENT EXHIBIT 10.4.1 ================================================================================ LOAN AGREEMENT between LEHMAN BROTHERS HOLDINGS INC. Lender and LODGIAN DENVER LLC, LODGIAN NORTH MIAMI LLC, LODGIAN COCONUT GROVE LLC, LODGIAN AUGUSTA LLC, LODGIAN FLORENCE LLC, LODGIAN FORT MITCHELL LLC, LODGIAN LAFAYETTE LLC, LODGIAN MERRIMACK LLC, LODGIAN HAMBURG LLC, LODGIAN SYRACUSE LLC, LODGIAN CINCINNATI LLC, LODGIAN TULSA LLC, LODGIAN JACKSON LLC, LODGIAN MEMPHIS LLC, LODGIAN COLCHESTER LLC, LODGIAN BRIDGEPORT LLC, LODGIAN FAIRMONT LLC, and LODGIAN MORGANTOWN LLC Borrower Dated: as of May 22, 2003 Property Location: - -------------------------- ------------------------- --------------------------- Marriott Hotel - 238 Courtyard - 90 Fairfield Inn - 105 #0707 DIA #1515 LAF #4205 JTN 16455 East 40th Circle 214 E. Kaliste Saloom Rd. 535 Wiley Parker Rd. Aurora, CO 80011 Lafayette, LA 70508 Jackson, TN 38305 - -------------------------- ------------------------- --------------------------- Mayfair House - 179 Fairfield Inn - 116 Holiday Inn Sycamore - 173 #1178 MAY #2828 MMK #4242 MHI 3000 Florida Ave. 4 Amherst Rd 6101 Shelby Oaks Dr. Miami, FL 33131 Merrimack, NH 03054 Memphis, TN 38134 - -------------------------- ------------------------- --------------------------- Holiday Inn N. Miami - 98 Holiday Inn - 130 Fairfield Inn - 117 #1183 MHJ #3398 HAM #4545 BVT 12210 Biscayne Blvd. 5440 Camp Rd. 84 South Park Drive Miami, FL 33181 Hamburg, NY 14075 Colchester, VT 05446 - -------------------------- ------------------------- --------------------------- Fairfield Inn - 117 Holiday Inn - 152 Holiday Inn - 159 #1265 AUG #3348 SYR #4899 CWV 201 Boy Scout Rd. 100 Farrell Rd. 100 Lodgeville Rd. Augusta, GA 30909 Syracuse, NY 13209 Clarksburg, WV 26330 - -------------------------- ------------------------- --------------------------- Holiday Inn - 105 Hotel Holiday Inn - 106 #2050 FHI #3535 CND #4800 FWV 8050 Holiday Place 800 West 8th St. I-79 and Old Grafton Rd. Florence, KY 41042 Cincinnati, OH 45203 Fairmont, WV 26554 - -------------------------- ------------------------- --------------------------- Holiday Inn - 214 Courtyard - 122 Holiday Inn - 147 #2020 CNS #3636 TUL #4848 MWV 2100 Dixie Hwy 3340 South 79th East Ave. 1400 Saratoga Ave. Ft. Mitchell, KY 41011 Tulsa, OK 74145 Morgantown, WV 26505 - -------------------------- ------------------------- --------------------------- Katten Muchin Zavis Rosenman 575 Madison Avenue New York, New York 10022 Attn.: Jill D. Block, Esq. ================================================================================ TABLE OF CONTENTS Section 1. DEFINED TERMS........................................................... 2 2. RESTATED NOTE; PAYMENT OF DEBT; INCORPORATION OF COVENANTS, CONDITIONS AND AGREEMENTS.......................................................... 8 3. WARRANTY OF TITLE....................................................... 10 4. INSURANCE............................................................... 11 5. PAYMENT OF TAXES........................................................ 15 6. TAX AND INSURANCE ESCROW FUND........................................... 15 7. ANNUAL BUDGET; ACCOUNTS................................................. 16 8. CONDEMNATION............................................................ 17 9. LEASES AND RENTS........................................................ 20 10. REPRESENTATIONS CONCERNING LOAN....................................... 22 11. SINGLE PURPOSE ENTITY; AUTHORIZATION.................................. 24 12. MAINTENANCE OF MORTGAGED PROPERTY..................................... 25 13. TRANSFER OR ENCUMBRANCE OF THE MORTGAGED PROPERTY..................... 26 14. ESTOPPEL CERTIFICATES; AFFIDAVITS..................................... 28 15. CHANGES IN THE LAWS REGARDING TAXATION................................ 28 16. NO CREDITS ON ACCOUNT OF THE DEBT..................................... 28 17. DOCUMENTARY STAMPS.................................................... 29 18. CONTROLLING AGREEMENT................................................. 29 19. BOOKS AND RECORDS..................................................... 29 20. PERFORMANCE OF OTHER AGREEMENTS....................................... 30 21. FURTHER ASSURANCES; RIGHT TO SPLIT AND PARTICIPATE THE LOAN........... 30 22. RECORDING OF MORTGAGE................................................. 31 23. REPORTING REQUIREMENTS................................................ 32 24. EVENTS OF DEFAULT..................................................... 32 25. LATE PAYMENT CHARGE; SERVICING FEES................................... 34 26. RIGHT TO CURE DEFAULTS................................................ 35 27. REMEDIES.............................................................. 35 28. RIGHT OF ENTRY........................................................ 38 29. SECURITY AGREEMENT.................................................... 38 30. ACTIONS AND PROCEEDINGS............................................... 39 31. WAIVER OF SETOFF AND COUNTERCLAIM..................................... 39 32. CONTEST OF CERTAIN CLAIMS............................................. 39 33. RECOVERY OF SUMS REQUIRED TO BE PAID.................................. 40 34. MARSHALLING AND OTHER MATTERS......................................... 40 35. HAZARDOUS SUBSTANCES.................................................. 40 36. ASBESTOS.............................................................. 41 37. ENVIRONMENTAL MONITORING.............................................. 42 38. MANAGEMENT OF THE MORTGAGED PROPERTY.................................. 42 39. HANDICAPPED ACCESS.................................................... 44 40. ERISA................................................................. 45 41. INDEMNIFICATION....................................................... 45 42. NOTICE................................................................ 46 43. AUTHORITY............................................................. 46 44. WAIVER OF NOTICE...................................................... 46 45. REMEDIES OF BORROWER.................................................. 46 46. SOLE DISCRETION OF LENDER............................................. 47 47. NON-WAIVER............................................................ 47 48. NO ORAL CHANGE........................................................ 47 49. JOINT AND SEVERAL LIABILITY........................................... 47 50. INAPPLICABLE PROVISIONS............................................... 47 51. SECTION HEADINGS...................................................... 48 52. COUNTERPARTS.......................................................... 48 53. CERTAIN DEFINITIONS................................................... 48 54. HOMESTEAD............................................................. 48 55. ASSIGNMENTS........................................................... 48 56. SUBMISSION TO JURISDICTION............................................ 48 57. AGENT FOR RECEIPT OF PROCESS.......................................... 49 58. SERVICE OF PROCESS.................................................... 49 59. WAIVER OF JURY TRIAL.................................................. 49 60. CHOICE OF LAW......................................................... 49 61. RELEASE OF PORTIONS OF THE MORTGAGED PROPERTY......................... 49 62. PATRIOT ACT........................................................... 50 Page (ii) LOAN AGREEMENT This LOAN AGREEMENT dated as of May 22, 2003, between LODGIAN DENVER LLC, LODGIAN NORTH MIAMI LLC, LODGIAN COCONUT GROVE LLC, LODGIAN AUGUSTA LLC, LODGIAN FLORENCE LLC, LODGIAN FORT MITCHELL LLC, LODGIAN LAFAYETTE LLC, LODGIAN MERRIMACK LLC, LODGIAN HAMBURG LLC, LODGIAN SYRACUSE LLC, LODGIAN CINCINNATI LLC, LODGIAN TULSA LLC, LODGIAN JACKSON LLC, LODGIAN MEMPHIS LLC, LODGIAN COLCHESTER LLC, LODGIAN BRIDGEPORT LLC, LODGIAN FAIRMONT LLC, and LODGIAN MORGANTOWN LLC, each a Delaware limited liability company, having its principal place of business at c/o Lodgian, Inc., 3445 Peachtree Road, N.E. -- Suite 700, Atlanta, Georgia 30326 (collectively "Borrower"), and LEHMAN BROTHERS HOLDINGS INC., a Delaware corporation, having an address at 399 Park Avenue, New York, New York 10022 ("Lender"). W I T N E S S E T H: WHEREAS, Lender is concurrently herewith making a loan to Borrower in the original principal amount of $80,000,000.00 (the "Loan") secured by a mortgage, deed of trust, deed to secure debt lien on, and security interest in, Borrower's interest in and to the real and personal property comprising the hotels listed on the attached Schedule A; WHEREAS, Lender is the holder of those certain promissory notes described on Exhibit A hereto (collectively, the "Underlying Note"); and secured by, among other things, those certain mortgages described on Exhibit B (collectively, and as such mortgages may be modified from time to time, the "Underlying Mortgages") and Borrower is an obligor under the Underlying Note and mortgagor under the Underlying Mortgages; and WHEREAS, Lender and Borrower desire: (i) to combine, consolidate, and coordinate the liens of the Underlying Mortgages in the aggregate principal amount of $80,000,000.00 and to consolidate the Underlying Notes to evidence a single indebtedness in the principal amount of $80,000,000.00, and (ii) to modify the terms and provisions of the Underlying Note and the loan evidenced thereby, by and amending and restating same as more particularly set forth herein; WHEREAS, the Loan is evidenced by a certain Consolidated, Amended and Restated Mortgage Note dated the date hereof made by Borrower in favor of Lender (the "Note") and secured by, among other things, certain mortgage, deed of trust or deed to secure debt instruments dated as of the date hereof and encumbering the Mortgaged Property (collectively, the "Mortgage"; the Note, the Mortgage, this Agreement and all other documents executed by Borrower, entities comprising Borrower and/or Lodgian, Inc., in any capacity, in connection with the Loan, collectively, the "Loan Documents"); and WHEREAS, Lender and Borrower have agreed to enter into this Loan Agreement to memorialize their understanding regarding their respective rights and obligations in respect of the Loan. NOW, THEREFORE, in consideration of the making of the Loan and the covenants, agreements, representations and warranties set forth in this Agreement, the parties hereby covenant, agree, represent and warrant as follows: Page 1 1. DEFINED TERMS The following terms shall have the following meanings: (a) "Access Laws" has the meaning set forth in Section 39 hereof. (b) "Acceptable Franchisor" means those hotel franchise companies listed on Exhibit E hereto, subject to the limitations listed on Exhibit E. (c) "Accounts" has the meaning set forth in Section 7 hereof. (d) "Additional Interest" has the meaning set forth in the Note. (e) "Asbestos" has the meaning set forth in Section 36 hereof. (f) "Assignment" has the meaning set forth in Section 2 hereof. (g) "Borrower" has the meaning set forth in the preamble to this Agreement. (h) "Budget" means the budget for the use and application of the Loan and gross revenues derived from the operation of the Mortgaged Property, including all operations and capital items and expenses to be satisfied from the Accounts, as set forth in Exhibit C hereto with respect to the balance of the current calendar year, and the annual budget for each subsequent calendar year for so long as any portion of the Debt remains outstanding. (i) "By-Laws" shall mean the by-laws of any condominium providing for the operation of a portion of the Mortgage Property, a true copy of which has been provided to Lender. (j) "Capital Expenses" means all payments for any fixed assets or improvements, or for replacements, substitutions or additions thereto, that are required to be capitalized consistent with accounting methods employed by Borrower for the Mortgaged Property. (k) "Capital Reserve" has the meaning set forth in Section 7 hereof. (l) "Collateral" has the meaning set forth in Section 29 hereof. (m) "Condemnation" has the meaning set forth in Section 8 hereof. (n) "Condominium" means any declaration of condominium affecting a portion of the Mortgaged Property. (o) "Condominium Act" shall mean the provisions of any state or other applicable statute affecting a Condominium. (p) "Condominium Board" shall mean the organization managing a Condominium. (q) "Condominium Documents" shall mean collectively the Declaration and the By-Laws. (r) "Controlling Interest" means the possession directly or indirectly of the power to direct or cause the direction of management and policies of a person or entity, whether through the ownership of voting securities or by contract or otherwise. (s) "Debt" means the outstanding principal balance of the Note from time to time, with all accrued and unpaid interest thereon, and all other sums now or hereafter due under the Loan Documents. Page 2 (t) "Debt Service Coverage Ratio" shall mean the ratio of: (i) the NOI produced by the operation of the Mortgaged Property during the 12 calendar month period immediately preceding the calculation to (ii) the payments of principal and interest due under this Loan Agreement and the Note for the 12 calendar month period immediately following the calculation using the Applicable Interest Rate on the date of calculation (or imputed for such period if such payments have actually accrued for less than 12 calendar months). (u) "Debt Service Reserve" has the meaning set forth in Section 7 hereof. (v) "Declaration" means any declaration forming a Condominium affecting a portion of the Mortgaged Property. (w) "Default Rate" means the rate of interest payable from and after the occurrence of an Event of Default, as more particularly described in the Note; provided, however, that with respect to an Event of Default of the type described in Section 24(a) hereof, such rate of interest shall apply from and after the date on which any such payment is due, without any period of grace or cure except as expressly set forth in Section 24(a) hereof, as more particularly described in the Note. (x) "Environmental Agreement" has the meaning set forth in Section 2 hereof. (y) "Environmental Laws" has the meaning set forth in Section 35 hereof. (z) "Equipment" means all machinery, furnishings, equipment, fixtures (including, without limitation, all heating, air conditioning, plumbing, lighting, communications and elevator fixtures), inventory and articles of personal property and accessions thereof and renewals, replacements thereof and substitutions therefor (including, without limitation, beds, bureaus, chiffonniers, chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs, carpeting, drapes, draperies, curtains, shades, venetian blinds, screens, paintings, hangings, pictures, divans, couches, luggage carts, luggage racks, stools, sofas, chinaware, linens, pillows, blankets, glassware, foodcarts, cookware, dry cleaning facilities, dining room wagons, keys or other entry systems, bars, bar fixtures, liquor and other drink dispensers, icemakers, radios, clock radios, television sets, intercom and paging equipment, electric and electronic equipment, dictating equipment, private telephone systems, medical equipment, potted plants, heating, lighting and plumbing fixtures, fire prevention and extinguishing apparatus, cooling and air-conditioning systems, elevators, escalators, fittings, plants, apparatus, stoves, ranges, refrigerators, laundry machines, tools, machinery, engines, dynamos, motors, boilers, incinerators, switchboards, conduits, compressors, vacuum cleaning systems, floor cleaning, waxing and polishing equipment, call systems, brackets, electrical signs, bulbs, bells, fuel, conveyors, cabinets, lockers, shelving, spotlighting equipment, dishwashers, garbage disposals, washer and dryers), other customary hotel equipment and other property of every kind and nature, whether tangible or intangible, whatsoever owned by Borrower, or in which Borrower has or shall have an interest, now or hereafter located upon the Premises and the Improvements, or appurtenant thereto, and usable in connection with the present or future operation and occupancy of the Premises and the Improvements and all building equipment, materials and supplies of any nature whatsoever owned by Borrower, or in which Borrower has or shall have an interest, now or hereafter located upon the Premises and the Improvements, or appurtenant thereto, or usable in connection with the present or future operation, enjoyment and occupancy of the Premises and the Improvements. (aa) "ERISA" has the meaning set forth in Section 40 hereof. (bb) "Event of Default" has the meaning set forth in Section 24 Page 3 hereof. (cc) "Executive Order" has the meaning set forth in Section 62 hereof. (dd) "Expenses" means the aggregate of the following items actually incurred by Borrower, whether or not paid, during the 12 month period ending one month prior to the date on which the NOI is to be calculated (except that Capital Expenses and reserves set forth in subsection (viii) below shall be adjusted by Lender to reflect projected adjustments for the subsequent 12 month period beginning on the date on which the NOI is to be calculated): (i) Taxes and Other Charges; (ii) personal property taxes; (iii) management fees of not less than four (4%) percent of the gross revenue derived from the operation of the Mortgaged Property and disbursements; (iv) wages, salaries, pension costs and all fringe and other employee-related benefits and expenses; (v) franchise fees and other fees due under the Franchise Agreement; (vi) Insurance Premiums and other related insurance costs; (vii) the cost of utilities, and all other administrative, management, ownership, operating, leasing and maintenance expenses and professional fees incurred in connection with the operation of the Mortgaged Property; (viii) the cost of necessary repair or replacement of existing improvements on the Mortgaged Property with repairs or replacements of like kind and quality or such kind or quality that is necessary to maintain the Mortgaged Property to the same standards as competitive properties of similar size and location to the Mortgaged Property or that are required under the Franchise Agreements together with (but without duplication) amounts required to be deposited in the Replacement Reserve Account; (ix) the cost of replacement of Equipment; and (x) the cost of any other maintenance materials, HVAC repairs, parts and supplies, and equipment. (ee) "Franchise Agreement" means, a franchise agreement set forth on Schedule A hereto (or such franchise agreements as may be entered into from and after the date hereof in accordance with the terms hereof) pursuant to which Borrower has the right to operate the hotels located on the Mortgaged Property under a name and/or hotel system controlled by such franchisor. (ff) "Franchisor" means, for each of the individual hotels comprising a portion of the Mortgaged Property, the franchisor under the respective Franchise Agreement. (gg) "Guarantor" means any guarantor of all or any part of the Debt. (hh) "Hazardous Substances" has the meaning set forth in Section 35 hereof. (ii) "IEEPA" means the International Emergency Economic Power Act, Page 4 50 U.S.C.ss.1701 et seq. (jj) "Improvements" means the buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements now or hereafter located on the Premises. (kk) "Insurance Premiums" has the meaning set forth in Section 4(d) hereof. (ll) "Insured Casualty" has the meaning set forth in Section 4(e)(ii) hereof. (mm) "Intangibles" means, without limitation, all accounts, escrows, documents, instruments, chattel paper, claims, deposits and general intangibles, as such terms are defined in the Uniform Commercial Code, and all contract rights, franchises, books, records, appraisals, architects and engineering plans, specifications, environmental and other reports relating to the Premises, trademarks, trade names, symbols, permits, licenses (to the extent assignable), approvals, actions, tenant or guest lists, correspondence with present and prospective purchasers, tenants, guests and suppliers, advertising materials and telephone exchange numbers as identified in such materials, refunds of real estate taxes and assessments and causes of action which now or hereafter relate to, are derived from or are used in connection with the Premises, or the use, operation, maintenance, occupancy or enjoyment thereof or the conduct of any business or activities thereon. (nn) "Interest and Principal Amortization Account" has the meaning set forth in Section 7 hereof. (oo) "Interest Rate Protection Agreement" means that certain ISDA form interest rate protection agreement (together with the confirmation and schedules relating thereto) dated as of the date hereof between Borrower and a counterparty reasonably acceptable to Lender which counterparty is an institution with a rating from Standard & Poor's of at least "AA-" or higher, and such replacement agreement is in form and substance acceptable to Lender. (pp) "Knowledge" whenever used in this Agreement or any other Loan Documents, or in any document or certificate executed on behalf of any Borrower pursuant to this Agreement or any other Loan Documents, reference is made to knowledge of Borrower or entity comprising Borrower or Guarantor (whether by use of the words "best knowledge", "knowledge" or "known" or other words of similar meaning, and whether or not the same are capitalized), such shall be deemed to refer to the knowledge (without independent investigation unless otherwise specified) of (i) the individuals who have significant responsibility for any policy making, major decisions or financial affairs of the applicable entity; (ii) the general manager for the applicable hotel comprising a portion of the Mortgaged Property; (iii) the regional vice president of operations for Guarantor, and the officers of each entity comprising Borrower involved in the operational issues of any hotel comprising a portion of the Mortgaged Property or any entity comprising Borrower; (iv) the chief operating officer of Guarantor, with respect to representations regarding Guarantor, and (v) the knowledge of the person signing such document or certificate. (qq) "LIBOR Rate" has the meaning ascribed to it in the Note. (rr) "Leases" means all leases and other agreements affecting the use, enjoyment or occupancy of the Premises or the Improvements heretofore or hereafter entered into by Borrower or its predecessor-in-interest (including, without limitation, subleases, licenses, concessions, tenancies and other occupancy agreements covering or encumbering all or any portion of the Premises), together with any guarantees, supplements, amendments, modifications, extensions and renewals of any thereof, and all additional remainders, reversions, and other rights and estates appurtenant thereto. Page 5 (ss) "Lender" has the meaning set forth in the preamble to this Agreement. (tt) "Loan" has the meaning set forth in the recitals of this Agreement. (uu) "Loan Documents" has the meaning set forth in the recitals of this Agreement. (vv) "Loan-to-Value Ratio" means the ratio of: (i) the Debt, plus all other debt (or other liquidated economic obligations) which are then outstanding and secured by the Mortgaged Property, to (ii) the appraised value of the Mortgaged Property as estimated by an appraiser reasonably acceptable to Lender. Any appraisal for purposes of calculating the Loan-to-Value Ratio shall be performed in accordance with the then-approved standards under the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended (FIRREA). (ww) "Lockbox Account" has the meaning set forth in Section 7 hereof. (xx) "Management Agreement" means, collectively, the Management Agreements more particularly set forth on Schedule A hereto pursuant to which the managers identified therein operate the Mortgaged Property as hotels. (yy) "Maturity Date" means the Applicable Maturity Date (as such term is defined in the Note). (zz) "Mortgage" has the meaning set forth in the recitals of this Agreement. (aaa) "Mortgaged Property" shall mean the Premises, all real and personal property located on or related to the Premises, including without limitation, the Collateral, Equipment, Improvements, Intangibles, Rents, Condemnation awards, insurance proceeds, tradenames, trademarks, servicemarks, logos, copyrights, goodwill, books and records, all refunds, rebates or credits in connection with a reduction in real estate taxes and assessments charged against the Premises as a result of tax certiorari or any applications or proceedings for reduction, all agreements, contracts, certificates, instruments, franchises, permits, licenses, plans, specifications and other documents, now or hereafter entered into, and all proceeds, substitutions and replacements thereof. (bbb) "NOI" means the gross revenue derived from the operation of the Mortgaged Property less Expenses. NOI shall include only Rents and such other income, including any rent loss, business interruption or business income insurance proceeds, vending or concession income, late fees, forfeited security deposits and other miscellaneous tenant charges, which are earned and Expenses incurred during the period for which the NOI is being calculated, as set forth on operating statements reasonably satisfactory to Lender. NOI shall be calculated on an accrual basis in accordance with generally accepted accounting principles consistently applied, based on the Uniform System of Accounts. (ccc) "Non-Flagged Properties" means the properties comprising portions of the Mortgaged Properties located at 3000 Florida Avenue, Miami, Florida and 800 West 8th Street, Cincinnati, Ohio. (ddd) "Note" has the meaning set forth in the recitals of this Agreement. (eee) "OFAC" means the U.S. Department of Treasury's Office of Foreign Asset Control. Page 6 (dd) "Operating Expense Account" has the meaning set forth in Section 7 hereof. (ee) "Other Charges" has the meaning set forth in Section 5 hereof. (fff) "PATRIOT Act" means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56) (The USA PATRIOT Act). (ggg) "Payment Date" has the meaning ascribed to it in the Note. (hhh) "Policies" has the meaning set forth in Section 4(d) hereof. (iii) "Premises" means, collectively, the real property comprising the Mortgaged Property, more particularly described on Exhibits A to each of instruments comprising the Mortgage. (jjj) "Prohibited Person" has the meaning set forth in Section 62 hereof. (kkk) "Remedial Work" has the meaning set forth in Section 37 hereof. (lll) "Rents" means all income, rents, room rates, issues, profits, revenues (including oil and gas or other mineral royalties and bonuses), deposits and other benefits from the Mortgaged Property including, without limitation, all revenues and credit card receipts collected from guest rooms, restaurants, bars, mini-bars, meeting rooms, banquet rooms and recreational facilities and otherwise, all receivables, customer obligations, installment payment obligations and other obligations now existing or hereafter arising or created out of the sale, lease, sublease (to the extent such rents are payable to Borrower), license, concession or other grant of the right of the possession, use or occupancy of all or any portion of the Mortgaged Property or personalty located thereon, or rendering of services by Borrower or any operator or manager of the Mortgaged Property (to the extent any amounts thereof are payable to Borrower) or acquired from others including, without limitation, from the rental of any office space, retail space, commercial space, guest room or other space, halls, stores or offices, including any deposits securing reservations of such space, exhibit or sales space of every kind, license, lease, sublease (to the extent such rents are payable to Borrower) and concession fees and rentals, health club use fees (if any), food and beverage wholesale and retail sales, service charges, vending machine sales and proceeds, if any, from business interruption or other loss of income insurance relating to the use, enjoyment or occupancy of the Mortgaged Property. (mmm) "Repair Agreement" means that certain Repair Escrow Agreement dated as of the date hereof between Borrower and Lender. (nnn) "Repair Escrow Account" has the meaning set forth in Section 7 hereof. (ooo) "Replacement Agreement" means that certain Replacement Reserve Agreement dated as of the date hereof between Borrower and Lender. (ppp) "Replacement Reserve Account" has the meaning set forth in Section 7 hereof. (qqq) "Sale Properties" means, collectively, (i) Mayfair House, 3000 Florida Ave., Miami, FL 33131, (ii) Holiday Inn N. Miami, 12210 Biscayne Blvd., Miami, FL 33181, (iii) Holiday Inn, 1400 Saratoga Ave., Morgantown, WV 26505 (iv) 800 West 8th St., Cincinnati, OH 45203, and (v) Holiday Inn, 2100 Dixie Hwy, Ft. Mitchell, KY 41011 Page 7 (rrr) "Securities" has the meaning set forth in Section 21 hereof. (sss) "Servicer" means the servicer of the Loan designated by Lender, in its sole and absolute discretion, from time to time. (ttt) "Tax and Insurance Escrow Account" has the meaning set forth in Section 7 hereof. (uuu) "Tax and Insurance Escrow Fund" has the meaning set forth in Section 6 hereof. (vvv) "Taxes" has the meaning set forth in Section 5 hereof. (www) "Uncured Franchise Default" means any of the following circumstances or occurrences: (i) if Borrower terminates or cancels a Franchise Agreement or operates any property comprising a portion the Mortgaged Property under the name of any hotel chain or system other than the respective franchises set forth on Schedule A hereto, without Lender's prior written consent; or (ii) if, with respect to any property comprising a portion the Mortgaged Property, Franchisor terminates or cancels a Franchise Agreement as a result of a default thereunder unless (A) a replacement franchise agreement with an Acceptable Franchisor is effective with respect to such property within five business days following the termination or cancellation, (B) such replacement franchise agreement is reasonably acceptable to Lender, and (C) Acceptable Franchisor provides Lender with a fully-executed comfort letter reasonably acceptable to Lender; or (iii) if a default has occurred and continues beyond any applicable cure period under a Franchise Agreement, which default permits a party to terminate or cancel such Franchise Agreement, and Borrower has not obtained an extension of the applicable cure period within 45 days after the expiration thereof (provided, that, if Franchisor terminates such Franchise Agreement within such 45-day period, such termination shall, subject to Borrower's replacement right contained in clause (ii), constitute an Uncured Franchise Default under clause (ii)); or (iv) if without Lender's prior written consent, there is any material change in a Franchise Agreement (or any succeeding franchise agreement). (xxx) "Uniform Commercial Code" means the Uniform Commercial Code, as adopted and enacted by the State or States where any of the Mortgaged Property is located. (yyy) "Uniform System of Accounts" has the meaning set forth in Section 10(f) hereof. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Note. 2. RESTATED NOTE; PAYMENT OF DEBT; INCORPORATION OF COVENANTS, CONDITIONS AND AGREEMENTS (a) In connection with the execution and delivery of this Agreement, and as a material inducement for Lender's agreement to accept the Loan Documents, Borrower has agreed to execute and deliver to Lender the Note pursuant to which all of the terms of the Underlying Note are restated in their entirety. The Underlying Note and the Note shall together evidence the indebtedness described in, and payable in accordance with, the Note. (b) To the extent of any inconsistency between the terms of any of the Loan Documents and the terms hereof, the terms of this Agreement shall control. Each of the Loan Documents is hereby modified such that all of the inconsistent terms of the Loan Documents are superseded by the applicable terms hereof and all of the terms and provisions hereof are hereby made part of the Loan Documents with the same force and effect as if each such term and provision were expressly set forth therein. The Mortgage is hereby modified to expressly Page 8 provide for each and every term and condition set forth herein, and further, to provide that it secures each and every obligation and liability of Borrower under the Note. (c) Borrower will pay the Debt at the time and in the manner provided in the Note, the Mortgage and in this Agreement. All gross revenue derived from the Mortgaged Property shall be paid into the Lockbox Account (it being acknowledged that Borrower has advised Lender in writing that rental payments under certain identified Leases relating to a portion of the Mortgage Property are paid by the lessee thereunder to the respective brokers that arranged such Leases and thus rental payments received by Borrower are net of such brokers' commissions). Subject to the occurrence and continuance of an Event of Default, on a weekly basis, or more frequently if dictated by specific circumstances, Servicer shall release funds held in the Lockbox Account for distribution to the Accounts and otherwise in accordance with the Budget in the following order of priority: (i) first, to fund the Tax and Insurance Escrow Account in an amount required for the next succeeding calendar month; (ii) next, the balance, if any, to fund the Operating Expense Account in an amount required for the next succeeding calendar month pursuant to the Budget (and any extraordinary expenses not otherwise contained in the Budget for which the prior written approval of Lender shall have been obtained, which approval shall not be unreasonably withheld); provided, that, first dollars funded into the Operating Expense Account shall be applied to the sublease obligations of Lodgian Colchester LLC, a Borrower, under the Lease Documents as such term is defined in that certain Amended and Restated Leasehold Mortgage, Deed of Trust, Assignment of Leases and Rents and Security Agreement dated as of the date hereof by Lodgian Colchester LLC for the benefit of Lender; (iii) next, the balance, if any, to fund the Interest and Principal Amortization Account, for application first to interest and then to principal amortization obligations, in an amount required for the next succeeding calendar month; (iv) next, the balance, if any, to reimburse Lender for reasonable costs and expenses in servicing the Loan (including, without limitation, servicing fees); (v) next, the balance, if any, to reimburse Lender for any unpaid reasonable costs and expenses incurred by Lender on Borrower's behalf or in the enforcement of Lender's rights hereunder with respect to any of which Lender shall advise Borrower no later than ten days prior to the last business day of any given month (and, to the extent any such notice is given after such day, such amount shall be payable in the following month); (vi) next, the balance, if any, to fund the Replacement Reserve Account in an amount required for the next succeeding calendar month; (vii) next, the balance, if any, to fund the Capital Reserve; (viii) next, the balance, if any, to fund the Debt Service Reserve; (ix) next, 75% of the balance, if any, to reduce the Additional Interest and 25% of such balance, to Borrower, to be used by Borrower for any purpose; and (x) lastly, 75% of the remaining balance, if any, to reduce Page 9 the outstanding principal balance of the Loan and 25% of such remaining balance to Borrower, to be used by Borrower for any purpose. (d) Anything herein to the contrary notwithstanding, if funds on deposit in the Lockbox Account are insufficient to fully fund: (i) the Interest and Principal Amortization Account when payments of interest and principal amortization are due under the Note and this Agreement, Servicer shall disburse funds from the Debt Service Reserve to fund such Account to the extent of such shortfall or (ii) the Operating Expense Account to pay operating expenses in accordance with the Budget or as otherwise agreed to by Lender pursuant to the Loan Documents, Servicer shall disburse funds from the Capital Reserve to fund such Account to the extent of such shortfall. In addition, in any month, Borrower may request an additional disbursement of funds from the Lockbox Account to fund the Operating Expense Account for unanticipated increases in operating expenses, which request shall be accompanied by supporting documentation reasonably required by Lender and which disbursement shall be subject to Lender's prior approval not to be unreasonably withheld, delayed or conditioned. (e) Servicer shall, on Borrower's behalf, pay from the Interest and Principal Amortization Account, the interest and principal payments due under, and at the time and in the manner provided in, the Note, the Mortgage and in this Agreement. If funds are available in the Lockbox Account to pay timely any amounts payable hereunder or under any other Loan Document and such amounts are not timely paid by reason of Servicer's failure to credit properly funds in the Lockbox Account, to transfer funds from the Lockbox Account or otherwise to follow its instructions properly given in accordance with the Loan Documents, such non-payment shall not constitute a default of Borrower's obligations hereunder. (f) All the covenants, conditions and agreements contained in the Note, the Mortgage, the Assignment of Leases and Rents dated as of the date hereof from Borrower to Lender (the "Assignment"), the Environmental Indemnity Agreement dated as of the date hereof among Lender, Borrower and Lodgian, Inc. (the "Environmental Agreement") and the other Loan Documents are hereby made a part of this Agreement to the same extent and with the same force as if fully set forth herein. 3. WARRANTY OF TITLE Borrower represents and warrants that each entity comprising Borrower has good, marketable and insurable fee simple (or, in the case of Lodgian Colchester LLC, leasehold) title to the portion of the Mortgaged Property indicated opposite such entity's name on Schedule A hereto (subject to any financed equipment leasing permitted under the Loan Documents) and each has the full power, authority and right to execute, deliver and perform its obligations under this Agreement and to encumber, mortgage, give, grant, bargain, sell, alienate, enfeoff, convey, confirm, pledge, assign, hypothecate and grant a security interest in and to such portion of the Mortgaged Property and that each such entity possesses an unencumbered fee (or, in the case of Lodgian Colchester LLC, leasehold) estate in the portion of the Premises and the Improvements indicated opposite such entity's name on Schedule A hereto, and that each such entity holds its right, title and interest in and to such portion of the Mortgaged Property free and clear of all liens, encumbrances and charges whatsoever except for those exceptions shown in the title insurance policy insuring the lien of the Mortgage or otherwise permitted hereunder, and that the Mortgage is and will remain a valid and enforceable first lien on and security interest in the Mortgaged Property, subject only to such exceptions. Borrower shall forever warrant, defend and preserve such title and the validity and priority of the lien of the Mortgage and shall forever warrant and defend such title, validity and priority to Lender against the claims of all persons whomsoever. Page 10 4. INSURANCE (a) Borrower, at its sole cost and expense, will keep the Mortgaged Property insured during the entire term of this Agreement for the mutual benefit of Borrower and Lender against loss or damage by fire and against loss or damage by other risks and hazards covered by a standard extended coverage insurance policy including, without limitation, riot and civil commotion, vandalism, malicious mischief, burglary and theft. The insurance policy shall contain option perils and income loss endorsements and if any of the Improvements or the use of the Mortgaged Property shall at any time constitute legal non-conforming structures or uses, a law and ordinance endorsement. Such insurance shall be in an amount: (i) equal to the lesser of: (A) the original principal amount of the Loan (in no event less than the minimum amount required to compensate for damage or loss on a replacement cost basis), and (B) the then full replacement cost of the Improvements and the Equipment, without deduction for physical depreciation; provided, however, that such insurance shall be in an amount such that the insurer would not deem Borrower a co-insurer under such policies. The deductible in respect of such insurance shall not exceed $250,000.00, unless a higher deductible is required by law. Unless such premiums are deposited in escrow pursuant to Section 6 of this Agreement, the premiums for the insurance carried in accordance with this Section shall be paid annually in advance and each policy shall contain the "Replacement Cost Endorsement" with a waiver of depreciation. (b) Borrower shall also obtain and maintain during the entire term of this Agreement, at its sole cost and expense, for the mutual benefit of Borrower and Lender, the following policies of insurance: (i) Flood insurance if any part of the Improvements is currently or at any time in the future located in an area identified by the Federal Emergency Management Agency as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968 (and any amendment or successor act thereto) in an amount at least equal to the lesser of: (A) the outstanding principal amount of the Note; and (B) the maximum limit of coverage available with respect to the Improvements and the Equipment under such Act. (ii) Comprehensive public liability insurance, including broad form property damage, blanket contractual and personal injuries (including death resulting therefrom) coverages and "Dram shop" or other liquor liability coverage if alcoholic beverages are sold from or may be consumed at the Mortgaged Property, and containing minimum limits per occurrence of $50,000,000.00 for the Premises and the Improvements, or such greater amount as may be required under the applicable Franchise Agreement. (iii) intentionally omitted; (iv) Business income insurance: (A) with loss payable to Lender; (B) covering all risks required to be covered by the insurance provided for in Section 4(a); (C) containing an extended period of indemnity endorsement which provides that after the physical loss to the Improvements and all personal property has been repaired, the continued loss of income will be insured until such income either returns to the same level it was at prior to the loss, or the expiration of 12 months from the date of the loss, whichever first occurs, and notwithstanding that the policy may expire prior to the end of such period; and (D) in an amount equal to the sum of Expenses and NOI, in each case for the preceding full calendar year. The amount of such business income insurance shall be determined prior to the date hereof and at least once each year thereafter based on clause (D) of this subsection. All insurance proceeds payable to Lender pursuant to this Section shall be held by Lender and shall be applied to the obligations secured hereunder from time to time Page 11 due and payable hereunder and under the Note in accordance with Section 2 hereof; provided, however, that nothing herein contained shall be deemed to relieve Borrower of its obligations to pay the obligations secured hereunder on the respective dates of payment provided for in the Note except to the extent such amounts are actually and timely paid out of the proceeds of such business income insurance; (v) Insurance, in an amount equal to the lesser of $2,000,000.00, or the insurable value of the Improvements, against loss or damage from: (A) leakage of sprinkler systems; and (B) explosion of steam boilers, air conditioning equipment, high pressure piping, machinery and equipment, pressure vessels or similar apparatus now or hereafter installed in the Improvements. (vi) Worker's compensation insurance with respect to any employees of Borrower, as required by any governmental authority or legal requirement. (vii) Motor vehicle liability coverage for all owned and non-owned vehicles, including rented and leased vehicles used in the operation of the Mortgaged Property containing minimum limits per occurrence of $5,000,000.00 or such greater amount as may be required under the applicable Franchise Agreement. (viii) Crime protection insurance for corporate personnel at Borrower's corporate offices. (ix) Earthquake insurance (including subsidence), if the Mortgaged Property is located in an earthquake prone region. (x) Terrorism insurance in the form of a blanket policy in an amount of no less than $35,000,000.00 with a deductible of no more than $150,000.00 and is otherwise reasonably acceptable to Lender; provided, however, for any 12-month period following the first anniversary of the date hereof, Borrower shall not be required to expend more than 150% of the amount expended in the first year following the date hereof to acquire the terrorism insurance required by this Section 4(b)(x); provided, further, however, that insurance coverages for the Property under the existing insurance policies carried by Borrower as of the date hereof satisfy the requirements of this Section 4(b)(x). (xi) Such other insurance as may from time to time be reasonably required by Lender, upon 60 days' notice to Borrower, in order to protect its interests in the Mortgaged Property, or as may be required by the Franchise Agreements. In any event, such other insurance shall be in amounts and covering such risks as are consistent with the requirements of like lenders for like properties in the vicinity of any such property comprising a portion of the Mortgaged Property. (c) Borrower shall increase the amount of insurance required to be provided hereunder at the time that each such policy is renewed (but, in any event not less frequently than once during each 12-month period) by using the F.W. Dodge Building Index to determine whether there has been an increase in the replacement cost of the improvement since the most recent adjustment of any such policy and, if there has been any such increase, the amount of insurance required to be provided hereunder shall be adjusted accordingly. (d) All policies of insurance required pursuant to this Section (collectively, the "Policies") shall: (i) be issued by an insurer with an "A" rating or better for claims paying ability by Moody's Investors Service, Inc. and Standard & Poor's Rating Group, or a general policy rating of "A" or better and a financial class of VIII or better assigned by A.M. Best Company, Inc.; (ii) with respect to the property policies (including, without limitation, Page 12 casualty insurance) contain a standard noncontributory mortgagee clause naming Lender as the person to which all payments made by such insurance company shall be paid and, with respect to the liability policies, name Lender as an "additional insured"; (iii) be maintained throughout the term of this Agreement without cost to Lender; (iv) be assigned and delivered to Lender; (v) contain such provisions as Lender deems reasonably necessary or appropriate to protect its interest including, without limitation, endorsements providing that neither Borrower, Lender nor any other party shall be a co-insurer thereunder, and that Lender shall receive at least 30 days prior written notice of any modification, reduction or cancellation; and (vi) be otherwise satisfactory in form and substance to Lender, and be approved by Lender as to amounts, form, risk coverage, deductible, loss payees and insureds. Subject to the provisions of Section 6 hereof, Borrower shall pay the premiums for the Policies (the "Insurance Premiums") as they become due and payable. Not later than 5 days prior to the expiration date of each of the Policies, Borrower will deliver to Lender satisfactory evidence of the renewal of each Policy. (e) If the Mortgaged Property shall be damaged or destroyed, in whole or in part, by fire or other casualty, Borrower shall give prompt notice thereof to Lender. (i) In the case of a loss covered by Policies, Lender may, in consultation with Borrower, settle and adjust for a reasonable amount any claim for losses in excess of $250,000.00 per property comprising a portion of the Mortgaged Property and, absent the occurrence and continuance of an Event of Default, Borrower shall be allowed to adjust losses aggregating not in excess of $250,000.00. Each of such adjustments shall be carried out in a commercially reasonable and timely manner, and provided in any case that Lender shall be, and is hereby, authorized to collect and receipt for any such insurance proceeds and make such proceeds available to Borrower for restoration of the Mortgaged Property in accordance with the terms hereof. The reasonable expenses incurred by Lender in the adjustment and collection of insurance proceeds shall become part of the Debt, shall be secured by the Mortgage and shall be reimbursed by Borrower to Lender within 10 days of demand therefor. (ii) In the event of any insured damage to or destruction of the Mortgaged Property or any part thereof (an "Insured Casualty") where: (A) the proceeds of insurance, or cash, letter of credit or other security deposited by Borrower reasonably acceptable to Lender, are sufficient to enable Borrower to fully restore the Mortgaged Property; (B) the term of, and proceeds derived from, Borrower's business interruption insurance (or other similar insurance) and anticipated proceeds from operations of the Mortgaged Property shall be sufficient to fully cover the period that the Mortgaged Property is undergoing restoration; (C) Lender determines that the restoration is reasonably capable of being completed at least 6 months prior to the Maturity Date; (D) the Loan-to-Value Ratio upon completion of restoration is estimated, by an appraiser acceptable to Lender, to be no greater than .7:1.0; (E) the applicable Franchise Agreement has not been, and will not be (pursuant to the terms of such Franchise Agreement or by written consent of Franchisor), terminated as a result of the Insured Casualty; (F) the restoration can be completed within 15 months from the date that the Insured Casualty occurred, or within such shorter time period as may be required by such Franchise Agreement (which shorter time period may be extended pursuant to Franchisor consent up to a maximum of 15 months); (G) the restoration is permitted or required under such Franchise Agreement or Franchisor has consented to the restoration; and (H) the Debt Service Coverage Ratio upon completion is reasonably anticipated to be at least 1.25, then, if no Event of Default shall have occurred and be continuing, the proceeds of insurance shall be applied to reimburse Borrower for the cost of restoring, repairing, replacing or rebuilding the Mortgaged Property or the part thereof subject to the Insured Casualty, as provided for below; and Borrower hereby covenants and Page 13 agrees forthwith to commence and diligently to prosecute such restoring, repairing, replacing or rebuilding. NOI for purposes of this calculation shall be NOI for the 12 calendar month period immediately preceding the casualty, unless the appraiser referenced in clause (D) above estimates that NOI after the restoration will be more than ten (10%) percent less than NOI for such 12 calendar month period, in which case the Debt Service Coverage Ratio shall be calculated using the appraiser's estimate of NOI. Notwithstanding anything in this Section 4(e)(ii) to the contrary, if the aggregate proceeds from an Insured Casualty with respect to a property comprising a portion of the Mortgaged Property do not exceed the greater of $250,000.00 and 5.00% of the "allocated loan amount" listed on Schedule A hereto for such property, Borrower shall be entitled to such proceeds for the restoration of such property without compliance with the requirements of this Section 4(e)(ii)(A)-(H). (iii) Except as provided above, the proceeds of insurance collected upon any Insured Casualty shall, at the option of Lender in its sole discretion, be applied to the payment of the Debt or applied to reimburse Borrower for the cost of restoring, repairing, replacing or rebuilding the Mortgaged Property or the part thereof subject to the Insured Casualty, in the manner set forth below. If Lender applies such insurance proceeds from an Insured Casualty with respect to a property comprising a portion of the Mortgaged Property to the payment of the Debt, Borrower may obtain the release of such property upon payment of the applicable "release price" listed on Schedule A hereto, less the amount of such insurance proceeds paid to Lender and applied in reduction of the Debt. In no case shall any such application reduce or postpone any payments otherwise required pursuant to the Note, other than the final payment on the Note. (iv) In the event that proceeds of insurance, if any, shall be made available to Borrower for the restoring, repairing, replacing or rebuilding of the Mortgaged Property, Borrower hereby covenants to restore, repair, replace or rebuild the Mortgaged Property to be, to the extent commercially feasible and legally possible, of at least equal value and of substantially the same character as prior to such damage or destruction, all to be effected in accordance with applicable law and plans and specifications approved in advance by Lender, which approval shall not be unreasonably withheld, delayed or conditioned,; and otherwise in accordance with the requirements of the applicable Franchise Agreement, if any; provided, however, that Borrower shall pay all costs (and if required by Lender, shall deposit the total thereof, or other security reasonably satisfactory to Lender, with Lender in advance) of such restoring, repairing, replacing or rebuilding in excess of the net proceeds of insurance made available pursuant to the terms hereof. (v) In the event Borrower is entitled to reimbursement out of insurance proceeds held by Lender, such proceeds shall be disbursed from time to time upon Lender being furnished with: (A) evidence reasonably satisfactory to it of the estimated cost of completion of the restoration, repair, replacement and rebuilding; (B) funds or reasonable assurances satisfactory to Lender that such funds are available, sufficient in addition to the proceeds of insurance to complete the proposed restoration, repair, replacement and rebuilding; and (C) such architect's certificates, waivers of lien for work previously performed, contractor's sworn statements, title insurance endorsements, bonds, plats of survey and such other reasonable evidences of cost, payment and performance as Lender may reasonably require and approve. Lender may, in any event, require that all plans and specifications for such restoration, repair, replacement and rebuilding be submitted to and approved by Lender prior to commencement of work (which approval shall not be unreasonably withheld). No payment made prior to the final completion of the restoration, repair, replacement and rebuilding shall exceed ninety (90%) percent of the value of the work Page 14 performed from time to time. Funds other than proceeds of insurance shall be disbursed prior to disbursement of such proceeds, and at all times the undisbursed balance of such proceeds remaining in Lender's possession, together with funds deposited for that purpose or irrevocably committed to the reasonable satisfaction of Lender by or on behalf of Borrower for that purpose, shall be at least sufficient in the reasonable judgment of Lender to pay for the cost of completion of the restoration, repair, replacement or rebuilding, free and clear of all liens and claims of lien. Any surplus which may remain out of insurance proceeds held by Lender after payment of such costs of restoration, repair, replacement or rebuilding shall be delivered to Borrower, provided such restoration was performed substantially in accordance with the provisions of this Section and Borrower is not then in default of its obligations under the Loan Documents. (f) Borrower shall not carry separate insurance, concurrent in kind or form or contributing in the event of loss, with any insurance required under this Section. Notwithstanding the foregoing, Borrower may carry insurance not required under this Agreement, provided any such insurance affecting the Mortgaged Property shall be for the mutual benefit of Borrower and Lender, as their respective interests may appear, and shall be subject to all other provisions of this Section. (g) Any insurance coverages required hereunder may be carried under a blanket policy which covers property other than the Mortgaged Property. 5. PAYMENT OF TAXES Borrower shall pay all taxes, assessments, water rates and sewer rents, now or hereafter levied, assessed or imposed against the Mortgaged Property or any part thereof (collectively, the "Taxes") and all ground rents, maintenance charges, other governmental impositions, and other charges including, without limitation, vault charges and license fees for the use of vaults, chutes and similar areas adjoining the Premises, now or hereafter levied, assessed or imposed against the Mortgaged Property or any part thereof (collectively, the "Other Charges") prior to delinquency, subject to the provisions of Section 6 hereof. Borrower will deliver to Lender evidence reasonably satisfactory to Lender that the Taxes and Other Charges have been so paid, or are not then delinquent, no later than 30 days following the date on which the Taxes and/or Other Charges would otherwise be delinquent if not paid; provided, however, that for so long as Lender shall pay Taxes from funds escrowed by Borrower for such purpose, Borrower shall not be required to pay or furnish Lender with evidence of such payment. Borrower shall not suffer, and shall promptly cause to be paid and discharged, any lien or charge whatsoever which may be or become a lien or charge against the Mortgaged Property, and shall promptly pay for all utility services provided to the Mortgaged Property. Upon Lender's request, Borrower shall furnish to Lender or its designee invoices of the charges for utility services showing no past due amounts. Borrower shall be entitled to contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount of any Taxes or Other Charges or utility services. Notwithstanding the preceding sentence, during the pendency of any such contest Borrower shall pay or cause to be paid all Taxes, Other Charges and utility services as and when due and payable, or otherwise in accordance with Section 32 hereof. 6. TAX AND INSURANCE ESCROW FUND Borrower shall pay to Lender on the first day of each calendar month: (a) one-twelfth of an amount which would be sufficient to pay the Taxes payable, or reasonably estimated by Lender to be payable, during the next ensuing 12 months; and (b) one-twelfth of an amount which would be sufficient to pay the Insurance Premiums due for the renewal of the coverage afforded by the Policies upon the expiration thereof (the amounts described in clauses (a) and Page 15 (b) above, collectively, the "Tax and Insurance Escrow Fund"). The Tax and Insurance Escrow Fund and the monthly installments of principal and interest payable under the Note shall be added together and shall be paid as an aggregate sum by Borrower to Lender. Borrower hereby pledges to Lender any and all monies now or hereafter deposited in the Tax and Insurance Escrow Fund as additional security for the payment of the Debt. Lender will apply the Tax and Insurance Escrow Fund to payments of Taxes and Insurance Premiums required to be made by Borrower pursuant to Sections 4 and 5 hereof; provided, however, that, with respect to Insurance Premiums, Borrower shall be reimbursed within 5 business days following Servicer's receipt of a copy of the invoice for such Insurance Premiums and the check issued by or on behalf of Borrower in payment thereof. If the amount of the Tax and Insurance Escrow Fund shall exceed the amounts due for Taxes and Insurance Premiums pursuant to Sections 4 and 5 hereof, Lender shall, in its discretion, return any excess to Borrower or credit such excess against future payments to be made to the Tax and Insurance Escrow Fund. If the Tax and Insurance Escrow Fund is not sufficient to pay the items set forth in clauses (a) and (b) above when required, Borrower shall promptly pay to Lender, upon demand, an amount which Lender shall estimate as sufficient to make up the deficiency. Upon the occurrence of an Event of Default, Lender may apply any sums then comprising the Tax and Insurance Escrow Fund to the payment of the Debt in any order in its sole discretion. Until expended or applied as above provided, any amounts in the Tax and Insurance Escrow Fund shall constitute additional security for the Debt. To the extent permitted by applicable law, the Tax and Insurance Escrow Fund shall not constitute a trust fund and may be commingled with other monies held by Lender. Earnings or interest on the Tax and Insurance Escrow Fund shall remain in the Tax and Insurance Escrow Fund for application to Borrower's obligations for payment of Taxes and Insurance Premiums as described herein, or as otherwise determined by Lender in accordance with the Loan Documents. 7. ANNUAL BUDGET; ACCOUNTS (a) No later than December 15 of each year Borrower shall submit to Lender, for Lender's approval, a form of Budget for the 12 calendar months succeeding the term covered by the last approved Budget. The Budget may contain a line item for unexpected contingencies equal to up to ten (10%) percent of the total approved amount of the Budget. Lender's approval of any proposed Budget shall not be unreasonably withheld or delayed. If Lender's approval or disapproval is not given prior to January 15, Borrower shall be deemed to be authorized to operate the Mortgaged Property in accordance with the most recently approved Budget with each expense line item increased by five (5%) percent or, with respect to Taxes, Other Charges and Insurance and utilities, by such amounts as may be in effect for such year based on usage for prior year; provided, however, that if Lender does not affirmatively disapprove such proposed Budget by January 31, the proposed Budget shall be deemed approved. In any given calendar year, Borrower may, at its option, reallocate among and between any line items in the Budget an amount equal to up to five (5%) percent of any surplus in any particular line item reasonably anticipated to be available once all obligations, projects or uses in respect of such line item have been completed in accordance with the terms of the Budget. (b) Servicer, on behalf of Borrower, shall this day, or as soon hereafter as is practicable, establish and shall thereafter maintain the following interest-bearing escrow accounts at one or more federally insured institutions to be designated by Lender (collectively, the "Accounts"), each of which shall be in Servicer's name with Borrower as beneficial owner (except for the Operating Expense Account, which shall be in Borrower's name), pledged to Lender pursuant to the Loan Documents as additional security for the Loan: (i) Lockbox Account, into which shall be paid, all gross revenue derived from operation of the Mortgaged Property (the "Lockbox Account"); Page 16 (ii) Operating Expense Account, into which shall be deposited weekly, pursuant to the Budget, proceeds from the Lockbox Account sufficient for Borrower to discharge the normal and ordinary day-to-day general operating expenses of the Mortgaged Property for which a separate Account has not been established, including sales and use taxes (the "Operating Expense Account"); (iii) Replacement Reserve Account, into which shall be deposited monthly for amounts to be paid on the next Payment Date, pursuant to the Budget, proceeds from the Lockbox Account in an amount equal to four (4%) percent of the gross revenue derived from the operation of the Mortgaged Property during the preceding calendar month from which Borrower may draw from time to time to refurbish, repair or replace Equipment at the Mortgaged Property, all as more particularly set forth in the Replacement Agreement (the "Replacement Reserve Account"); (iv) Repair Escrow Account, into which shall be deposited at closing not less than the sum of $3,277,077.00 for certain improvements at the Mortgaged Property, all as more particularly set forth in the Repair Agreement (the "Repair Escrow Account"); (v) Interest and Principal Amortization Account, into which shall be deposited monthly, proceeds from the Lockbox Account in an amount sufficient to satisfy Borrower's obligations for the regular and periodic monthly payment of interest on the outstanding principal balance of the Loan and periodic monthly principal payments required to be paid on the next Payment Date (the "Interest and Principal Amortization Account"); (vi) Tax and Insurance Escrow Account, into which shall be deposited monthly, pursuant to the Budget, proceeds from the Lockbox Account in an amount sufficient to satisfy Borrower's obligations under Section 6 hereof for the next Payment Date (the "Tax and Insurance Escrow Account"); and (vii) Capital Reserve, into which shall be deposited at closing not less than $500,000.00 and, thereafter, into which shall be deposited monthly proceeds from the Lockbox Account to the extent available, up to a maximum balance at any one time not to exceed $500,000.00, and from which amounts may be withdrawn and applied to the payment of amounts due under Section 2(c)(i), (ii) and (vi) hereof from time to time to the extent funds derived from the operation of the Mortgaged Property are insufficient therefor (the "Capital Reserve"). (vii) Debt Service Reserve, into which shall be deposited at closing not less than $1,000,000.00 and, thereafter, into which shall be deposited monthly proceeds from the Lockbox Account to the extent available, up to a maximum balance at any one time not to exceed $1,000,000.00, and from which amounts may be withdrawn and applied to the payment of amounts due under Section 2(c)(iii) and (iv) hereof from time to time to the extent funds derived from the operation of the Mortgaged Property are insufficient therefor (the "Debt Service Reserve"). (c) Servicer, as Lender's agent, shall have sole signatory authority with respect to any and all withdrawals from the Accounts, except for the Operating Expense Account with respect to which Borrower shall have sole signatory authority. All such withdrawals shall be made solely in accordance with the Budget, and by this instrument Borrower does hereby irrevocably authorize and direct Servicer to make all such withdrawals on Borrower's behalf to satisfy Borrower's obligations hereunder. 8. CONDEMNATION (a) Borrower shall promptly give Lender written notice of the actual Page 17 or threatened commencement of any condemnation or eminent domain proceeding (a "Condemnation") and shall deliver to Lender copies of any and all papers served in connection with such proceedings. Lender is hereby irrevocably appointed as Borrower's attorney-in-fact, coupled with an interest, with exclusive power to collect, receive and retain any award or payment for such Condemnation and to make any compromise or settlement in connection with such proceeding, subject to the provisions of this Agreement. Notwithstanding any taking by any public or quasi-public authority through eminent domain or otherwise (including, without limitation, any transfer made in lieu of or in anticipation of the exercise of such taking), Borrower shall continue to pay the Debt at the time and in the manner provided for in the Note, the Mortgage, this Agreement, the Assignment, the Environmental Agreement and the other Loan Documents, and the Debt shall not be reduced until any award or payment therefor shall have been actually received after expenses of collection and applied by Lender to the discharge of the Debt. Lender shall not be limited to the interest paid on the award by the condemning authority but shall be entitled to receive out of the award interest at the rate or rates provided in the Note. (b) If the Mortgaged Property shall be the subject of a Condemnation, in whole or in part, Borrower shall give prompt notice thereof to Lender. (i) In the case of a Condemnation, Lender may, in consultation with Borrower, settle and adjust any claim with the reasonable consent of Borrower for losses in excess of $250,000.00 per property comprising a portion of the Mortgaged Property and Borrower, absent the occurrence and continuance of an Event of Default, shall be allowed to adjust losses aggregating not in excess of $250,000.00. Each of such adjustments shall be carried out in a commercially reasonable and timely manner, and provided in any case that Lender shall be, and is hereby, authorized to collect and receipt for any such Condemnation award or proceeds. The reasonable expenses incurred by Lender in the adjustment and collection of a Condemnation award or proceeds shall become part of the Debt, shall be secured by the Mortgage and shall be reimbursed by Borrower to Lender within 10 days of demand therefor. (ii) In the event of any Condemnation affecting all or any portion of the Mortgaged Property where: (A) the Condemnation award or proceeds, or cash, letter of credit or other security deposited by Borrower reasonably acceptable to Lender, are sufficient to enable Borrower to fully restore the Mortgaged Property; (B) the term of, and proceeds derived from, Borrower's business interruption insurance (or other similar insurance) and anticipated proceeds from the operation of the Mortgaged Property shall be sufficient to fully cover the period that the Mortgaged Property is undergoing restoration; (C) Lender determines that the restoration is reasonably capable of being completed at least 6 months prior to the Maturity Date; (D) the Loan-to-Value Ratio upon completion of restoration is estimated, by an appraiser acceptable to Lender, to be no greater than .7:1.0; (E) the applicable Franchise Agreement has not been, and will not be (pursuant to the terms of such Franchise Agreement or by written consent of Franchisor), terminated as a result of the Condemnation; (F) the restoration can be completed within 15 months from the date that the Condemnation occurred, or within such shorter time period as may be required by such Franchise Agreement or Franchisor consent (which shorter time period may be extended pursuant to Franchisor consent up to a maximum of 15 months); (G) the restoration is permitted or required under such Franchise Agreement or Franchisor has consented to the restoration; and (H) the Debt Service Coverage Ratio upon completion is reasonably anticipated to be at least 1.25, then, if no Event of Default shall have occurred and be continuing, the Condemnation award or proceeds shall be applied to reimburse Borrower for the cost of restoring, repairing, replacing or rebuilding the Mortgaged Property or the part thereof subject to the Condemnation, as provided for below; and Page 18 Borrower hereby covenants and agrees forthwith to commence and diligently to prosecute such restoring, repairing, replacing or rebuilding. NOI for purposes of this calculation shall be NOI for the 12 calendar month period immediately preceding the Condemnation, unless the appraiser referenced in clause (D) above estimates that NOI after the restoration will be more than ten (10%) percent less than NOI for such 12 calendar month period, in which case the Debt Service Coverage Ratio shall be calculated using the appraiser's estimate of NOI. Notwithstanding anything in this Section 8(b)(ii) to the contrary, if the aggregate Condemnation awards or proceeds with respect to a property comprising a portion of the Mortgaged Property do not exceed the greater of $250,000.00 and 5.00% of the "allocated loan amount" listed on Schedule A hereto for such property, Borrower shall be entitled to such proceeds for the restoration of such property without compliance with the requirements of this Section 8(b)(ii)(A)-(H). (iii) Except as provided above, the award or proceeds collected upon any Condemnation shall, at the option of Lender in its sole discretion, be applied to the payment of the Debt or applied to reimburse Borrower for the cost of restoring, repairing, replacing or rebuilding the Mortgaged Property or the part thereof subject to the Condemnation in the manner set forth below. If Lender applies such award or proceeds with respect to a property comprising a portion of the Mortgaged Property to the payment of the Debt, Borrower may obtain the release of such property upon payment of the applicable "release price" listed on Schedule A hereto, less the amount of any Condemnation awards or proceeds applied by Lender to the payment of the Debt. In no case shall any such application reduce or postpone any payments otherwise required pursuant to the Note, other than the final payment on the Note. (iv) In the event that a Condemnation award or proceeds, if any, shall be made available to Borrower for the restoring, repairing, replacing or rebuilding of the Mortgaged Property, Borrower hereby covenants to restore, repair, replace or rebuild the Mortgaged Property to be, to the extent commercially feasible and legally possible, of at least equal value and of substantially the same character as prior to such Condemnation, all to be effected in accordance with applicable law and plans and specifications approved in advance by Lender, which approval shall not be unreasonably withheld, delayed or conditioned; provided, however, that Borrower shall pay all costs (and if required by Lender, shall deposit the total thereof, or other security reasonably satisfactory to Lender, with Lender in advance) of such restoring, repairing, replacing or rebuilding in excess of the net award or proceeds made available pursuant to the terms hereof. (v) In the event Borrower is entitled to reimbursement out of proceeds held by Lender, such proceeds shall be disbursed from time to time upon Lender being furnished with: (A) evidence reasonably satisfactory to it of the estimated cost of completion of the restoration, repair, replacement and rebuilding; (B) funds reasonable assurances satisfactory to Lender that such funds are available, sufficient in addition to the Condemnation award or proceeds to complete the proposed restoration, repair, replacement and rebuilding; and (C) such architect's certificates, waivers of lien for work previously performed, contractor's sworn statements, title insurance endorsements, bonds, plats of survey and such other reasonable evidences of cost, payment and performance as Lender may reasonably require and approve. Lender may, in any event, require that all plans and specifications for such restoration, repair, replacement and rebuilding be submitted to and approved by Lender prior to commencement of work (which approval shall not be unreasonably withheld). No payment made prior to the final completion of the restoration, repair, replacement and rebuilding shall exceed ninety (90%) percent of the value of the work performed from time to time. Funds other than the Condemnation award or proceeds shall be disbursed prior to disbursement of such proceeds, and at Page 19 all times the undisbursed balance of such proceeds remaining in Lender's possession, together with funds deposited for that purpose or irrevocably committed to the reasonable satisfaction of Lender by or on behalf of Borrower for that purpose, shall be at least sufficient in the reasonable judgment of Lender to pay for the cost of completion of the restoration, repair, replacement or rebuilding, free and clear of all liens and claims of lien. Any surplus which may remain out of a Condemnation award or proceeds held by Lender after payment of such costs of restoration, repair, replacement or rebuilding shall be delivered to Borrower, provided such restoration was performed substantially in accordance with the provisions of this Section, and Borrower is not then in default of its obligations under the Loan Documents. 9. LEASES AND RENTS (a) In connection with the Loan, Borrower has absolutely and unconditionally assigned to Lender all of Borrower's right, title and interest in all current and future Leases and Rents, it being intended by Borrower that such assignment constitutes a present, absolute assignment and not an assignment for additional security only. Such assignment to Lender shall not be construed to bind Lender to the performance of any of the covenants, conditions or provisions contained in any such Lease or otherwise to impose any obligation upon Lender. Borrower shall execute and deliver to Lender such additional instruments, in form and substance reasonably satisfactory to Lender, as may hereafter be requested by Lender to further evidence and confirm such assignment. Nevertheless, subject to the terms of this Section, Lender has granted to Borrower a revocable license to operate and manage the Mortgaged Property and to collect the Rents. Borrower shall hold the Rents, or a portion thereof sufficient to discharge all current sums due on the Debt, in trust for the benefit of Lender for use in the payment of such sums. Upon the occurrence and during the continuance of an Event of Default, the license granted to Borrower shall automatically be revoked, and Lender shall immediately be entitled to possession of all Rents, whether or not Lender enters upon or takes control of the Mortgaged Property. Lender is hereby granted and assigned by Borrower the right, at its option, upon revocation of the license granted herein (and subject to the rights of tenants, if any), to enter upon the Mortgaged Property in person, by agent or by court-appointed receiver to collect the Rents. Any Rents collected during the continuance of any revocation of the license may be applied toward payment of the Debt in such priority and proportions as Lender in its discretion shall deem appropriate. (b) Borrower shall furnish Lender with executed copies of all Leases. All renewals of Leases and all proposed Leases shall provide for rental rates comparable to existing local market rates and shall be arms-length transactions. All proposed Leases shall be subject to the prior approval of Lender except that with respect to proposed Leases which: (i) do not individually or in the aggregate materially alter the ratio of office/retail space to hotel space as presently utilized in the Mortgaged Property; (ii) are for less than 1,500 rentable square feet in the aggregate at each hotel comprising a portion of the Mortgaged Property; (iii) provide for minimum terms of not less than two years (unless the proposed Lease is for a gift shop or concession); (iv) provide for work letters and other tenant improvement allowances that are commercially reasonable and customary business practice for a lease of the kind considered; (v) do not contain any provision for free rent or rent abatement greater than that which is commercially reasonable and customary Page 20 business practice for a lease of the kind considered, but in no event shall the free rent or rent abatement exceed an amount equal to two months' rent under the proposed Lease; (vi) except as may be required by applicable law, do not contain any cancellation or termination rights exercisable by the tenant thereunder; (vii) are the result of an arms-length transaction with a bona fide, independent third-party; (viii) provide for rental rates comparable to existing market rates; and (ix) do not contain any terms which would materially affect Lender's rights under the Note, the Mortgage, this Agreement, the Assignment, the Environmental Agreement or the other Loan Documents, Lender's approval shall not be unreasonably withheld or delayed and, if Lender does not affirmatively disapprove a proposed Lease within 20 days following Lender's receipt of Borrower's request for approval of such Lease, the proposed Lease shall be deemed approved. All Leases shall provide that they are subordinate to the Mortgage and that the lessee agrees to attorn to Lender. Borrower shall: (A) observe and perform, in all material respects, all the obligations imposed upon the lessor under the Leases and shall not do or permit to be done anything to impair the value of the Leases as security for the Debt; (B) promptly send to Lender copies of all notices of default which Borrower shall send or receive thereunder; (C) enforce, in all material respects, all of the terms, covenants and conditions contained in the Lease on the part of the lessee thereunder to be observed or performed, short of termination thereof; (D) not collect any Rents more than one month in advance; (E) not execute any other assignment of the lessor's interest in the Leases or Rents; (F) other than immaterial non-financial amendments, not alter, modify or change the terms of the Leases without the prior written consent of Lender (which consent shall not be unreasonably withheld), or, except if a lessee is in default, cancel or terminate the Leases or accept a surrender thereof or convey or transfer or suffer or permit a conveyance or transfer of the Mortgaged Property or of any interest therein so as to effect a merger of the estates and rights of, or a termination or diminution of the obligations of, lessees thereunder; provided, however, that any Lease may be cancelled if at the time of the cancellation thereof a new Lease is entered into with a bona fide, independent third-party on substantially the same terms or more favorable terms as the cancelled Lease; (G) not alter, modify or change the terms of any guaranty of a Lease or cancel or terminate such guaranty without the prior written consent of Lender; (H) not consent to any assignment of or subletting under the Leases not in accordance with their terms, without the prior written consent of Lender, which consent shall not be unreasonably withheld, delayed or conditioned; and (I) execute and deliver at the request of Lender all such further assurances, confirmations and assignments in connection with the Mortgaged Property as Lender shall from time to time reasonably request. (c) All security deposits of lessees, whether held in cash or any other form, shall not be commingled with any other funds of Borrower and, if cash, shall be deposited by Borrower into the Security Deposits Account other than security deposits held by Borrower on and as of the date hereof and which in the aggregate do not exceed $5,000.00. Any bond or other instrument which Borrower is permitted to hold in lieu of cash security deposits under any applicable legal requirements shall be maintained in full force and effect unless replaced by cash deposits as hereinabove described, shall be issued by an institution reasonably satisfactory to Lender, shall, if permitted pursuant to any legal requirements, name Lender as payee or mortgagee thereunder (or at Lender's option, be fully assignable to Lender) and shall, in all respects, comply with any applicable legal requirements and otherwise be reasonably Page 21 satisfactory to Lender. Borrower shall, upon request, provide Lender with evidence reasonably satisfactory to Lender of Borrower's compliance with the foregoing. Following the occurrence and during the continuance of any Event of Default, Borrower shall, upon Lender's request, if permitted by any applicable legal requirements, turn over to Lender the security deposits (and any interest theretofore earned thereon) with respect to all or any portion of the Mortgaged Property, to be held by Lender subject to the terms of the Leases. 10. REPRESENTATIONS CONCERNING LOAN Borrower represents, warrants and covenants as follows: (a) The Note, the Mortgage, this Agreement, the Assignment, the Environmental Agreement and the other Loan Documents are the legal, valid and binding obligations of Borrower, subject only to applicable bankruptcy, insolvency and similar laws affecting rights of creditors generally, and to general principles of equity. The Loan Documents are not subject to any right of rescission, set-off, counterclaim or defense, including the defense of usury, nor would the operation of any of the terms of the Note, the Mortgage, this Agreement, the Assignment, the Environmental Agreement and the other Loan Documents, or the exercise of any right thereunder, render the Mortgage unenforceable, in whole or in part, or subject to any right of rescission, set-off, counterclaim or defense, including the defense of usury. (b) Except as disclosed to Lender in writing, to the best of Borrower's knowledge, all material certifications, permits, licenses and approvals required for the legal use, occupancy and operation of portions of the Mortgaged Property as hotels including, without limitation, any applicable liquor license, certificate of completion and occupancy permit, have been obtained and are in full force and effect; provided, however, that notwithstanding the foregoing, Borrower has valid liquor licenses at each of the properties comprising the Mortgaged Property where liquor is being served. Nothing herein shall excuse Borrower from obtaining all such certifications, permits, licenses and approvals required for the legal use, occupancy and operation of portions of the Mortgaged Property as hotels. Except as disclosed in the comfort letters from franchisor(s) with agreements affecting the Mortgaged Property delivered to Lender on or before the date hereof, the Mortgaged Property is free of material damage and is in good repair, and there is no proceeding pending or, to the best of Borrower's knowledge, threatened for the total or partial condemnation of, or affecting, the Mortgaged Property. (c) To the best of Borrower's knowledge, except as disclosed on the title policies and surveys delivered to Lender in connection with the Loan, all of the Improvements which were considered in determining the appraised value of the Mortgaged Property lie wholly within the boundaries and building restriction lines of the Mortgaged Property, no improvements on adjoining properties encroach upon the Mortgaged Property, and no easements or other encumbrances upon the Premises encroach upon any of the Improvements, so as to affect the value or marketability of the Mortgaged Property. To Borrower's knowledge, except as disclosed on the title policies and surveys delivered to Lender in connection with the Loan, the Mortgaged Property is contiguous to and has access to a physically and legally open all-weather public street, has all necessary permits and approvals for ingress and egress, is adequately serviced by public water, sewer systems and utilities and is on one or more separate tax parcels, all of which are separate and apart from any other property owned by Borrower or any other person. To Borrower's knowledge, the Mortgaged Property has all necessary access by public roads or easements which in each case are not terminable and are not subordinate to any mortgage other than the Mortgage. To the best of Borrower's knowledge, all of the Improvements comply with all requirements of applicable building codes, zoning and subdivision laws and ordinances. (d) The Mortgaged Property is not subject to any leases, licenses or Page 22 other use or occupancy agreements other than the Leases described in the rent roll delivered to Lender in connection with this Agreement and transient hotel guests and one on-site property manager for each property comprising a portion of the Mortgaged Property. No person has any possessory interest in the Mortgaged Property or right to occupy any portion thereof except under and pursuant to the provisions of the Leases or transient hotel guests, and one on-site property manager for each property comprising a portion of the Mortgaged Property, in the ordinary course of Borrower's business. (e) To Borrower's knowledge, the survey of the Mortgaged Property delivered to Lender in connection with this Agreement has been performed by a duly licensed surveyor or registered professional engineer in the jurisdiction in which the Mortgaged Property is situated, and does not fail to reflect any material matter affecting the Mortgaged Property or the title thereto. (f) The financial statements heretofore furnished to Lender are, as of the date specified therein, complete and correct in all material respects and fairly present the financial condition of Borrower, and are prepared in accordance with the Uniform System of Accounts for hotel and motel properties as approved by the American Hotel and Motel Association (as in effect from time to time, the "Uniform System of Accounts") applied on a consistent basis. Borrower does not have on the date hereof any contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments which in each case are known to Borrower and which, in Borrower's opinion, are reasonably likely to result in a material adverse effect on the Mortgaged Property or the operation thereof as a hotel, except as referred to or reflected or provided for in the financial statements heretofore furnished to Lender or as otherwise disclosed to Lender herein. Since the last date of such financial statements, there has been no material adverse change in the financial condition, operations or business of Borrower from that set forth in such financial statements as of the dates thereof. (g) Except as set forth on Schedule B hereto, each Franchise Agreement is in full force and effect and, to Borrower's knowledge, there is no default, breach or violation existing thereunder by any party thereto and no event (other than payments due but not yet delinquent) which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach or violation by any party thereunder. (h) The Management Agreement is in full force and effect and there is no default, breach or violation existing thereunder by any party thereto and no event (other than payments due but not yet delinquent) which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach or violation by any party thereunder. (i) Neither the execution and delivery of the Loan Documents, Borrower's performance thereunder, the recordation of the Mortgage, nor the exercise of any remedies by Lender, will adversely affect: (A) Borrower's rights under any Franchise Agreement or Management Agreement; or (B) the licenses, registrations, permits, certificates, authorizations and approvals necessary for the operation of the Mortgaged Property as a hotel. (j) The current Leases are in full force and effect and there are no defaults thereunder by Borrower or, to Borrower's knowledge, any other party, and there are no conditions which with the passage of time and/or notice would constitute defaults thereunder. (k) To Borrower's knowledge, each of Borrower, Borrower's constituent entities, and Guarantor has complied with the provisions of The Foreign Corrupt Practices Act of 1977, as amended or other laws addressing bribery and corruption. Without limiting the foregoing sentence, to Borrower's knowledge, none of Borrower, Borrower's constituent entities or Guarantor or any affiliates thereof has made, offered to make or authorized the making of any Page 23 improper payment or other improper contribution of value, directly or indirectly, to any officer, employee or representative of a government or instrumentality thereof or of any public international organization or made any other illegal payment. (l) None of Borrower, Borrower's constituent entities or Guarantor or any affiliate thereof has off-balance sheet arrangements with any entity to (i) provide financing, liquidity, or market or credit risk support for Borrower, Borrower's constituent entities or Guarantor or any affiliate thereof; (ii) engage in leasing, hedging, or research and development services with Borrower, Borrower's constituent entities or Guarantor or any affiliate thereof; or (iii) expose Borrower, Borrower's constituent entities or Guarantor or any affiliate thereof to any material liability that is not reflected on the face of the associated financial statements. (m) Borrower has obtained, and shall hereafter maintain in effect, an Interest Rate Protection Agreement, having a term equal to the term of the Loan and covering the original principal amount of the Loan. The Interest Rate Protection Agreement shall at all times be (i) unless otherwise approved by Lender, with the same counterparty under the Interest Rate Protection Agreement in effect on the date hereof, (ii) in form and substance substantially similar the Interest Rate Protection Agreement in effect on the date hereof and (iii) shall be a cap agreement under which the cap provider would pay the excess, if any, of LIBOR over 5.0% in exchange for a premium paid by Borrower. 11. SINGLE PURPOSE ENTITY; AUTHORIZATION Borrower represents and warrants, and covenants for so long as any obligations secured by the Mortgage remain outstanding, as follows: (a) Each entity included within Borrower does not and will not own any asset or property other than: (i) its interest in its respective portion of the Mortgaged Property; and (ii) incidental personal property necessary for the ownership or operation of the Mortgaged Property. (b) Each entity included within Borrower does not and will not engage in any business other than the ownership, management and operation of its interest in its respective portion of the Mortgaged Property, and each entity comprising Borrower will conduct and operate its business in all material respects as presently conducted and operated. (c) Except with respect to the Management Agreement which, in its present form, is acceptable to Lender, Borrower will not enter into any contract or agreement with any Guarantor or an affiliate, except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length third-party basis. (d) Borrower has not incurred and will not incur any indebtedness, secured or unsecured, direct or indirect, absolute or contingent (including guaranteeing any obligation), other than: (i) the Debt; (ii) trade and operational debt incurred in the ordinary course of business with trade creditors and in amounts as are customary and reasonable under the circumstances; and (iii) equipment leasing in the ordinary course of business in amounts as are customary and reasonable under the circumstances. Except with Lender's prior written approval in each instance, no indebtedness other than the Debt is or shall be secured by the Mortgaged Property (other than in connection with equipment leasing as provided herein). Lender's approval shall be granted or withheld at Lender's sole discretion. In connection with any such financing approved by Lender, Borrower shall be required to obtain and deliver to Lender a subordination and standstill agreement from such lender which shall be in form and substance satisfactory to Lender in its sole discretion. (e) Borrower has not made and will not make any loans or advances to Page 24 any third party (including any constituent party, any Guarantor or any affiliate of Borrower, of any constituent party or of any Guarantor), except in de minimis amounts in the ordinary course of business and of the character of trade or operational expenses. (f) Borrower has done or caused to be done, and will do or cause to be done, all things necessary to preserve its existence, and Borrower will not, nor will Borrower permit any constituent party or Guarantor, to amend, modify or otherwise change the partnership certificate, partnership agreement, articles of incorporation and bylaws, trust or other organizational documents, as the case may be, of Borrower or such constituent party or Guarantor in a manner which would adversely affect Borrower's existence as a single purpose entity. (g) Borrower will maintain books and records and bank accounts separate from those of its affiliates and any constituent party (except that Borrower may be included in consolidated statements of its affiliates), and Borrower will file or cause to be filed separate tax returns (or consolidated tax returns if applicable). Borrower shall not change the principal place of its business without providing Lender with at least 30 days prior written notice of such change to Lender. (h) Borrower is and will be, and at all times will hold itself out to the public as, a legal entity separate and distinct from any other entity (including any affiliate of Borrower, any constituent party, any Guarantor or any affiliate of any constituent party or Guarantor). (i) Neither Borrower nor any constituent party will cause or seek the dissolution or winding up, in whole or in part, of Borrower. (j) Borrower will not commingle its funds and other assets with those of any constituent party, any Guarantor, any affiliate of Borrower, of any constituent party or of any Guarantor, or any other person, except as expressly permitted by the Loan Documents. (k) Borrower will not file or consent to the filing of any petition to take advantage of any applicable insolvency, bankruptcy, liquidation or reorganization statute, or make an assignment for the benefit of creditors. (l) Borrower does not and will not hold itself out to be responsible for the debts or obligations of any other person, except as expressly permitted by the Loan Documents. (m) Each entity comprising Borrower shall at all times maintain at least one duly appointed independent director on its Board of Directors, which manager has not been at the time of such individual's appointment and may not have been at any time during the preceding two years: (i) a stockholder of, or an officer or an employee of any entity comprising Borrower or any affiliate thereof; (ii) a customer of or supplier to any entity comprising Borrower or any affiliate thereof; (iii) a person or other entity controlling any such stockholder, officer, employee, customer or supplier; or (iv) a member of the immediate family of any such stockholder, officer, employee, customer or supplier or any other director of any entity comprising Borrower or any affiliate thereof. An independent director may sit as an independent director on more than one Board of Directors of the entities comprising Borrower and affiliates of Borrower. As used in this subsection (m), the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such person or entity, whether through ownership of voting securities by contract or otherwise. 12. MAINTENANCE OF MORTGAGED PROPERTY Borrower shall cause the Mortgaged Property to be maintained in a good and safe condition and repair. The Improvements and the Equipment shall not Page 25 be removed, demolished or materially altered (except for normal replacement of the Equipment) without the consent of Lender in its reasonable discretion. Borrower shall promptly comply with all laws, orders and ordinances affecting the Mortgaged Property, or the use thereof. Borrower shall promptly repair, replace or rebuild any part of the Mortgaged Property which may be destroyed by any casualty, or become damaged, worn or dilapidated, or which may be affected by any proceeding of the character referred to in Section 8 hereof, and shall complete and pay for any structure at any time in the process of construction or repair on the Premises. Except as expressly permitted in writing by Lender, which permission shall not be unreasonably withheld, Borrower shall not initiate, join in, acquiesce in, or consent to any change in any private restrictive covenant, zoning law or other public or private restriction limiting or defining the uses which may be made of the Mortgaged Property or any part thereof. If under applicable zoning provisions the use of all or any portion of the Mortgaged Property is or shall become a nonconforming use, Borrower will not cause or permit such nonconforming use to be discontinued or abandoned without the prior written consent of Lender. Borrower shall not: (a) change the use of the Mortgaged Property as currently configured and utilized; (b) permit or suffer to occur any waste on or to the Mortgaged Property or to any portion thereof; or (c) take any steps whatsoever to convert the Mortgaged Property, or any portion thereof, to a condominium or cooperative form of ownership. 13. TRANSFER OR ENCUMBRANCE OF THE MORTGAGED PROPERTY (a) Borrower acknowledges that Lender has examined and relied on the creditworthiness and experience of Borrower and its general partners, principals and (if Borrower is a trust) beneficial owners in owning and operating properties such as the Mortgaged Property in agreeing to make the Loan, and that Lender will continue to rely on Borrower's ownership of the Mortgaged Property and Guarantor's indirect ownership of Borrower as means of maintaining the value of the Mortgaged Property as security for repayment of the Debt. Borrower acknowledges that Lender has a valid interest in maintaining the value of the Mortgaged Property so as to ensure that, should Borrower default in the repayment of the Debt, Lender can recover the Debt by a sale of the Mortgaged Property. Borrower shall not, and shall cause Guarantor not to, without the prior written consent of Lender, sell, convey, alienate, mortgage, encumber, pledge or otherwise transfer the Mortgaged Property or any part thereof, or permit the Mortgaged Property or any part thereof to be sold, conveyed, alienated, mortgaged, encumbered, pledged or otherwise transferred, other than Leases and easement agreements executed in accordance with the Loan Documents. (b) A sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer within the meaning of this Section shall be deemed to include: (i) an installment sales agreement wherein Borrower agrees to sell the Mortgaged Property or any part thereof for a price to be paid in installments; (ii) an agreement by Borrower leasing all or a substantial part of the Mortgaged Property for other than actual occupancy by a space tenant thereunder or a sale, assignment or other transfer of, or the grant of a security interest in, Borrower's right, title and interest in and to any Leases or any Rents; (iii) subject to the provisions in the last sentence of this subsection, if Borrower, any Guarantor, or any general partner or manager of Borrower or any Guarantor is a corporation, the voluntary or involuntary sale, conveyance or transfer of such corporation's stock (or the stock of any corporation directly or indirectly controlling such corporation by operation of law or otherwise) or the creation or issuance of new stock in one or a series of transactions by which an aggregate of more than forty-nine (49%) percent of such corporation's stock shall be vested in a party or parties who are not now stockholders; and (iv) if Borrower, any Guarantor or any general partner of Borrower or any Guarantor is a limited or general partnership or joint venture or a limited liability company, the change, removal or resignation of a general partner, managing partner or joint venturer, manager, managing member or a director (unless a manager or majority of the directors continue to be directors or officers of Guarantor), or the transfer of the partnership interest of any general partner, managing Page 26 partner or joint venturer or, in the case of a limited liability company, the transfer of the limited liability company interests by a manager or managing member; provided, however, that the direct or indirect holders of equity interests (whether limited liability company interests, limited partnership interests, stock or otherwise) in Borrower as of the date hereof may transfer in the aggregate up to 49% of such equity interests so long as such direct or indirect holders at all times during the term of the Loan maintain, directly or indirectly, controlling and voting ownership of no less than 51% of the equity interests in Borrower and, provided, further, that (A) any transferee of equity interests or interests as a general partner, managing member or director is a reputable entity or person, creditworthy, with sufficient financial worth considering any obligations assumed and undertaken with respect to the Loan, as evidenced by financial statements and other information reasonably requested by Lender; (B) the properties comprising the Mortgaged Property at all times shall continue to be managed by reputable property managers, experienced in the management of properties similar to those comprising the Mortgaged Property, and reasonably acceptable to Lender; and (C) if reasonably requested by Lender or, after issuance of Securities with respect to all or a portion of the Loan, as may be required by one or more national rating agencies, with respect to the transfer of 20% or more of the direct or indirect equity interests in Borrower, Lender shall have received customary legal substantive non-consolidation opinions, and such other opinions as customarily required in circumstances where an entity is a single member limited liability company, reasonably acceptable to Lender regarding the entities comprising Borrower and any entity owning a beneficial interest in an entity comprising Borrower. In addition to the foregoing, Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C., the holders, in the aggregate, of 100% of the equity interests in and to Borrower, may transfer all, but not a portion, of such equity interests to Impac Hotel Group, L.L.C., a Delaware limited liability company, provided, that: (w) Impac Hotel Group, L.L.C. is, and remains through the term of the Loan, wholly owned by Lodgian, Inc., (x) Borrower notifies Lender not less than 30 days in advance of such transfer and, upon the actual transfer, simultaneous notice thereof, (y) Borrower provides Lender with financial statements and organizational documents of Impac Hotel Group, L.L.C. certified by such entity and such other documents as Lender may reasonably request, (z) the transferor and transferee otherwise comply with clauses (B)-(C) of this Section 13(b) if reasonably requested by Lender. Notwithstanding anything to the contrary provided herein, transfers of publicly traded equity in Lodgian, Inc. shall be permitted provided that, until such time as (1) the original principal amount of the Loan has been reduced by $20,000,000.00 and (2) the Debt Service Coverage Ratio equals at least 1.20 for three consecutive calendar months, such transfers shall not individually or in the aggregate result in a transfer of a Controlling Interest of or in Lodgian, Inc. to any person or entity. (c) Except as set forth herein, no sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer of the Mortgaged Property, or of any interest therein, shall be permitted during the term of the Loan without Lender's prior written approval. Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default hereunder in order to declare the Debt immediately due and payable upon Borrower's sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer of the Mortgaged Property without Lender's consent if required hereunder. This provision shall apply to every sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer of the Mortgaged Property regardless of whether voluntary or not, or whether or not Lender has consented to any previous sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer of the Mortgaged Property. (d) Lender's consent to one sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer of the Mortgaged Property shall not be deemed to be a waiver of Lender's right to require such consent in the future. Any sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer of the Mortgaged Property made in contravention of this Section shall be null and void Page 27 and of no force or effect. (e) Borrower agrees to bear and shall pay or reimburse Lender on demand for all expenses (including, without limitation, Lender's reasonable out-of-pocket expenses, reasonable attorney's fees and disbursements, title search costs and title insurance endorsement premiums) incurred by Lender in connection with the review, approval or disapproval, and documentation of any such sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer. (f) Anything herein to the contrary notwithstanding, transfers and partial releases of the Mortgaged Property shall be permitted in accordance with the terms of Section 61 hereof. 14. ESTOPPEL CERTIFICATES; AFFIDAVITS (a) Within 10 days after request, Borrower and Lender shall furnish the other with a statement, duly acknowledged and certified, setting forth: (i) the amount of the original principal amount of the Note; (ii) the then outstanding principal balance of the Note; (iii) the rate of interest of the Note; (iv) the date on which installments of interest and/or principal were last paid; (v) any offsets or defenses to the payment of the Debt; and (vi) that the Note, the Mortgage, this Agreement, the Assignment, the Environmental Agreement and the other Loan Documents are valid, legal and binding obligations, which have not been modified or if modified, giving particulars of such modification; provided, however, that a party is only required to furnish two such statements in any 12 calendar month period during the term of the Loan. (b) Within ten (10) days after request by Lender, in connection with Lender's efforts with respect to any sale, securitization, pooling, split, severance or hypothecation of all or a portion of the Loan, Borrower shall furnish Lender with a certificate reaffirming all representations and warranties of Borrower set forth herein and in the other Loan Documents as of the date requested by Lender or, to the extent of any changes to any such representations and warranties, so stating such changes. (c) Borrower shall use commercially reasonable efforts to deliver to Lender upon request, tenant estoppel certificates from each tenant under a Lease in form and substance reasonably satisfactory to Lender; provided, however, that Lender may only request up to two tenant estoppel certificates from the same tenant in any 12 calendar month period during the term of the Loan. 15. CHANGES IN THE LAWS REGARDING TAXATION If any law is enacted, adopted or amended after the date of this Agreement which deducts the Debt from the value of the Mortgaged Property for the purpose of taxation, or which imposes a tax, either directly or indirectly, on the Debt or Lender's interest in the Mortgaged Property, Borrower will pay such tax, with interest and penalties thereon, if any. In the event Lender or its counsel determines in good faith that the payment of such tax or interest and penalties by Borrower would be unlawful or taxable to Lender or unenforceable or provide the basis for a defense of usury, then in any such event, Lender shall have the option, by written notice of not less than 90 days, to declare the Debt immediately due and payable. 16. NO CREDITS ON ACCOUNT OF THE DEBT Borrower will not claim, demand or be entitled to any credit or credits on account of the Debt for any part of the Taxes or Other Charges assessed against the Mortgaged Property, or any part thereof, and no deduction shall otherwise be made or claimed from the assessed value of the Mortgaged Property, or any part thereof, for real estate tax purposes by reason of the Mortgage or the Debt. In the event such claim, credit or deduction shall be required by law, Lender shall have the option, by written notice of not less Page 28 than 90 days, to declare the Debt immediately due and payable. 17. DOCUMENTARY STAMPS If at any time the United States of America, any State thereof or any subdivision of any such State shall require revenue or other stamps to be affixed to the Note or the Mortgage, or shall impose any other tax or charge on the same, Borrower will pay for the same, with interest and penalties thereon, if any. 18. CONTROLLING AGREEMENT It is expressly stipulated and agreed to be the intent of Borrower and Lender at all times to comply with applicable state law or applicable United States federal law (to the extent that it permits Lender to contract for, charge, take, reserve, or receive a greater amount of interest than under state law) and that this Section shall control every other covenant and agreement in this Agreement and the other Loan Documents. If the applicable law (state or federal) is ever judicially interpreted so as to render usurious any amount called for under the Note or under any of the other Loan Documents, or contracted for, charged, taken, reserved, or received with respect to the Debt, or if Lender's exercise of the option to accelerate the maturity of the Note, or if any prepayment by Borrower results in Borrower having paid any interest in excess of that permitted by applicable law, then it is Borrower's and Lender's express intent that all excess amounts theretofore collected by Lender shall be credited on the principal balance of the Note and all other Debt (or, if the Note and all other Debt have been or would thereby be paid in full, refunded to Borrower), and the provisions of the Note and the other Loan Documents immediately be deemed reformed and the amounts thereafter collectible hereunder and thereunder reduced, without the necessity of the execution of any new documents, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder or thereunder. All sums paid or agreed to be paid to Lender for the use, forbearance or detention of the Debt shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Debt until payment in full so that the rate or amount of interest on account of the Debt does not exceed the maximum lawful rate from time to time in effect and applicable to the Debt for so long as the Debt is outstanding. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, it is not the intention of Lender to accelerate the maturity of any interest that has not accrued at the time of such acceleration or to collect unearned interest at the time of such acceleration. 19. BOOKS AND RECORDS Borrower will maintain full and accurate books of accounts and other records reflecting the independent operations of each of the individual hotels comprising a portion of the Mortgaged Property. Borrower will furnish, or cause to be furnished to Lender, within 30 days of the end of each calendar month, the following items, each certified by a senior financial officer of Borrower as true, correct and complete in all material respects as of the end of and for such period (subject to normal year-end adjustments), and as having been prepared in accordance with the Uniform System of Accounts, consistently applied: (a) a written occupancy statement dated as of the last day of the most recently ended calendar quarter identifying each of the Leases by the term, space occupied, rental required to be paid, security deposit paid, any rental concessions, and identifying any defaults or payment delinquencies thereunder; (b) monthly and year to date operating statements detailing the total revenues earned and total expenses incurred in connection with the ownership and operation of each of the individual hotels comprising a portion of the Mortgaged Property, including a comparison of the budgeted income and expenses and the actual income and expenses for such month and the year to date (which operating information shall include the Improvements); and (c) a written statement dated Page 29 as of the last day of the most recently ended month showing the percentage of hotel or motel rooms rented and occupied during such month and the average daily room rate charged during such month. Upon request by Lender, Borrower will provide a detailed explanation of any variances of ten (10%) percent or more between budgeted and actual amounts for such periods. Borrower shall furnish, within 120 days following the end of each calendar year, a statement of the financial affairs and condition of the hotels comprising the Mortgaged Property, including a statement of profit and loss and a balance sheet for the Mortgaged Property (and Borrower) for the immediately preceding fiscal year, certified on a review basis by an independent certified public accountant acceptable to Lender; provided, however, that for purposes of such statements of the financial affairs and conditions, Borrower may produce such statements of the financial affairs and condition on a consolidated basis for groups of hotels, which groups shall be designated by Lender and in no event shall Lender designate more than three groups for such statements for any one year; provided, further, however, that if Lender shall in good faith determine that there is a discrepancy in any such consolidated statements that is not resolved, in Lender's sole, but good faith, determination, after conferring with Borrower, Lender shall have the right to require such statements for each of the hotels comprising a portion of the Mortgaged Property, certified on a review basis by the independent certified public accountant. Borrower shall deliver to Lender on or before December 15 of each calendar year an itemized operating budget and capital expenditure budget for the Mortgaged Property and a management plan for the Mortgaged Property for the next succeeding calendar year in such detail as Lender may reasonably request. Borrower shall promptly after receipt deliver to Lender copies of all quality inspection reports or similar reports or inspection results that are delivered to it by the Franchisor. At any time and from time to time Borrower shall deliver to Lender or its agents such other financial data as Lender or its agents shall reasonably request with respect to Borrower and the ownership, maintenance, use and operation of each of the individual hotels comprising a portion of the Mortgaged Property. All information required to be furnished to Lender pursuant to this Section shall be on the form provided by Lender (which form shall accompany Lender's request) substantially in the form annexed hereto as Exhibit D. 20. PERFORMANCE OF OTHER AGREEMENTS Borrower shall observe and perform in all material respects each and every term to be observed or performed by Borrower pursuant to the terms of any agreement or recorded instrument affecting or pertaining to the Mortgaged Property. 21. FURTHER ASSURANCES; RIGHT TO SPLIT AND PARTICIPATE THE LOAN (a) Borrower will, at the cost of Borrower, and without expense to Lender, do, execute, acknowledge and deliver all and every such further acts, deeds, conveyances, mortgages, assignments, notices of assignment, Uniform Commercial Code financing statements or continuation statements, transfers and assurances as Lender shall, from time to time, reasonably require, for the better assuring, conveying, assigning, transferring, and confirming unto Lender the property and rights hereby mortgaged, given, granted, bargained, sold, alienated, enfeoffed, conveyed, confirmed, pledged, assigned and hypothecated or intended now or hereafter so to be, or which Borrower may be or may hereafter become bound to convey or assign to Lender, or for carrying out the intention or facilitating the performance of the terms of this Agreement or for filing, registering or recording the Mortgage. Borrower, within 5 days after demand, will execute and deliver and hereby authorizes Lender to execute in the name of Borrower or without the signature of Borrower to the extent Lender may lawfully do so, one or more financing statements, chattel mortgages or other instruments, to evidence more effectively the security interest of Lender in the Mortgaged Property; provided, however, that Lender agrees not to execute any such documents in Borrower's name unless Borrower fails to comply within 5 days after Lender's demand therefor. Borrower grants to Lender an irrevocable power of Page 30 attorney coupled with an interest for the purpose of exercising and perfecting any and all rights and remedies available to Lender at law and in equity, including without limitation such rights and remedies available to Lender pursuant to this Section; provided, however, that so long as no Event of Default has occurred or is continuing, Lender will first seek Borrower's assistance in exercising and perfecting such rights and remedies. (b) Borrower acknowledges that Lender may sell all or a portion of the Loan evidenced by all or a portion of the Loan Documents to a party who may pool the Loan with a number of other loans and to have the holder of such loans grant participations therein or issue one or more classes of Mortgage Backed, Pass-Through Certificates or other securities evidencing a beneficial interest in a rated or unrated public offering or private placement (the "Securities"). The Securities may be rated by one or more national rating agencies. In connection therewith, Borrower agrees to make available to Lender all information concerning its business and operations which Lender reasonably requests. Lender may share such information with the investment banking firms, rating agencies, accounting firms, law firms and other third-party advisory firms involved with the Loan or the Securities; provided, however, information with respect to Guarantor shall be shared to the extent such information is publicly available. The information provided by Borrower to Lender with respect to Borrower, the Mortgaged Property and/or Guarantor (with respect to Guarantor, information only to the extent that it is publicly available) may ultimately be incorporated into the offering documents for the Securities and thus such information may be disclosed to various investors. Lender and all of the aforesaid third-party advisors and professional firms shall be entitled to rely on the information supplied by, or on behalf of, Borrower. (c) Lender shall have the right, at any time in its sole and absolute discretion, to split and sever the Loan into two or more separate loans with the same or differing priorities, each secured by liens on some or all of the Mortgaged Property, to sell participations in the Loan to third parties or sell, assign, pledge or otherwise hypothecate the Loan or one or more severed portions of the Loan to third parties. Borrower shall execute and deliver all such instruments, documents and other papers, and do or cause to be done all such acts and things as Lender may reasonably request in order to effect such splitter and severance or participation. In connection with any participation, Borrower agrees to make available to Lender all information concerning its business and operations, the Mortgaged Property and/or Guarantor which Lender reasonably requests and Lender may share such information and any other information in Lender's possession concerning Borrower and the Loan with prospective participants and other third-party advisory firms involved with such activities. (d) Borrower shall cooperate with Lender in Lender's efforts with respect to any sale, securitization, pooling, split, severance or hypothecation of the Loan described in this Section 21 by executing and delivering all such documents, certificates, instruments and other things reasonably necessary to evidence or confirm Borrower's obligations hereunder, and in no such event shall the Debt or Borrower's obligations hereunder be increased, or Borrower's rights hereunder be decreased, as a result thereof, nor shall Borrower be required to incur additional expense; provided, however, that Borrower's obligations hereunder may be modified so long as the aggregate Debt and the monthly payments of principal and interest do not change. Lender shall pay all of Borrower's actual out-of-pocket expenses and third-party costs (including attorney's fees and expenses associated therewith). 22. RECORDING OF MORTGAGE Borrower forthwith upon the execution and delivery of this Agreement and thereafter, from time to time, will cause the Mortgage, and any security instrument creating a lien or security interest or evidencing the lien thereof upon the Mortgaged Property and each instrument of further assurance to be Page 31 filed, registered or recorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to protect the lien or security interest thereof upon, and the interest of Lender in, the Mortgaged Property. Borrower will pay all filing, registration or recording fees, and all expenses incident to the preparation, execution and acknowledgment of the Mortgage, any mortgage supplemental thereto, any security instrument with respect to the Mortgaged Property and any instrument of further assurance, and all federal, state, county and municipal taxes, duties, imposts, assessments and charges arising out of or in connection with the execution and delivery of the Mortgage, any mortgage supplemental thereto, any security instrument with respect to the Mortgaged Property or any instrument of further assurance, except where prohibited by law so to do. Borrower shall hold harmless and indemnify Lender, its successors and assigns, against any liability incurred by reason of the imposition of any tax on the making and recording of the Mortgage. 23. REPORTING REQUIREMENTS Borrower agrees to give prompt notice to Lender of the insolvency or bankruptcy filing of Borrower or any constituent thereof, or the death, insolvency or bankruptcy filing of any Guarantor. 24. EVENTS OF DEFAULT The term "Event of Default" as used herein shall mean the occurrence or happening, at any time and from time to time, of any one or more of the following: (a) if any portion of the Debt is not paid prior to the tenth (10th) day after the date such payment is due or if the entire Debt is not paid on or before the Maturity Date; (b) subject to Borrower's right to contest as provided herein, if any of the Taxes or Other Charges are not paid in accordance with Section 5 hereof; (c) if the Policies are not kept in full force and effect, or if the Policies are not delivered to Lender upon request, or if, within 15 days after notice, Borrower has not delivered notice of renewal; (d) if Borrower transfers or encumbers any portion of the Mortgaged Property in violation of the terms of this Agreement; (e) if any representation or warranty of Borrower, or of any Guarantor, made herein, in any Loan Document, any guaranty, or in any certificate, report, financial statement or other instrument or document furnished to Lender shall have been intentionally false or intentionally misleading in any material respect when made; (f) if Borrower or any Guarantor shall make an assignment for the benefit of creditors, or if Borrower shall generally not be paying its debts as they become due; (g) if a receiver, liquidator or trustee of Borrower or of any Guarantor shall be appointed, or if Borrower or any Guarantor shall be adjudicated a bankrupt or insolvent, or if any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by or against, consented to, or acquiesced in by, Borrower or any Guarantor or if any proceeding for the dissolution or liquidation of Borrower or of any Guarantor shall be instituted; provided, however, that such appointment, adjudication, petition or proceeding, if involuntary and not consented to by Borrower or such Guarantor, shall constitute an Event of Default only if not being discharged, stayed or dismissed within 90 Page 32 days; (h) if Borrower shall be in default under any ground lease or any other mortgage or security agreement covering any part of the Mortgaged Property, whether it be superior or junior in lien to the Mortgage, which default continues beyond applicable notice and grace periods, if any; (i) subject to Borrower's right to contest as provided herein, if the Mortgaged Property becomes subject to any mechanic's, materialman's or other lien, other than a lien for local real estate taxes and assessments not then due and payable, and such lien is not paid or discharged within ten days from the date such lien becomes an encumbrance on the Mortgaged Property; (j) if Borrower fails to cure promptly any material violations of laws or ordinances affecting the Mortgaged Property; (k) except as permitted in this Agreement, the alteration, improvement, demolition or removal of any of the Improvements without the prior written consent of Lender; (l) if there shall occur any material damage to the Mortgaged Property in any manner which is not covered by insurance solely as a result of Borrower's failure to maintain insurance required in accordance with this Agreement; (m) if without Lender's prior written consent: (i) the manager under the Management Agreement (or any succeeding management agreement) resigns or is removed; (ii) the ownership, management or control of such manager is transferred to a person or entity other than the general partner or managing partner of Borrower; or (iii) there is any material change in or termination of the Management Agreement (or any succeeding management agreement); (n) if an Uncured Franchise Default occurs; (o) if for more than 30 days after receipt of notice from Lender, Borrower shall continue to be in default under any term, covenant, representation, warranty or condition of this Agreement, the Assignment, the Environmental Agreement or any of the other Loan Documents other than as specified in any of subsections (a) through (n) of this Section; provided, however, that if the cure of any such default cannot reasonably be effected within such 30-day period and Borrower shall have promptly and diligently commenced to cure such default within such 30-day period, then, the period within which Borrower may cure shall be deemed extended for up to 90 days from Lender's default notice so long as Borrower diligently and continuously proceeds to cure such default to Lender's satisfaction; (p) if a default has occurred and continues beyond any applicable cure period under the Management Agreement if such default permits a party to terminate or cancel the Management Agreement; (q) intentionally omitted; (r) if Borrower ceases to operate a hotel on any of the individual properties comprising a portion of the Mortgaged Property or terminates such business for any reason whatsoever (other than temporary cessation in connection with any renovations to the Mortgaged Property or restoration of the Mortgaged Property after casualty or condemnation); (s) if any of the common charges and special assessments to be paid by Borrower pursuant to the Condominium Documents are not paid by Borrower when the same are due and payable and such default shall continue for ten (10) business days after written notice thereof; Page 33 (t) if, the Condominium Board (to the extent it is required pursuant to the Condominium Documents) or Borrower fails in accordance with the terms of the Condominium Documents, (a) to pay, as and when the same becomes due and payable, any charge or encumbrance which, if unpaid, would become a lien against the applicable portion of the Mortgaged Property or any part thereof prior to or on a parity with the lien of the Mortgage and, if such failure shall result in the imposition of a lien against such property and such lien shall not be discharged, dismissed or bonded by the Condominium Association or Borrower within thirty (30) days of such imposition and, in either case, the default shall continue for an additional ten (10) days after written notice thereof to Borrower subject, however, to the Condominium Board's or Borrower's right to contest same pursuant to this Agreement and/or the Condominium Documents; (u) if, any material provision of the Condominium Act is held invalid and such invalidity shall adversely affect the lien of the Mortgage; (v) if, without the prior written consent of Lender, Borrower votes for, or acquiesces to permit, the Condominium Board to effectuate, any modification or amendment to any of the terms or provisions of the Condominium Documents so as to materially adversely affect the applicable portion of the Mortgaged Property and/or increase Borrower's obligations under the Condominium Documents in any material respect; (w) if, without the prior written consent of Lender, Borrower fails to comply with any material terms of the Condominium Documents and the Condominium Act and such default continues for ten (10) days after written notice; (x) if, without the prior written consent of Lender, which consent shall not be unreasonably withheld, Borrower votes for, or acquiesces to permit, the Condominium Board, such other party as may in writing be designated by the Condominium Board, or any other party, as the case may be, to effectuate, any expansion of the Condominium and annexes to the land covered by the Condominium additional land and improvements thereon; (y) if Borrower votes or acquiesces to permit a portion of the Mortgaged Property that is subject to a Condominium or other condominium unit to be withdrawn from regime established by the Condominium Act in connection with any condemnation, any casualty or otherwise, without Lender's written consent, which consent shall not be unreasonably withheld; or (z) if Borrower votes or acquiesces to permit the Condominium to be terminated without Lender's written consent, which consent shall not be unreasonably withheld. 25. LATE PAYMENT CHARGE; SERVICING FEES (a) If any portion of the Debt is not paid prior to the tenth (10th) day after the date such payment is due (other than if the entire Debt is not paid on or before the Maturity Date), Borrower shall pay to Lender upon demand an amount equal to five (5%) percent of such overdue portion of the Debt, to defray the expense incurred by Lender in handling and processing such delinquent payment and to compensate Lender for the loss of the use of such delinquent payment, and such amount shall be secured by the Mortgage, the Assignment, the Environmental Agreement and the other Loan Documents. (b) Borrower shall pay all fees to the Servicer in respect of servicing the Loan, payable on a monthly basis, not to exceed ten basis points of the Loan on an annual basis and Borrower shall reimburse the Servicer for all of the Servicer's out-of-pocket costs and expenses incurred in connection with the Servicer's servicing of the Loan, including without limitation, lease review, preparing and reviewing subordination, non-disturbance and attornment agreements, property inspections (for which Lender has a right to receive Page 34 reimbursement under this Agreement or other Loan Documents), casualty or condemnation matters or defaults under the Loan. 26. RIGHT TO CURE DEFAULTS Upon the occurrence of any Event of Default or if Borrower fails to make any payment or to do any act as herein provided, Lender may, but without any obligation to do so and without notice to or demand on Borrower and without releasing Borrower from any obligation hereunder, take such action as Lender may deem necessary to protect its security for the Loan. Lender is authorized to enter upon the Mortgaged Property for such purposes or to appear in, defend, or bring any action or proceeding to protect its interest in the Mortgaged Property or to foreclose the Mortgage or collect the Debt, and the cost and expense thereof (including Lender's attorneys' fees to the extent permitted by law), with interest at the Default Rate for the period after notice from Lender that such cost or expense was incurred to the date of payment to Lender, shall constitute a portion of the Debt, shall be secured by the Mortgage, the Assignment, the Environmental Agreement and the other Loan Documents and shall be due and payable to Lender upon demand. 27. REMEDIES (a) Upon the occurrence of any Event of Default, Lender may take such action, without notice or demand, as it deems advisable to protect and enforce its rights against Borrower and in and to the Mortgaged Property by Lender itself or otherwise including, without limitation, the following actions, each of which may be pursued concurrently or otherwise, at such time and in such order as Lender may determine, in its sole discretion, without impairing or otherwise affecting the other rights and remedies of Lender: (i) declare the entire Debt to be immediately due and payable; (ii) institute a proceeding or proceedings, judicial or nonjudicial, by advertisement or otherwise, for the complete foreclosure of the Mortgage in which case the Mortgaged Property or any interest therein may be sold for cash or otherwise in one or more parcels or in several interests or portions and in any order or manner; (iii) with or without entry, to the extent permitted and pursuant to the procedures provided by applicable law, institute proceedings for the partial foreclosure of the Mortgage for the portion of the Debt then due and payable, subject to the continuing lien of the Mortgage for the balance of the Debt not then due; (iv) sell for cash or otherwise the Mortgaged Property or any part thereof and all estate, claim, demand, right, title and interest of Borrower therein and rights of redemption thereof, pursuant to the power of sale contained herein or otherwise, at one or more sales, as an entity or in parcels, at such time and place, upon such terms and after such notice thereof as may be required or permitted by law; (v) institute an action, suit or proceeding in equity for the specific performance of any covenant, condition or agreement contained herein, in the Assignment, the Environmental Agreement, the Note or in the other Loan Documents; (vi) recover judgment on the Note either before, during or after any proceedings for the enforcement of the Mortgage; (vii) apply for the appointment of a trustee, receiver, liquidator or conservator of the Mortgaged Property, without notice and without regard for the adequacy of the security for the Debt and without regard for the solvency of Borrower, any Guarantor or of any person, firm Page 35 or other entity liable for the payment of the Debt; (viii) revoke the license granted to Borrower to collect the Rents and other sums due under the Leases and enforce Lender's interest in the Leases and Rents and enter into or upon the Mortgaged Property, either personally or by its agents, nominees or attorneys and dispossess Borrower and its agents and servants therefrom, and thereupon Lender may to the maximum extent permitted, or not restricted, under applicable law: (A) use, operate, manage, control, insure, maintain, repair, restore and otherwise deal with all and every part of the Mortgaged Property subject to the rights of tenant, if any, and conduct the business thereat; (B) complete any construction on the Mortgaged Property in such manner and form as Lender deems advisable; (C) make alterations, additions, renewals, replacements and improvements to or on the Mortgaged Property; (D) exercise all rights and powers of Borrower with respect to the Mortgaged Property, whether in the name of Borrower or otherwise including, without limitation, the right to make, cancel, enforce or modify Leases, obtain and evict tenants, and demand, sue for, collect and receive all earnings, revenues, rents, issues, profits and other income of the Mortgaged Property and every part thereof; and (E) apply the receipts from the Mortgaged Property to the payment of the Debt, after deducting therefrom all expenses (including Lender's attorneys' fees) incurred in connection with the aforesaid operations and all amounts necessary to pay the taxes, assessments, insurance and other charges in connection with the Mortgaged Property, as well as just and reasonable compensation for the services of Lender, its counsel, agents and employees; (ix) require Borrower to pay monthly in advance to Lender, or any receiver appointed to collect the Rents, the fair and reasonable rental value for the use and occupancy of any portion of the Mortgaged Property occupied by Borrower (by way of example, but not limitation, use of hotel rooms as offices, complimentary use of hotel rooms by representatives and agents of Borrower or its affiliates, but excluding use of reception areas) and require Borrower to vacate and surrender possession of the Mortgaged Property to Lender or to such receiver and, in default thereof, evict Borrower by summary proceedings or otherwise; and (x) pursue such other rights and remedies as may be available at law or in equity or under the Uniform Commercial Code, including the right to establish a lock box for all Rents and other receivables of Borrower relating to the Mortgaged Property. In the event of a sale, by foreclosure or otherwise, of less than all of the Mortgaged Property, the Mortgage shall continue as a lien on the remaining portion of the Mortgaged Property. (b) The proceeds of any sale made under or by virtue of this Section, together with any other sums which then may be held by Lender under this Agreement, whether under the provisions of this Section or otherwise, shall be applied by Lender to the payment of the Debt in such priority and proportion as Lender in its sole discretion shall deem proper. (c) Lender may adjourn from time to time any sale by it to be made under or by virtue of the Mortgage by announcement at the time and place appointed for such sale or for such adjourned sale or sales; and, except as otherwise provided by any applicable provision of law, Lender, without further notice or publication, may make such sale at the time and place to which such sale shall be so adjourned. (d) Upon the completion of any sale or sales pursuant hereto, Lender or an officer of any court empowered to do so, shall execute and deliver to the accepted purchaser or purchasers a good and sufficient instrument, or good and sufficient instruments, conveying, assigning and transferring all estate, right, Page 36 title and interest in and to the property and rights sold. Lender is hereby irrevocably appointed the true and lawful attorney-in-fact of Borrower, to act in its name and stead (such power of attorney being coupled with an interest, and irrevocable), to make all necessary conveyances, assignments, transfers and deliveries of the Mortgaged Property and rights so sold and for that purpose Lender may execute all necessary instruments of conveyance, assignment and transfer, and may substitute one or more persons with like power, Borrower hereby ratifying and confirming all that its attorney or such substitute or substitutes shall lawfully do by virtue hereof. Any sale or sales made under or by virtue of this Section, whether made under the power of sale herein granted or under or by virtue of judicial proceedings or of a judgment or decree of foreclosure and sale, shall operate to divest all the estate, right, title, interest, claim and demand whatsoever, whether at law or in equity, of Borrower in and to the properties and rights so sold, and shall be a perpetual bar both at law and in equity against Borrower and against any and all persons claiming or who may claim the same, or any part thereof from, through or under Borrower. (e) Upon any sale made under or by virtue of this Section, whether made under the power of sale herein granted or under or by virtue of judicial proceedings or of a judgment or decree of foreclosure and sale, Lender may bid for and acquire the Mortgaged Property or any part thereof and in lieu of paying cash therefor may make settlement for the purchase price by crediting upon the Debt the net sales price after deducting therefrom the expenses of the sale and costs of the action and any other sums which Lender is authorized to deduct under the Mortgage. (f) No recovery of any judgment by Lender and no levy of an execution under any judgment upon the Mortgaged Property or upon any other property of Borrower shall affect in any manner or to any extent the lien of the Mortgage upon the Mortgaged Property or any part thereof, or any liens, rights, powers or remedies of Lender hereunder, but such liens, rights, powers and remedies of Lender shall continue unimpaired as before. (g) Lender may terminate or rescind any proceeding or other action brought in connection with its exercise of the remedies provided in this Section at any time before the conclusion thereof, as determined in Lender's sole discretion and without prejudice to Lender. (h) Lender may resort to any remedies and the security given by the Note, the Mortgage, this Agreement, the Assignment, the Environmental Agreement or the other Loan Documents in whole or in part, and in such portions and in such order as determined by Lender's sole discretion. No such action shall in any way be considered a waiver of any rights, benefits or remedies evidenced or provided by the Note, the Mortgage, this Agreement, the Assignment, the Environmental Agreement or the other Loan Documents. The failure of Lender to exercise any right, remedy or option provided in the Note, the Mortgage, this Agreement, the Assignment, the Environmental Agreement or the other Loan Documents shall not be deemed a waiver of such right, remedy or option or of any covenant or obligation secured by the Note, the Mortgage, this Agreement, the Assignment, the Environmental Agreement or the other Loan Documents. No acceptance by Lender of any payment after the occurrence of any Event of Default and no payment by Lender of any obligation for which Borrower is liable hereunder shall be deemed to waive or cure any Event of Default with respect to Borrower, or Borrower's liability to pay such obligation. No sale of all or any portion of the Mortgaged Property, no forbearance on the part of Lender, and no extension of time for the payment of the whole or any portion of the Debt or any other indulgence given by Lender to Borrower, shall operate to release or in any manner affect the interest of Lender in the remaining Mortgaged Property or the liability of Borrower to pay the Debt. No waiver by Lender shall be effective unless it is in writing and then only to the extent specifically stated. (i) The interests and rights of Lender under the Note, the Mortgage, this Agreement, the Assignment, the Environmental Agreement or the other Loan Page 37 Documents shall not be impaired by any indulgence, including: (i) any renewal, extension or modification which Lender may grant with respect to any of the Debt; (ii) any surrender, compromise, release, renewal, extension, exchange or substitution which Lender may grant with respect to the Mortgaged Property or any portion thereof; or (iii) any release or indulgence granted to any maker, endorser, guarantor or surety of any of the Debt. (j) Anything herein to the contrary notwithstanding, if any of the foregoing remedies conflict or are otherwise inconsistent with any remedies available under the Mortgage (or as a matter of law in the jurisdiction governing the Mortgage) then, to the extent permitted as a matter of law in the jurisdiction in which any such remedy is being sought, such inconsistency shall be resolved in favor of the interpretation that would grant Lender the broadest possible remedies. (k) Borrower hereby expressly waives and releases to the fullest extent permitted by law, the pleading of any statute of limitations as a defense to payment of the Debt or performance of its obligations under any of the Loan Documents. 28. RIGHT OF ENTRY Lender and its agents shall have the right to enter and inspect the Mortgaged Property during normal business hours upon reasonable notice. Lender shall use commercially reasonable efforts to avoid material disruption to hotel guests and tenants, if any, at the Mortgaged Property. 29. SECURITY AGREEMENT This Agreement is a "security agreement" within the meaning of the Uniform Commercial Code. The Mortgaged Property includes both real and personal property and all other rights and interests, whether tangible or intangible in nature, of Borrower in the Mortgaged Property. By executing and delivering this Agreement, Borrower has granted and hereby grants to Lender, as security for the Debt, a security interest in the Mortgaged Property to the full extent that the Mortgaged Property may be subject to the Uniform Commercial Code (such portion of the Mortgaged Property so subject to the Uniform Commercial Code being called in this Section the "Collateral"). Borrower hereby agrees with Lender to execute and deliver to Lender, in form and substance satisfactory to Lender, such financing statements and such further assurances as Lender may from time to time, reasonably consider necessary to create, perfect or preserve Lender's security interest therein granted. The Mortgage shall also constitute a "fixture filing" for the purposes of the Uniform Commercial Code. All or part of the Mortgaged Property are or are to become fixtures. If an Event of Default shall occur, Lender, in addition to any other rights and remedies which it may have, shall have and may exercise immediately and without demand, any and all rights and remedies granted to a secured party upon default under the Uniform Commercial Code including, without limitation, the right to take possession of the Collateral or any part thereof, and to take such other measures as Lender may deem necessary for the care, protection and preservation of the Collateral. Upon request or demand of Lender, Borrower shall at its expense assemble the Collateral and make it available to Lender at the Mortgaged Property. Borrower shall pay to Lender on demand any and all reasonable out-of-pocket expenses, including Lender's reasonable attorneys' fees, incurred or paid by Lender in protecting the interest in the Collateral and in enforcing the rights hereunder with respect to the Collateral. Any notice of sale, disposition or other intended action by Lender with respect to the Collateral sent to Borrower in accordance with the provisions hereof at least 10 days prior to such action, shall constitute commercially reasonable notice to Borrower. The proceeds of any disposition of the Collateral, or any part thereof, may be applied by Lender to the payment of the Debt in such priority and proportions as Lender in its discretion shall deem proper. In the event of any change in name, identity or structure of any Borrower, such Borrower shall notify Lender thereof and Page 38 promptly after request shall execute, file and record such Uniform Commercial Code forms as are necessary to maintain the priority of Lender's lien upon and security interest in the Collateral, and shall pay all expenses and fees in connection with the filing and recording thereof. If Lender shall require the filing or recording of additional Uniform Commercial Code forms or continuation statements, Borrower shall, promptly after request, execute, file and record such Uniform Commercial Code forms or continuation statements as Lender shall deem necessary, and shall pay all expenses and fees in connection with the filing and recording thereof, it being understood and agreed, however, that no such additional documents shall increase Borrower's obligations under the Note, the Mortgage, this Agreement, the Assignment, the Environmental Agreement and the other Loan Documents. Borrower hereby irrevocably appoints Lender as its attorney-in-fact, coupled with an interest, to file with the appropriate public office on its behalf any financing or other statements signed only by Lender, as secured party, in connection with the Collateral covered by the Mortgage. 30. ACTIONS AND PROCEEDINGS Lender has the right to appear in and defend any action or proceeding brought with respect to the Mortgaged Property and to bring any action or proceeding, in the name and on behalf of Borrower, which Lender, in its reasonable discretion, decides should be brought to protect its interest in the Mortgaged Property. Lender shall, at its option, be subrogated to the lien of any mortgage or other security instrument discharged in whole or in part by the Debt, and any such subrogation rights shall constitute additional security for the payment of the Debt. 31. WAIVER OF SETOFF AND COUNTERCLAIM All amounts due under the Mortgage, the Note and the other Loan Documents shall be payable without setoff, counterclaim or any deduction whatsoever. Borrower hereby waives the right to assert a counterclaim (other than compulsory counterclaims) in any action or proceeding brought against it by Lender, or arising out of or in any way connected with this Agreement, the Mortgage, the Note, any of the other Loan Documents, or the Debt. 32. CONTEST OF CERTAIN CLAIMS Notwithstanding the provisions of Sections 5 and 24(i) hereof, Borrower shall not be in default for failure to pay or discharge Taxes, Other Charges or a mechanic's or materialman's lien asserted against the Mortgaged Property if, and so long as: (a) Borrower shall have notified Lender of such nonpayment and the reasons therefor within five days of obtaining knowledge thereof; (b) Borrower shall diligently and in good faith contest such Taxes, Other Charges or lien by appropriate legal proceedings which shall operate to prevent the enforcement or collection thereof and the sale of the Mortgaged Property or any part thereof, in satisfaction thereof; (c) Borrower shall have furnished to Lender, at Borrower's option, either a cash deposit, or an indemnity bond satisfactory to Lender with a surety satisfactory to Lender, in the amount of the Taxes, Other Charges or mechanic's or materialman's lien claim, plus a reasonable additional sum to pay all costs, interest and penalties that may be imposed or incurred in connection therewith, to assure payment of the matters under contest and to prevent any sale or forfeiture of the Mortgaged Property or any part thereof; (d) Borrower shall promptly upon final determination thereof pay the amount of any such Taxes, Other Charges or claim so determined, together with all costs, interest and penalties which may be payable in connection therewith; and (e) the failure to pay the Taxes, Other Charges or mechanic's or materialman's lien claim does not constitute a default under any other deed of trust, mortgage or security interest covering or affecting any part of the Mortgaged Property. Notwithstanding the foregoing, Borrower shall immediately upon request of Lender pay (and if Borrower shall fail so to do, Lender may, but shall not be required to, pay or cause to be discharged or bonded against) any such Taxes, Other Charges or claim Page 39 notwithstanding such contest, if in the reasonable opinion of Lender, the Mortgaged Property or any part thereof or interest therein may be in danger of being sold, forfeited, foreclosed, terminated, cancelled or lost. Lender may pay over any such cash deposit or part thereof to the claimant entitled thereto at any time when, in the reasonable judgment of Lender, the entitlement of such claimant is established. 33. RECOVERY OF SUMS REQUIRED TO BE PAID Lender shall have the right from time to time to take action to recover any sum or sums which constitute a part of the Debt as they become due, without regard to whether or not the balance of the Debt shall be due, and without prejudice to the right of Lender thereafter to bring an action of foreclosure, or any other action, for a default or defaults by Borrower existing at the time such earlier action was commenced. 34. MARSHALLING AND OTHER MATTERS Borrower hereby waives, to the extent permitted by law, the benefit of all appraisement, valuation, stay, extension, reinstatement and redemption laws now or hereafter in force, and all rights of marshalling in the event of any sale hereunder of the Mortgaged Property or any part thereof or any interest therein. Further, Borrower hereby expressly waives any and all rights of redemption from sale under any order or decree of foreclosure of the Mortgage on behalf of Borrower, and on behalf of each and every person acquiring any interest in or title to the Mortgaged Property subsequent to the date of this Agreement and on behalf of all persons to the extent permitted by applicable law. 35. HAZARDOUS SUBSTANCES Borrower hereby represents and warrants to Lender that, to the best of Borrower's knowledge, except as disclosed in the Environmental Reports: (a) the Mortgaged Property is not in material violation of any local, state, federal or other governmental authority, statute, ordinance, code, order, decree, law, rule or regulation pertaining to or imposing liability or standards of conduct concerning environmental regulation, contamination or clean-up including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, as amended, the Resource Conservation and Recovery Act, as amended, and any state super-lien and environmental clean-up statutes (collectively, "Environmental Laws"); (b) the Mortgaged Property is not subject to any private or governmental lien or judicial or administrative notice or action relating to hazardous and/or toxic, dangerous and/or regulated, substances, solvents, wastes, materials, pollutants or contaminants, petroleum, tremolite, anthlophylie or actinolite or polychlorinated biphenyls (including, without limitation, any raw materials which include hazardous constituents) and any other substances, materials or solvents which are included under or regulated by Environmental Laws (collectively, "Hazardous Substances"); (c) no Hazardous Substances are or have been, prior to Borrower's acquisition of the Mortgaged Property, discharged, generated, treated, disposed of or stored on, incorporated in or removed or transported from the Mortgaged Property other than in compliance with all Environmental Laws; and (d) no underground storage tanks exist on any of the Mortgaged Property in violation of Environmental Laws. So long as Borrower owns or is in possession of the Mortgaged Property, Borrower shall keep or cause the Mortgaged Property to be kept free from Hazardous Substances (other than de minimis quantities of Hazardous Substances that are necessary and lawfully used in the operation of the Mortgaged Property as a hotel or motel, and which are stored and disposed of in compliance with all Environmental Laws) and in compliance with all Environmental Laws, shall promptly notify Lender if Borrower shall become aware of any Hazardous Substances on the Mortgaged Property (other than de minimis quantities of Hazardous Substances that are necessary and lawfully used in the operation of the Mortgaged Property as a hotel or motel, and which are stored and disposed of Page 40 in compliance with all Environmental Laws) and/or if Borrower shall become aware that the Mortgaged Property is in direct or indirect violation of any Environmental Laws and Borrower shall remove such Hazardous Substances and/or cure such violations, as applicable, as required by law, promptly after Borrower becomes aware of such Hazardous Substances or such violations, at Borrower's sole expense. Borrower shall have the right to contest any Environmental Law (as such term is defined in the Environmental Agreement) as provided in the Environmental Agreement, subject to any and all conditions to the exercise of such right contained therein. Nothing herein shall prevent Borrower from recovering such expenses from any other party that may be liable for such removal or cure. Upon Lender's request, at any time and from time to time while this Agreement is in effect (but in no event more frequently than once in any three-year period or more frequently if specific facts and circumstances reasonably dictate, or otherwise at Lender's election but at Lender's expense), Borrower shall provide at Borrower's sole expense, an inspection or audit of the Mortgaged Property prepared by a licensed hydrogeologist or licensed environmental engineer reasonably approved by Lender indicating the presence or absence of Hazardous Substances on the Mortgaged Property; provided, however, unless Lender demonstrates a reasonable factual basis to believe that Hazardous Substances or Asbestos exists on a property comprising a portion of the Mortgaged Property creating a condition in violation of applicable law, Borrower shall not be required to expend during the term of the Loan in excess of $45,000.00 in the aggregate for such inspections or audits or inspections or audits of the Mortgaged Property prepared by an engineering or consulting firm reasonably approved by Lender, indicating the presence or absence of Asbestos on the Mortgaged Property pursuant to Section 36 hereof. If Borrower fails to provide such inspection or audit within 60 days after such request, Lender may order such inspection or audit, and Borrower hereby grants to Lender and its employees and agents access to the Mortgaged Property and a license to undertake such inspection or audit at reasonable hours and on reasonable notice to Borrower. Subject to the limitations contained in this Section concerning aggregate expense to Borrower, the cost of such inspection or audit shall be paid by Borrower and, if not so paid, shall be added to the principal balance of the sums due under the Note and the Mortgage and shall bear interest thereafter until paid at the Default Rate. The liabilities of Borrower under this Section shall survive any termination, satisfaction, or assignment of the Mortgage and the exercise by Lender of any of its rights or remedies thereunder including, without limitation, the acquisition of the Mortgaged Property by foreclosure or a conveyance in lieu of foreclosure. Notwithstanding anything herein to the contrary, Borrower shall have no liability under this Section with respect to: (i) any acts or omissions which occur from and after the conveyance of the Mortgaged Property to Lender, or its designee, by foreclosure, deed in lieu of foreclosure or similar transaction, or the discharge, by satisfaction or assignment of the Mortgage; or (ii) any matters which arise by reason of the acts or omissions of Lender or any of successors, assigns or designees. 36. ASBESTOS (a) Borrower hereby represents and warrants to Lender that, to the best of Borrower's knowledge, except as disclosed in the Environmental Reports, no asbestos or any substance containing asbestos (collectively, "Asbestos") is located on the Mortgaged Property. Borrower shall not install in the Mortgaged Property, nor permit to be installed in the Mortgaged Property, Asbestos and shall remove (if, and to the extent, required by, and in accordance with, applicable Environmental Laws) any Asbestos promptly upon discovery to the satisfaction of Lender, at Borrower's sole expense. Upon Lender's reasonable request, at any time and from time to time (but in no event more frequently than once in any three-year period or more frequently if specific facts and circumstances reasonably dictate, or otherwise at Lender's election but at Lender's expense), Borrower shall provide, at Borrower's sole expense (subject to the limitations of Borrower's expense obligations set forth in Section 35 hereof), an inspection or audit of the Mortgaged Property prepared by an engineering or consulting firm approved by Lender, indicating the presence or Page 41 absence of Asbestos on the Mortgaged Property. If Borrower fails to provide such inspection or audit within 60 days after such request, Lender may order such inspection or audit. Subject to the limitations contained in Section 35 concerning aggregate expense to Borrower, the cost of such inspection or audit shall be paid by Borrower and added to the principal balance of the sums due under the Note and the Mortgage, and shall bear interest thereafter until paid at the Default Rate. The liabilities of Borrower under this Section shall survive any termination, satisfaction, or assignment of the Mortgage and the exercise by Lender of any of its rights or remedies thereunder, including but not limited to, the acquisition of the Mortgaged Property by foreclosure or a conveyance in lieu of foreclosure. (b) Borrower shall, subject to Lender's reasonable approval, develop an operations and maintenance plan for the Mortgaged Property with respect to the presence of Asbestos in the Improvements (the "O&M Plan"). Borrower shall comply in all respects with the terms and conditions of the O&M Plan. Unless required by Environmental Laws, Borrower shall not modify or amend the O&M Plan in any material manner without Lender's prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned. (c) Borrower shall not remove, disturb, encapsulate or otherwise remediate the Asbestos in the Improvements except in compliance with the O&M Plan and all Environmental Laws. If Borrower makes any alterations or modifications to the Improvements that would disturb or expose any Asbestos in the Improvements or cause any of such Asbestos to become friable, Borrower shall remove or encapsulate such Asbestos in compliance with all applicable Environmental Laws before allowing occupancy of such space or opening such space to the public. 37. ENVIRONMENTAL MONITORING Borrower shall give prompt written notice to Lender of: (a) any governmental proceeding or inquiry with respect to the presence of any Hazardous Substance on, under, from or about the Mortgaged Property; (b) all written claims made by any third party against Borrower or the Mortgaged Property relating to any material loss or injury resulting from any Hazardous Substance; and (c) Borrower's actual discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Mortgaged Property that could reasonably be expected to cause the Mortgaged Property to be subject to any investigation or cleanup pursuant to any Environmental Law. Borrower shall permit Lender to join and participate, as a party if it so elects, in any legal proceedings or actions initiated with respect to the Mortgaged Property in connection with any Environmental Law or Hazardous Substance, and Borrower shall pay all attorneys' fees incurred by Lender in connection therewith, provided that, unless Lender shall reasonably determine that a conflict of interest exists between Lender and Borrower, Lender and Borrower shall both be represented by one counsel selected by Borrower and reasonably acceptable to Lender. In the event that any environmental site assessment report prepared for the Mortgaged Property recommends that an operations and maintenance plan be implemented for Asbestos or any Hazardous Substance, Borrower shall cause such operations and maintenance plan to be prepared and implemented at Borrower's expense upon request of Lender and in accordance with the recommendation. In the event that any investigation, site monitoring, containment, cleanup, removal, restoration, or other work of any kind which is reasonably necessary or desirable under an applicable Environmental Law ("Remedial Work"), Borrower shall, at its sole cost and expense, commence and thereafter diligently prosecute to completion all such Remedial Work within 90 days after written demand by Lender for performance thereof (or such shorter period of time as may be required under applicable law). 38. MANAGEMENT OF THE MORTGAGED PROPERTY Borrower further covenants and agrees with Lender as follows: Page 42 (a) Borrower shall cause each hotel located on the Mortgaged Property to be operated pursuant to the applicable Franchise Agreement (other than the Non-Flagged Properties) and the Management Agreement. Borrower may, absent an Uncured Franchise Default, replace a franchisor with an Acceptable Franchisor in the same numbered or lower numbered tier as listed for such then current franchisor as set forth on Exhibit E hereto, provided, that (i) the proposed franchise agreement with such proposed Acceptable Franchisor is reasonably acceptable to Lender, (ii) Lender receives a fully executed comfort letter from such proposed Acceptable Franchisor reasonably acceptable to Lender and (iii) such proposed replacement franchise or license could not reasonably result in any downgrade, withdrawal or qualification of the current rating of any Securities (or if Securities have not yet been issued, would not reasonably result in any downgrade, withdrawal or qualification of the anticipated rating thereof). (b) Borrower shall: (i) pay all sums required to be paid by Borrower under each Franchise Agreement and the Management Agreement and promptly perform and/or observe in all material respects all of the covenants and agreements required to be performed and observed by it under each Franchise Agreement and the Management Agreement and do all things necessary to preserve and to keep unimpaired its material rights thereunder; (ii) promptly notify Lender of any default under any Franchise Agreement of which it has received, or been given notice, or under the Management Agreement, and provide Lender with copies of any notices delivered in connection therewith; (iii) promptly deliver to Lender a copy of each financial statement, business plan, capital expenditures plan, notice, report and estimate received by it under any Franchise Agreement or the Management Agreement; (iv) promptly enforce the performance and observance of all of the covenants and agreements required to be performed and/or observed by the franchisor under the applicable Franchise Agreement and the manager under the Management Agreement; (v) assign to Lender any right, to the extent assignable, it may have to modify a Franchise Agreement or the Management Agreement; (vi) grant Lender the right, to the extent assignable (but Lender shall be under no obligation) to pay any sums and to perform any act or take any action as may be appropriate to cause all the terms, covenants and conditions of each Franchise Agreement on the part of Borrower to be performed or observed to be promptly performed or observed on behalf of Borrower, to the end that the rights of Borrower in, to and under each Franchise Agreement shall be kept unimpaired and free from default; (vii) use its reasonable efforts to obtain, from time to time, from the franchisor under each Franchise Agreement such certificates of estoppel with respect to compliance by Borrower with the terms of the applicable Franchise Agreement as may be requested by Lender, not to exceed two such certificates in any 12 calendar month period during the term of the Loan; and (viii) exercise each individual option, if any, to extend or renew the term of each Franchise Agreement upon demand by Lender made at any time within one year of the last day upon which any such option may be Page 43 exercised, and Borrower hereby expressly authorizes and appoints Lender its attorney-in-fact to exercise any such option in the name of and upon behalf of Borrower if Borrower fails to exercise any such option, which power of attorney shall be irrevocable and shall be deemed to be coupled with an interest. (c) Borrower shall not, without Lender's prior written consent, exercise any right, option or discretion to: (i) surrender, terminate or cancel any Franchise Agreement or the Management Agreement; (ii) reduce or consent to the reduction of the term of any Franchise Agreement or the Management Agreement; (iii) increase or consent to the increase of the amount of any charges under any Franchise Agreement or the Management Agreement; (iv) otherwise modify, change, supplement, alter or amend, or waive or release any of its rights and remedies under any Franchise Agreement or the Management Agreement in any material respect; or (v) operate the Mortgaged Property (other than the Non-Flagged Properties) under the name of any hotel chain or system other than as set forth on Schedule A with respect to each hotel comprising a portion of the Mortgaged Property. (d) Except pursuant to existing terms of the applicable Franchise Agreement and the Management Agreement, Borrower shall not, without Lender's prior written consent, enter into transactions with any affiliate including, without limitation, any arrangement providing for the management of the hotel on the Mortgaged Property, the rendering or receipt of services or the purchase or sale of inventory, except any such transaction in the ordinary course of business of Borrower if the monetary or business consideration arising therefrom would be substantially as advantageous to Borrower as the monetary or business consideration which would obtain in a comparable transaction with a person not an affiliate of Borrower. (e) Borrower irrevocably authorizes and directs Franchisor to deliver to Lender: (i) all operating information concerning the Property submitted by Borrower to Franchisor; (ii) the written results of all quality assurance inspections of the Property performed by Franchisor's Quality Assurance Directors; and (iii) such other information that Lender or Lender's agents may reasonably request, from time to time, including any information in the possession of Franchisor relating to Borrower not included in the reports referred to above. 39. HANDICAPPED ACCESS (a) Borrower agrees that the Mortgaged Property shall at all times strictly comply to the extent applicable with the requirements of the Americans with Disabilities Act of 1990, all state and local laws and ordinances related to handicapped access and all rules, regulations, and orders issued pursuant thereto including, without limitation, the Americans with Disabilities Act Accessibility Guidelines for Buildings and Facilities (collectively, "Access Laws"). (b) Notwithstanding any provisions set forth herein or in any other document regarding Lender's approval of alterations of the Mortgaged Property, Borrower shall not alter the Mortgaged Property in any manner which would increase Borrower's responsibilities for compliance with the applicable Access Laws without the prior written approval of Lender, which approval shall not be unreasonably withheld, delayed or conditioned. The foregoing shall apply to tenant improvements constructed by Borrower or by any of its tenants. Lender may condition any such approval upon receipt of a certificate of Access Law compliance from an architect, engineer or other person acceptable to Lender. (c) Borrower agrees to give prompt notice to Lender of the receipt by Borrower of any written complaints from any governmental authority related to violation of any Access Laws and of the commencement of any proceedings or investigations which relate to compliance with applicable Access Laws. Page 44 40. ERISA (a) Borrower covenants and agrees that it shall not engage in any transaction which would cause any obligation, or action taken or to be taken, hereunder (or the exercise by Lender of any of its rights under the Note, the Mortgage, this Agreement and the other Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under the Employee Retirement Income Security Act of 1974 (or any successor legislation thereto), as amended ("ERISA"). (b) Borrower further covenants and agrees to deliver to Lender such certifications or other evidence from time to time throughout the term of this Agreement, as requested by Lender in its sole discretion, that: (i) Borrower is not an "employee benefit plan" as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, or a "governmental plan" within the meaning of Section 3(32) of ERISA; (ii) Borrower is not subject to state statutes regulating investments and fiduciary obligations with respect to governmental plans; and (iii) one or more of the following circumstances is true: (A) Equity interests in Borrower are publicly offered securities, within the meaning of 29 C.F.R. ss. 2510.3-101(b)(2); (B) Less than 25 percent of each outstanding class of equity interests in Borrower are held by "benefit plan investors" within the meaning of 29 C.F.R. ss. 2510.3-101(f)(2); or (C) Borrower qualifies as an "operating company" or a "real estate operating company" within the meaning of 29 C.F.R. ss. 2510.3-101(c) or (e) or an investment company registered under The Investment Company Act of 1940. 41. INDEMNIFICATION In addition to any other indemnifications provided herein, in the Assignment, the Environmental Agreement or in the other Loan Documents, Borrower shall protect, defend, indemnify and save harmless Lender from and against all liabilities, obligations, claims, demands, damages, penalties, causes of action, losses, fines, costs and expenses (including, without limitation, reasonable out-of-pocket attorneys' fees and expenses), imposed upon or incurred by or asserted against Lender by reason of: (a) ownership of the Mortgage, the Mortgaged Property or any interest therein or receipt of any Rents; (b) any accident, injury to or death of persons or loss of or damage to property occurring in, on or about the Mortgaged Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (c) any use, nonuse or condition in, on or about the Mortgaged Property or any part thereof or on adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (d) any failure on the part of Borrower to perform or comply with any of the terms of this Agreement; (e) performance of any labor or services or the furnishing of any materials or other property in respect of the Mortgaged Property or any part thereof; (f) the presence, disposal, escape, seepage, leakage, spillage, discharge, emission, release, or threatened release of any Hazardous Substance or Asbestos on, from, or affecting the Mortgaged Property or any other property; (g) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to such Hazardous Substance or Asbestos; (h) any lawsuit brought or threatened, settlement reached, or government order relating to such Hazardous Substance or Asbestos; (i) any violation of the Environmental Laws, which are based upon or in any way related to such Hazardous Substance or Asbestos including, without limitation, the reasonable costs and expenses of any remedial action, reasonable out-of-pocket attorney's and consultant's fees, investigation and laboratory fees, court costs, and reasonable litigation expenses; (j) any failure of the Mortgaged Property to comply with any Access Laws; (k) any representation or Page 45 warranty made in the Note, the Mortgage, this Agreement, the Environmental Agreement or the other Loan Documents being false or misleading in any material respect as of the date such representation or warranty was made; (l) any claim by brokers, finders or similar persons claiming to be entitled to a commission in connection with any Lease or other transaction involving the Mortgaged Property or any part thereof under any legal requirement or any liability asserted against Lender with respect thereto; and (m) the claims of any lessee of all or any portion of the Mortgaged Property or any person acting through or under any lessee or otherwise arising under or as a consequence of any Lease. Any amounts payable to Lender by reason of the application of this Section shall be immediately due and payable within 10 days after written demand, shall be secured by the Mortgage and shall bear interest at the Default Rate from the date loss or damage is sustained by Lender until paid. The obligations and liabilities of Borrower under this Section shall survive any termination, satisfaction or assignment of this Agreement or the entry of a judgment of foreclosure, sale of the Mortgaged Property by nonjudicial foreclosure sale, or delivery of a deed in lieu of foreclosure. Notwithstanding the foregoing, Borrower shall not be obligated to indemnify Lender for the gross negligence or willful misconduct of Lender or anyone claiming by, through or under Lender. 42. NOTICE Any notice, demand, statement, request or consent made hereunder shall be in writing and shall be deemed given on the next business day if sent by Federal Express or other reputable overnight courier and designated for next business day delivery, or on the third day following the day such notice is deposited with the United States postal service first class certified mail, return receipt requested, addressed to the address, as set forth above, of the party to whom such notice is to be given, or to such other address or additional party as Borrower or Lender, as the case may be, shall in like manner designate in writing. 43. AUTHORITY Borrower represents and warrants that: (a) it has full power, authority and right to execute, deliver and perform its obligations pursuant to this Agreement, and to mortgage, give, grant, bargain, sell, alien, enfeoff, convey, confirm, warrant, pledge, hypothecate and assign the Mortgaged Property pursuant to the terms hereof and to keep and observe all of the terms of this Agreement on Borrower's part to be performed; and (b) Borrower is not a "foreign person" within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended, and the related Treasury Department regulations, including temporary regulations. Lender represents and warrants that it has full power, authority and right to execute, deliver and perform its obligations pursuant to this Agreement. 44. WAIVER OF NOTICE Borrower shall not be entitled to any notices of any nature whatsoever from Lender except with respect to matters for which this Agreement or the other Loan Documents specifically and expressly provides for the giving of notice by Lender to Borrower and except with respect to matters for which Lender is required by applicable law to give notice, and Borrower hereby expressly waives the right to receive any notice from Lender with respect to any matter for which this Agreement does not specifically and expressly provide for the giving of notice by Lender to Borrower. 45. REMEDIES OF BORROWER In the event that a claim or adjudication is made that Lender has acted unreasonably or has unreasonably delayed acting in any case where by law or under the Note, the Mortgage, this Agreement, the Assignment, the Environmental Agreement or the other Loan Documents, it has an obligation to act Page 46 reasonably or promptly, Lender shall not be liable for any monetary damages, and Borrower's remedies shall be limited to injunctive relief or declaratory judgment. 46. SOLE DISCRETION OF LENDER Wherever pursuant to this Agreement Lender exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Lender, the decision of Lender to approve or disapprove or to decide that arrangements or terms are satisfactory or not satisfactory shall be in the sole, but reasonable, discretion of Lender and shall be final and conclusive, except as may be otherwise expressly and specifically provided herein. 47. NON-WAIVER The failure of Lender to insist upon strict performance of any term hereof shall not be deemed to be a waiver of any term of this Agreement. Borrower shall not be relieved of Borrower's obligations hereunder by reason of: (a) the failure of Lender to comply with any request of Borrower or any Guarantor to take any action to foreclose the Mortgage or otherwise to enforce any of the provisions hereof or of the Note, the Assignment, the Environmental Agreement or the other Loan Documents; (b) the release, regardless of consideration, of the whole or any part of the Mortgaged Property, or of any person liable for the Debt or any portion thereof; or (c) any agreement or stipulation by Lender extending the time of payment or otherwise modifying or supplementing the terms of the Note, the Mortgage, this Agreement, the Assignment, the Environmental Agreement or the other Loan Documents. Lender may resort for the payment of the Debt to any other security held by Lender in such order and manner as Lender, in its discretion, may elect. Lender may take action to recover the Debt, or any portion thereof, or to enforce any covenant hereof without prejudice to the right of Lender thereafter to foreclose the Mortgage. The rights and remedies of Lender under this Agreement shall be separate, distinct and cumulative and none shall be given effect to the exclusion of the others. No act of Lender shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision. Lender shall not be limited exclusively to the rights and remedies herein stated but shall be entitled to every right and remedy now or hereafter afforded at law or in equity. 48. NO ORAL CHANGE This Agreement, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Borrower or Lender, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. 49. JOINT AND SEVERAL LIABILITY If Borrower consists of more than one person, the obligations and liabilities of each such person hereunder shall be joint and several, and any reference to the "Mortgaged Property" shall refer to each of the individual hotels comprising a portion of the Mortgaged Property, and to all of such hotels, collectively, as the context may require. Subject to the provisions hereof requiring Lender's consent to any transfer of the Mortgaged Property, this Agreement shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns forever. 50. INAPPLICABLE PROVISIONS If any term, covenant or condition of the Note, the Mortgage or any other Loan Document is held to be invalid, illegal or unenforceable in any Page 47 respect, the Note, the Mortgage and other Loan Documents shall be construed without such provision. 51. SECTION HEADINGS The headings and captions of the various Sections of this Agreement are for convenience of reference only and are not to be construed as defining or limiting, in any way, the scope or intent of the provisions hereof. 52. COUNTERPARTS This Agreement may be executed in any number of counterparts and each such duplicate original shall be deemed to be an original. 53. CERTAIN DEFINITIONS Unless the context clearly indicates a contrary intent or unless otherwise specifically provided herein, words used in this Agreement may be used interchangeably in singular or plural form and the word "Borrower" shall mean "each Borrower, and each of the entities comprising Borrower, individually, as the context may require, and any subsequent owner or owners of the Mortgaged Property or any part thereof or any interest therein", the word "Lender" shall mean "Lender and any subsequent holder of the Note", the word "Debt" shall mean "the Note and any other evidence of indebtedness secured by the Mortgage", the word "person" shall include an individual, corporation, partnership, limited liability company, trust, unincorporated association, government, governmental authority and any other entity, and the words "Mortgaged Property" shall include any portion of the Mortgaged Property and any interest therein, and shall refer to each and every property comprising a portion of the Mortgaged Property, as the context may require, and the words "attorneys' fees" shall include any and all attorneys' fees, paralegal and law clerk fees including, without limitation, fees at the pretrial, trial and appellate levels incurred or paid by Lender in protecting its interest in the Mortgaged Property and Collateral and enforcing its rights hereunder, and any of the Loan Documents shall include any extensions, renewals, amendments, restatements and modifications thereof. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice versa. 54. HOMESTEAD Borrower hereby waives and renounces all homestead and exemption rights provided by the constitution and the laws of the United States and of any state, in and to the Premises as against the collection of the Debt, or any part thereof. 55. ASSIGNMENTS Lender shall have the right to assign or transfer its rights under this Agreement without limitation. Any assignee or transferee shall be entitled to all the benefits afforded Lender under this Agreement. 56. SUBMISSION TO JURISDICTION BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN NEW YORK COUNTY OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. LENDER MAY, AT ITS SOLE DISCRETION, ELECT THE STATE OF NEW YORK, NEW YORK COUNTY, OR THE UNITED STATES OF AMERICA, FEDERAL DISTRICT COURT HAVING JURISDICTION OVER NEW YORK COUNTY, AS THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING. BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO SUCH VENUE AS BEING AN INCONVENIENT FORUM. Page 48 57. AGENT FOR RECEIPT OF PROCESS Borrower hereby irrevocably appoints Cadwalader, Wickersham & Taft LLP, 100 Maiden Lane, New York, New York 10038, Attn: Robert McDonough, Esq., as its authorized agent to accept and acknowledge, on behalf of Borrower, service of any and all process which may be served in any suit, action or proceeding of the nature referred to in Section 56 hereof in any State or Federal court within New York County. If such agent shall cease so to act, Borrower shall irrevocably designate and appoint without delay another such agent satisfactory to Lender, and shall promptly deliver to Lender written evidence of such other agent's acceptance of such appointment. 58. SERVICE OF PROCESS To the extent permitted by applicable law, process in any suit, action or proceeding of the nature referred to in Section 56 hereof may be served: (a) by registered or certified mail, postage prepaid, to Borrower at the address set forth above or to such other address of which Borrower shall have given Lender written notice; or (b) if Borrower shall not have made an appearance within 21 days after service in accordance with clause (a) of this Section, by hand delivery to the agent identified in Section 57 hereof, or such successor agent as shall have been identified in accordance with Section 57 hereof. Nothing in this Section shall affect the Lender's right to serve process in any manner permitted by law, or limit Lender's right to bring proceedings against Borrower in the courts of any other jurisdiction. 59. WAIVER OF JURY TRIAL EACH OF LENDER AND BORROWER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE NOTE, THE MORTGAGE, THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM (OTHER THAN COMPULSORY COUNTERCLAIMS) OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY LENDER AND BORROWER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. EACH OF LENDER AND BORROWER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY THE OTHER PARTY. 60. CHOICE OF LAW THIS LOAN AGREEMENT SHALL BE DEEMED TO BE A CONTRACT ENTERED INTO PURSUANT TO THE LAWS OF THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS BE GOVERNED, CONSTRUED, APPLIED, AND ENFORCED IN ACCORDANCE WITH THE LAWS OF SUCH JURISDICTION. 61. RELEASE OF PORTIONS OF THE MORTGAGED PROPERTY (a) Borrower shall have the right to obtain the release of any one or more individual properties that comprises a portion of the Mortgaged Property from the lien of the Mortgage provided that, in each instance: (i) no Event of Default shall have occurred and be continuing; (ii) each such sale is to a third party purchaser unrelated to Borrower or Guarantor; (iii) Borrower pays to Lender the greater of: (A) 100% of the proceeds of the sale or refinancing of such individual property (net of usual and customary costs, fees and expenses associated therewith, including without limitation, transfer taxes, customary brokerage commissions and legal fees) with respect to which such partial release is being sought; and (B) the applicable "Release Price" set forth on Schedule A hereto Page 49 with respect to such property; together with all other sums then due and payable in respect of the Loan (including, without limitation, interest, late fees, costs and expenses payable in accordance herewith); (iv) the Debt Service Coverage Ratio with respect to the remaining properties that comprise the Mortgaged Property on or about the date of a partial release of lien under this Section is equal to or greater than 1.20 to 1.0 (provided, however, that with respect to the release of any of the Sale Properties, the Debt Service Coverage Ratio with respect to the remaining properties that comprise the Mortgaged Property after giving effect to such partial release of lien under this Section need not be equal to or greater than 1.20 to 1.0, so long as the Debt Service Coverage Ratio is higher after giving effect to such release than it is prior to such release and Borrower may increase the amount payable under this Section 61 to an amount sufficient to cause such Debt Service Coverage Ratio to be met); and (v) Borrower shall deliver to Lender a current title search with respect to the remaining Mortgaged Property showing no liens or other encumbrances other than as permitted hereunder or to which Lender shall have consented. In order to confirm or effect such release, Lender shall execute one or more instruments as reasonably requested by Borrower, in recordable form, evidencing such release and the release of the entity of the Borrower that owned (or, in the case of a refinancing, owns) the released property from liability in respect of the Loan. (b) Any sums paid to Lender in respect of a release under this Section in excess of the outstanding balance of the Loan allocated to that portion of the Mortgaged Property (including, without limitation, all interest other than the Additional Interest, deferred financing fees, costs and expenses) shall be applied by Lender as follows: (i) 4.5% of the such excess to reduce the outstanding amount of the Additional Interest and (ii) the balance, if any, of such excess to reduce the principal amount of the Loan (which reduction shall be applied, pro rata, to the "allocated loan amounts" of the remaining properties comprising the Mortgaged Property, as set forth on Schedule A hereto). Nothing herein shall obligate Borrower to repay amounts in excess of the Loan. 62. PATRIOT ACT (a) Borrower hereby represents and warrants to, and covenants with, Lender that as of the date hereof and until such time as the Debt shall be paid in full: (i) To Borrower's knowledge, none of Guarantor or any indemnitor or principal under the Loan Documents, or entities comprising Borrower, or any of their respective constituents or affiliates, any of their respective officers or directors (including officers or directors of any such constituents or affiliates), and, to Borrower's knowledge, any of their respective brokers, investors or other agents acting or benefiting in any capacity in connection with the Loan, is a Prohibited Person (as defined below); (ii) None of Guarantor or any indemnitor or principal under the Loan Documents, or entities comprising Borrower, or any of their respective direct or indirect constituents or affiliates, any of their respective officers or directors (including officers or directors of any such constituents or affiliates) (A) to Borrower's knowledge, has conducted or will conduct any business or has engaged or will engage in any transaction or dealing with any Prohibited Person, including making or receiving any contribution of funds, goods or services to or for the benefit of any Prohibited Person, (B) to Borrower's knowledge, has dealt or will deal in, or otherwise has engaged or will engage in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order (as defined below); or (C) to Borrower's knowledge, has engaged or will engage in or has conspired or will conspire to engage in any transaction that evades or avoids, or has the purpose of evading or Page 50 avoiding, or attempts to violate, any of the requirements or prohibitions set forth in the Executive Order or the PATRIOT Act (as defined below); (iii) To Borrower's knowledge, none of the brokers, investors or other agents for any entity comprising Borrower, Guarantor or any indemnitor or principal under the Loan Documents acting in any capacity in connection with the Loan (A) has conducted or will conduct any business or has engaged or will engage in any transaction or dealing with any Prohibited Person, including making or receiving any contribution of funds, goods or services to or for the benefit of any Prohibited Person, (B) has dealt or will deal in, or otherwise has engaged or will engage in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order; or (C) has engaged or will engage in or has conspired or will conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the requirements or prohibitions set forth in the Executive Order or the PATRIOT Act; (iv) Borrower covenants and agrees to deliver to Lender any certification or other evidence reasonably requested from time to time by Lender, confirming Borrower's compliance with this Section; (v) Borrower represents and warrants that to its knowledge Borrower, Guarantor, and any indemnitors or principals under the Loan Documents and all of their respective affiliates (including any officers and directors of any of the foregoing) are in full compliance with all applicable orders, rules and regulations issued by, and recommendations of, the U.S. Department of the Treasury and OFAC (as defined below) pursuant to IEEPA (as defined below), the PATRIOT Act, other legal requirements relating to money laundering or terrorism and any executive orders related thereto; (vi) At all times throughout the term of the Loan, Borrower, Guarantor, and any indemnitors or principals under the Loan Documents and all of their respective affiliates (including any officers and directors of any of the foregoing) shall be in full compliance with all applicable orders, rules and regulations issued by, and recommendations of, the U.S. Department of the Treasury and OFAC pursuant to IEEPA, the PATRIOT Act, other legal requirements relating to money laundering or terrorism and any executive orders related thereto; (vii) Borrower is advised that, by law, Lender may be obligated to "freeze its account" or any account of its investors, either by prohibiting additional funds, declining any withdrawal, redemption, or transfer request(s) and/or segregating assets in compliance with governmental regulations, and Lender may also be required to report such action to governmental or regulatory authorities, including OFAC; (viii) Borrower covenants that it will adopt policies, procedures and internal controls to be fully compliant with any additional laws, rules or regulations relating to money laundering and/or terrorism, including the PATRIOT Act, to which it may become subject; (ix) intentionally omitted; (x) intentionally omitted; (xi) Guarantor applies, and will continue to apply, its anti-money laundering program and/or procedures to all investors as required by applicable law, and will take appropriate steps as required by applicable law that all required relevant documentation is retained, including identification relating to those investors; (xii) Borrower does not believe, and has no reason to believe, that Page 51 any of its investors is a "Prohibited Foreign Shell Bank" (as defined in the PATRIOT Act), or is named on any available lists of known or suspected terrorists, terrorist organizations or of other sanctioned persons issued by the United States government and/or the government(s) of any jurisdiction(s) in which Borrower is doing business; (xiii) intentionally omitted; (xiv) Borrower does not believe, and has no reason to believe, that the person or entity from whom Borrower acquired the Mortgaged Property is a Prohibited Foreign Shell Bank, or is named on any available lists of known or suspected terrorists, terrorist organizations or of other sanctioned persons issued by the United States government and/or the government(s) of any jurisdiction(s) in which Borrower is doing business; (xv) Each of Guarantor and any indemnitors and principals under the Loan Documents has adopted reasonable procedures as required by applicable law as of the date hereof with respect to the matters contained in this Section; and (xvi) Borrower will advise Lender immediately of any material change that would affect the representations, covenants and warranties provided in this Section. "Prohibited Person" means any Person: (a) listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, and relating to Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (the "Executive Order"); (b) that is owned or controlled by, or acting for or on behalf of, any person or entity that is listed in the Annex to, or is otherwise subject to the provisions of the Executive Order; (c) with whom Lender is prohibited from dealing or otherwise engaging in any transaction by any terrorism or money laundering legal requirements, including the PATRIOT Act and the Executive Order; (d) that commits, threatens or conspires to commit or supports "terrorism" as defined in the Executive Order; (e) that is named as a "specifically designated national (SDN)" on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website, http://www.treas.gov.ofac/t11sdn.pdf or at any replacement website or other replacement official publication of such list or is named on any other U.S. or foreign government or regulatory list issued post-09/11/01; (f) that is covered by IEEPA, OFAC or any other law, regulation or executive order relating to the imposition of economic sanctions against any country, region or individual pursuant to United States law or United Nations resolution; or (g) that is an affiliate (including any principal, officer, immediate family member or close associate) of a person or entity described in one or more of clauses (a) - (f) of this definition of Prohibited Person. Page 52 IN WITNESS WHEREOF, Borrower and Lender have executed this instrument as of the day and year first above written. BORROWER: LODGIAN DENVER LLC LODGIAN NORTH MIAMI LLC LODGIAN COCONUT GROVE LLC LODGIAN AUGUSTA LLC LODGIAN FLORENCE LLC LODGIAN FORT MITCHELL LLC LODGIAN LAFAYETTE LLC LODGIAN MERRIMACK LLC LODGIAN HAMBURG LLC LODGIAN SYRACUSE LLC LODGIAN CINCINNATI LLC LODGIAN TULSA LLC LODGIAN JACKSON LLC LODGIAN MEMPHIS LLC LODGIAN COLCHESTER LLC LODGIAN BRIDGEPORT LLC LODGIAN FAIRMONT LLC LODGIAN MORGANTOWN LLC By: /s/ Daniel E. Ellis ------------------------------------ Name: Daniel E. Ellis Authorized Signatory LENDER: LEHMAN BROTHERS HOLDINGS INC. By: /s/ Joseph J. Flannery ------------------------------------ Name: Joseph J. Flannery Authorized Signatory [ACKNOWLEDGMENT] Page 53 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the 21st day of May in the year 2003 before me, the undersigned, personally appeared Daniel E. Ellis, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument, and that such individual made such appearance before the undersigned in the City of New York. (Notarial Seal) /s/ Ellen Warren -------------------------------------- Notary Public ELLEN WARREN Notary Public, State of New York No. 31-4847374 Qualified in New York County Commission Expires July 31, 2005 STATE OF NEW JERSEY ) ) ss.: COUNTY OF SOMERSET ) On the 19th day of May in the year 2003 before me, the undersigned, a Notary Public in and for said State, personally appeared Joseph J. Flannery, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument. (Notarial Seal) /s/ Yonima Frontela Reg. #2266304 -------------------------------------- My Commission Expires Notary Public October 17, 2005 Page 54 SCHEDULE A List of Mortgaged Properties
- --------------- ----------------------- -------------------- -------------- --------------- ------------ ------------ ------------- NAME OF ENTITY PROPERTY LOCATION AND FRANCHISE FRANCHISOR MANAGEMENT MANAGER ALLOCATED RELEASE COMPRISING NAME AGREEMENT(1) AGREEMENT LOAN AMOUNT PRICE BORROWER - --------------- ----------------------- -------------------- -------------- --------------- ------------ ------------ ------------- Lodgian Denver Marriott Hotel - 238 License Agreement Marriott Management Lodgian $20,967,742 $26,209,677 LLC #0707 DIA dated May 19, International, Agreement Management 16455 East 40th Circle 1997, as amended Inc. dated the Corp. Aurora, CO 80011 December 23, 1998 ("Marriott") date hereof ("LMC") between individual Borrower and LMC - --------------- ----------------------- -------------------- -------------- --------------- ------------ ------------ ------------- Lodgian Mayfair House - 179 N/A N/A Management LMC $10,887,097 $13,608,871 Coconut Grove #1178 MAY Agreement LLC 3000 Florida Ave. dated the Miami, FL 33131 date hereof between individual Borrower and LMC - --------------- ----------------------- -------------------- -------------- --------------- ------------ ------------ ------------- Lodgian North Holiday Inn N. Miami - Change of Holiday Management LMC $1,693,548 $2,116,935 Miami LLC 98 Ownership License Hospitality Agreement #1183 MHJ Agreement dated Franchising, dated the 12210 Biscayne Blvd. December 11, 1998, Inc. ("HHF") date hereof Miami, FL 33181 together with an between Addendum to individual License Agreement Borrower and dated as of March LMC 14, 2000 - --------------- ----------------------- -------------------- -------------- --------------- ------------ ------------ ------------- Lodgian Fairfield Inn - 117 Franchise Marriott Management LMC $2,016,129 $2,520,161 Augusta LLC #1265 AUG Agreement dated Agreement 201 Boy Scout Rd. April 28, 1995, as dated the Augusta, GA 30909 assumed October date hereof 30, 1997, as between assigned as of individual December 7, 1998, Borrower and as amended as of LMC December 23, 1998, as amended December 15, 2000 - --------------- ----------------------- -------------------- -------------- --------------- ------------ ------------ ------------- Lodgian Holiday Inn - 105 Change of HHF Management LMC $2,016,129 $2,520,161 Florence LLC #2050 FHI Ownership License Agreement 8050 Holiday Place Agreement dated dated the Florence, KY 41042 December 11, 1998 date hereof between individual Borrower and LMC - --------------- ----------------------- -------------------- -------------- --------------- ------------ ------------ ------------- Lodgian Fort Holiday Inn - 214 Change of HHF Management LMC $1,774,194 $2,217,742 Mitchell LLC #2020 CNS Ownership License Agreement 2100 Dixie Hwy Agreement dated dated the Ft. Mitchell, KY 41011 December 11, 1998, date hereof together with an between Addendum to individual License Agreement Borrower and dated as of March LMC 14, 2000 - --------------- ----------------------- -------------------- -------------- --------------- ------------ ------------ ------------- Lodgian Courtyard - 90 Franchise Marriott Management LMC $5,645,161 $7,056,452 Lafayette LLC #1515 LAF Agreement dated Agreement 214 E. Kaliste Saloom March 4, 1996, as dated the Rd. assumed and date hereof Lafayette, LA 70508 assigned October between 29, 1997, as individual amended as of Borrower and December 23, 1998 LMC - --------------- ----------------------- -------------------- -------------- --------------- ------------ ------------ ------------- Lodgian Fairfield Inn - 116 Franchise Marriott Management LMC $3,387,097 $4,233,871 Merrimack LLC #2828 MMK Agreement dated Agreement 4 Amherst Rd April 28, 1995, as dated the Merrimack, NH 03054 assumed October date hereof 30, 1997, as between amended January 1, individual 1998, as assigned Borrower and as of December 7, LMC 1998, as amended as of December 23, 1998, as amended December 15, 2000 - --------------- ----------------------- -------------------- -------------- --------------- ------------ ------------ ------------- Lodgian Holiday Inn - 130 Change of HHF Management LMC $3,225,806 $4,032,258 Hamburg LLC #3398 HAM Ownership License Agreement 5440 Camp Rd. Agreement dated dated the Hamburg, NY 14075 December 11, 1998, date hereof together with an between Addendum to individual License Agreement Borrower and dated as of March LMC 14, 2000 - --------------- ----------------------- -------------------- -------------- --------------- ------------ ------------ ------------- Lodgian Holiday Inn - 152 Change of HHF Management LMC $2,419,355 $3,024,194 Syracuse LLC #3348 SYR Ownership License Agreement 100 Farrell Rd. Agreement dated dated the Syracuse, NY 13209 December 11, 1998 date hereof between individual Borrower and LMC - --------------- ----------------------- -------------------- -------------- --------------- ------------ ------------ ------------- Lodgian #3535 CND N/A N/A Management LMC $1,451,613 $1,814,516 Cincinnati LLC 800 West 8th St. Agreement Cincinnati, OH 45203 dated the date hereof between individual Borrower and LMC - --------------- ----------------------- -------------------- -------------- --------------- ------------ ------------ ------------- Lodgian Tulsa Courtyard - 122 Franchise Marriott Management LMC $6,451,613 $8,064,516 LLC #3636 TUL Agreement dated Agreement 3340 South 79th East February 7, 1996, dated the Ave. as assumed July date hereof Tulsa, OK 74145 31, 1997, as between assigned as of individual December 7, 1998, Borrower and as amended as of LMC December 23, 1998 - --------------- ----------------------- -------------------- -------------- --------------- ------------ ------------ ------------- Lodgian Fairfield Inn - 105 Franchise Marriott Management LMC $1,693,548 $2,116,935 Jackson LLC #4205 JTN Agreement dated Agreement 535 Wiley Parker Rd. April 28, 1995, as dated the Jackson, TN 38305 assumed October date hereof 30, 1997, as between amended January 1, individual 1998, as assigned Borrower and as of December 7, LMC 1998, as amended as of December 23, 1998, as amended December 15, 2000 - --------------- ----------------------- -------------------- -------------- --------------- ------------ ------------ ------------- Lodgian Holiday Inn Sycamore - Change of HHF Management LMC $2,580,645 $3,225,806 Memphis LLC 173 Ownership License Agreement #4242 MHI Agreement dated dated the 6101 Shelby Oaks Dr. December 11, 1998, date hereof Memphis, TN 38134 together with an between Addendum to individual License Agreement Borrower and dated as of March LMC 14, 2000 - --------------- ----------------------- -------------------- -------------- --------------- ------------ ------------ ------------- Lodgian Fairfield Inn - 117 Franchise Marriott Management LMC $2,419,355 $3,024,194 Colchester LLC #4545 BVT Agreement dated Agreement 84 South Park Drive April 28, 1995, as dated the Colchester, VT 05446 assumed October date hereof 30, 1997, as between amended January 1, individual 1998, as assigned Borrower and as of December 7, LMC 1998, as amended as of December 23, 1998, as amended December 15, 2000 - --------------- ----------------------- -------------------- -------------- --------------- ------------ ------------ ------------- Lodgian Holiday Inn - 159 Change of HHF Management LMC $6,048,387 $7,560,484 Bridgeport LLC #4899 CWV Ownership License Agreement 100 Lodgeville Rd. Agreement dated dated the Clarksburg, WV 26330 December 11, 1998, date hereof together with an between Addendum to individual License Agreement Borrower and dated as of March LMC 14, 2000 - --------------- ----------------------- -------------------- -------------- --------------- ------------ ------------ ------------- Lodgian Holiday Inn - 106 Change of HHF Management LMC $2,822,581 $3,528,226 Fairmont LLC #4800 FWV Ownership License Agreement I-79 and Old Grafton Agreement dated dated the Rd. December 11, 1998, date hereof Fairmont, WV 26554 together with an between Addendum to individual License Agreement Borrower and dated as of March LMC 14, 2000 - --------------- ----------------------- -------------------- -------------- --------------- ------------ ------------ ------------- Lodgian Holiday Inn - 147 Change of HHF Management LMC $2,500,000 $3,125,000 Morgantown LLC #4848 MWV Ownership License Agreement 1400 Saratoga Ave. Agreement dated dated the Morgantown, WV 26505 December 11, 1998, date hereof together with an between Addendum to individual License Agreement Borrower and dated as of March LMC 14, 2000 - --------------- ----------------------- -------------------- -------------- --------------- ------------ ------------ -------------
(1) All Franchise Agreements are further modified by the agreements between Franchisors and the predecessors-in-interest of Borrower, which agreements are filed of record in the proceedings under Chapter 11 of 11 U.S.C. 101 et seq. captioned In re Lodgian, Inc., et al., Case No. 01-16345 (BRL), and copies of which agreements have been provided to Lender. Page 55 SCHEDULE B DEFAULTS UNDER FRANCHISE AGREEMENTS See attached letters Page 56 EXHIBIT A Underlying Notes GAP MORTGAGE NOTE dated the date hereof in the principal amount of $5,000,000.00 made by Lodgian Denver LLC, Lodgian North Miami LLC, Lodgian Coconut Grove LLC, Lodgian Augusta LLC, Lodgian Florence LLC, Lodgian Fort Mitchell LLC, Lodgian Lafayette LLC, Lodgian Merrimack LLC, Lodgian Hamburg LLC, Lodgian Syracuse LLC, Lodgian Cincinnati LLC, Lodgian Tulsa LLC, Lodgian Jackson LLC, Lodgian Memphis LLC, Lodgian Colchester LLC, Lodgian Bridgeport LLC, Lodgian Fairmont LLC, and Lodgian Morgantown LLC to Lehman Brothers Holdings Inc. CONSOLIDATED AMENDED AND RESTATED PROMISSORY NOTE dated August 31, 2000 from Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C. to The Capital Company of America LLC in the principal amount of $108,651,655.38, which promissory note consolidates, amends and restates the following notes: Impac II Notes 1. Amended Restated and Consolidated Secured Promissory Note dated May 9, 1997 from Impac Hotels II, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $6,489,309.07 (Clarksburg, WV). 2. Amended Restated and Consolidated Secured Promissory Note dated May 9, 1997 from Impac Hotels II, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $4,257,083.66 (Morgantown, VW). 3. Amended Restated and Consolidated Secured Promissory Note dated May 9, 1997 from Impac Hotels II, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $3,323,884.40 (Fairmont, WV). 4. Amended Restated and Consolidated Secured Promissory Note dated May 9, 1997 from Impac Hotels II, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $2,918,487.35 (Florence, KY). 5. Amended Restated and Consolidated Secured Promissory Note dated May 9, 1997 form Impac Hotels II, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $7,539,560.20 (Memphis, TN). 6. Amended Restated and Consolidated Secured Promissory Note dated May 9, 1997 from Impac Hotels L.L.C to Nomura Asset Capital Corporation in the principal amount of $8,009,007.01 (Cincinnati, OH). 7. Amended Restated and Consolidated Secured Promissory Note dated May 9, 1997 from Impac Hotels II, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $6,964,165.71 (Ft. Mitchell, KY). 8. Amended Restated and Consolidated Secured Promissory Note dated May 9, 1997 from Impac Hotels II, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $4,651,284.95 (N. Miami, FL). 9. Secured Promissory Note dated April 15, 1997 from Impac Hotels II, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $2,122,303.00 (Hamburg, NY). 10. Secured Promissory Note dated May 9, 1997 from Impac Hotels II, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $1,821,295.85 (Hamburg, NY). 11. Secured Promissory Note dated March 12, 1997 from Impac Hotels II, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $2,128,901.99 (Syracuse, NY). 12. Secured Promissory Note dated May 9, 1997 from Impac Hotels II. L.L.C. to Nomura Asset Capital Corporation in the principal amount of $l,006,788.10 (Syracuse, NY). 13. Amended, Restated and Consolidated Secured Promissory Note dated December 3, 1997 from Impac Hotels II, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $24,400,000 (Coconut Grove, FL). 14. Secured Promissory Note dated July 31, 1997 from Impac Hotels II, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $4,709,407.15 (Tulsa, OK). 15. Secured Promissory Note dated November 19, 1997 from Impac Hotels II, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $16,893,738.61 (Denver, CO). Page 57 Impac III Notes 1. Second Amended and Restated Secured Promissory Note dated December 15, 1997 from Impac Hotels III, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $2,877,009.22. (Augusta, GA) 2. Amended and Restated Secured Promissory Note dated December 16, 1997 from Impac Hotels III, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $4,025,388.29. (Lafayette, LA) 3. Second Amended and Restated Secured Promissory Note dated December 16, 1997 from Impac Hotels III, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $2,953,646.50. (Merrimack, NH) 4. Second Amended and Restated Secured Promissory Note dated December 16, 1997 from Impac Hotels III, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $1,875,754.41. (Jackson, TN) 5. Second Amended and Restated Secured Promissory Note dated December 16, 1997 from Impac Hotels III, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $2,620,319.34. (Colchester, VT) Page 58 EXHIBIT B Underlying Mortgages Page 59 EXHIBIT C Budget Page 60 EXHIBIT D Forms for Reporting Certain Financial Data Page 61 EXHIBIT E Acceptable Franchisors Page 62 EX-10.4.2 23 g87458exv10w4w2.txt EX-10.4.2 $80,000,000 CONSOLIDATED, AMENDED EXHIBIT 10.4.2 CONSOLIDATED, AMENDED AND RESTATED MORTGAGE NOTE $80,000,000.00 May 22, 2003 New York, New York This CONSOLIDATED, AMENDED AND RESTATED MORTGAGE NOTE dated the date first set forth above, made by LODGIAN DENVER LLC, LODGIAN NORTH MIAMI LLC, LODGIAN COCONUT GROVE LLC, LODGIAN AUGUSTA LLC, LODGIAN FLORENCE LLC, LODGIAN FORT MITCHELL LLC, LODGIAN LAFAYETTE LLC, LODGIAN MERRIMACK LLC, LODGIAN HAMBURG LLC, LODGIAN SYRACUSE LLC, LODGIAN CINCINNATI LLC, LODGIAN TULSA LLC, LODGIAN JACKSON LLC, LODGIAN MEMPHIS LLC, LODGIAN COLCHESTER LLC, LODGIAN BRIDGEPORT LLC, LODGIAN FAIRMONT LLC, and LODGIAN MORGANTOWN LLC, each a Delaware limited liability company having its principal place of business at c/o Lodgian, Inc., 3445 Peachtree Road, N.E. -- Suite 700, Atlanta, Georgia 30326 (collectively, "Maker"), to and for the benefit of LEHMAN BROTHERS HOLDINGS INC., a Delaware corporation ("Payee"). W I T N E S S E T H: WHEREAS, Payee is the owner and holder of those certain promissory notes described on Schedule A hereto (collectively, the "Underlying Notes"); and WHEREAS, Maker has assumed the obligations of obligor and maker under the Underlying Notes as if the original makers thereunder; WHEREAS, Maker and Payee desire to consolidate the indebtedness evidenced by the Underlying Notes to form a single indebtedness, and to amend and restate the terms and conditions of the Underlying Notes in their entirety in the manner set forth herein. NOW, THEREFORE, by Maker's execution and delivery of this Note, and Payee's acceptance of delivery of this Note, the indebtedness evidenced by the Underlying Notes is hereby consolidated to form a single indebtedness, this Note is deemed to amend and restate the terms of the Underlying Notes and the Underlying Notes are hereby amended and restated in their entirety to read as follows: FOR VALUE RECEIVED LODGIAN DENVER LLC, LODGIAN NORTH MIAMI LLC, LODGIAN COCONUT GROVE LLC, LODGIAN AUGUSTA LLC, LODGIAN FLORENCE LLC, LODGIAN FORT MITCHELL LLC, LODGIAN LAFAYETTE LLC, LODGIAN MERRIMACK LLC, LODGIAN HAMBURG LLC, LODGIAN SYRACUSE LLC, LODGIAN CINCINNATI LLC, LODGIAN TULSA LLC, LODGIAN JACKSON LLC, LODGIAN MEMPHIS LLC, LODGIAN COLCHESTER LLC, LODGIAN BRIDGEPORT LLC, LODGIAN FAIRMONT LLC, and LODGIAN MORGANTOWN LLC, each a Delaware limited liability company having its principal place of business at c/o Lodgian, Inc., 3445 Peachtree Road, N.E. -- Suite 700, Atlanta, Georgia 30326 (collectively, "Maker"), promises to pay to the order of LEHMAN BROTHERS HOLDINGS 1 INC., a Delaware corporation ("Payee"), at its principal place of business at 399 Park Avenue, New York, New York 10022, or at such place as the holder hereof may from time to time designate in writing, the principal sum of Eighty Million and 00/100 Dollars (the "Loan"), in lawful money of the United States of America, with interest thereon to be computed on the unpaid principal balance from time to time outstanding at the Applicable Interest Rate (as such term is defined in Section 2 hereof), and to be paid in installments as follows: (a) On the date hereof, a payment of interest only at the Applicable Interest Rate as of the date hereof, calculated in accordance with Section 3 hereof, for the period commencing on the date hereof and ending on, and including, the last day of the month in which this Note is executed; and (b) Monthly payments of principal and interest in the amount calculated in accordance with Section 3 hereof, on the first day of each calendar month beginning with the first day of the second full calendar month after the date hereof (each, a "Payment Date"), which monthly payment amount is subject to further recalculation based upon mandatory prepayment described in Section 9(c) hereof; with the entire outstanding principal balance, together with accrued and unpaid interest and any other amounts due under this Note, shall be due and payable on the maturity date of the Loan, as determined in accordance with Section 1 hereof. 1. LOAN TERM. (a) The Loan shall be for a term of two years, and shall mature on the second anniversary of the first day of the first full calendar month following the date hereof or, if the date hereof is the first day of a calendar month, then on the second anniversary of the date hereof (the "Initial Maturity Date"). (b) Maker shall have a one-time option to extend the term of the Loan for an additional 12-month period beginning on the Initial Maturity Date (the "Extension Period") and, if so extended, the Loan shall mature on the third anniversary of the first day of the first full calendar month following the date hereof or, if the date hereof is the first day of a calendar month, then on the third anniversary of the date hereof (the "Extended Maturity Date"; the Initial Maturity Date or the Extended Maturity Date, as applicable, the "Applicable Maturity Date"), subject to satisfaction of the following conditions: (i) Not less than 60 days, and not more than 120 days, prior to the Initial Maturity Date, Maker shall give Payee written notice of its election to extend the term of the Loan (the "Election Notice"), which election shall be irrevocable once written notice is given; (ii) On or before the Initial Maturity Date, Maker shall pay to Payee an extension fee in the amount of $3,000,000.00; and (iii) At the time the Election Notice is given and on the Initial Maturity Date, no Event of Default (as such term is defined in Section 7 hereof) shall have occurred and be continuing, and no event which, with the passage of time or the giving of notice, or both, would constitute a monetary Event of Default, shall have occurred and be continuing. 2 2. APPLICABLE INTEREST RATE. (a) Interest on the Loan shall accrue and be payable at "USD-LIBOR-BBA" (as such term is defined in subsection (b) of this Section) plus the applicable Spread (as such term is defined in subsection (c) of this Section) as calculated from time to time (the "LIBOR Rate"). (b) As used herein, the term "USD-LIBOR-BBA" means, with respect to each "Interest Period", the rate for deposits in United States dollars for a one-month period which appears on the display designated as "Page 3750" on the Dow Jones Telerate Service (or such other page as may replace 3750 on that service or such other service as may be nominated by the British Bankers' Association as the information vendor for the purpose of displaying British Bankers' Association Interest Settlement Rates for U.S. dollar deposits) as of 11:00 a.m. London time on the day that is two "London Banking Days" preceding the "Reset Date". If such rate does not appear on Telerate Page 3750, the rate for that Interest Period shall be determined on the basis of the rates at which deposits in U.S. Dollars are offered by any four major reference banks in the London interbank market selected by Payee to provide such bank's offered quotation of such rates at approximately 11:00 a.m., London time, on the related Determination Date to prime banks in the London interbank market for a period of one month, commencing on the first day of such Interest Period and in an amount that is representative for a single such transaction in the relevant market at the relevant time. Payee shall request the principal London office of any four major reference banks in the London interbank market selected by Payee to provide a quotation of such rates, as offered by each such bank. If at least two such quotations are provided, USD-LIBOR-BBA for such Interest Period will be the arithmetic mean of such quotations. If fewer than two quotations are provided, USD-LIBOR-BBA for such Interest Period will be the arithmetic mean of the rates quoted by major banks in New York City, selected by Payee, at approximately 11:00 a.m., New York City time, on the first day of such Interest Period for loans in United States dollars to leading European banks for a period equal to one month, commencing on the first day of such Interest Period and in an amount that is representative for a single such transaction in the relevant market at the relevant time. The term "Interest Period" shall mean the respective 30-day term of a particular LIBOR contract. The term "Reset Date" shall mean the first day of an Interest Period. The term "London Banking Day" shall mean any day that is not a Saturday, a Sunday or a day on which banks in the City of London are required or permitted to be closed for interbank or foreign exchange transactions. USD-LIBOR-BBA shall be adjusted prospectively for reserve requirements that are applicable to Payee which become effective on or after the date hereof. (c) As used in this Note, the term "Spread" shall mean the number of basis points added to LIBOR to determine the LIBOR Rate from time to time. During the term of the Loan, the Spread shall be 525 basis points (5.25%). (d) As used in this Note the term "Applicable Interest Rate" shall mean the greater of: (i) the LIBOR Rate as applicable from time to time; and (ii) seven and one-quarter percent (7.25%) per annum. 3 3. CALCULATION OF INTEREST; APPLICATION OF PAYMENTS. (a) Interest on the outstanding principal balance of this Note shall be calculated by multiplying the actual number of days elapsed in any given payment period by a daily rate based on a 360-day year. Interest shall be payable for the full number of days in any given payment period. (b) The LIBOR Rate, and the amount of interest payable monthly, shall be recalculated at each LIBOR Reset Date. (c) The amount of principal and interest payable monthly shall be recalculated at each LIBOR Reset Date on the basis of a 25-year amortization schedule from the first Payment Date. (d) Payments under this Note shall be applied in accordance with that certain Loan Agreement dated as of the date hereof between Maker and Payee (the "Loan Agreement"). All amounts due under this Note shall be payable without setoff, counterclaim or any other deduction whatsoever. 4. ADDITIONAL INTEREST. Maker shall pay to Payee, in addition to any other amounts due hereunder, additional interest in the amount of $4,400,000.00 (the "Additional Interest"). The Additional Interest shall be fully earned on the date hereof, and shall be payable on the earlier to occur of: (a) the Applicable Maturity Date, (b) Maker's payment of the partial prepayment made under Section 9(c) hereof (in connection with such partial payment, only a pro rata portion of Additional Interest is payable from the partial prepayment amount in accordance with the terms of Section 9(c)), and (c) the earlier repayment in full of the Loan, at maturity, by acceleration or otherwise. In addition, payments in respect of the Additional Interest shall be made pursuant to the provisions of Section 2 of the Loan Agreement. The amount of the Additional Interest shall be decreased by $800,000.00 to an amount equal to $3,600,000.00 if Maker makes the mandatory principal prepayment in accordance with Section 9(c) hereof. 5. SECURITY FOR THE LOAN. (a) This Note is secured by: (i) those certain mortgage, deed of trust or deed to secure debt instruments, each dated as of the date hereof from each of the parties constituting Maker to Payee (individually or collectively as the context may require, the "Mortgage") affecting the real property and improvements (or, leasehold interests in such real property and improvements, as applicable) more particularly described on Schedule B hereto (collectively, the "Mortgaged Property"); (ii) those certain instruments titled Assignment of Leases and Rents each dated as of the date hereof from each of the parties constituting Maker to Payee (collectively, the "Assignment"); (iii) an Environmental Indemnity Agreement dated as of the date hereof among Payee, Maker and Lodgian, Inc. (the "Environmental Agreement"); and (iv) such other documents now or hereafter executed by Maker, one or more entities comprising Maker and/or Lodgian, Inc., in any capacity, and by or in favor of Payee, which wholly or partially secure or guarantee payment of this Note including, without limitation, any collateral assignments and reserve and/or escrow accounts (such other documents, collectively, the "Other Security Documents"). 4 (b) As used herein, the term "Loan Documents" means, collectively, this Note, the Mortgage, the Loan Agreement, the Assignment, the Environmental Agreement, the Other Security Documents and any and all other documents executed by any entity comprising Maker and/or Lodgian, Inc., in any capacity, in connection with the Loan. 6. LATE CHARGE. If any sum payable under this Note (other than the entire Debt (as such term is defined in Section 7 hereof) payable on or before the Applicable Maturity Date) is not paid prior to the tenth (10th) day after the date such payment is due, Maker shall pay to Payee on demand an additional amount equal to five (5%) percent of such unpaid sum to defray the expenses incurred by Payee in handling and processing such delinquent payment and to compensate Payee for the loss of the use of such delinquent payment, and such additional amount shall be secured by the Mortgage, the Assignment and the Other Security Documents. 7. EVENTS OF DEFAULT. The entire outstanding principal balance of this Note, together with all accrued and unpaid interest thereon and all other sums due under the Loan Documents including, without limitation, the Additional Interest (all such sums, collectively, the "Debt"), or any portion thereof, shall without notice become immediately due and payable at the option of Payee: (a) if any payment required in this Note is not paid prior to the tenth (10th) day after the date when due or on the Applicable Maturity Date; or (b) upon the happening of any other Event of Default under and as defined in the Loan Agreement (each of the foregoing, an "Event of Default"). In the event that Payee retains counsel to collect the Debt or to protect or foreclose the security provided in connection herewith, Maker also agrees to pay on demand all costs of collection incurred by Payee, including reasonable attorneys' fees for the services of counsel whether or not suit be brought. 8. DEFAULT RATE INTEREST. Maker does hereby agree that upon the occurrence of an Event of Default, including Maker's failure to pay the Debt in full on the Applicable Maturity Date, Payee shall be entitled to receive, and Maker shall pay, interest on the entire outstanding principal balance and any other amounts due at the rate equal to the lesser of (a) the maximum rate permitted by applicable law; and (b) the Applicable Interest Rate plus three and one-quarter (3.25%) percent (the lesser of such rates in (a) or (b), the "Default Rate"); provided, however, that with respect to an Event of Default of the type described in Section 24(a) of the Loan Agreement, such rate of interest shall apply from and after the date on which any such payment is due, without any period of grace or cure. Interest shall accrue and be payable at the Default Rate from the occurrence of the Event of Default until all such Events of Default have been fully cured. Interest at the Default Rate shall be added to the Debt, and shall be deemed secured by the Mortgage, the Assignment and the Other Security Documents. This provision, however, shall not be construed as an agreement or privilege to extend the date of the payment of the Debt, nor as a waiver of any other right or remedy accruing to Payee by reason of the occurrence of any Event of Default. 9. PREPAYMENT. (a) The principal balance of this Note may be prepaid, in whole or (subject to the provisions of subsection (b) of this Section) in part, upon: (i) not less than 30 days prior written notice to Payee specifying the date on which prepayment is to be made (the "Prepayment Date"); (ii) payment of accrued interest to and including the Prepayment Date, including the Additional Interest (or, in the case of a partial prepayment pursuant to subsection (b) of this Section but excluding principal amortization payments pursuant to Section 2 of the Loan Agreement, a portion of the Additional Interest, pro rata in proportion to the amount that 5 such principal prepayment bears to the outstanding principal balance of the Loan); and (iii) payment of all other sums then due under this Note, the Loan Agreement, the Mortgage, the Assignment and the Other Security Documents. If any such notice of prepayment is given, the principal amount set forth in such notice and the other sums required under this Section shall be due and payable on the Prepayment Date. (b) Partial prepayments of principal hereunder shall be permitted only: (i) in accordance with Section 2 of the Loan Agreement, (ii) upon a casualty or condemnation event in accordance with the terms of the Loan Agreement; (iii) in connection with a partial release of a property comprising a portion of the Mortgaged Property pursuant to Section 61 of the Loan Agreement; or (iv) as provided in this Section 9 of this Note. The amounts to be paid in connection with a partial prepayment are set forth in subsection (a) of this Section. (c) If on or before the first day of the tenth full calendar month following the date hereof Maker makes one or more prepayments of at least $20,000,000.00 in the aggregate to Payee, which Payee shall apply in reduction of the then outstanding principal balance of the Loan and the Additional Interest (allocated pro-rata between the then outstanding principal balance of the Loan and the outstanding balance of the Additional Interest), (i) the Additional Interest shall be reduced as provided in Section 4 hereof and (ii) the monthly principal payment amount due under this Note shall be recalculated for the remainder of the term of the Loan to the amount necessary to amortize the Loan (as so reduced) based on a 25-year amortization schedule and a loan constant based on the Applicable Interest Rate on the date hereof. 10. LIMITATIONS ON RECOURSE. (a) Subject to the qualifications set forth in this Section, Payee shall not enforce the liability and obligation of Maker to perform and observe the obligations contained in this Note, the Loan Agreement, the Mortgage, the Assignment, the Other Security Documents or the other Loan Documents by an action or proceeding wherein a money judgment shall be sought against Maker, any member, stockholder, partner, employee, officer or director of Maker (each a "Related Party") except that Payee may bring a foreclosure action, an action for specific performance or any other appropriate action or proceeding to enable Payee to enforce and realize upon this Note, the Mortgage, the Assignment, the Other Security Documents, and the interests in the Mortgaged Property and any other collateral given to Payee pursuant to the Mortgage, the Assignment, the Other Security Documents and the other Loan Documents; provided, however, that, except as specifically provided in this Section, any judgment in any such action or proceeding shall be enforceable against Maker only to the extent of each Maker's respective interest in the Mortgaged Property and in any other collateral given to Payee. Payee, by accepting this Note, the Loan Agreement, the Assignment, the Mortgage, the Other Security Documents and the other Loan Documents, agrees that it shall not sue for, seek or demand any personal liability of or any deficiency judgment against Maker or any Related Party in any such action or proceeding, under, by reason of or in connection with the Mortgage, the Loan Agreement, the Assignment, the Other Security Documents, this Note or the other Loan Documents. The provisions of this Section shall not, however: (i) constitute a waiver, release or impairment of any obligation evidenced or secured by the Mortgage, the Loan Agreement, the Assignment, the Environmental Agreement, the Other Security Documents, this Note or the other Loan Documents; (ii) impair the right of Payee to name Maker as a party defendant in any action or suit for foreclosure and sale under the Mortgage; (iii) affect the validity or enforceability of any guaranty or indemnity agreement made in connection with the Mortgage, the Loan Agreement, this Note, the Assignment, the Other Security Documents or the other Loan 6 Documents; (iv) impair the right of Payee to obtain the appointment of a receiver; (v) impair the enforcement of the Assignment; (vi) impair the right of Payee to bring suit with respect to fraud or intentional misrepresentation by Maker or any other person or entity in connection with the Mortgage, the Loan Agreement, this Note, the Assignment, the Environmental Agreement, the Other Security Documents or the other Loan Documents; or (vii) affect the validity or enforceability of the Environmental Agreement or limit the liability of Maker or any other party thereunder. Anything herein to the contrary notwithstanding, Payee shall have the right in a foreclosure action to name as defendants Maker and any guarantor of any of Maker's obligations hereunder, by reason of their potential liability for the entire Debt or Payee's losses, as the case may be, as more particularly set forth in this Section. Nothing herein shall limit any personal liability of a Related Party for the payment of the Debt or any other sum due under this Note, the Loan Agreement, the Mortgage, the Assignment, the Other Security Documents or the other Loan Documents, or for the performance or observance of any other obligation of Maker under any guaranty, indemnity or similar agreement executed by such Related Party for personal obligations expressly set forth in such guaranty, indemnity or similar agreement. (b) Nothing herein shall be deemed to be a waiver of any right which Payee may have under Section 506(a), 506(b), 1111(b) or any other provisions of the U.S. Bankruptcy Code to file a claim for the full amount of the Debt secured by the Mortgage or to require that all collateral shall continue to secure all of the debt owing to Payee in accordance with this Note, the Loan Agreement, the Mortgage, the Assignment, the Environmental Agreement, the Other Security Documents and the other Loan Documents. (c) Notwithstanding the foregoing provisions of this Section or any other provision in the Loan Documents, Maker (but not any Related Party, other than pursuant to a written instrument executed by such Related Party specifically providing for such liability) shall be fully liable for and shall indemnify Payee for any or all loss, cost, liability, judgment, claim, damage or expense sustained, suffered or incurred by Payee (including, without limitation, Payee's reasonable attorneys' fees and reasonable out of pocket expenses) arising out of or attributable or relating to: (i) the gross negligence or willful misconduct of Maker, or of Maker's principals or guarantor of the Loan; (ii) the physical waste or willful destruction of the Mortgaged Property; (iii) the breach of provisions in any of the Loan Documents concerning Environmental Laws, Hazardous Substances and Asbestos, and any indemnification of Payee or other indemnitor therein with respect to such Environmental Laws, Hazardous Substances and Asbestos; (iv) the removal or disposal of any portion of the personal property comprising the Mortgaged Property in violation of the Loan Documents; (v) the failure to satisfy and remove any mechanic or materialman liens against the Mortgaged Property to the extent there was available cash derived from the operation of the Mortgaged Property to pay the same or the work relating to such liens was not approved by Payee or permitted under the Loan Documents; 7 (vi) the failure to satisfy Taxes and Other Charges (as such terms are defined in the Loan Agreement) as required by Section 5 of the Loan Agreement to the extent there was available cash derived from the operation of the Mortgaged Property to pay same; (vii) any security deposits or advance deposits collected with respect to the Mortgaged Property which are not delivered to Payee upon a foreclosure of the Mortgaged Property or action in lieu thereof; (viii) the failure of Maker (A) to comply with the single purpose entity requirements and covenants set forth in Section 11 of the Loan Agreement, with Employee Retirement Income Security Act of 1974 (or any successor legislation thereto), as amended, (B) to pay brokers' commissions or fees, (C) maintain required insurance policies with respect to the Mortgaged Property and the operation thereof as set forth in Section 4 of the Loan Agreement, or (D) obtain prior consent of Maker with respect to material leases on or affecting the Mortgaged Property in accordance with the Loan Agreement and the Assignment; (ix) any amendment, modification, cancellation or termination of any ground leases which constitute a portion of the Mortgaged Property without Payee's prior written consent; (x) the misappropriation, misapplication, conversion or any application of insurance proceeds, condemnation awards, rents or security deposit in violation of the Loan documents (including interference with the operation of that certain Security Agreement and Lockbox Agreement dated as of the date hereof among Maker, Payee and Maker's loan servicer; and/or (xi) the intentional failure of Maker to comply with other legal requirements applicable to the Mortgaged Property or the operation thereof. (d) Notwithstanding the foregoing, the agreement of Payee not to pursue recourse liability against Maker as set forth in subsection (a) above SHALL BECOME NULL AND VOID and shall be of no further force or effect in the event of: (i) any fraud or material intentional misrepresentation by Maker or any principal of Maker or guarantor of the Loan in connection with the Loan, including, without limitation, any financial information concerning Maker, principal of Maker or any guarantor of the Loan proving to be fraudulent in any respect, containing any fraudulent information or misrepresenting in any material respect the financial condition of Maker or any guarantor of the Loan; (ii) any contest of the validity or enforceability of any or all of the Loan Documents; provided, however, that Maker shall be permitted to allege that no default occurred under the Loan Documents and that Maker is in compliance with the Loan Documents; (iii) any violation of the due-on-sale or due-on-encumbrance provisions of Section 13 of the Loan Agreement; (iv) Maker's failure, which failure continues after expiration of all applicable notice and cure provisions, (A) to permit on-site inspections in accordance with the Loan Documents, (B) to deliver financial statements expressly required by the Loan Documents or (C) to deliver estoppel certificates concerning the status of the Loan in accordance with the Loan Documents; (iv) a voluntary bankruptcy filing by Maker, or an involuntary filing against Maker (if such case is not dismissed within ninety (90) days) provided such filing was facilitated, coordinated or directed by Maker, any of its principals or affiliates, or any guarantor of the Loan; provided, however, that, the failure of any of Maker's principals or affiliates to 8 advance or contribute funds or assets shall not be deemed to be a facilitation of any such filing; (v) any amendment or modification of the organizational documents of Maker or any constituent partner, member or other person or entity, in each case without the prior written consent of Payee and in violation of the single purpose entity and/or bankruptcy remoteness requirements of Section 11 of the Loan Agreement; (ix) any violation of the provisions waiving jury trial or counterclaims (other than compulsory counterclaims) contained in the Loan Documents; and/or (x) any assertion in legal proceedings by Maker, any principal of Maker or any guarantor of the Loan that (a) Payee has modified the Loan Documents other than by written instrument signed by Payee, (b) Payee has waived the provisions of the Loan Documents by failing to require Maker's strict performance of the terms thereof or (c) Maker's and Payee's relationship is other than that of a debtor/creditor arising under the Loan Documents. 11. NO USURY. It is expressly stipulated and agreed to be the intent of Maker and Payee at all times to comply with applicable state law or applicable United States federal law (to the extent that it permits Payee to contract for, charge, take, reserve, or receive a greater amount of interest than under state law) and that this Section shall control every other covenant and agreement in this Note and the other Loan Documents. If the applicable law (state or federal) is ever judicially interpreted so as to render usurious any amount called for under this Note or under any of the other Loan Documents, or contracted for, charged, taken, reserved, or received with respect to the Debt, or if Payee's exercise of the option to accelerate the maturity of this Note, or if any prepayment by Maker results in Maker having paid any interest in excess of that permitted by applicable law, then it is Maker's and Payee's express intent that all excess amounts theretofore collected by Payee shall be credited to the principal balance of this Note and all other Debt (or, if this Note and all other Debt have been or would thereby be paid in full, refunded to Maker), and the provisions of this Note and the other Loan Documents immediately be deemed reformed and the amounts thereafter collectible hereunder and thereunder reduced, without the necessity of the execution of any new documents, so as to comply with the applicable law and so as to permit the recovery of the fullest amount otherwise called for hereunder or thereunder. All sums paid or agreed to be paid to Payee for the use, forbearance, or detention of the Debt shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Debt until payment in full so that the rate or amount of interest on account of the Debt does not exceed the maximum lawful rate from time to time in effect and applicable to the Debt for so long as the Debt is outstanding. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, it is not the intention of Payee to accelerate the maturity of any interest that has not accrued at the time of such acceleration or to collect unearned interest at the time of such acceleration. 12. TRANSFERS NOT PERMITTED. Without the prior written consent of Payee, Maker shall not sell, convey, alienate, mortgage, encumber, pledge or otherwise transfer, or permit the transfer of, directly or indirectly, the Mortgaged Property or ownership interests of Maker, except as permitted in the Loan Agreement. 13. AUTHORITY. Maker represents that Maker has full power, authority and legal right to execute, deliver and perform its obligations pursuant to this Note, the Mortgage and the other Loan Documents and that this Note, the Mortgage and the other Loan Documents constitute valid and binding obligations of Maker. 9 14. NOTICES. All notices or other communications required or permitted to be given pursuant hereto shall be given in the manner specified in the Loan Agreement directed to the parties at their respective addresses as provided therein. 15. WAIVER OF JURY TRIAL. MAKER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS NOTE, THE LOAN AGREEMENT, THE MORTGAGE, OR THE OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY MAKER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO TRIAL BY JURY WOULD OTHERWISE ACCRUE. PAYEE IS HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY MAKER. 16. GOVERNING LAW. This Note shall be governed by and construed in accordance with the laws of the State of New York (without regard to conflicts of laws principles) and the applicable laws of the United States of America. 17. MISCELLANEOUS. (a) No release of any security for the Debt or any person liable for payment of the Debt, no extension of time for payment of this Note or any installment hereof, and no alteration, amendment or waiver of any provision of the Loan Documents made by agreement between Payee and any other person or party shall release, modify, amend, waive, extend, change, discharge, terminate or affect the liability of Maker, and any other person or party who might be or become liable for the payment of all or any part of the Debt, under the Loan Documents. (b) Maker and all others who may become liable for the payment of all or any part of the Debt do hereby severally waive presentment and demand for payment, notice of dishonor, protest, notice of protest, notice of non-payment, notice of intent to accelerate the maturity hereof and of acceleration. (c) This Note may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Maker or Payee, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. (d) Whenever used, the singular number shall include the plural, the plural the singular, and the words "Payee" and "Maker" shall include their respective successors, assigns, heirs, executors and administrators. (e) If Maker consists of more than one person or party, the obligations and liabilities of each such person or party shall be joint and several. 10 (f) This Note represents a continuation of an existing debt, subject to the amendment and restatement of certain terms, as set forth herein and in the other Loan Documents. The Underlying Notes are amended and restated and superseded in their entirety by this Note, but the indebtedness evidenced by the Underlying Notes shall not be discharged or impaired by the execution and delivery of this Note, and the execution and delivery of this Note is not intended to constitute a novation of the Underlying Notes nor impair or modify the priority of any security document executed in connection therewith. (g) This Note may be executed in any number of counterparts and each such duplicate original shall be deemed to be an original. 11 IN WITNESS WHEREOF, Maker has duly executed this Note and Payee, by its signature, has accepted this Note, on the day and year first above written. MAKER: LODGIAN DENVER LLC LODGIAN NORTH MIAMI LLC LODGIAN COCONUT GROVE LLC LODGIAN AUGUSTA LLC LODGIAN FLORENCE LLC LODGIAN FORT MITCHELL LLC LODGIAN LAFAYETTE LLC LODGIAN MERRIMACK LLC LODGIAN HAMBURG LLC LODGIAN SYRACUSE LLC LODGIAN CINCINNATI LLC LODGIAN TULSA LLC LODGIAN JACKSON LLC LODGIAN MEMPHIS LLC LODGIAN COLCHESTER LLC LODGIAN BRIDGEPORT LLC LODGIAN FAIRMONT LLC LODGIAN MORGANTOWN LLC By: /s/ Daniel E. Ellis --------------------------------------- Name: Daniel E. Ellis Authorized Signatory/VP & Secretary NOTICE TO CO-SIGNER: YOUR SIGNATURE ON THIS NOTE MEANS THAT YOU ARE EQUALLY LIABLE FOR REPAYMENT OF THIS LOAN. IF ANY MAKER DOES NOT PAY, THE PAYEE HAS A LEGAL RIGHT TO COLLECT FROM YOU. PAYEE: LEHMAN BROTHERS HOLDINGS INC. By: /s/ Joseph J. Flannery --------------------------------------- Name: Joseph J. Flannery Authorized Signatory [ACKNOWLEDGMENT] 12 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK) On the 21st day of May in the year 2003 before me, the undersigned, personally appeared Daniel E. Ellis, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument, and that such individual made such appearance before the undersigned in the City of New York. (Notarial Seal) /s/ Ellen Warren ------------------------------ Notary Public ELLEN WARREN NOTARY PUBLIC, STATE OF NEW YORK NO. 31-4847374 QUALIFIED IN NEW YORK COUNTY COMMISSION EXPIRES: JULY 31, 2005 STATE OF NEW JERSEY ) ) ss.: COUNTY OF SUMMERSET ) - On the 19th day of May in the year 2003 before me, the undersigned, a Notary Public in and for said State, personally appeared Joseph J. Flannery, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument. (Notarial Seal) /s/ Yonima Frontela ------------------------------ Notary Public Reg # 2266304 My Commission Expires October 17, 2005 13 SCHEDULE A Underlying Notes GAP MORTGAGE NOTE dated the date hereof in the principal amount of $5,000,000.00 made by Lodgian Denver LLC, Lodgian North Miami LLC, Lodgian Coconut Grove LLC, Lodgian Augusta LLC, Lodgian Florence LLC, Lodgian Fort Mitchell LLC, Lodgian Lafayette LLC, Lodgian Merrimack LLC, Lodgian Hamburg LLC, Lodgian Syracuse LLC, Lodgian Cincinnati LLC, Lodgian Tulsa LLC, Lodgian Jackson LLC, Lodgian Memphis LLC, Lodgian Colchester LLC, Lodgian Bridgeport LLC, Lodgian Fairmont LLC, and Lodgian Morgantown LLC to Lehman Brothers Holdings Inc. CONSOLIDATED AMENDED AND RESTATED PROMISSORY NOTE dated August 31, 2000 from Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C. to The Capital Company of America LLC in the principal amount of $108,651,655.38, which promissory note consolidates, amends and restates the following notes: Impac II Notes 1. Amended Restated and Consolidated Secured Promissory Note dated May 9, 1997 from Impac Hotels II, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $6,489,309.07 (Clarksburg, WV). 2. Amended Restated and Consolidated Secured Promissory Note dated May 9, 1997 from Impac Hotels II, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $4,257,083.66 (Morgantown, VW). 3. Amended Restated and Consolidated Secured Promissory Note dated May 9, 1997 from Impac Hotels II, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $3,323,884.40 (Fairmont, WV). 4. Amended Restated and Consolidated Secured Promissory Note dated May 9, 1997 from Impac Hotels II, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $2,918,487.35 (Florence, KY). 5. Amended Restated and Consolidated Secured Promissory Note dated May 9, 1997 form Impac Hotels II, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $7,539,560.20 (Memphis, TN). 6. Amended Restated and Consolidated Secured Promissory Note dated May 9, 1997 from Impac Hotels L.L.C to Nomura Asset Capital Corporation in the principal amount of $8,009,007.01 (Cincinnati, OH). 7. Amended Restated and Consolidated Secured Promissory Note dated May 9, 1997 from Impac Hotels II, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $6,964,165.71 (Ft. Mitchell, KY). 8. Amended Restated and Consolidated Secured Promissory Note dated May 9, 1997 14 from Impac Hotels II, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $4,651,284.95 (N. Miami, FL). 9. Secured Promissory Note dated April 15, 1997 from Impac Hotels II, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $2,122,303.00 (Hamburg, NY). 10. Secured Promissory Note dated May 9, 1997 from Impac Hotels II, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $1,821,295.85 (Hamburg, NY). 11. Secured Promissory Note dated March 12, 1997 from Impac Hotels II, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $2,128,901.99 (Syracuse, NY). 12. Secured Promissory Note dated May 9, 1997 from Impac Hotels II. L.L.C. to Nomura Asset Capital Corporation in the principal amount of $l,006,788.10 (Syracuse, NY). 13. Amended, Restated and Consolidated Secured Promissory Note dated December 3, 1997 from Impac Hotels II, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $24,400,000 (Coconut Grove, FL). 14. Secured Promissory Note dated July 31, 1997 from Impac Hotels II, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $4,709,407.15 (Tulsa, OK). 15. Secured Promissory Note dated November 19, 1997 from Impac Hotels II, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $16,893,738.61 (Denver, CO). Impac III Notes 1. Second Amended and Restated Secured Promissory Note dated December 15, 1997 from Impac Hotels III, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $2,877,009.22. (Augusta, GA) 2. Amended and Restated Secured Promissory Note dated December 16, 1997 from Impac Hotels III, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $4,025,388.29. (Lafayette, LA) 3. Second Amended and Restated Secured Promissory Note dated December 16, 1997 from Impac Hotels III, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $2,953,646.50. (Merrimack, NH) 15 4. Second Amended and Restated Secured Promissory Note dated December 16, 1997 from Impac Hotels III, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $1,875,754.41. (Jackson, TN) 5. Second Amended and Restated Secured Promissory Note dated December 16, 1997 from Impac Hotels III, L.L.C. to Nomura Asset Capital Corporation in the principal amount of $2,620,319.34. (Colchester, VT) SCHEDULE B THE PROPERTIES Marriott Hotel - 238 Courtyard - 90 Fairfield Inn - 105 #0707 DIA #1515 LAF #4205 JTN 16455 East 40th Circle 214 E. Kaliste Saloom Rd. 535 Wiley Parker Rd. Aurora, CO 80011 Lafayette, LA 70508 Jackson, TN 38305 Mayfair House - 179 Fairfield Inn - 116 Holiday Inn Sycamore - 173 #1178 MAY #2828 MMK #4242 MHI 3000 Florida Ave. 4 Amherst Rd 6101 Shelby Oaks Dr. Miami, FL 33131 Merrimack, NH 03054 Memphis, TN 38134 Holiday Inn N. Miami - 98 Holiday Inn - 130 Fairfield Inn - 117 #1183 MHJ #3398 HAM #4545 BVT 12210 Biscayne Blvd. 5440 Camp Rd. 84 South Park Drive Miami, FL 33181 Hamburg, NY 14075 Colchester, VT 05446 Fairfield Inn - 117 Holiday Inn - 152 Holiday Inn - 159 #1265 AUG #3348 SYR #4899 CWV 201 Boy Scout Rd. 100 Farrell Rd. 100 Lodgeville Rd. Augusta, GA 30909 Syracuse, NY 13209 Clarksburg, WV 26330 Holiday Inn - 105 Hotel Holiday Inn - 106 #2050 FHI #3535 CND #4800 FWV 8050 Holiday Place 800 West 8th St. I-79 and Old Grafton Rd. Florence, KY 41042 Cincinnati, OH 45203 Fairmont, WV 26554 Holiday Inn - 214 Courtyard - 122 Holiday Inn - 147 #2020 CNS #3636 TUL #4848 MWV 2100 Dixie Hwy 3340 South 79th East Ave. 1400 Saratoga Ave. Ft. Mitchell, KY 41011 Tulsa, OK 74145 Morgantown, WV 26505

16 EX-10.4.3 24 g87458exv10w4w3.txt EX-10.4.3 $5,000,000 GAP MORTGAGE NOTE EXHIBIT 10.4. 3 GAP MORTGAGE NOTE $5,000,000.00 May 22, 2003 New York, New York FOR VALUE RECEIVED LODGIAN DENVER LLC, LODGIAN NORTH MIAMI LLC, LODGIAN COCONUT GROVE LLC, LODGIAN AUGUSTA LLC, LODGIAN FLORENCE LLC, LODGIAN FORT MITCHELL LLC, LODGIAN LAFAYETTE LLC, LODGIAN MERRIMACK LLC, LODGIAN HAMBURG LLC, LODGIAN SYRACUSE LLC, LODGIAN CINCINNATI LLC, LODGIAN TULSA LLC, LODGIAN JACKSON LLC, LODGIAN MEMPHIS LLC, LODGIAN COLCHESTER LLC, LODGIAN BRIDGEPORT LLC, LODGIAN FAIRMONT LLC, AND LODGIAN MORGANTOWN LLC, each a Delaware limited liability company having its principal place of business at c/o Lodgian, Inc., 3445 Peachtree Road, N.E., Suite 700, Atlanta, Georgia 30326 (collectively, "Maker"), promises to pay to the order of LEHMAN BROTHERS HOLDINGS INC., a Delaware corporation ("Payee"), at its principal place of business at 399 Park Avenue, New York, New York 10022, or at such place as the holder hereof may from time to time designate in writing, the principal sum of Five Million and 00/100 Dollars (the "Loan"), in lawful money of the United States of America, with interest thereon to be computed on the unpaid principal balance from time to time outstanding at the Applicable Interest Rate (as such term is defined in Section 2 hereof), and to be paid in installments as follows: (a) On the first day of each calendar month beginning with the second full calendar month after the date hereof (each a "Payment Date"), monthly payments of interest at the Applicable Interest Rate, calculated in accordance with Section 3 hereof, for the full number of days in such previous calendar month; and (b) On each Payment Date, monthly payments of principal based on a 25-year amortization schedule and a loan constant based on the Applicable Interest Rate on the date hereof; with the entire outstanding principal balance, together with accrued and unpaid interest and any other amounts due under this Note, shall be due and payable on the maturity date of the Loan, as determined in accordance with Section 1 hereof. 1. LOAN TERM. The Loan shall be for a term of two years, and shall mature on the second anniversary of the first day of the first full calendar month following the date hereof or, if the date hereof is the first day of a calendar month, then on the second anniversary of the date hereof (the "Initial Maturity Date"). 2. APPLICABLE INTEREST RATE. (a) Interest on the Loan shall accrue and be payable at LIBOR (as such term is defined in subsection (b) of this Section) plus the applicable Spread (as such term is defined in subsection (c) of this Section) as calculated from time to time (the "LIBOR Rate"). 1 (b) As used herein, the term "LIBOR", with respect to the relevant Interest Period (as such term is defined in this subsection), shall mean the rate per annum (rounded upwards, if necessary, to the nearest one-sixteenth (1/16) of one (1%) percent) reported on the date two "Eurodollar Business Days" (as such term is defined in this subsection) prior to the first day of such Interest Period (the "LIBOR Reset Date"), as reported in The Wall Street Journal as the London Interbank Offered Rate for U.S. dollar deposits having a term comparable to such Interest Period and in an amount of $1,000,000.00 or more (or if The Wall Street Journal shall cease to be publicly available or if the information contained in The Wall Street Journal, in Payee's reasonable judgment, shall cease to accurately reflect such London Interbank Offered Rate, then LIBOR shall be as reported by any publicly available source of similar market data selected by Payee that, in Payee's sole, but reasonable, judgment, accurately reflects such London Interbank Offered Rate). The term "Interest Period" shall mean the respective 30-day term of a particular LIBOR contract. The term "Eurodollar Business Day" shall mean any day that is not a Saturday, a Sunday or a day on which banks in the City of London are required or permitted to be closed for interbank or foreign exchange transactions. LIBOR shall be adjusted prospectively for reserve requirements that are applicable to Payee which become effective on or after the date hereof. (c) As used in this Note, the term "Spread" shall mean the number of basis points added to LIBOR to determine the LIBOR Rate from time to time. During the term of the Loan, the Spread shall be 525 basis points (5.25%). (d) As used in this Note the term "Applicable Interest Rate" shall mean the greater of: (i) the LIBOR Rate as applicable from time to time; and (ii) seven and one-quarter percent (7.25%) per annum. 3. CALCULATION OF INTEREST; APPLICATION OF PAYMENTS. (a) Interest on the outstanding principal balance of this Note shall be calculated by multiplying the actual number of days elapsed in any given payment period by a daily rate based on a 360-day year. (b) The LIBOR Rate, and the amount of interest payable monthly, shall be recalculated at each LIBOR Reset Date. (c) Payments under this Note shall be applied in accordance with the certain Mortgage (as defined below). All amounts due under this Note shall be payable without setoff, counterclaim or any other deduction whatsoever. 4. INTENTIONALLY OMITTED. 5. SECURITY FOR THE LOAN. (a) This Note is secured by: (i) that certain mortgage, deed of trust or deed to secure debt instruments dated as of the date hereof (the "Mortgage") affecting the real property and improvements more particularly described on Schedule B hereto (collectively, the "Mortgaged Property"); and (ii) such other documents now or hereafter executed by Maker, one or more entities comprising Maker and/or Lodgian, Inc., in any capacity, and by or in favor of Payee, which wholly or partially secure or guarantee payment of this Note including, without limitation, any collateral assignments and reserve and/or escrow accounts (such other documents, collectively, the "Other Security Documents"). 2 (b) As used herein, the term "Loan Documents" means, collectively, this Note, the Mortgage, the Assignment, the Other Security Documents and any and all other documents executed by any entity comprising Maker and/or Lodgian, Inc., in any capacity, in connection with the Loan. 6. LATE CHARGE. If any sum payable under this Note (other than the entire Debt (as such term is defined in Section 7 hereof) payable on or before the Applicable Maturity Date) is not paid prior to the tenth (10th) day after the date such payment is due, Maker shall pay to Payee on demand an additional amount equal to five (5%) percent of such unpaid sum to defray the expenses incurred by Payee in handling and processing such delinquent payment and to compensate Payee for the loss of the use of such delinquent payment, and such additional amount shall be secured by the Mortgage, the Assignment and the Other Security Documents. 7. EVENTS OF DEFAULT. The entire outstanding principal balance of this Note, together with all accrued and unpaid interest thereon and all other sums due under the Loan Documents (all such sums, collectively, the "Debt"), or any portion thereof, shall without notice become immediately due and payable at the option of Payee: (a) if any payment required in this Note is not paid prior to the tenth (10th) day after the date when due or on the Applicable Maturity Date; or (b) upon the happening of any other Event of Default under and as defined in the Mortgage (each of the foregoing, an "Event of Default"). In the event that Payee retains counsel to collect the Debt or to protect or foreclose the security provided in connection herewith, Maker also agrees to pay on demand all costs of collection incurred by Payee, including reasonable attorneys' fees for the services of counsel whether or not suit be brought. 8. DEFAULT RATE INTEREST. Maker does hereby agree that upon the occurrence of an Event of Default, including Maker's failure to pay the Debt in full on the Applicable Maturity Date, Payee shall be entitled to receive, and Maker shall pay, interest on the entire outstanding principal balance and any other amounts due at the rate equal to the lesser of (a) the maximum rate permitted by applicable law; and (b) the Applicable Interest Rate plus three and one-quarter (3.25%) percent (the lesser of such rates in (a) or (b), the "Default Rate"); provided, however, that with respect to an Event of Default that is an interest and principal amortization payment default, such rate of interest shall apply from and after the date on which any such payment is due, without any period of grace or cure. Interest shall accrue and be payable at the Default Rate from the occurrence of the Event of Default until all such Events of Default have been fully cured. Interest at the Default Rate shall be added to the Debt, and shall be deemed secured by the Mortgage, the Assignment and the Other Security Documents. This provision, however, shall not be construed as an agreement or privilege to extend the date of the payment of the Debt, nor as a waiver of any other right or remedy accruing to Payee by reason of the occurrence of any Event of Default. 9. PREPAYMENT. (a) The principal balance of this Note may be prepaid, in whole or (subject to the provisions of subsection (b) of this Section) in part, upon: (i) not less than 30 days prior written notice to Payee specifying the date on which prepayment is to be made (the "Prepayment Date"); (ii) payment of accrued interest to and including the Prepayment Date; and (iii) payment of all other sums then due under this Note, the Mortgage, the Assignment and the Other Security Documents. If any such notice of prepayment is given, the principal amount set forth in such notice and the other sums required under this Section shall be due and payable on the Prepayment Date. 3 (b) Partial prepayments of principal hereunder shall be permitted only: (i) upon a casualty or condemnation event; or (ii) as provided in this Section 9 of this Note. The amounts to be paid in connection with a partial prepayment are set forth in subsection (a) of this Section. 10. LIMITATIONS ON RECOURSE. (a) Subject to the qualifications set forth in this Section, Payee shall not enforce the liability and obligation of Maker to perform and observe the obligations contained in this Note, the Mortgage, the Assignment or the Other Security Documents by an action or proceeding wherein a money judgment shall be sought against Maker, any member, stockholder, partner, employee, officer or director of Maker (each a "Related Party") except that Payee may bring a foreclosure action, an action for specific performance or any other appropriate action or proceeding to enable Payee to enforce and realize upon this Note, the Mortgage, the Assignment, the Other Security Documents, and the interests in the Mortgaged Property and any other collateral given to Payee pursuant to the Mortgage, the Assignment and the Other Security Documents; provided, however, that, except as specifically provided in this Section, any judgment in any such action or proceeding shall be enforceable against Maker only to the extent of each Maker's respective interest in the Mortgaged Property and in any other collateral given to Payee. Payee, by accepting this Note, the Assignment, the Mortgage and the Other Security Documents, agrees that it shall not sue for, seek or demand any personal liability of or any deficiency judgment against Maker or any Related Party in any such action or proceeding, under, by reason of or in connection with the Mortgage, the Assignment, the Other Security Documents or this Note. The provisions of this Section shall not, however: (i) constitute a waiver, release or impairment of any obligation evidenced or secured by the Mortgage, the Assignment or the Other Security Documents or this Note; (ii) impair the right of Payee to name Maker as a party defendant in any action or suit for foreclosure and sale under the Mortgage; (iii) affect the validity or enforceability of any guaranty or indemnity agreement made in connection with the Mortgage, this Note, the Assignment or the Other Security Documents; (iv) impair the right of Payee to obtain the appointment of a receiver; (v) impair the enforcement of the Assignment; (vi) impair the right of Payee to bring suit with respect to fraud or intentional misrepresentation by Maker or any other person or entity in connection with the Mortgage, this Note, the Assignment or the Other Security Documents; or (vii) affect the validity or enforceability of an environmental agreement or limit the liability of Maker or any other party thereunder. Anything herein to the contrary notwithstanding, Payee shall have the right in a foreclosure action to name as defendants Maker and any guarantor of any of Maker's obligations hereunder, by reason of their potential liability for the entire Debt or Payee's losses, as the case may be, as more particularly set forth in this Section. Nothing herein shall limit any personal liability of a Related Party for the payment of the Debt or any other sum due under this Note, the Mortgage, the Assignment or the Other Security Documents, or for the performance or observance of any other obligation of Maker under any guaranty, indemnity or similar agreement executed by such Related Party for personal obligations expressly set forth in such guaranty, indemnity or similar agreement. (b) Nothing herein shall be deemed to be a waiver of any right which Payee may have under Section 506(a), 506(b), 1111(b) or any other provisions of the U.S. Bankruptcy Code to file a claim for the full amount of the Debt secured by the Mortgage or to require that all collateral shall continue to secure all of the debt owing to Payee in accordance with this Note, the Mortgage, the Assignment and the Other Security Documents. (c) Notwithstanding the foregoing provisions of this Section or any other provision in the Loan Documents, Maker (but not any Related Party, other than pursuant to a written instrument executed by such Related Party specifically providing for such liability) shall be fully liable for and shall indemnify Payee for any or all loss, cost, liability, judgment, claim, damage or 4 expense sustained, suffered or incurred by Payee (including, without limitation, Payee's reasonable attorneys' fees and reasonable out of pocket expenses) arising out of or attributable or relating to: (i) the gross negligence or willful misconduct of Maker, or of Maker's principals or guarantor of the Loan; (ii) the physical waste or willful destruction of the Mortgaged Property; (iii) the breach of provisions in any of the Loan Documents concerning environmental laws, hazardous substances and asbestos, and any indemnification of Payee or other indemnitor therein with respect to such environmental laws, hazardous substances and asbestos; (iv) the removal or disposal of any portion of the personal property comprising the Mortgaged Property in violation of the Loan Documents; (v) the failure to satisfy and remove any mechanic or materialman liens against the Mortgaged Property to the extent there was available cash derived from the operation of the Mortgaged Property to pay the same or the work relating to such liens was not approved by Payee or permitted under the Loan Documents; (vi) the failure to satisfy taxes and other charges to the extent there was available cash derived from the operation of the Mortgaged Property to pay same; (vii) any security deposits or advance deposits collected with respect to the Mortgaged Property which are not delivered to Payee upon a foreclosure of the Mortgaged Property or action in lieu thereof; (viii) the failure of Maker (A) to comply with the single purpose entity requirements and covenants, with Employee Retirement Income Security Act of 1974 (or any successor legislation thereto), as amended, (B) to pay brokers' commissions or fees, (C) maintain required insurance policies with respect to the Mortgaged Property and the operation thereof, or (D) obtain prior consent of Maker with respect to material leases on or affecting the Mortgaged Property in accordance with the Assignment; (ix) any amendment, modification, cancellation or termination of any ground leases which constitute a portion of the Mortgaged Property without Payee's prior written consent; (x) the misappropriation, misapplication, conversion or any application of insurance proceeds, condemnation awards, rents or security deposit in violation of the Loan Documents (including interference with the operation of that certain Security Agreement and Lockbox Agreement dated as of the date hereof among Maker, Payee and Maker's loan servicer); and/or (xi) the intentional failure of Maker to comply with other legal requirements applicable to the Mortgaged Property or the operation thereof. (d) Notwithstanding the foregoing, the agreement of Payee not to pursue recourse liability against Maker as set forth in subsection (a) above SHALL BECOME NULL AND VOID 5 and shall be of no further force or effect in the event of (i) any fraud or material intentional misrepresentation by Maker or any principal of Maker or guarantor of the Loan in connection with the Loan, including, without limitation, any financial information concerning Maker, principal of Maker or any guarantor of the Loan proving to be fraudulent in any respect, containing any fraudulent information or misrepresenting in any material respect the financial condition of Maker or any guarantor of the Loan; (ii) any contest of the validity or enforceability of any or all of the Loan Documents; provided, however, that Maker shall be permitted to allege that no default occurred under the Loan Documents and that Maker is in compliance with the Loan Documents; (iii) any violation of the due-on-sale or due-on-encumbrance provisions of the Mortgage; (iv) Maker's failure, which failure continues after expiration of all applicable notice and cure provisions, (A) to permit on-site inspections in accordance with the Loan Documents, (B) to deliver financial statements expressly required by the Loan Documents or (C) to deliver estoppel certificates concerning the status of the Loan in accordance with the Loan Documents; (iv) a voluntary bankruptcy filing by Maker, or an involuntary filing against Maker (if such case is not dismissed within ninety (90) days) provided such filing was facilitated, coordinated or directed by Maker, any of its principals or affiliates, or any guarantor of the Loan; provided, however, that, the failure of any of Maker's principals or affiliates to advance or contribute funds or assets shall not be deemed to be a facilitation of any such filing; (v) any amendment or modification of the organizational documents of Maker or any constituent partner, member or other person or entity, in each case without the prior written consent of Payee and in violation of the single purpose entity and/or bankruptcy remoteness requirements; (ix) any violation of the provisions waiving jury trial or counterclaims (other than compulsory counterclaims) contained in the Loan Documents; and/or (x) any assertion in legal proceedings by Maker, any principal of Maker or any guarantor of the Loan that (a) Payee has modified the Loan Documents other than by written instrument signed by Payee, (b) Payee has waived the provisions of the Loan Documents by failing to require Maker's strict performance of the terms thereof or (c) Maker's and Payee's relationship is other than that of a debtor/creditor arising under the Loan Documents. 11. NO USURY. It is expressly stipulated and agreed to be the intent of Maker and Payee at all times to comply with applicable state law or applicable United States federal law (to the extent that it permits Payee to contract for, charge, take, reserve, or receive a greater amount of interest than under state law) and that this Section shall control every other covenant and agreement in this Note and the other Loan Documents. If the applicable law (state or federal) is ever judicially interpreted so as to render usurious any amount called for under this Note or under any of the other Loan Documents, or contracted for, charged, taken, reserved, or received with respect to the Debt, or if Payee's exercise of the option to accelerate the maturity of this Note, or if any prepayment by Maker results in Maker having paid any interest in excess of that permitted by applicable law, then it is Maker's and Payee's express intent that all excess amounts theretofore collected by Payee shall be credited to the principal balance of this Note and all other Debt (or, if this Note and all other Debt have been or would thereby be paid in full, refunded to Maker), and the provisions of this Note and the other Loan Documents immediately be deemed reformed and the amounts thereafter collectible hereunder and thereunder reduced, without the necessity of the execution of any new documents, so as to comply with the applicable law and so as to permit the recovery of the fullest amount otherwise called for hereunder or thereunder. All sums paid or agreed to be paid to Payee for the use, forbearance, or detention of the Debt shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Debt until payment in full so that the rate or amount of interest on account of the Debt does not exceed the maximum lawful rate from time to time in effect and applicable to the Debt for so long as the Debt is outstanding. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, it is not the intention of Payee to 6 accelerate the maturity of any interest that has not accrued at the time of such acceleration or to collect unearned interest at the time of such acceleration. 12. TRANSFERS NOT PERMITTED. Without the prior written consent of Payee, Maker shall not sell, convey, alienate, mortgage, encumber, pledge or otherwise transfer, or permit the transfer of, directly or indirectly, the Mortgaged Property or ownership interests of Maker. 13. AUTHORITY. Maker represents that Maker has full power, authority and legal right to execute, deliver and perform its obligations pursuant to this Note, the Mortgage and the other Loan Documents and that this Note, the Mortgage and the other Loan Documents constitute valid and binding obligations of Maker. 14. NOTICES. All notices or other communications required or permitted to be given pursuant hereto shall be given in the manner specified in the Mortgage directed to the parties at their respective addresses as provided therein. 15. WAIVER OF JURY TRIAL. MAKER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS NOTE, THE MORTGAGE, OR THE OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY MAKER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO TRIAL BY JURY WOULD OTHERWISE ACCRUE. PAYEE IS HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY MAKER. 16. GOVERNING LAW. This Note shall be governed by and construed in accordance with the laws of the State of New York (without regard to conflicts of laws principles) and the applicable laws of the United States of America. 17. MISCELLANEOUS. (a) No release of any security for the Debt or any person liable for payment of the Debt, no extension of time for payment of this Note or any installment hereof, and no alteration, amendment or waiver of any provision of the Loan Documents made by agreement between Payee and any other person or party shall release, modify, amend, waive, extend, change, discharge, terminate or affect the liability of Maker, and any other person or party who might be or become liable for the payment of all or any part of the Debt, under the Loan Documents. (b) Maker and all others who may become liable for the payment of all or any part of the Debt do hereby severally waive presentment and demand for payment, notice of dishonor, protest, notice of protest, notice of non-payment, notice of intent to accelerate the maturity hereof and of acceleration. (c) This Note may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Maker or Payee, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. 7 (d) Whenever used, the singular number shall include the plural, the plural the singular, and the words "Payee" and "Maker" shall include their respective successors, assigns, heirs, executors and administrators. (e) If Maker consists of more than one person or party, the obligations and liabilities of each such person or party shall be joint and several. 8 IN WITNESS WHEREOF, Maker has duly executed this Note and Payee, by its signature, has accepted this Note, on the day and year first above written. MAKER: LODGIAN DENVER LLC LODGIAN NORTH MIAMI LLC LODGIAN COCONUT GROVE LLC LODGIAN AUGUSTA LLC LODGIAN FLORENCE LLC LODGIAN FORT MITCHELL LLC LODGIAN LAFAYETTE LLC LODGIAN MERRIMACK LLC LODGIAN HAMBURG LLC LODGIAN SYRACUSE LLC LODGIAN CINCINNATI LLC LODGIAN TULSA LLC LODGIAN JACKSON LLC LODGIAN MEMPHIS LLC LODGIAN COLCHESTER LLC LODGIAN BRIDGEPORT LLC LODGIAN FAIRMONT LLC LODGIAN MORGANTOWN LLC By:/s/ Daniel E. Ellis --------------------------------------- Name: Daniel E. Ellis Authorized Signatory/Vice President and Secretary [ACKNOWLEDGEMENT] 9 STATE OF NEW YORK ) ) ss: COUNTY OF NEW YORK ) On the 20th day of May in the year 2003 before me, the undersigned, personally appeared Daniel E. Ellis, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument, and that such individual made such appearance before the undersigned in the City of New York. (Notarial Seal) /s/ Ellen Warren -------------------------------------------- Notary Public ELLEN WARREN NOTARY PUBLIC, STATE OF NEW YORK NO. 31-4847374 QUALIFIED IN NEW YORK COUNTY COMMISSION EXPIRES: JULY 31, 2005 10 SCHEDULE A THE PROPERTIES Marriott Hotel - 238 Courtyard - 90 Fairfield Inn - 105 #0707 D1A #1515 LAF #4205 JTN 16455 East 40th Circle 214 E. Kaliste Saloom Rd. 535 Wiley Parker Rd. Aurora, CO 80011 Lafayette, LA 70508 Jackson, TN 38305 Mayfair House - 179 Fairfield Inn- 116 Holiday Inn Sycamore - 173 #1178 MAY #2828 MMK #4242 MH1 3000 Florida Ave. 4 Amherst Rd 6101 Shelby Oaks Dr. Miami, FL 33131 Merrimack, NH 03054 Memphis, TN 38134 Holiday Inn N. Miami - 98 Holiday Inn- 130 Fairfield Inn - 117 #1183 MHJ #3398 HAM #4545 BVT 12210 Biscayne Blvd. 5440 Camp Rd. 84 South Park Drive Miami, FL 33181 Hamburg, NY 14075 Colchester, VT 05446 Fairfield Inn - 117 Holiday Inn - 152 Holiday Inn - 159 #1265 AUG #3348 SYR #4899 CWV 201 Boy Scout Rd. 100 Farrell Rd. 100 Lodgeville Rd. Augusta, GA 30909 Syracuse, NY 13209 Clarksburg, WV 26330 Holiday Inn - 105 Holiday Inn Downtown - 243 Holiday Inn - 106 #2050 FHI #3535 CND #4800 FWV 8050 Holiday Place 800 West 8'" St. 1-79 and Old Grafton Rd. Florence, KY 41042 Cincinnati, OH 45203 Fairmont, WV 26554 Holiday Inn - 214 Courtyard - 122 Holiday Inn - 147 #2020 CNS #3636 TUL #4848 MWV 2100 Dixie Hwy 3340 South 79'" East Ave. 1400 Saratoga Ave. Ft. Mitchell, KY 41011 Tulsa, OK 74145 Morgantown, WV 26505

11 EX-10.4.4 25 g87458exv10w4w4.txt EX-10.4.4 PRINCIPAL'S AGREEMENT EXHIBIT 10.4.4 PRINCIPAL'S AGREEMENT This PRINCIPAL'S AGREEMENT dated as of May 22, 2003 by LODGIAN, INC., a Delaware corporation with an address at 3445 Peachtree Road, N.E., Suite 700, Atlanta, Georgia 30326 ("Principal"), to and for the benefit of LEHMAN BROTHERS HOLDINGS INC., a Delaware corporation, having an address at 399 Park Avenue, New York, New York 10022 ("Lender"). W I T N E S S E T H: WHEREAS, Lender has this day made a loan to Lodgian Denver LLC, Lodgian North Miami LLC, Lodgian Coconut Grove LLC, Lodgian Augusta LLC, Lodgian Florence LLC, Lodgian Fort Mitchell LLC, Lodgian Lafayette LLC, Lodgian Merrimack LLC, Lodgian Hamburg LLC, Lodgian Syracuse LLC, Lodgian Cincinnati LLC, Lodgian Tulsa LLC, Lodgian Jackson LLC, Lodgian Memphis LLC, Lodgian Colchester LLC, Lodgian Bridgeport LLC, Lodgian Fairmont LLC, and Lodgian Morgantown LLC, each a Delaware limited liability company (collectively "Borrower") in the original principal amount of $80,000,000.00 (the "Loan"); WHEREAS, the Loan is evidenced by a Consolidated, Amended and Restated Mortgage Note made by Borrower (as the same may be amended, restated, extended or modified, the "Note") and is secured by, among other things, a first mortgage, deed of trust or deed to secure debt lien on fee and leasehold interests, as applicable, in the real property and improvements more particularly described on Schedule A hereto (the "Premises"; the Note and all other documents and instruments executed by one or more entities comprising Borrower and/or Lodgian, Inc., in any capacity, in connection with the Loan, collectively, the "Loan Documents"); WHEREAS, each of the entities comprising Borrower is a special purpose entity, created solely to own the Premises and to enter into the transactions contemplated in the Loan Documents; WHEREAS, except as specifically set forth therein, the Note evidences the joint and several non-recourse liability of Borrower and, except as expressly provided therein to the contrary, Lender's recourse under the Loan Documents is limited to Borrower's interest in and to the Premises (the liability arising by reason of Section 10 of the Note, collectively, the "Recourse Liability"); WHEREAS, Principal has agreed to guarantee the payment of operating expenses and other costs of the operations of the Mortgaged Property for the period commencing on the date hereof through May 31, 2003 (the "May Operating Expenses"); WHEREAS, Principal is the indirect 100% owner of Borrower, and Principal expects to derive substantial economic benefit from the Loan; and WHEREAS, as a material condition to making the Loan and accepting the Loan Documents Lender has required Principal, and Principal has agreed, to guaranty the Recourse Liability and the May Operating Expenses. NOW, THEREFORE, in consideration of Ten ($10.00) Dollars, the Loan, and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, Principal agrees as follows: 1. Principal hereby absolutely and unconditionally guaranties the prompt satisfaction and discharge of any and all Recourse Liability and May Operating Expenses without defense, offset, counterclaim or right of subrogation, each of which is hereby waived. This Agreement is and shall be construed as a continuing, absolute and unconditional guaranty of payment, and not as a guaranty of collection. It is expressly understood and agreed that this is a continuing guaranty and that the obligations of Principal hereunder are and shall be absolute under any and all circumstances, without regard to the validity, regularity or enforceability of the Note or the other Loan Documents, a true copy of each of which documents Principal hereby acknowledges having received and reviewed. 2. (a) Principal hereby waives: (i) notice of acceptance of this Agreement by Lender and of presentment, demand, protest, notice of protest and of dishonor, notice of default and all other notices of every kind or nature now or hereafter provided by agreement or available at law (it being understood that this Section 2(a)(i) is not a waiver by Borrower of its rights to receive notice pursuant to the Loan Documents); (ii) the pleading of any statute of limitations as a defense to the obligations hereunder; and (iii) any right to require or compel Lender, prior to exercising its rights hereunder to first proceed against Borrower or any security for the Loan, or to pursue any other remedy available to Lender. Lender's failure to exercise, or delay in exercising, any right or power hereunder shall not operate as a waiver thereof, nor shall any single or partial exercise by Lender of any right, remedy or power hereunder preclude any other or future exercise of any other right, remedy or power. Principal acknowledges that if there shall occur any Recourse Liability or May Operating Expenses that have not been paid when due, Lender may seek recovery therefor, and may exercise any remedies it may have, against Principal with the same force and effect as if Principal were a primary obligor under the Note and the other Loan Documents. (b) Principal further agrees that the validity of this Agreement and the obligations of Principal hereunder shall in no way be terminated, affected or impaired by reason of: (i) the assertion by Lender of any rights or remedies which it may have under or with respect to the Note or the other Loan Documents, against any person obligated thereunder or against the owner of the Premises; (ii) any failure to file or record any of the Loan Documents or to take or perfect any security intended to be provided thereby; (iii) the release or exchange of the Premises or any other collateral for the Loan; (iv) the commencement of a case under the Bankruptcy Code, 11 U.S.C. ss. 101 et seq., as amended from time to time (the "Bankruptcy Code"), by or against any person obligated under the Note or the other Loan Documents, or the dissolution or corporate reorganization of any Principal; or (v) any payment made on the Debt (as such term is defined in the Note) or any other indebtedness arising under the Note or the other Loan Documents, whether made by Borrower or Principal or any other person, which is required to be refunded pursuant to any bankruptcy or insolvency law; it being understood that no payment so refunded shall be considered as a payment of any portion of the Debt, nor shall it have the effect of reducing the liability of Principal hereunder. It is further understood that if Borrower shall 2 have taken advantage of, or be subject to the protection of, any provision of the Bankruptcy Code, the effect of which is to prevent or delay Lender from taking any remedial action against Borrower, including the exercise of any option Lender has to declare the Debt due and payable on the happening of any default or event by which, under the terms of the Loan Documents, the Debt shall become due and payable, Lender may, as against Principal, nevertheless, declare any Recourse Liability or May Operating Expenses due and payable, and enforce any and all of its rights and remedies provided for herein. (c) Principal further covenants: (i) that this Agreement shall remain and continue in full force and effect as to any modification, extension or renewal of the Note or any of the other Loan Documents; (ii) that Lender shall not be under a duty to protect, secure or insure any security or lien provided by the Loan Documents or other collateral for the Loan; and (iii) that other indulgence or forbearance may be granted under any or all of the Loan Documents, without notice to or further consent of Principal. 3. Principal will not convey, transfer or assign, directly or indirectly, any material portion of its property of any nature, whether real, personal or mixed, tangible or intangible, or any interest therein, for less than full and fair consideration. 4. Any indebtedness of Borrower to Principal now or hereafter existing (including, without limitation, any rights of subrogation Principal may have as a result of any payment by Principal under this Agreement), together with any interest thereon, shall be, and such indebtedness is hereby, deferred, postponed and subordinated to the prior payment in full of the Debt. Until payment in full of the Debt (and including interest accruing on the Note after the commencement of a proceeding by or against Borrower under the Bankruptcy Code which interest the parties agree shall remain a claim that is prior and superior to any claim of Principal notwithstanding any contrary practice, custom or ruling in cases under the Bankruptcy Code generally), Principal agrees not to accept any satisfaction or payment of any kind of indebtedness of Borrower to Principal and hereby assigns such indebtedness to Lender, including the right to file proof of claim and to vote thereon in connection with any such proceeding under the Bankruptcy Code, including the right to vote on any plan of reorganization. Further, if Principal shall now or at any time in the future comprise more than one person, firm or corporation, Principal agrees that until such payment in full of the Debt: (a) no one of them shall accept payment from the others by way of contribution on account of any payment made hereunder by such party to Lender; (b) no one of them will take any action to exercise or enforce any rights to such contribution; and (c) if any one of them should receive any payment, satisfaction or security for any indebtedness of Borrower to any Principal or for any contribution by the others of them for payment made hereunder by the recipient to Lender, such payment, satisfaction or security shall be delivered to Lender in the form received, endorsed or assigned as may be appropriate for application on account of, or as security for, the Debt and until so delivered shall be held in trust for Lender as security for the Debt. 5. Principal hereby represents and warrants that it has obtained all requisite consents and approvals and that it has full power and authority to execute and deliver this Agreement. 6. PRINCIPAL HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE OR ANY OTHER STATE AND COUNTY IN WHICH ANY PORTION OF THE PREMISES IS LOCATED, OR 3 FEDERAL COURT SITTING IN NEW YORK COUNTY, OR ANY OTHER COUNTY IN WHICH ANY PORTION OF THE PREMISES IS LOCATED, OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. LENDER MAY, AT ITS SOLE DISCRETION, ELECT THE STATE OF NEW YORK, NEW YORK COUNTY, OR ANY OTHER STATE AND COUNTY IN WHICH ANY PORTION OF THE PREMISES IS LOCATED OR THE UNITED STATES OF AMERICA, FEDERAL DISTRICT COURT HAVING JURISDICTION OVER NEW YORK COUNTY, OR ANY OTHER COUNTY IN WHICH ANY PORTION OF THE PREMISES IS LOCATED, AS THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING. PRINCIPAL HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO SUCH VENUE AS BEING AN INCONVENIENT FORUM. 7. Principal hereby irrevocably appoints Cadwalader, Wickersham & Taft LLP, 100 Maiden Lane, New York, New York 10038, Attn: Robert McDonough, Esq., as its authorized agent to accept and acknowledge, on behalf of Principal, service of any and all process which may be served in any suit, action or proceeding of the nature referred to in Section 6 hereof in any State or Federal court within New York County. If such agent shall cease so to act, Principal shall irrevocably designate and appoint without delay another such agent satisfactory to Lender, and shall promptly deliver to Lender written evidence of such other agent's acceptance of such appointment. 8. Process in any suit, action or proceeding of the nature referred to in Section 6 hereof may be served: (a) by registered or certified mail, postage prepaid, to Principal at the address set forth above or to such other address of which Principal shall have given Lender written notice; or (b) if Principal shall not have made an appearance within 21 days after service in accordance with clause (a) of this Section, by hand delivery to the agent identified in Section 7 hereof, or such successor agent as shall have been identified in accordance with Section 7 hereof. Nothing in this Section shall affect the Lender's right to serve process in any manner permitted by law, or limit Lender's right to bring proceedings against Principal in the courts of any other jurisdiction. 9. This Agreement constitutes the entire agreement between Principal and Lender with respect to the matters referred to herein, and no modification or waiver of any of the terms hereof shall be effective unless in writing, signed by the party to be charged with such modification or waiver. 10. This Agreement shall inure to the benefit of Lender and any subsequent holder of the Loan Documents and shall be binding upon Principal, its successors and assigns. 11. This Agreement shall be governed by the laws of the State of New York, without regard for conflicts of laws principles or otherwise. 12. (a) Lender may, at any time, sell all or a portion of the Loan evidenced by all or a portion of the Loan Documents to a party who may pool the Loan with a number of other loans and to have the holder of such loans grant participations therein or issue one or more classes of Mortgage Backed, Pass-Through Certificates or other securities evidencing a beneficial interest in a rated or unrated public offering or private placement (the "Securities"). The Securities may be rated by one or more national rating agencies. In 4 connection therewith, Principal agrees to make available to Lender all information concerning its business and operations which Lender reasonably requests; provided, however, information with respect to Principal shall be shared only to the extent such information is publicly available. Lender may share such information with the investment banking firms, rating agencies, accounting firms, law firms and other third-party advisory firms involved with the Loan or the Securities. The information provided by Borrower or Principal to Lender with respect to Principal (with respect to Principal, information only to the extent that it is publicly available) may ultimately be incorporated into the offering documents for the Securities and thus such information may be disclosed to various investors. Lender and all of the aforesaid third-party advisors and professional firms shall be entitled to rely on the information supplied by, or on behalf of, Principal. Without limiting the foregoing, Lender may sell or assign any or all servicing rights with respect thereto. (b) Lender shall have the right, at any time in its sole and absolute discretion, to split and sever the Loan into two or more separate loans with the same or differing priorities, each secured by liens on some or all of the Mortgaged Property, to sell participations in the Loan to third parties or sell, assign, pledge or otherwise hypothecate the Loan or one or more severed portions of the Loan to third parties. Principal shall execute and deliver all such instruments, documents and other papers, and do or cause to be done all such acts and things as Lender may reasonably request in order to effect such splitter and severance or participation. In connection with any participation, Principal agrees to make available to Lender all information concerning its business and operations which Lender reasonably requests and Lender may share such information and any other information in Lender's possession concerning Principal with prospective participants and other third-party advisory firms involved with such activities. (c) Principal shall cooperate with Lender in Lender's efforts with respect to any sale, securitization, pooling, split, severance or hypothecation of the Loan described in this Section by executing and delivering all such documents, certificates, instruments and other things reasonably necessary to evidence or confirm Principal's obligations hereunder, and in no such event shall the Debt or Principal's obligations hereunder be increased, or Principal's rights hereunder be decreased, as a result thereof, nor shall Principal be required to pay additional expense. Lender shall pay all of Principal's actual out-of-pocket expenses and third-party costs (including attorneys' fees and expenses associated therewith). (d) Upon any transfer or proposed transfer contemplated above and by the Loan Documents, at Lender's request, Principal shall provide an estoppel certificate to purchaser or a prospective purchaser in such form, substance and detail as Lender, or such purchaser or prospective purchaser may require. 13. Without limiting any of the foregoing, Principal shall be obligated to pay, and shall pay, the May Operating Expenses as they come due. With respect to the May Operating Expenses only, Principal shall be entitled to repayment of May Operating Expenses actually paid by Principal if, and only to the extent of, (i) as measured on June 10, 2003, there are funds contained in the Lockbox (as defined in and in accordance with that certain Lockbox Agreement and Security Agreement dated as of the date hereof among Lender, Borrower and Loan servicer named therein) in respect of revenue derived from the Mortgaged Property in and in respect of the calendar month of May 2003, (ii) there are funds in excess of amounts required to be deposited in the accounts listed in Section 2(c)(i) - (vi) of the Loan Agreement during the month of June, 2003; and (iii) to the extent of May Operating Expenses actually paid by 5 Principal. The amount of repayment, if any, shall be determined on or about June 30, 2003 and repayment made as soon as practicable thereafter. Thereafter, right of Principal or any other party to receive any reimbursement in respect of the May Operating Expenses shall be extinguished, and Principal or any other party in interest shall not be entitled to any further reimbursement with respect thereto. 6 IN WITNESS WHEREOF, Principal has executed this Agreement as of the day and year first above written. LODGIAN, INC. By:/s/ Daniel E. Ellis --------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary STATE OF NEW YORK ) ) ss. COUNTY OF NEW YORK ) On the 20th day of May in the year 2003 before me, the undersigned, personally appeared Daniel E. Ellis, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument, and that such individual made such appearance before the undersigned in the City of New York. (Notarial Seal) /s/ Ellen Warren ------------------------------------------- Notary Public ELLEN WARREN NOTARY PUBLIC, STATE OF NEW YORK NO. 31-4847374 QUALIFIED IN NEW YORK COUNTY COMMISSION EXPIRES: JULY 31, 2005 7 SCHEDULE A List of Premises Marriott Hotel - 238 Courtyard - 90 Fairfield Inn - 105 #0707 DIA #1515 LAF #4205 JTN 16455 East 40th Circle 214 E. Kaliste Saloom Rd. 535 Wiley Parker Rd. Aurora, CO 80011 Lafayette, LA 70508 Jackson, TN 38305 Mayfair House - 179 Fairfield Inn - 116 Holiday Inn Sycamore - 173 #1178 MAY #2828 MMK #4242 MHI 3000 Florida Ave. 4 Amherst Rd 6101 Shelby Oaks Dr. Miami, FL 33131 Merrimack, NH 03054 Memphis, TN 38134 Holiday Inn N. Miami - 98 Holiday Inn - 130 Fairfield Inn - 117 #1183 MHJ #3398 HAM #4545 BVT 12210 Biscayne Blvd. 5440 Camp Rd. 84 South Park Drive Miami, FL 33181 Hamburg, NY 14075 Colchester, VT 05446 Fairfield Inn - 117 Holiday Inn - 152 Holiday Inn - 159 #1265 AUG #3348 SYR #4899 CWV 201 Boy Scout Rd. 100 Farrell Rd. 100 Lodgeville Rd. Augusta, GA 30909 Syracuse, NY 13209 Clarksburg, WV 26330 Holiday Inn - 105 Holiday Inn Downtown - 243 Holiday Inn - 106 #2050 FHI #3535 CND #4800 FWV 8050 Holiday Place 800 West 8th St. I-79 and Old Grafton Rd. Florence, KY 41042 Cincinnati, OH 45203 Fairmont, WV 26554 Holiday Inn - 214 Courtyard - 122 Holiday Inn - 147 #2020 CNS #3636 TUL #4848 MWV 2100 Dixie Hwy 3340 South 79th East Ave. 1400 Saratoga Ave. Ft. Mitchell, KY 41011 Tulsa, OK 74145 Morgantown, WV 26505

8 EX-10.4.5 26 g87458exv10w4w5.txt EX-10.4.5 SECURITY AGREEMENT AND LOCKBOX AGREEMENT EXHIBIT 10.4.5 SECURITY AGREEMENT AND LOCKBOX AGREEMENT This SECURITY AGREEMENT AND LOCKBOX AGREEMENT DATED AS OF MAY 22, 2003 AMONG LODGIAN DENVER LLC, LODGIAN NORTH MIAMI LLC, LODGIAN COCONUT GROVE LLC, LODGIAN AUGUSTA LLC, LODGIAN FLORENCE LLC, LODGIAN FORT MITCHELL LLC, LODGIAN LAFAYETTE LLC, LODGIAN MERRIMACK LLC, LODGIAN HAMBURG LLC, LODGIAN SYRACUSE LLC, LODGIAN CINCINNATI LLC, LODGIAN TULSA LLC, LODGIAN JACKSON LLC, LODGIAN MEMPHIS LLC, LODGIAN COLCHESTER LLC, LODGIAN BRIDGEPORT LLC, LODGIAN FAIRMONT LLC, AND LODGIAN MORGANTOWN LLC, each a Delaware limited liability company, with an address at c/o Lodgian, Inc., 3445 Peachtree Road, N.E., Suite 700, Atlanta, Georgia 30326 ("Borrower"), LEHMAN BROTHERS HOLDINGS INC., a Delaware corporation with an address at 399 Park Avenue, New York, New York 10022 ("Lender") and TRIMONT REAL ESTATE ADVISORS, INC. (f/k/a Hatfield Philips, Inc.), a Georgia corporation, whose address is Marquis Two Tower, Suite 2300, 285 Peachtree Center Avenue, Atlanta, Georgia 30303 ("Servicer"). WITNESSETH: WHEREAS, Lender has this day made a loan to Borrower in the original principal amount of $80,000,000.00 (the "Loan"); WHEREAS, the Loan is evidenced by a certain Consolidated, Amended and Restated Mortgage Note dated the date hereof from Borrower to Lender (as the same may be amended, restated, extended or modified, the "Note") and a certain Loan Agreement dated as of the date hereof between Borrower and Lender (as the same may be amended, restated, extended or modified, the "Loan Agreement"; capitalized terms not otherwise defined herein shall have the meanings set forth in the Loan Agreement), and is secured by, among other things, certain mortgage, deed of trust or deed to secure debt instruments each dated as of the date hereof from each of the entities comprising Borrower (as the same may be amended, restated, extended or modified, collectively, the "Mortgage"; the Note, the Loan Agreement, the Mortgage and all other documents executed by Borrower, entities comprising Borrower and/or Lodgian, Inc., in any capacity, in connection with the Loan, collectively, the "Loan Documents") creating a first lien on each of the properties described on Schedule A hereto (collectively, the "Premises"); WHEREAS, as additional security for the Loan and for Borrower's obligations in respect of the Loan and the Premises, Lender has required that Borrower enter into certain continuing cash management arrangements with Servicer, pursuant to which all revenue and proceeds generated or otherwise received from the Premises shall be deposited by Borrower into an interest-bearing cash collateral account to be maintained in the name of Servicer, as Lender's agent, at such place as shall be designated by Servicer, which account shall be pledged and assigned to Lender as additional collateral for the -1- Loan, and from which account Servicer, as Lender's agent, shall approve any and all disbursements, in all events in accordance with the Loan Agreement (the "Lockbox"); WHEREAS, as more particularly provided herein, Servicer shall make periodic withdrawals from the Lockbox, and shall disburse portions of the sums so withdrawn to one or more of the accounts specified in Section 5 hereof (the "Accounts"); and WHEREAS, Borrower, Lender and Servicer have agreed to memorialize their agreements regarding the Lockbox and the Accounts and Lender's rights and interests with respect thereto, as more particularly set forth herein. NOW, THEREFORE, in consideration of Ten ($10.00) Dollars, the mutual premises herein contained and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, Borrower, Lender and Servicer agree as follows: 1. THE BUDGET. Attached hereto as Exhibit A is a budget with respect to the income and expenses of the operation of each of the properties comprising the Premises for the current calendar year (the budget, and any approved revisions, replacements and substitutions thereof, and any future approved budgets for the Premises in accordance with the terms of the Loan Agreement for periods when any sums in respect of the Loan remain outstanding, (the "Budget"). 2. REPORTING REQUIREMENTS. Borrower and Servicer shall periodically share information concerning revenue and expenses such that, within 30 days after the end of each calendar month, an operating statement for the Premises may be produced by Borrower detailing all income and proceeds generated or otherwise received from or in respect of any portion of the Premises ("Gross Revenue"), and all expenses incurred in respect of the operation of the Premises and Borrower in and for the preceding calendar month including, without limitation, debt service payable in respect of the Loan ("Expenses"; the amount by which Gross Revenue for a particular calendar month exceeds Expenses for such calendar month, "Net Income"). Each monthly statement detailing Gross Revenue and Expenses shall also contain a calculation of Net Income for the calendar month, and shall be certified by a senior financial officer of each entity comprising Borrower (with respect to the Gross Revenue, Expenses and Net Income of such entity) as being true, correct and complete in all material respects. In the event of any inconsistencies between the reporting requirements of this Section and those contained in Section 19 of the Loan Agreement, Section 19 of the Loan Agreement shall govern. 3. NOTICES TO CREDIT CARD ISSUERS AND TENANTS. (a) Simultaneously with the execution and delivery hereof, Borrower has executed and is delivering to Lender multiple counterparts of a letter to the tenants at the Premises in the form annexed hereto as Exhibit B (the "Tenant Letters") and a letter to credit card issuers in the form annexed hereto as Exhibit C (the "Credit Card Issuer Letters"), directing the tenants and credit card issuers to make payments due Borrower payable to the account and delivered to Servicer or its designee at the addresses set forth in the Tenant Letters and the Credit -2- Card Issuer Letters, as applicable. (b) Additionally, in all invoices and other correspondence from Borrower to tenants and credit card issuers with respect to remittances of amounts owed to Borrower, Borrower shall instruct the tenants at the Premises to mail all remittances to the address specified in the Tenant Letters and the credit card issuers to mail all remittances to the address specified in the Credit Card Issuer Letters, and Borrower shall take all further steps necessary or desirable, in Lender's reasonable opinion, to cause such tenants and credit card issuers to mail all remittances in accordance with the Tenant Letters and the Credit Card Issuer Letters, as applicable. Any remittances received by Borrower shall be mailed by Borrower, within two business days, to the address specified in the Tenant Letters or in the Credit Card Issuer Letters, as applicable. If at any time the location of the Lockbox or Servicer shall change, Borrower shall send out replacement instruction notices or amendments or supplements as Lender or Servicer shall request. (c) All tenants under leases or credit card issuers under agreements entered into after the date hereof shall be given a Tenant Letter or a Credit Card Issuer Letter, as applicable, contemporaneously with the execution of their leases or agreements, as applicable. The instructions to tenants at the Premises to pay all rent and other charges as specified in the Tenant Letters, and to the credit card issuers to remit payment as specified in the Credit Card Issuer Letter, shall be irrevocable, except by written direction of Lender. 4. DEPOSITS OF GROSS REVENUE TO THE LOCKBOX. For so long as any sums in respect of the Loan remain outstanding, any Gross Revenue received by Borrower shall be deposited in the accounts maintained in the name of Servicer, as Lender's agent, in banks located in the respective vicinities of the properties comprising the Premises (the "Local Accounts") and thereafter transferred by Servicer for deposit into the Lockbox. Borrower, Lender and Servicer agree that there shall be a balance of $1,000.00 maintained in each of the Local Accounts for the term of the Loan, unless such amounts are otherwise required to satisfy Borrower's obligations under the Loan Documents. 5. DISBURSEMENTS FROM THE LOCKBOX. (a) For so long as any sums in respect of the Loan remain outstanding, Servicer, as Lender's agent, shall have sole and exclusive dominion and control over the Lockbox, all funds held therein and all proceeds thereof for the purposes herein provided, until distributed in accordance with this Section. Subject to the occurrence and continuance of an Event of Default (as such term is defined in the Loan Agreement), on a weekly basis, or more frequently if dictated by specific circumstances, Servicer shall withdraw the entire balance of the Lockbox for same-day disbursement, in the following order of priority: (i) first, to fund the Tax and Insurance Escrow Account in an amount required for the next succeeding calendar month; (ii) next, the balance, if any, to fund the Operating Expense Account in an amount required for the next succeeding calendar month pursuant to the Budget (and any extraordinary expenses not otherwise -3- contained in the Budget for which the prior written approval of Lender shall have been obtained, which approval shall not be unreasonably withheld); provided, that, first dollars funded into the Operating Expense Account shall be applied to the sublease obligations of Lodgian Colchester LLC, a Borrower, under the Lease Documents as such term is defined in that certain Amended and Restated Leasehold Mortgage, Deed of Trust, Assignment of Leases and Rents and Security Agreement dated as of the date hereof by Lodgian Colchester LLC for the benefit of Lender; (iii) next, the balance, if any, to fund the Interest and Principal Amortization Account, for application first to interest and then to principal amortization obligations, in an amount required for the next succeeding calendar month; (iv) next, the balance, if any, to reimburse Lender for reasonable costs and expenses in servicing the Loan (including, without limitation, servicing fees); (v) next, the balance, if any, to reimburse Lender for any unpaid reasonable costs and expenses incurred by Lender on Borrower's behalf or in the enforcement of Lender's rights hereunder with respect to any of which Lender shall advise Borrower no later than ten days prior to the last business day of any given month (and, to the extent any such notice is given after such day, such amount shall be payable in the following month); (vi) next, the balance, if any, to fund the Replacement Reserve Account in an amount required for the next succeeding calendar month; (vii) next, the balance, if any, to fund the Capital Reserve; (viii) next, the balance, if any, to fund the Debt Service Reserve; (ix) next, 75% of the balance, if any, to reduce the Additional Interest and 25% of such balance, to Borrower, to be used by Borrower for any purpose; and (x) lastly, 75% of the remaining balance, if any, to reduce the outstanding principal balance of the Loan and 25% of such remaining balance to Borrower, to be used by Borrower for any purpose. (b) Additionally, once weekly to the extent that funds are available in excess of amounts necessary to fund the Tax and Insurance Escrow Account or otherwise in accordance with this Agreement and the Loan Agreement, Servicer shall withdraw funds from the Lockbox Account for same-day disbursement to satisfy Borrower's obligations under the Loan Agreement to fund the Operating Expense Account in accordance with the Budget to the extent that such account requires replenishment in accordance with the Budget. Anything herein to the contrary notwithstanding, if funds on deposit in the -4- Lockbox Account are insufficient to fully fund: (i) the Interest and Principal Amortization Account, when payments of interest and principal amortization are due under the Note and Loan Agreement, Servicer shall disburse funds from the Debt Service Reserve to fund such Account to the extent of such shortfall or (ii) the Tax and Insurance Escrow Account, the Operating Expense Account to pay operating expenses in accordance with the Budget or as otherwise agreed to by Lender pursuant to the Loan Documents, and/or the Replacement Reserve Account, Servicer shall disburse funds from the Capital Reserve to fund such Account to the extent of such shortfall. In addition, in any month, Borrower may request an additional disbursement of funds from the Lockbox Account to fund the Operating Expense Account for unanticipated increases in operating expenses, which request shall be accompanied by supporting documentation reasonably required by Lender and which disbursement shall be subject to Lender's prior approval not to be unreasonably withheld, delayed or conditioned. 6. USE OF FUNDS IN TAX AND INSURANCE ESCROW ACCOUNT. For so long as any sums remain outstanding in respect of the Loan, Servicer, as Lender's agent, shall have sole and exclusive dominion and control over the Tax and Insurance Escrow Account, all funds held therein and all proceeds thereof, for the sole purposes of: (a) paying, as and when due, the Taxes, Other Charges and Insurance Premiums; and (b) further securing Borrower's obligations under and in respect of the Loan. Borrower hereby authorizes and directs Servicer to remit payment from the Tax and Insurance Escrow Account, in respect of Taxes and Other Charges, as and when due and payable, and otherwise in accordance with the Loan Agreement and the Budget. Servicer shall reimburse Borrower from the Tax and Insurance Escrow Account for Insurance Premiums within 5 business days following Servicer's receipt of a copy of the invoice for such Insurance Premiums and the check issued by or on behalf of Borrower in payment thereof. 7. USE OF FUNDS IN INTEREST AND PRINCIPAL AMORTIZATION ACCOUNT. For so long as any sums remain outstanding in respect of the Loan, Servicer, as Lender's agent, shall have sole and exclusive dominion and control over the Interest and Principal Amortization Account, all funds held therein and all proceeds thereof for the sole purposes of: (a) making regular and periodic monthly interest payments on the outstanding principal balance of the Loan; and (b) of further securing Borrower's obligations under and in respect of the Loan. Borrower hereby authorizes and directs Servicer to remit payment from the Interest and Principal Amortization Account, in respect of principal and interest due under the Note, as and when due and payable, and otherwise in accordance with the Loan Documents. 8. USE OF FUNDS IN CAPITAL RESERVE. For so long as any sums remain outstanding in respect of the Loan, Servicer, as Lender's agent, shall have sole and exclusive dominion and control over the Capital Reserve, all funds held therein and all proceeds thereof for the sole purposes of: (a) making payments due under Section 5(a)(i), (ii) and (vi) hereof (and the corresponding provisions of the Loan Agreement) from time to time to the extent funds derived from the operation of the Mortgaged Property are insufficient therefor; and (b) of further securing Borrower's obligations under and in respect of the Loan. Borrower hereby authorizes and directs Servicer to remit payment -5- from the Capital Reserve, in respect of payments to be made under Section 5(a)(i), (ii) and (vi), as and when due and payable, and otherwise in accordance with the Loan Documents. 9. USE OF FUNDS IN DEBT SERVICE RESERVE. For so long as any sums remain outstanding in respect of the Loan, Servicer, as Lender's agent, shall have sole and exclusive dominion and control over the Debt Service Reserve, all funds held therein and all proceeds thereof for the sole purposes of: (a) making payments due under Section 5(a)(iii) and (iv) hereof (and the corresponding provisions of the Loan Agreement) from time to time to the extent funds derived from the operation of the Mortgaged Property are insufficient therefor; and (b) of further securing Borrower's obligations under and in respect of the Loan. Borrower hereby authorizes and directs Servicer to remit payment from the Debt Service Reserve, in respect of principal and interest due under the Note, as and when due and payable, and otherwise in accordance with the Loan Documents. 10. USE OF FUNDS IN OPERATING EXPENSE ACCOUNT. Borrower shall have sole and exclusive dominion and control over the Operating Expense Account, all funds held therein and all proceeds thereof for the sole purpose of paying, or causing to be paid, Expenses as and when due and payable, and otherwise in accordance with the Loan Agreement and the Budget. 11. USE OF FUNDS IN REPAIR ESCROW ACCOUNT. For so long as any sums remain outstanding in respect of the Loan, Servicer, as Lender's agent, shall have sole and exclusive dominion and control over the Repair Escrow Account, all funds held therein and all proceeds thereof, for the sole purposes: (a) set forth in the Loan Agreement and the Repair Escrow Agreement; and (b) of further securing Borrower's obligations under and in respect of the Loan. 12. USE OF FUNDS IN REPLACEMENT RESERVE ACCOUNT. For so long as any sums remain outstanding in respect of the Loan, Servicer, as Lender's agent, shall have sole and exclusive dominion and control over the Replacement Reserve Account, all funds held therein and all proceeds thereof, for the sole purposes: (a) set forth in the Loan Agreement and the Replacement Reserve Agreement; and (b) of further securing Borrower's obligations under and in respect of the Loan. 13. SECURITY INTEREST. Borrower hereby pledges, assigns and grants to Lender a lien and security interest in and to all of its right, title and interest in and to all funds held in the Lockbox and the Accounts from time to time and all proceeds thereof. Borrower agrees to execute and deliver on demand any and all documentation requested by Lender to further evidence or perfect such assignment. Borrower hereby irrevocably constitutes and appoints Lender as its attorney-in-fact, with full power of substitution and transfer, to execute and deliver any and all such documentation. The power of attorney hereby granted shall be coupled with an interest and irrevocable. This Agreement shall constitute a Security Agreement under the Uniform Commercial Code as enacted in the State of New York. 14. REMEDIES NOT EXCLUSIVE. The rights and remedies herein conferred upon -6- or reserved to Lender are not intended to be exclusive of any other right or remedy which Lender may be entitled to exercise against Borrower, and each and every such right and remedy shall be cumulative, and shall be in addition to every other right or remedy now or hereafter existing under the Loan Documents, at law or in equity. No delay or omission of Lender to exercise any right or power it may have shall impair such right or power, or shall be construed to be a waiver of such right or power. The resort to any remedy hereunder shall not prevent the concurrent or subsequent exercise of any other appropriate remedy Lender may have. 15. POWER OF ATTORNEY. Borrower hereby irrevocably constitutes and appoints Servicer, as Lender's agent, as its attorney-in-fact, with full power of substitution and transfer, to demand and receive any and all proceeds of the Lockbox and the Accounts. The power of attorney hereby granted shall be coupled with an interest and irrevocable. 16. GOVERNING LAW. This Agreement shall be governed and construed in accordance with the laws of the State of New York, without regard for conflicts of laws principles or otherwise. 17. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, and shall inure to the benefit of, the parties' respective successors and assigns. 18. AMENDMENTS IN WRITING. This Agreement, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Borrower or Lender, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. 19. TERMINATION. This Agreement shall terminate and be of no further force or effect upon the payment in full of all sums due under the Note. Upon termination of this Agreement, Lender shall, upon Borrower's request, execute revocations of the Tenant Letters and the Credit Card Issuer Letters. 20. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND LENDER EACH HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE NOTE, THE MORTGAGE, THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER AND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. LENDER AND BORROWER ARE EACH HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER. -7- 21. JOINT AND SEVERAL LIABILITY. The liability for Borrower's obligations hereunder shall be and constitute the joint and several liability of the constituent parties comprising Borrower, without regard to whether or not any particular unfulfilled obligations relate exclusively to any one property or several properties of the Premises. Any references herein to "Borrower" shall be deemed to refer to all of the constituent parties comprising Borrower, jointly and severally, or to such of the constituent parties as the context may require when referring to one or more properties of the Premises. 22. LIMITATION ON RECOURSE. Anything herein to the contrary notwithstanding, Lender's recourse upon the occurrence of a default which continues beyond applicable notice and cure periods, if any, is limited pursuant to the express provisions of the Note, as though such provisions were set forth in their entirety herein. 23. COUNTERPARTS. This Agreement may be executed in any number of counterparts and each such duplicate original shall be deemed to be an original. -8- IN WITNESS WHEREOF, Borrower, Lender and Servicer have executed this Agreement as of the day and year first above written. LODGIAN DENVER LLC LODGIAN NORTH MIAMI LLC LODGIAN COCONUT GROVE LLC LODGIAN AUGUSTA LLC LODGIAN FLORENCE LLC LODGIAN FORT MITCHELL LLC LODGIAN LAFAYETTE LLC LODGIAN MERRIMACK LLC LODGIAN HAMBURG LLC LODGIAN SYRACUSE LLC LODGIAN CINCINNATI LLC LODGIAN TULSA LLC LODGIAN JACKSON LLC LODGIAN MEMPHIS LLC LODGIAN COLCHESTER LLC LODGIAN BRIDGEPORT LLC LODGIAN FAIRMONT LLC LODGIAN MORGANTOWN LLC By: /s/ Daniel E. Ellis --------------------------------------- Name: Daniel E. Ellis Authorized Signatory/Vice President and Secretary LEHMAN BROTHERS HOLDINGS INC. By: /s/ Joseph J. Flannery --------------------------------------- Name: Joseph J. Flannery Authorized Signatory TRIMONT REAL ESTATE ADVISORS, INC. By: --------------------------------------- Name: Title: -9- SCHEDULE A The Properties Marriott Hotel - 238 Courtyard - 90 Fairfield Inn - 105 #0707 D1A #1515 LAF #4205 JTN 16455 East 40th Circle 214 E. Kaliste Saloom Rd. 535 Wiley Parker Rd. Aurora, CO 80011 Lafavette, LA 70508 Jackson, TN 38305 Mayfair House - 179 Fairfield Inn- 116 Holiday Inn Sycamore - 173 #1178 MAY #2828 MMK #4242 MH1 3000 Florida Ave. 4 Amherst Rd 6101 Shelby Oaks Dr. Miami, FL 33131 Merrimack, NH 03054 Memphis, TN 38134 Holiday Inn N. Miami - 98 Holiday Inn- 130 Fairfield Inn - 117 #1183 MHJ #3398 HAM #4545 BVT 12210 Biscayne Blvd. 5440 Camp Rd. 84 South Park Drive Miami, FL 33181 Hamburg, NY 14075 Colchester, VT 05446 Fairfield Inn - 117 Holiday Inn - 152 Holiday Inn - 159 #1265 AUG #3348 SYR #4899 CWV 201 Boy Scout Rd. 100 Farrell Rd. 100 LodgeviIle Rd. Augusta, GA 30909 Syracuse, NY 13209 Clarksburg, WV 26330 Holiday Inn - 105 Holiday Inn Downtown - 243 Holiday Inn - 106 #2050 FHI #3535 CND #4800 FWV 8050 Holiday Place 800 West 8th St. 1-79 and Old Grafton Rd. Florence, KY 41042 Cincinnati, OH 45203 Fairmont, WV 26554 Holiday Inn - 214 Courtyard - 122 Holiday Inn - 147 #2020 CNS #3636 TUL #4848 MWV 2100 Dixie Hwy 3340 South 79th East Ave. 1400 Saratoga Ave. Ft. Mitchell, KY 41011 Tulsa, OK 74145 Morgantown, WV 26505

-10- EXHIBIT A Budget -11- EXHIBIT B Form of Tenant Letter [___________________] [___________________] [___________________] May [_], 2003 [___________________] Dear Tenant: To facilitate the processing of income and expenses, you are hereby directed to remit all payments, as and when they become due under your lease, to the following address: [___________________] [___________________] [___________________] Payment of rent in accordance with this letter shall constitute payment as required under your lease. To ensure proper credit, checks should be made payable to: --------------------------------------- All payments should be mailed to the address stated above, on or before the due dates provided in your lease. This payment direction is irrevocable except by notice from the payee named above. Very truly yours, By: --------------------------------------- Name: Title: -12- EXHIBIT C Form of Credit Card Issuer Letter [___________________] [___________________] [___________________] May [_], 2003 [___________________] Dear ________________: To facilitate the processing of revenues and expenses, you are hereby directed to remit all payments, as and when they become due, to the following address: ----------------- ----------------- ----------------- ----------------- Payments in accordance with this letter shall constitute payment as required under your credit card remittance arrangements with [Borrower]. To ensure proper credit, payment should be made payable to ______________________________, and should be mailed to the address stated above, on or before the due dates. This payment direction is irrevocable except by notice from the payee named above. Very truly yours, By: --------------------------------------- Name: Title: EX-10.4.6 27 g87458exv10w4w6.txt EX-10.4.6 FIRST AMENDMENT TO LOAN DOCUMENTS EXHIBIT 10.4.6 FIRST AMENDMENT TO LOAN DOCUMENTS Dated as of November, 11, 2003 Among LODGIAN DENVER LLC, LODGIAN NORTH MIAMI LLC, LODGIAN COCONUT GROVE LLC, LODGIAN AUGUSTA LLC, LODGIAN FLORENCE LLC, LODGIAN FORT MITCHELL LLC, LODGIAN LAFAYETTE LLC, LODGIAN MERRIMACK LLC, LODGIAN HAMBURG LLC, LODGIAN SYRACUSE LLC, LODGIAN CINCINNATI LLC, LODGIAN TULSA LLC, LODGIAN JACKSON LLC, LODGIAN MEMPHIS LLC, LODGIAN COLCHESTER LLC, LODGIAN BRIDGEPORT LLC, LODGIAN FAIRMONT LLC, AND LODGIAN MORGANTOWN LLC, collectively, as Borrower LODGIAN, INC. as Guarantor and LEHMAN BROTHERS HOLDINGS INC. as Lender FIRST AMENDMENT TO LOAN DOCUMENTS THIS FIRST AMENDMENT TO LOAN DOCUMENTS dated as of November 11, 2003, (this "Amendment") among LEHMAN BROTHERS HOLDINGS INC., a Delaware corporation, having an address at 399 Park Avenue, New York, New York 10022 ("Lender"); LODGIAN DENVER LLC, LODGIAN NORTH MIAMI LLC, LODGIAN COCONUT GROVE LLC, LODGIAN AUGUSTA LLC, LODGIAN FLORENCE LLC, LODGIAN FORT MITCHELL LLC, LODGIAN LAFAYETTE LLC, LODGIAN MERRIMACK LLC, LODGIAN HAMBURG LLC, LODGIAN SYRACUSE LLC, LODGIAN CINCINNATI LLC, LODGIAN TULSA LLC, LODGIAN JACKSON LLC, LODGIAN MEMPHIS LLC, LODGIAN COLCHESTER LLC, LODGIAN BRIDGEPORT LLC, LODGIAN FAIRMONT LLC, and LODGIAN MORGANTOWN LLC, each a Delaware limited liability company, having its principal place of business at c/o Lodgian, Inc., 3445 Peachtree Road, N.E. -- Suite 700, Atlanta, Georgia 30326 (collectively, "Borrower"), and LODGIAN, INC., a Delaware limited liability company, having its principal place of business at 3445 Peachtree Road, N.E. -- Suite 700, Atlanta, Georgia 30326 ("Guarantor"). WITNESSETH: WHEREAS, on May 22, 2003, Lender made a loan to Borrower in the principal amount of $80,000,000.00 (the "Loan") which is, among other things: (a) evidenced by a certain Consolidated, Amended and Restated Mortgage Note dated May 22, 2003 made by Borrower in favor of Lender (the "Note") and governed by a certain Loan Agreement dated as of May 22, 2003, between Borrower and Lender (the "Loan Agreement"); (b) guarantied pursuant to a certain Principal's Agreement dated as of May 22, 2003, by Guarantor in favor of Lender; and (c) secured by, among other things, certain mortgages and deeds of trust each dated as of May 22, 2003, by each of the individual entities that comprise Borrower in favor of Lender (the "Security Instruments") and a certain Environmental Indemnity Agreement dated as of May 22, 2003, by Guarantor and Borrower in favor of Lender; and WHEREAS, Lender, Borrower and Guarantor desire to amend the Loan Agreement and the other Loan Documents (as defined in the Loan Agreement) to which they are a party in the manner hereinafter provided. NOW, THEREFORE, for good and valuable consideration, the parties hereto hereby agree that the Loan Agreement and the Loan Documents are hereby amended as follows: 1. All capitalized terms not otherwise defined herein shall have the meanings provided in the Loan Agreement. 2. Borrower, Guarantor and Lender, in each of their respective capacities under the Loan Documents, hereby amend each of the Loan Documents as of the date hereof to provide that each reference in any Loan Document to the Loan Agreement shall be a reference to the Loan Agreement as amended hereby and as the Loan Agreement may hereafter be further amended or restated, replaced, supplemented or otherwise modified from time to time, and each such Loan Document is so amended. 3. Section 1 of the Loan Agreement is hereby amended in the following respects, effective from and after the date hereof: (a) The definition of "Sale Properties" is hereby amended in its entirety to read as follows: "Sale Properties" means, collectively, (i) Mayfair House, 3000 Florida Ave., Miami, FL 33131, (ii) Holiday Inn N. Miami, 12210 Biscayne Blvd., Miami, FL 33181, (iii) Holiday Inn, 1400 Saratoga Ave., Morgantown, WV 26505 (iv) 800 West 8th St., Cincinnati, OH 45203, (v) Holiday Inn, 2100 Dixie Hwy., Ft. Mitchell, KY 41011, (vi) Holiday Inn, 8050 Holiday Place, Florence, KY 41042, (vii) Holiday Inn, 100 Farrell Rd., Syracuse, NY 13209, and (viii) Holiday Inn Sycamore, 6101 Shelby Oaks Dr., Memphis, TN 38134. 4. Each of Borrower and Guarantor hereby ratify, affirm, reaffirm, confirm and acknowledge to Lender each of their respective representations, warranties, covenants and agreements in the Loan Documents, as amended hereby, as of the date hereof and after giving effect to the terms and provisions of this Amendment. 5. Each of Borrower and Guarantor hereby represents and warrants that there are no rights of set-off, offsets, claims, counterclaims, credits or defenses to the payment or performance of its obligations under the Loan Documents, as amended hereby, to which it is a party, and that as of the date hereof no event has occurred which would constitute an Event of Default under the Loan Documents, to which it is a party. 6. Each of Borrower and Guarantor hereby ratifies, affirms, reaffirms, confirms, acknowledges and agrees that the Loan Documents, as amended hereby, to which it is a party, represent the valid, enforceable and collectible obligations of Borrower and Guarantor and confirms that the liens, security interests, assignments and other rights evidenced by the Loan Documents, as amended hereby, to which it is a party, continue uninterrupted from the date of the Loan and shall continue uninterrupted under the Loan Documents. Each of Borrower and Guarantor agrees that neither this Amendment nor the Loan Documents constitute a novation of the Loan in any matter whatsoever. 7. Each of Borrower and Guarantor hereby waives, discharges and releases forever any and all existing claims and defenses, personal or otherwise, and rights of set-off that it may have against Lender or which might affect the enforceability of Lender's rights and remedies under the Loan Documents as amended hereby, to which it is a party. -2- 8. This Amendment is limited as specified and other than the specific amendments contained herein shall not constitute an amendment, modification or waiver of, or otherwise affect, in any way, any other provisions of the Loan Documents as amended hereby, and they are ratified, affirmed, reaffirmed and confirmed in all respects. 9. Each of Borrower and Guarantor agree to execute and deliver, or cause to be executed and delivered, to Lender, at the sole cost and expense of Borrower, all additional documents, instruments and certificates reasonably considered necessary by Lender to cause this Amendment, the Loan Documents or any other document, instrument or certificate executed in connection therewith to be, become or remain valid and effective in accordance with its terms or in order to implement more fully the intent of this Amendment or such other document, instrument or certificate. 10. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. 11. If any term, covenant or condition of this Amendment is held to be invalid, illegal or unenforceable in any respect, this Amendment shall be construed without such provision. 12. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT ENTERED INTO PURSUANT TO THE LAWS OF THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS BE GOVERNED, CONSTRUED, APPLIED, AND ENFORCED IN ACCORDANCE WITH THE LAWS OF SUCH JURISDICTION. 13. Each of Borrower and Guarantor hereby declares and acknowledges that it hereby receives, without charge, a true copy of this Amendment. [THERE IS NO FURTHER TEXT ON THIS PAGE] -3- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their duly authorized representatives, all as of the day and year first above written. LENDER: LEHMAN BROTHERS HOLDINGS INC., a Delaware corporation By: /s/ Alan Kanders ------------------------------------ Name: Alan Kanders Title: Authorized Signatory BORROWER: LODGIAN DENVER LLC LODGIAN NORTH MIAMI LLC LODGIAN COCONUT GROVE LLC LODGIAN AUGUSTA LLC LODGIAN FLORENCE LLC LODGIAN FORT MITCHELL LLC LODGIAN LAFAYETTE LLC LODGIAN MERRIMACK LLC LODGIAN HAMBURG LLC LODGIAN SYRACUSE LLC LODGIAN CINCINNATI LLC LODGIAN TULSA LLC LODGIAN JACKSON LLC LODGIAN MEMPHIS LLC LODGIAN COLCHESTER LLC LODGIAN BRIDGEPORT LLC LODGIAN FAIRMONT LLC LODGIAN MORGANTOWN LLC, each a Delaware limited liability company By: /s/ Daniel E. Ellis ------------------------------------ Name: Daniel E. Ellis Title: Vice President -4- GUARANTOR: LODGIAN, INC., a Delaware corporation By: /s/ Daniel E. Ellis --------------------------------------- Name: Daniel E. Ellis Title: Senior Vice President and General Counsel -5- STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK ) On the 4th day of November in the year 2003, before me, the undersigned, personally appeared Alan Kanders, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her capacity, that by his/h signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument, and that such individual made such appearance before the undersigned in the State of New York, County of New York. /s/ Saleenah Callaway ----------------------------- Notary Public SALEENAH CALLAWAY Notary Public, State of New York Certificate Filed in New York County Commission Expires 9/18/06 #01 CA 6047908 (Notarial Seal) STATE OF GEORGIA ) : ss.: COUNTY OF FULTON ) On the 19th day of September in the year 2003, before me, the undersigned, personally appeared Daniel E. Ellis, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her capacity, that by his/her signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument, and that such individual made such appearance before the undersigned in the State of Georgia County of Fulton. /s/ Patricia E. Whigham -------------------------------- Notary Public NOTARY PUBLIC, ROCKDALE COUNTY, GEORGIA My Commission Expires November 7, 2005 (Notarial Seal) STATE OF GEORGIA ) : ss.: COUNTY OF FULTON ) On the 19th day of September in the year 2003, before me, the undersigned, personally appeared Daniel E. Ellis, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her capacity, that by his/her signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument, and that such individual made such appearance before the undersigned in the State of Georgia County of Fulton. /s/ Patricia E. Whigham ------------------------------- Notary Public NOTARY PUBLIC, ROCKDALE COUNTY, GEORGIA My Commission Expires November 7, 2005 (Notarial Seal) -6- EX-10.5 28 g87458exv10w5.txt EX-10.5 2002 STOCK INCENTIVE PLAN OF LODIGAN EXHIBIT 10.5 LODGIAN, INC. 2002 STOCK INCENTIVE PLAN Effective as of November 25, 2002. LODGIAN, INC. 2002 STOCK INCENTIVE PLAN TABLE OF CONTENTS
Page Section 1 Purpose.........................................................1 Section 2. Definitions.....................................................1 Section 3. Administration of the Plan......................................4 Section 4. Duration of Plan................................................5 Section 5. Shares of Stock Subject to the Plan.............................5 Section 6. Eligible Individuals............................................6 Section 7. Awards Generally................................................6 Section 8. Stock Options...................................................7 Section 9. Stock Appreciation Rights.......................................8 Section 10. Stock Awards....................................................8 Section 11. Performance Share Awards........................................8 Section 12. Other Awards....................................................9 Section 13. Section 162(m) Awards...........................................9 Section 14. Non-Transferability............................................10 Section 15. Recapitalization or Reorganization.............................10 Section 16. Change in Control..............................................10 Section 17. Amendment of the Plan..........................................11 Section 18. Miscellaneous..................................................11
i LODGIAN, INC. 2002 STOCK INCENTIVE PLAN Section 1. Purpose. The purposes of the Lodgian, Inc. 2002 Stock Incentive Plan (the "Plan") are to attract, retain and motivate officers and other key employees and consultants of LODGIAN, INC., a Delaware corporation (the "Company"), and its Subsidiaries (as hereinafter defined), to compensate them for their contributions to the growth and profits of the Company and to encourage ownership by them of stock of the Company. Section 2. Definitions. For purposes of the Plan, the following terms shall be defined as follows: "Administrator" means the individual or individuals to whom the Committee delegates authority under the Plan in accordance with Section 3(d). "Affiliate" and "Associate" have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act. "Award" means an award made pursuant to the terms of the Plan to an Eligible Individual in the form of Stock Options, Stock Appreciation Rights, Stock Awards, Performance Share Awards, Section 162(m) Awards or other awards determined by the Committee. "Award Agreement" means a written agreement or certificate granting an Award. An Award Agreement shall be executed by an officer on behalf of the Company and shall contain such terms and conditions as the Committee deems appropriate and that are not inconsistent with the terms of the Plan. The Committee may in its discretion require that an Award Agreement be executed by the Participant to whom the relevant Award is made. "Beneficial Owner" has the meaning ascribed to such term in Rule 13d-3 promulgated under the Exchange Act. "Board" means the Board of Directors of the Company. A "Change in Control" of the Company shall be deemed to have occurred when: (a) any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any person or entity organized, appointed or established by the Company or any Subsidiary of the Company for or pursuant to the terms of any such plan), alone or together with its Affiliates and Associates (collectively, an "Acquiring Person"), shall become the Beneficial Owner of 40 percent or more of the then outstanding shares of Common Stock or the Combined Voting Power of the Company, (b) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board, and any new director (other than a director who is a representative or nominee of an Acquiring Person) whose election by the Board or nomination for election by the Company's shareholders was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved (collectively, the "Continuing Directors"), cease for any reason to constitute a majority of the Board, (c) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the Surviving Entity (as defined in Section 16 hereof) or any Parent of such Surviving Entity) at least a majority of the Combined Voting Power of the Company, such Surviving Entity or the Parent of such Surviving Entity outstanding immediately after such merger or consolidation; or (d) the consummation of a plan of reorganization (other than a reorganization under the United States Bankruptcy Code) or complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets, other than a sale of all or substantially all of the Company's assets to a transferee, the majority of whose voting securities are held by the Company; provided, however, that a Change in Control shall not be deemed to have occurred in the event of (i) a sale or conveyance in which the Company continues as a holding company of an entity or entities that conduct all or substantially all of the business or businesses formerly conducted by the Company, or (ii) any transaction undertaken for the purpose of incorporating the Company under the laws of another jurisdiction, if such transaction does not materially affect the beneficial ownership of the Company's capital stock. "Code" means the Internal Revenue Code of 1986, as amended, and the applicable rulings and regulations thereunder. "Combined Voting Power" means the combined voting power of the Company's or other relevant entity's then outstanding voting securities. "Committee" means the Compensation Committee of the Board, any successor committee thereto or if no such committee has yet been established, the Board. The Committee shall consist of at least two people as the Board may appoint to administer the Plan. Unless the Board is acting as the Committee or the Board specifically determines otherwise, each member of the Committee shall, at the time he takes any action with respect to an Option under the Plan, be an Eligible Director; provided that the mere fact a Committee member shall fail to qualify as an Eligible Director shall not invalidate any Option granted by the Committee which Option is otherwise validly made under the Plan. "Common Stock" means the Common Stock, par value $.01 per share, of the Company. 2 "Eligible Individuals" means the individuals described in Section 6 who are eligible for Awards under the Plan. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the applicable rulings and regulations thereunder. "Eligible Director" means a person who is (i) a "non-employee director" within the meaning of Rule 16b-3 under the Exchange Act, or a person meeting any similar requirement under any successor rule or regulation and (ii) an "outside director" within the meaning of Section 162(m) of the Code, and the Treasury Regulations promulgated thereunder. "Fair Market Value" means, in the event the Common Stock is traded on a recognized securities exchange or quoted by the National Association of Securities Dealers Automated Quotations on National Market Issues, an amount equal to the average of the high and low prices of the Common Stock on such exchange or such quotation on the date set for valuation or, if no sales of Common Stock were made on said exchange or so quoted on that date, the average of the high and low prices of the Common Stock on the next preceding day on which sales were made on such exchange or quotations; or, if the Common Stock is not so traded or quoted, that value determined, in its sole discretion, by the Committee. "Incentive Stock Option" means a Stock Option which is an "incentive stock option" within the meaning of Section 422 of the Code and designated by the Committee as an Incentive Stock Option in an Award Agreement. "Nonqualified Stock Option" means a Stock Option which is not an Incentive Stock Option. "Parent " means any corporation which is a "parent corporation" within the meaning of Section 424(e) of the Code with respect to the relevant entity. "Participant " means an Eligible Individual to whom an Award has been granted under the Plan. "Performance Period" means a fiscal year of the Company or such other period that may be specified by the Committee in connection with the grant of a Section 162(m) Award. "Performance Share Award" means a conditional Award of shares of Common Stock granted to an Eligible Individual pursuant to Section 11 hereof. "Person" means any person, entity or "group" within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act. "Section 162(m) Participant" means, for a given fiscal year of the Company, any Participant designated by the Committee by not later than 90 days following the start of such year as a Participant (or such other time as may be required or permitted by Section 162(m) of the Code) whose compensation for such fiscal year may be subject to the limit on deductible compensation imposed by Section 162(m) of the Code. 3 "Stock Appreciation Right" means an Award to receive all or some portion of the appreciation on shares of Common Stock granted to an Eligible Individual pursuant to Section 9 hereof. "Stock Award" means an Award of shares of Common Stock granted to an Eligible Individual pursuant to Section 10 hereof. "Stock Option" means an Award to purchase shares of Common Stock granted to an Eligible Individual pursuant to Section 8 hereof. "Subsidiary" means (i) any corporation which is a "subsidiary corporation" within the meaning of Section 424(f) of the Code with respect to the Company or (ii) any other corporation or other entity in which the Company, directly or indirectly, has an equity or similar interest and which the Committee designates as a Subsidiary for the purposes of the Plan. "Substitute Award" means an Award granted upon assumption of, or in substitution for, outstanding awards previously granted by a company or other entity in connection with a corporate transaction, such as a merger, combination, consolidation or acquisition of property or stock. Section 3. Administration of the Plan. (a) Power and Authority of the Committee. The Plan shall be administered by the Committee, which shall have full power and authority, subject to the express provisions hereof, (i) to select Participants from the Eligible Individuals, (ii) to make Awards in accordance with the Plan, (iii) to determine the number of Shares subject to each Award or the cash amount payable in connection with an Award, (iv) to determine the terms and conditions of each Award, including, without limitation, those related to vesting, forfeiture, payment and exercisability, and the effect, if any, of a Participant's termination of employment with the Company or, subject to Section 16 hereof, of a Change in Control on the outstanding Awards granted to such Participant, and including the authority to amend the terms and conditions of an Award after the granting thereof to a Participant in a manner that is not prejudicial to the rights of such Participant in such Award, (v) to specify and approve the provisions of the Award Agreements delivered to Participants in connection with their Awards, (vi) to construe and interpret any Award Agreement delivered under the Plan, (vii) to prescribe, amend and rescind rules and procedures relating to the Plan, (viii) to vary the terms of Awards to take account of tax, securities law and other regulatory requirements of foreign jurisdictions, (ix) subject to the provisions of the Plan and subject to such additional limitations and restrictions as the Committee may impose, to delegate to one or more officers of the Company some or all of its authority under the Plan, and (x) to make all other determinations and to formulate such procedures as may be necessary or advisable for the administration of the Plan. (b) Plan Construction and Interpretation. The Committee shall have full power and authority, subject to the express provisions hereof, to construe and interpret the Plan. (c) Determinations of Committee Final and Binding. All determinations by the Committee in carrying out and administering the Plan and in construing and interpreting the Plan shall be final, binding and conclusive for all purposes and upon all persons interested herein. 4 (d) Delegation of Authority. The Committee may, but need not, from time to time delegate some or all of its authority under the Plan to an Administrator consisting of one or more members of the Committee or of one or more officers of the Company; provided, however, that the Committee may not delegate its authority (i) to make Awards to Eligible Individuals (A) who are Section 162(m) Participants or (B) who are officers of the Company who are delegated authority by the Committee hereunder, or (ii) under Sections 3(b) and 17 of the Plan. Any delegation hereunder shall be subject to the restrictions and limits that the Committee specifies at the time of such delegation or thereafter. Nothing in the Plan shall be construed as obligating the Committee to delegate authority to an Administrator, and the Committee may at any time rescind the authority delegated to an Administrator appointed hereunder or appoint a new Administrator. At all times, the Administrator appointed under this Section 3(d) shall serve in such capacity at the pleasure of the Committee. Any action undertaken by the Administrator in accordance with the Committee's delegation of authority shall have the same force and effect as if undertaken directly by the Committee, and any reference in the Plan to the Committee shall, to the extent consistent with the terms and limitations of such delegation, be deemed to include a reference to the Administrator. (e) Liability of Committee. No member of the Committee shall be liable for anything whatsoever in connection with the administration of the Plan except such person's own willful misconduct. Under no circumstances shall any member of the Committee be liable for any act or omission of any other member of the Committee. In the performance of its functions with respect to the Plan, the Committee shall be entitled to rely upon information and advice furnished by the Company's officers, the Company's accountants, the Company's counsel and any other party the Committee deems necessary, and no member of the Committee shall be liable for any action taken or not taken in reliance upon any such advice. Section 4. Duration of Plan. The Plan shall remain in effect until terminated by the Board of Directors and thereafter until all Awards granted under the Plan are satisfied by the issuance of shares of Common Stock or the payment of cash or are terminated under the terms of the Plan or under the Award Agreement entered into in connection with the grant thereof. Notwithstanding the foregoing, no Awards may be granted under the Plan after the tenth anniversary of the Effective Date (as defined in Section 18(k)). Section 5. Shares of Stock Subject to the Plan. Subject to adjustment as provided in Section 15(b) hereof, the number of shares of Common Stock that may be issued under the Plan pursuant to Awards shall not exceed, in the aggregate, 1,060,000 shares (the "Section 5 Limit"), of which the number of shares of Common Stock that may be issued under the Plan pursuant to Incentive Stock Options may not exceed, in the aggregate, 1,000,000 shares. Such shares may be either authorized but unissued shares, treasury shares or any combination thereof. For purposes of determining the number of shares that remain available for issuance under the Plan, the following rules shall apply: (a) the number of Shares subject to outstanding Awards shall be charged against the Section 5 Limit; and (b) the Section 5 Limit shall be increased by: 5 (i) the number of shares subject to an Award (or portion thereof) which lapses, expires or is otherwise terminated without the issuance of such shares or is settled by, the delivery of consideration other than shares, (ii) the number of shares tendered to pay the exercise price of a Stock Option or other Award, and (iii) the number of shares withheld from any Award to satisfy a Participant's tax withholding obligations or, if applicable, to pay the exercise price of a Stock Option or other Award. In addition, any shares underlying Substitute Awards shall not be counted against the Section 5 Limit set forth in the first sentence of this Section 5. Section 6. Eligible Individuals. (a) Eligibility Criteria. Awards may be granted by the Committee to individuals ("Eligible Individuals") who are officers or other key employees or consultants (including non-employee directors) of the Company or a Subsidiary with the potential to contribute to the future success of the Company or its Subsidiaries; provided, however, that no Incentive Stock Options shall be granted to any Eligible Individual who is not an employee of the Company or a "parent" or "subsidiary" of the Company, as such terms are used in Section 422(a)(s) of the Code. An individual's status as an Administrator or a member of the Committee will not affect his or her eligibility to participate in the Plan. (b) Maximum Number of Shares Per Eligible Individual. In accordance with the requirements under Section 162(m) of the Code, no Eligible Individual shall receive grants of Awards with respect to an aggregate of more than 500,000 shares of Common Stock in respect of any fiscal year of the Company. For purposes of the preceding sentence, any Award that is made as bonus compensation, or is made in lieu of compensation that otherwise would be payable to an Eligible Individual, shall be considered made in respect of the fiscal year to which such bonus or other compensation relates or otherwise was earned. Section 7. Awards Generally. Awards under the Plan may consist of Stock Options, Stock Appreciation Rights, Stock Awards, Performance Share Awards, Section 162(m) Awards or other awards determined by the Committee. The terms and provisions of an Award shall be set forth in a written Award Agreement approved by the Committee and delivered or made available to the Participant as soon as practicable following the date of the award. The vesting, exercisability, payment and other restrictions applicable to an Award (which may include, without limitation, restrictions on transferability or provision for mandatory resale to the Company) shall be determined by the Committee and set forth in the applicable Award Agreement. Notwithstanding the foregoing, the Committee may accelerate (i) the vesting or payment of any Award, (ii) the lapse of restrictions on any Award or (iii) the date on which any Stock Option or Stock Appreciation Right first becomes exercisable. The date of a Participant's termination of employment for any reason shall be determined in the sole discretion of the Committee. The Committee shall also have full authority to determine and specify in the applicable Award Agreement the effect, if any, that a Participant's termination of employment 6 for any reason will have on the vesting, exercisability, payment or lapse of restrictions applicable to an outstanding Award. Section 8. Stock Options. (a) Terms of Stock Options Generally. Subject to the terms of the Plan and the applicable Award Agreement, each Stock Option shall entitle the Participant to whom such Stock Option was granted to purchase the number of shares of Common Stock specified in the applicable Award Agreement and shall be subject to the terms and conditions established by the Committee in connection with the Award and specified in the applicable Award Agreement. Upon satisfaction of the conditions to exercisability specified in the applicable Award Agreement, a Participant shall be entitled to exercise the Stock Option in whole or in part and to receive, upon satisfaction or payment of the exercise price or an irrevocable notice of exercise in the manner contemplated by Section 8(d) below, the number of shares of Common Stock in respect of which the Stock Option shall have been exercised. Stock Options may be either Nonqualified Stock Options or Incentive Stock Options. (b) Exercise Price. The exercise price per share of Common Stock purchasable under a Stock Option shall be determined by the Committee at the time of grant and set forth in the Award Agreement, provided, that the exercise price per share shall be no less than 100% of the Fair Market Value per share on the date of grant. Notwithstanding the foregoing, the exercise price per share of a Stock Option that is a Substitute Award may be less than the Fair Market Value per share on the date of award, provided that the excess of: (i) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the shares subject to the Substitute Award, over (ii) the aggregate exercise price thereof, does not exceed the excess of: (iii) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determined by the Committee) of the shares of the predecessor entity that were subject to the award assumed or substituted for by the Company, over (iv) the aggregate exercise price of such shares. (c) Option Term. The term of each Stock Option shall be fixed by the Committee and set forth in the Award Agreement; provided, however, that a Stock Option shall not be exercisable after the expiration of ten (10) years after the date the Stock Option is granted. (d) Method of Exercise. Subject to the provisions of the applicable Award Agreement, the exercise price of a Stock Option may be paid in cash or previously owned shares or a combination thereof. In accordance with the rules and procedures established by the Committee for this purpose and only to the extent permitted by applicable law, the Stock Option may also be exercised through a "cashless exercise" procedure approved by the Committee involving a broker or dealer approved by the Committee, that affords Participants the opportunity to sell immediately some or all of the shares underlying the exercised portion of the Stock Option in order to generate sufficient cash to pay the Stock Option exercise price and/or to satisfy 7 withholding tax obligations related to the Stock Option. When payment of the exercise price for a Stock Option consists of shares of the Company's capital stock, such shares will not be accepted as payment unless the Participant has held such shares for the requisite period necessary to avoid a charge to the Company's earnings for financial reporting purposes. (e) (i) Incentive Stock Option. Notwithstanding anything to the contrary in this Plan, if an Incentive Stock Option is granted to a Participant who owns stock representing more than ten percent of the voting power of all classes of stock of the Company, the Option Period shall not exceed five years from the Date of Grant of such Option and the Option Price shall be at least 110 percent of the Fair Market Value (on the Date of Grant) of the Stock subject to the Option. (ii) $100,000 Per Year Limitation for Incentive Stock Options. To the extent the aggregate Fair Market Value (determined as of the time of grant) of Stock for which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year (under all plans of the Company) exceeds $100,000, such excess Incentive Stock Options shall be treated as Nonqualified Stock Options. Section 9. Stock Appreciation Rights. Stock Appreciation Rights shall be subject to the terms and conditions established by the Committee in connection with the Award thereof and specified in the applicable Award Agreement. Upon satisfaction of the conditions to the payment specified in the applicable Award Agreement, each Stock Appreciation Right shall entitle a Participant to an amount, if any, equal to the Fair Market Value of a share of Common Stock on the date of exercise over the Stock Appreciation Right exercise price specified in the applicable Award Agreement. At the discretion of the Committee, payments to a Participant upon exercise of a Stock Appreciation Right may be made in Shares, cash or a combination thereof. A Stock Appreciation Right may be granted alone or in addition to other Awards, or in tandem with a Stock Option. If granted in tandem with a Stock Option, a Stock Appreciation Right shall cover the same number of shares of Common Stock as covered by the Stock Option (or such lesser number of shares as the Committee may determine) and shall be exercisable only at such time or times and to the extent the related Stock Option shall be exercisable, and shall have the same term and exercise price as the related Stock Option. Upon exercise of a Stock Appreciation Right granted in tandem with a Stock Option, the related Stock Option shall be cancelled automatically to the extent of the number of shares covered by such exercise; conversely, if the related Stock Option is exercised as to some or all of the shares covered by the tandem grant, the tandem Stock Appreciation Right shall be cancelled automatically to the extent of the number of shares covered by the Stock Option exercised. Section 10. Stock Awards. Stock Awards shall consist of one or more shares of Common Stock granted or offered for sale to an Eligible Individual, and shall be subject to the terms and conditions established by the Committee in connection with the Award and specified in the applicable Award Agreement. The shares of Common Stock subject to a Stock Award may, among other things, be subject to vesting requirements or restrictions on transferability. Section 11. Performance Share Awards. Performance Share Awards shall be evidenced by an Award Agreement in such form and containing such terms and conditions as the Committee deems appropriate and which are not inconsistent with the terms of the Plan. Each 8 Award Agreement shall set forth the number of shares of Common Stock to be earned by a Participant upon satisfaction of certain specified performance criteria and subject to such other terms and conditions as the Committee deems appropriate. Payment in settlement of a Performance Share Award shall be made as soon as practicable following the conclusion of the applicable performance period, or at such other time as the Committee shall determine, in shares of Common Stock, in an equivalent amount of cash or in a combination of Common Stock and cash, as the Committee shall determine. Section 12. Other Awards. The Committee shall have the authority to specify the terms and provisions of other forms of equity-based or equity-related Awards not described above which the Committee determines to be consistent with the purpose of the Plan and the interests of the Company, which Awards may provide for cash payments based in whole or in part on the value or future value of Common Stock, for the acquisition or future acquisition of Common Stock, or any combination thereof. Other Awards shall also include cash payments (including the cash payment of dividend equivalents) under the Plan which may be based on one or more criteria determined by the Committee which are unrelated to the value of Common Stock and which may be granted in tandem with, or independent of, other Awards under the Plan. Section 13. Section 162(m) Awards. (a) Terms of Section 162(m) Awards Generally. In addition to any other Awards under the Plan, the Company may make Awards that are intended to qualify as "qualified performance-based compensation" for purposes of Section 162(m) of the Code ("Section 162(m) Awards"). Section 162(m) Awards may consist of Stock Options, Stock Appreciation Rights, Stock Awards, Performance Share Awards or Other Awards the vesting, exercisability and/or payment of which is conditioned upon the attainment for the applicable Performance Period of specified performance targets related to designated performance goals for such period selected by the Committee from among the performance goals specified in Section 13(b) below. Section 162(m) Awards will be made in accordance with the procedures specified in applicable treasury regulations for compensation intended to be "qualified performance-based compensation." (b) Performance Goals. For purposes of this Section 13, performance goals shall be limited to one or more of the following: (i) net revenue, (ii) net earnings, (iii) operating earnings or income, (iv) absolute and/or relative return on equity or assets, (v) earnings per share, (vi) cash flow, (vii) pretax profits, (viii) earnings growth, (ix) revenue growth, (x) book value per share, (xi) stock price and (xii) performance relative to peer companies, each of which may be established on a corporate-wide basis or established with respect to one or more operating units, divisions, acquired businesses, minority investments, partnerships or joint ventures. (c) Other Performance-Based Compensation. The Committee's decision to make, or not to make, Section 162(m) Awards within the meaning of this Section 13 shall not in any way prejudice the qualification of any other Awards as performance based compensation under Section 162(m). In particular, Awards of Stock Options may, pursuant to applicable regulations promulgated under Section 162(m), be qualified as performance-based compensation for Section 162(m) purposes without regard to this Section 13. 9 Section 14. Non-Transferability. No Award granted under the Plan or any rights or interests therein shall be sold, transferred, assigned, pledged or otherwise encumbered or disposed of except by will or by the laws of descent and distribution or pursuant to a "qualified domestic relations order" ("QDRO") as defined in the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations thereunder; provided, however, that the Committee may, subject to such terms and conditions as the Committee shall specify, permit the transfer of an Award to a Participant's family members or to one or more trusts established in whole or in part for the benefit of one or more of such family members; provided, however, that the restrictions in this sentence shall not apply to the shares received in connection with an Award after the date that the restrictions on transferability of such shares set forth in the applicable Award Agreement have lapsed. During the lifetime of a Participant, a Stock Option or Stock Appreciation Right shall be exercisable only by, and payments in settlement of Awards shall be payable only to, the Participant or, if applicable, the "alternate payee" under a QDRO or the family member or trust to whom such Stock Option, Stock Appreciation Right or other Award has been transferred in accordance with the previous sentence. Section 15. Recapitalization or Reorganization. (a) Authority of the Company and Shareholders. The existence of the Plan, the Award Agreements and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Company or the shareholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Common Stock or the rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. (b) Change in Capitalization. Notwithstanding any provision of the Plan or any Award Agreement, in the event of any change in the outstanding Common Stock by reason of a stock dividend, recapitalization, reorganization, merger, consolidation, stock split, combination or exchange of shares or any other significant corporate event affecting the Common Stock, the Committee, in its discretion, may make (i) such proportionate adjustments it considers appropriate (in the form determined by the Committee in its sole discretion) to prevent diminution or enlargement of the rights of Participants under the Plan with respect to the aggregate number of shares of Common Stock for which Awards in respect thereof may be granted under the Plan, the number of shares of Common Stock covered by each outstanding Award, and the exercise or Award prices in respect thereof and/or (ii) such other adjustments as it deems appropriate. The Committee's determination as to what, if any, adjustments shall be made shall be final and binding on the Company and all Participants. Section 16. Change in Control. In the event of a Change in Control, (i) all Stock Options or Stock Appreciation Rights then outstanding shall become fully exercisable as of the date of the Change in Control, whether or not then exercisable, (ii) all restrictions and conditions of all Stock Awards then outstanding shall lapse as of the date of the Change in Control, (iii) all 10 Performance Share Awards shall be deemed to have been fully earned as of the date of the Change in Control, and (iv) in the case of a Change in Control involving a merger of, or consolidation involving, the Company in which the Company is (A) not the surviving corporation (the "Surviving Entity") or (B) becomes a wholly owned subsidiary of the Surviving Entity or any Parent thereof, each outstanding Stock Option granted under the Plan and not exercised (a "Predecessor Option") will be converted into an option (a "Substitute Option") to acquire common stock of the Surviving Entity or its Parent, which Substitute Option will have substantially the same terms and conditions as the Predecessor Option, with appropriate adjustments as to the number and kind of shares and exercise prices. Section 17. Amendment of the Plan. The Board or Committee may at any time and from time to time terminate, modify, suspend or amend the Plan in whole or in part; provided, however, that no such termination, modification, suspension or amendment shall be effective without shareholder approval if such approval is required to comply with any applicable law or stock exchange rule; and provided, however, that the Board or Committee may not, without shareholder approval, increase the maximum number of shares issuable under the Plan. No termination, modification, suspension or amendment of the Plan shall, without the consent of a Participant to whom any Awards shall previously have been granted, adversely affect his or her rights under such Awards. Notwithstanding any provision herein to the contrary, the Board or Committee shall have broad authority to amend the Plan or any Stock Option to take into account changes in applicable tax laws, securities laws, accounting rules and other applicable state and federal laws. Section 18. Miscellaneous. (a) Tax Withholding. No later than the date as of which an amount first becomes includable in the gross income of the Participant for applicable income tax purposes with respect to any award under the Plan, the Participant shall pay to the Company or make arrangements satisfactory to the Committee regarding the payment of any federal, state or local taxes of any kind required by law to be withheld with respect to such amount. Unless otherwise determined by the Committee, in accordance with rules and procedures established by the Committee, the minimum required withholding obligations may be settled with Common Stock, including Common Stock that is part of the award that gives rise to the withholding requirement. The obligation of the Company under the Plan shall be conditioned upon such payment or arrangements and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant. (b) No Right to Grants or Employment. No Eligible Individual or Participant shall have any claim or right to receive grants of Awards under the Plan. Nothing in the Plan or in any Award or Award Agreement shall confer upon any employee of the Company or any Subsidiary any right to continued employment with the Company or any Subsidiary, as the case may be, or interfere in any way with the right of the Company or a Subsidiary to terminate the employment of any of its employees at any time, with or without cause. (c) Unfunded Plan. The Plan is intended to constitute an unfunded plan for incentive compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater 11 than those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Common Stock or payments in lieu thereof with respect to awards hereunder. (d) Other Employee Benefit Plans. Payments received by a Participant under any Award made pursuant to the provisions of the Plan shall not be included in, nor have any effect on, the determination of benefits under any other employee benefit plan or similar arrangement provided by the Company. (e) Securities Law Restrictions. The Committee may require each Eligible Individual purchasing or acquiring shares of Common Stock pursuant to a Stock Option or other Award under the Plan to represent to and agree with the Company in writing that such Eligible Individual is acquiring the shares for investment and not with a view to the distribution thereof. All certificates for shares of Common Stock delivered under the Plan shall be subject to such stock-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, the American Stock Exchange or any other exchange upon which the Common Stock is then listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. No shares of Common Stock shall be issued hereunder unless the Company shall have determined that such issuance is in compliance with, or pursuant to an exemption from, all applicable federal and state securities laws. (f) Compliance With Applicable Law. (i) The Plan is intended to comply with applicable law, including, without limitation, Rule 16b-3 under the Exchange Act or its successors under the Exchange Act, and the Committee shall interpret and administer the provisions of the Plan or any Award Agreement in a manner consistent therewith. To the extent any provision of the Plan or Award Agreement or any action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. Moreover, in the event the Plan or an Award Agreement does not include a provision required by applicable law, including, without limitation, Rule 16b-3 to be stated therein, such provision (other than one relating to eligibility requirements, or the price and amount of Awards) shall be deemed automatically to be incorporated by reference into the Plan or such Award Agreement. (ii) Notwithstanding anything contained in the Plan or any Award Agreement to the contrary, if the consummation of any transaction under the Plan would result in the possible imposition of liability on a Participant pursuant to Section 16(b) of the Exchange Act, the Committee shall have the right, in its sole discretion, but shall not be obligated, to defer such transaction to the extent necessary to avoid such liability. (g) Award Agreement. In the event of any conflict or inconsistency between the Plan and any Award Agreement, the Plan shall govern, and the Award Agreement shall be interpreted to minimize or eliminate any such conflict or inconsistency. 12 (h) Expenses. The costs and expenses of administering the Plan shall be borne by the Company. (i) Applicable Law. Except as to matters of federal law, the Plan and all actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Delaware without giving effect to conflicts of law principles. (j) Reserved. (k) Effective Date. The Plan shall be effective as of November 25, 2002 (the "Effective Date"). 13 EX-10.6 29 g87458exv10w6.txt EX-10.6 DISCLOSURE STATEMENT FOR JOINT PLAN EXHIBIT 10.6 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 DISCLOSURE STATEMENT FOR JOINT PLAN OF REORGANIZATION OF LODGIAN, INC., ET AL. (OTHER THAN THE CCA DEBTORS), TOGETHER WITH THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE CADWALADER, WICKERSHAM & TAFT CURTIS, MALLET-PREVOST, COLT Attorneys for the Debtors and & MOSLE LLP Debtors-In-Possession Co-Attorneys for the Debtors and 100 Maiden Lane Debtors-In-Possession New York, New York 10038 101 Park Avenue (212) 504-6000 New York, New York 10178 (212) 696-6000 - and - DEBEVOISE & PLIMPTON Attorneys for the Official Committee of Unsecured Creditors 919 Third Avenue New York, New York 10022 (212) 909-6000 Dated: As of September 25, 2002 THE DEADLINE BY WHICH EACH HOLDER OF AN IMPAIRED CLAIM OR EQUITY INTEREST MUST CAST A PROPERLY COMPLETED AND DELIVERED BALLOT FOR ITS VOTE TO ACCEPT OR REJECT THE PLAN TO BE COUNTED IS OCTOBER 28, 2002, AT 5:00 P.M. (PACIFIC TIME), UNLESS EXTENDED. IMPORTANT NOTICE THIS DISCLOSURE STATEMENT AND ITS RELATED DOCUMENTS ARE THE ONLY DOCUMENTS AUTHORIZED BY THE BANKRUPTCY COURT TO BE USED IN CONNECTION WITH THE SOLICITATION OF VOTES TO ACCEPT THE PLAN. NO REPRESENTATIONS HAVE BEEN AUTHORIZED BY THE BANKRUPTCY COURT CONCERNING THE DEBTORS, THEIR BUSINESS OPERATIONS OR THE VALUE OF THEIR ASSETS, EXCEPT AS EXPLICITLY SET FORTH IN THIS DISCLOSURE STATEMENT. PLEASE REFER TO THE GLOSSARY AND THE PLAN FOR DEFINITIONS OF THE CAPITALIZED TERMS USED BUT NOT DEFINED IN THIS DISCLOSURE STATEMENT. THE DEBTORS RESERVE THE RIGHT TO FILE AN AMENDED PLAN AND DISCLOSURE STATEMENT FROM TIME TO TIME. THE DEBTORS URGE YOU TO READ THIS DISCLOSURE STATEMENT CAREFULLY FOR A DISCUSSION OF VOTING INSTRUCTIONS, RECOVERY INFORMATION, CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS, THE HISTORY OF THE DEBTORS AND THE CHAPTER 11 CASES, THE DEBTORS' BUSINESSES, PROPERTIES AND RESULTS OF OPERATIONS, HISTORICAL AND PROJECTED FINANCIAL RESULTS AND A SUMMARY AND ANALYSIS OF THE PLAN. THE PLAN AND THIS DISCLOSURE STATEMENT HAVE NOT BEEN REQUIRED TO BE PREPARED IN ACCORDANCE WITH FEDERAL OR STATE SECURITIES LAWS OR OTHER APPLICABLE NONBANKRUPTCY LAW. NEITHER THE SECURITIES AND EXCHANGE COMMISSION, NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE PLAN OR THE PLAN SECURITIES OR HAS PASSED ON THE ACCURACY OR ADEQUACY OF THIS DISCLOSURE STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THIS DISCLOSURE STATEMENT CONTAINS ONLY A SUMMARY OF THE PLAN. THIS DISCLOSURE STATEMENT IS NOT INTENDED TO REPLACE THE CAREFUL AND DETAILED REVIEW AND ANALYSIS OF THE PLAN, ONLY TO AID AND SUPPLEMENT SUCH REVIEW. THIS DISCLOSURE STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PLAN, THE PLAN SUPPLEMENT AND THE EXHIBITS ATTACHED THERETO AND THE AGREEMENTS AND DOCUMENTS DESCRIBED THEREIN. IF THERE IS A CONFLICT BETWEEN THE PLAN AND THIS DISCLOSURE STATEMENT, THE PROVISIONS OF THE PLAN WILL GOVERN. YOU ARE ENCOURAGED TO REVIEW THE FULL TEXT OF THE PLAN AND PLAN SUPPLEMENT AND TO READ CAREFULLY THE ENTIRE DISCLOSURE STATEMENT, INCLUDING ALL EXHIBITS, BEFORE DECIDING HOW TO VOTE WITH RESPECT TO THE PLAN. EXCEPT AS OTHERWISE INDICATED, THE STATEMENTS IN THIS DISCLOSURE STATEMENT ARE MADE AS OF THE DATE INDICATED ON THE COVER AND THE DELIVERY OF THIS DISCLOSURE STATEMENT WILL NOT IMPLY THAT THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT IS CORRECT AT ANY TIME AFTER THAT DATE. ESTIMATES OF CLAIMS AND EQUITY INTERESTS IN THIS DISCLOSURE STATEMENT MAY VARY FROM THE FINAL AMOUNTS OF CLAIMS OR EQUITY INTERESTS ALLOWED BY THE BANKRUPTCY COURT. YOU SHOULD NOT CONSTRUE THIS DISCLOSURE STATEMENT AS PROVIDING ANY LEGAL, BUSINESS, FINANCIAL OR TAX ADVICE. YOU SHOULD, THEREFORE, CONSULT WITH YOUR OWN LEGAL, BUSINESS, FINANCIAL AND TAX ADVISORS AS TO ANY SUCH MATTERS IN CONNECTION WITH THE PLAN, THE SOLICITATION OF VOTES ON THE PLAN AND THE TRANSACTIONS CONTEMPLATED BY THE PLAN. 2 AS TO ANY CONTESTED MATTERS, ADVERSARY PROCEEDINGS OR OTHER ACTIONS OR THREATENED ACTIONS, THIS DISCLOSURE STATEMENT IS NOT, AND IS IN NO EVENT TO BE CONSTRUED AS, AN ADMISSION OR STIPULATION. INSTEAD, THIS DISCLOSURE STATEMENT IS, AND IS FOR ALL PURPOSES TO BE CONSTRUED AS, SOLELY AND EXCLUSIVELY A STATEMENT MADE IN SETTLEMENT NEGOTIATIONS. THE SETTLEMENTS AND COMPROMISES DESCRIBED IN THE PLAN AND THIS DISCLOSURE STATEMENT REMAIN SUBJECT TO ONGOING NEGOTIATIONS WITH THE RESPECTIVE PARTIES. FORWARD-LOOKING INFORMATION THIS DISCLOSURE STATEMENT INCLUDES FORWARD-LOOKING STATEMENTS BASED LARGELY ON THE DEBTORS' CURRENT EXPECTATIONS AND PROJECTIONS ABOUT FUTURE EVENTS AND FINANCIAL TRENDS AFFECTING THE FINANCIAL CONDITION OF THE DEBTORS' OR THE REORGANIZED LODGIAN DEBTORS' BUSINESSES. THESE INCLUDE MANAGEMENT'S EXPECTATIONS WITH RESPECT TO THE CHAPTER 11 CASES, STATEMENTS THAT DESCRIBE ANTICIPATED REVENUES, CAPITAL EXPENDITURES AND OTHER FINANCIAL ITEMS, STATEMENTS THAT DESCRIBE THE REORGANIZED LODGIAN DEBTORS' BUSINESS PLANS AND OBJECTIVES, AND STATEMENTS THAT DESCRIBE THE EXPECTED IMPACT OF COMPETITION, GOVERNMENT REGULATION, LITIGATION AND OTHER FACTORS ON THE REORGANIZED LODGIAN DEBTORS' 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. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO A NUMBER OF RISKS, UNCERTAINTIES AND ASSUMPTIONS, INCLUDING THOSE DESCRIBED IN SECTION VIII, "RISK FACTORS", OF THIS DISCLOSURE STATEMENT. IN LIGHT OF THESE RISKS AND UNCERTAINTIES, THE FORWARD-LOOKING EVENTS AND CIRCUMSTANCES DISCUSSED IN THIS DISCLOSURE STATEMENT MAY NOT OCCUR AND ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THE FORWARD-LOOKING STATEMENTS. NONE OF THE DEBTORS, THE REORGANIZED LODGIAN DEBTORS NOR ANY OTHER PERSON UNDERTAKES ANY OBLIGATION TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE. 3 21375155v19 TABLE OF CONTENTS
PAGE ---- I. Introduction.......................................................................................... 1 II. Treatment of Creditors and Shareholders Under the Plan................................................ 5 A. New Capital Structure of the Reorganized Lodgian Debtors; Liquidation Plan of Liquidating Debtors.......................................................................... 5 1. Reorganized Lodgian Debtors......................................................... 5 2. Liquidation Plan of Liquidating Debtors............................................. 6 B. Summary of Classification and Treatment...................................................... 7 C. Lodgian Debtors - Allocation of Value Under the Plan......................................... 10 D. Description of the Classes................................................................... 12 1. Secured Claims (Class 1)............................................................ 12 2. Priority Non-Tax Claims (Class 2)................................................... 16 3. General Unsecured Claims (Class 3).................................................. 17 4. Senior Subordinated Notes Claims (Class 4).......................................... 19 5. Convenience Claims (Class 5)........................................................ 19 6. CRESTS Claims (Class 7)............................................................. 19 7. Old Lodgian Common Stock Interests (Class 8)........................................ 20 8. Debtor Owned Old Subsidiary Equity Interests (Class 9).............................. 20 9. Third Party Owned Old Subsidiary Equity Interests (Class 10)........................ 21 10. Subordinated Claims (Class 11)...................................................... 22 E. Administrative Expenses of the Debtors....................................................... 23 1. Debtor-in-Possession Financing...................................................... 24 2. Fees and Expenses of Professionals.................................................. 24 3. Indenture Trustee Claims............................................................ 24
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PAGE ---- F. Securities to Be Issued Under the Plan....................................................... 24 1. New Preferred Stock................................................................. 24 2. New Common Stock.................................................................... 25 3. Warrants............................................................................ 25 4. Equity Ownership of Reorganized Lodgian............................................. 26 G. Securities Law Matters....................................................................... 28 1. Issuance and Resale of Securities Plan.............................................. 28 2. Listing............................................................................. 30 3. Registration Rights................................................................. 30 4. Subsequent Transfers Under State Law................................................ 30 H. Reservation of "Cram Down" Rights............................................................ 30 III. Voting Procedures and Requirements.................................................................... 31 A. Vote Required for Acceptance by a Class...................................................... 32 B. Classes Not Entitled to Vote................................................................. 32 C. Voting....................................................................................... 32 IV. Financial Information, Projections and Valuation Analysis............................................. 33 A. Operating Performance........................................................................ 33 B. Three-Year Projections of the Reorganized Lodgian Debtors.................................... 34 C. Reorganization Valuation of the Reorganized Lodgian Debtors.................................. 35 1. Reorganized Lodgian Debtors......................................................... 35 2. Valuation Methodology............................................................... 36 V. Business Description and Reasons for Chapter 11....................................................... 38 A. Historical Background........................................................................ 38 1. Commencement of Cases............................................................... 38
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PAGE ---- 2. Employment of the Debtors' Professionals............................................ 38 3. Formation of the Committee.......................................................... 38 4. Debtors' Businesses and Management.................................................. 39 5. Debtors' Debt Structure............................................................. 40 6. Events Leading up to the Chapter 11 Cases and the Need to Reorganize................ 46 7. Debtors' Debtor-In-Possession Financing and Use of Cash Collateral.................. 47 8. Continuation of Business After the Commencement Date................................ 48 9. Disputes with CCA................................................................... 48 B. Filing of Schedules/Bar Date For Filing Proofs of Claim and Equity Interests................. 49 VI. Governance of the Reorganized Debtors................................................................. 49 A. Boards of Directors of the Reorganized Debtors............................................... 49 B. Senior Management of the Reorganized Debtors................................................. 49 C. Liquidating Debtors.......................................................................... 50 VII. Other Aspects of the Plan............................................................................. 50 A. Exit Financing Facility - Condition Precedent to the Effective Date.......................... 50 B. Distributions Under the Plan................................................................. 51 1. Disbursing Agent.................................................................... 51 2. Timing and Conditions of Distributions.............................................. 51 3. Procedures for Treating Disputed Claims and Equity Interests Under the Plan......... 52 C. Treatment of Executory Contracts and Unexpired Leases........................................ 54 1. Contracts and Leases Not Expressly Assumed Are Rejected............................. 54 2. Cure of Defaults.................................................................... 54
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PAGE ---- 3. Rejection Claims.................................................................... 54 4. Franchise Agreements................................................................ 54 D. New Equity Incentive Plan.................................................................... 55 E. Releases..................................................................................... 55 F. Effect of Confirmation....................................................................... 56 1. Discharge of Claims and Cancellation of Equity Interests............................ 56 2. Indemnification..................................................................... 56 3. Waiver of Contractual Subordination Rights.......................................... 56 G. Miscellaneous Provisions..................................................................... 57 VIII. Risk Factors.......................................................................................... 57 A. Certain Bankruptcy Considerations............................................................ 57 1. General Risks Relating to Confirmation and Consummation............................. 57 2. Risks Relating to Plan Treatment of Mortgage Financings............................. 58 3. Matters Affecting Recoveries........................................................ 58 4. Loss of Franchise Agreements........................................................ 58 5. No Assurance of Feasibility......................................................... 59 B. Risks Relating to the Plan Securities........................................................ 60 1. Variances from Projections.......................................................... 60 2. Significant Holders................................................................. 60 3. Lack of Trading Market.............................................................. 60 4. Dividend Policies................................................................... 61 5. Restrictions on Transfer............................................................ 61 6. Trading Values of the Plan Securities............................................... 61 C. Financing Risks.............................................................................. 62 1. Post-Reorganization Obligations..................................................... 62
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PAGE ---- 2. Limited Access to Working Capital................................................... 62 D. Risks Associated with the Businesses......................................................... 62 1. Certain Tax Implications............................................................ 63 IX. Confirmation of the Plan.............................................................................. 63 A. Confirmation Hearing......................................................................... 63 B. General Requirements of Section 1129......................................................... 64 C. Best Interests Tests......................................................................... 65 D. Liquidation Analysis......................................................................... 67 E. Feasibility.................................................................................. 67 F. Section 1129(b).............................................................................. 68 1. No Unfair Discrimination............................................................ 68 2. Fair and Equitable Test............................................................. 68 X. Alternatives to Confirmation and Consummation of the Plan............................................. 69 A. Liquidation Under Chapter 7.................................................................. 69 B. Alternative Plan............................................................................. 69 XI. Certain Federal Income Tax Consequences of the Plan................................................... 70 A. Consequences to Certain Debtors.............................................................. 71 1. Cancellation of Debt................................................................ 71 2. Limitations on NOL Carryforwards and Other Tax Benefits............................. 72 3. Alternative Minimum Tax............................................................. 74 B. Consequences to Holders of Certain Claims.................................................... 74 1. Consequences to Holders of General Unsecured Claims Against Lodgian, Inc. That Do Not Constitute "Securities" Who Receive New Common Stock and New Preferred Stock............................................................................... 75
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PAGE ---- 2. Consequences to Holders of General Unsecured Claims Against Lodgian, Inc. That Constitute "Securities" Who Receive New Common Stock and New Preferred Stock........ 76 3. Consequences to Holders of General Unsecured Claims Against Lodgian Debtors Other Than Lodgian, Inc............................................................. 77 4. Consequences to Holders of Senior Subordinated Notes Claims......................... 78 5. Consequences to Holders of CRESTS Junior Subordinated Debentures Claims............. 79 6. Consequences to Holders of Old Lodgian Common Stock Interests....................... 80 7. Distributions in Discharge of Accrued Interest...................................... 81 8. Market Discount..................................................................... 81 9. Treatment of Subsequent Distributions on New Preferred Stock and New Common Stock............................................................................... 81 10. Subsequent Sale of New Common Stock or New Preferred Stock.......................... 83 11. Redemption of New Preferred Stock................................................... 83 12. Ownership and Disposition of Warrants............................................... 84 13. Information Reporting and Withholding............................................... 84 XII. Conclusion............................................................................................ 85
EXHIBITS - -------- Exhibit A Debtors' Joint Plan of Reorganization Exhibit B Estimated Plan Recoveries and Liquidation Analysis by Debtor Exhibit C Estimated Class 3 Allowed Claims and Recoveries and Allocations of Class 3 Plan Securities Exhibit D Projections Exhibit E Commitment Letter and Summary of Principal Terms of Exit Financing Facility Exhibit F Liquidation Analysis Assumptions and Summary of Liquidation Recovery by Class vi 21375155v19 GLOSSARY The terms in the following table are used in this Disclosure Statement and, in most cases, the Plan. The definitions given below of terms used in the Plan are summaries. Please refer to the Plan for the complete definitions of those terms and other defined terms used throughout this Disclosure Statement. Unless otherwise specified, all section references in this Disclosure Statement are to sections of this Disclosure Statement. A Warrants Warrants to purchase up to 17.75% of the New Common Stock on a fully diluted basis excluding (a) B Warrant Shares, (b) New Incentive Shares and (c) Other Future Shares. The A Warrants are described in section II.F.3. The effect of the issuance of B Warrant Shares and New Incentive Shares is summarized in section II.F.3. A Warrant Shares Shares of New Common Stock issuable upon exercise of the A Warrants. Administrative Expense Any expense relating to the administration of a Claim Debtor's Chapter 11 Case, including actual and necessary costs and expenses of preserving the Debtor's estate and operating the Debtor's businesses, any indebtedness or obligations incurred or assumed during the applicable Chapter 11 Case, allowances for compensation and reimbursement of expenses to the extent allowed by the Bankruptcy Court, and certain statutory fees chargeable against the Debtor's estate. Allowed Claim or Equity A Claim against, or Equity Interest in, a Debtor Interest which the Debtor agrees, or in the event of a dispute, which the Bankruptcy Court determines, to be a valid obligation of the Debtor in the amount so agreed or determined. B Warrants Warrants to purchase up to 10.79% of the New Common Stock on a fully diluted basis, excluding (a) New Incentive Shares and (b) Other Future Shares. The B Warrants are described in section II.F.3. The effect of the issuance of New Incentive Shares is summarized in section II.F.4. B Warrant Shares Shares of New Common Stock issuable upon exercise of the B Warrants. Bankruptcy Code Title 11 of the United States Code. Bankruptcy Court The United States Bankruptcy Court for the Southern District of New York. Bar Date June 3, 2002, which is the date fixed by the Bankruptcy Court as the last date upon which proofs of claim and equity interests could be filed against the Debtors' estates. CCA The Capital Company of America LLC. CCA Debtors IMPAC Hotels II, L.L.C. and IMPAC Hotels III, L.L.C, as debtors and debtors in possession in chapter 11 cases 01-16367 and 01-16375, respectively. Claim A right to payment from a Debtor, whether legal or equitable and whether or not liquidated, fixed, matured or undisputed. Class Liquidating Class 3 Subclasses consisting of General Unsecured Subclasses Claims against a Liquidating Debtor. Class 3 Plan Securities The aggregate Plan Securities available for distribution to holders of Allowed Claims in Class 3 Lodgian Subclasses. Class 3 Lodgian Class 3 Subclasses consisting of General Unsecured Subclasses Claims against a Lodgian Debtor. Class 4 Compromise The compromise embodied in the Plan of certain issues between the Debtors and the holders of Senior Subordinated Notes, including the amount of such holders' Allowed Claims against each Guarantor Debtor and the determination of the Debtors that are liable as Guarantor Debtors, as well as the valuation of the Debtors on which recoveries should be based. Commencement Date The date a Debtor's Chapter 11 Case was commenced (December 20, 2001, for all the Debtors other than Worcester Hospitality, L.P., Lodgian Hotels, Inc., Brecksville Hospitality, L.P. and Sioux City Hospitality, L.P., each of whose Commencement Date is December 21, 2001, and New Orleans Airport Motel Associates, L.P., whose Commencement Date is April 17, 2002). Committee The official committee of general unsecured creditors appointed in the Debtors' Chapter 11 Cases. CRESTS The 7% Convertible Redeemable Equity Structured Trust Securities issued by Lodgian Capital Trust I. CRESTS Junior The 7% Convertible Junior Subordinated Debentures due Subordinated Debentures 2010 originally issued by Servico, Inc. and assumed by Lodgian, Inc. 2 Debtors Lodgian, Inc. and its direct and indirect subsidiaries listed in Exhibit A to the Plan, which do not include the CCA Debtors. The CCA Debtors intend to file a separate plan or plans of reorganization which are not the subject of the Plan and this Disclosure Statement. Disclosure Statement This document together with the annexed exhibits. Disputed Claim or Equity A Claim or Equity Interest that is not an Allowed Interest Claim or Equity Interest. Effective Date A business day selected by the Plan Proponents on or after the date of confirmation of the Plan, on which all conditions to the effectiveness of the Plan have been satisfied or waived and there is no stay of the order confirming the Plan. The Plan Proponents may select different Effective Dates for one or more Debtors. Equity Interest The rights of a holder of a Debtor's capital stock, membership or partnership interests, or similar ownership interests, including any right to acquire such an interest. Final Order An order of the Bankruptcy Court entered on the docket in the Chapter 11 Cases, which has not been reversed, vacated or stayed and (i) as to which the time to appeal or move for a new trial, reargument or rehearing has expired and as to which no appeal or other proceedings for a new trial, reargument or rehearing is then pending, or (ii) if an appeal, new trial, reargument or rehearing has been sought, which has been affirmed by the highest court to which such order was appealed, or a new trial, reargument or rehearing has been denied or resulted in no modification of such order, and the time to take any further appeal or move for a new trial, reargument or rehearing has expired. General Unsecured Claim Any general unsecured Claim against a Debtor other than Senior Subordinated Notes Claims, CRESTS Claims, Subordinated Claims or any Administrative Expense Claim or other priority Claim. GMAC-Orix Debtors Brecksville Hospitality, L.P., Servico Council Bluffs, Inc., Servico Omaha, Inc., Servico Omaha Central, Inc., Servico West Des Moines, Inc., Servico Wichita, Inc., Sioux City Hospitality, L.P. and 1075 Hospitality, L.P. Guarantor Debtor Each Debtor that has guaranteed the Senior Subordinated Notes, including Lodgian, Inc. and the direct and indirect subsidiaries of Lodgian Financing Corp. 3 Hotel Properties As applicable, the respective interests of the Debtors and the CCA Debtors in the hotel properties (including leasehold interests) described in section V.A.5. Initial New Common Stock The shares of New Common Stock to be issued pursuant to the Plan on the Effective Date, representing in the aggregate 100% of the shares of New Common Stock before issuance of (a) A Warrant Shares, (b) B Warrant Shares, (c) New Incentive Shares and (d) Other Future Shares. The effect of the issuance of A Warrant Shares, B Warrant Shares and New Incentive Shares is summarized in section II.F.4. LCT I Lodgian Capital Trust I, a Delaware statutory business trust and the issuer of the CRESTS. Liquidating Debtors The GMAC-Orix Debtors and the Roundabout Debtor. Lodgian Debtors The Debtors other than the Liquidating Debtors. Mortgage Financing The Debtors' existing financing arrangements secured by one or more Hotel Properties as described in section V.A.5. New Common Stock New common stock of Reorganized Lodgian to be issued under the Plan. The New Common Stock is described in section II.F.2. New Equity Incentive Plan The management equity incentive plan to be adopted by Reorganized Lodgian under which up to 10.0% of the New Common Stock on a fully diluted basis will be available for issuance. New Incentive Share Shares of New Common Stock issuable pursuant to the New Equity Incentive Plan. New Preferred Stock New 12.25% preferred stock of Reorganized Lodgian to be issued under the Plan in an aggregate liquidation preference of $125 million. The New Preferred Stock is described in section II.F.1. New Subsidiary Equity New Equity Interests issued by a Reorganized Debtor other than Reorganized Lodgian, to be issued on the Effective Date pursuant to the Plan. Old Lodgian Common Common stock (and options, warrants or rights to Stock acquire common stock) of Lodgian, Inc. outstanding immediately prior to the Effective Date. 4 Other Future Shares Shares of New Common Stock that the Board of Reorganized Lodgian may in the future determine to issue other than (a) the Initial New Common Stock, (b) Warrant Shares or (c) New Incentive Shares. Plan The Debtors' Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, annexed as Exhibit A to this Disclosure Statement. Plan Proponents Each Debtor and the Committee. Plan Securities The New Preferred Stock, the New Common Stock and the Warrants. Plan Supplement A supplemental appendix to the Plan to be filed with the Bankruptcy Court within 7 days before the hearing to confirm the Plan, but no later than 5 days before the last day to vote to accept or reject the Plan. Reorganized Debtors The Debtors as reorganized as of the Effective Date in accordance with the Plan. Reorganized Lodgian Lodgian, Inc. as reorganized as of the Effective Date in accordance with the Plan. Reorganized Lodgian The Lodgian Debtors as reorganized as of the Debtors Effective Date in accordance with the Plan. Roundabout Debtor Raleigh-Downtown Enterprises, Inc. Secured Claim A Claim to the extent (i) secured by Collateral, the amount of which Claim is equal to or less than the value of such Collateral (A) as set forth in this Plan, (B) as agreed to by the holder of such Claim and the applicable Debtor(s), or (C) as determined by a Final Order in accordance with section 506(a) of the Bankruptcy Code, or (ii) secured by the amount of any rights of setoff of the holder thereof under section 553 of the Bankruptcy Code. Senior Subordinated Notes The 12 1/4% Senior Subordinated Notes due 2009 issued by Lodgian Financing Corp., and guaranteed by the Guarantor Debtors. Subclass Debtor With respect to any Subclass of Claims or Equity Interests under the Plan, the Debtor to which those Claims or Equity Interests relate. Voting Agent See section I for contact information. 5 Voting Procedures Order An order of the Bankruptcy Court that sets which Claims and Equity Interests may vote on the Plan and designates the form of ballot to be used. Warrants The A Warrants and the B Warrants. Warrant Shares The A Warrant Shares and the B Warrant Shares. 6 I. INTRODUCTION The Plan Proponents are soliciting votes to accept or reject the Plan. The overall purpose of the Plan is to provide for the restructuring of the Debtors' liabilities in a manner designed to maximize recoveries to all stakeholders. The Plan provides for the continued operation of the Reorganized Lodgian Debtors and the orderly liquidation of the Liquidating Debtors. A copy of the Plan is attached as Exhibit A to this Disclosure Statement. Please refer to the Glossary and the Plan for definitions of terms used but not defined in this Disclosure Statement. Although the Plan is proposed as a joint plan of reorganization of the Debtors, the Plan is a separate Plan for each Debtor. As such, the Plan does not provide for substantive consolidation of the assets or liabilities of any of the Debtors with any other Debtor. The Plan Proponents reserve the right to proceed at any time with confirmation of the Plan as to some, but not all, of the Debtors. The Plan does not include the CCA Debtors. The CCA Debtors intend to file a separate plan or plans of reorganization, which are not the subject of this Disclosure Statement. See section V.A.9. The purpose of this Disclosure Statement is to provide sufficient information to enable the creditors and equity interest holders of each Debtor who are entitled to vote to make an informed decision on whether to accept or reject the Plan. This Disclosure Statement describes: - the new capital structures of the Reorganized Lodgian Debtors and the liquidation plan of the Liquidating Debtors, how the holders of Allowed Claims and Equity Interests are treated, and the terms of the Plan Securities (section II); - how to vote on the Plan and who is entitled to vote (section III); - certain financial information about the Debtors, including 3-year consolidated cash flow projections and potential enterprise valuations of the Reorganized Lodgian Debtors (section IV); - the businesses of the Debtors, the reasons why they commenced their Chapter 11 Cases and significant events that have occurred in the Chapter 11 Cases (section V); - how the Reorganized Debtors will be governed when the Plan becomes effective (section VI); - how distributions under the Plan will be made and the manner in which Disputed Claims and Equity Interests will be resolved (section VII.B); - certain factors creditors and equity interest holders should consider before voting (section VIII); - the procedure and requirements for confirming the Plan, including a liquidation analysis (section IX); - alternatives to the Plan (section X); and - certain federal tax considerations (section XI). Additional financial information about the Debtors can be found in Lodgian, Inc.'s periodic reports filed with the Securities and Exchange Commission including: Lodgian, Inc.'s annual report on Form 10-K for the fiscal year ended December 31, 2001, and quarterly reports on Form 10-Q for the fiscal quarters ended March 31, 2002 and June 30, 2002. Copies of these filings will be included in the Plan Supplement and may be obtained over the Internet at www.sec.gov or www.freeedgar.com. The Plan Supplement will contain material documents to be entered into in connection with the implementation of the Plan, including, among others, the organizational documents of the Reorganized Debtors, the documents related to the Plan Securities, the Exit Financing Facility documents and the amended Mortgage Financings. The Plan Supplement will be filed with the Bankruptcy Court within 7 days before the hearing to confirm the Plan, but no later than 5 days before the last day to vote to accept or reject the Plan. This Disclosure Statement, the attached exhibits, the Plan and the Plan Supplement are the only materials that you should use in determining whether to vote to accept or reject the Plan. The summaries of the Plan and other documents related to the restructuring of the Debtors are qualified in their entirety by the Plan, its exhibits, and the documents and exhibits contained in the Plan Supplement. 2 CLASSES ENTITLED TO VOTE ON THE PLAN - Classes 1, 3 (other than Class 3 Liquidating Subclasses), 4, 5, 7 and 10-B are impaired under the Plan and entitled to vote on the Plan. - Class 2, Class 9 Lodgian Subclasses, Class 10-C are unimpaired under the Plan, are deemed to have accepted the Plan and will not be entitled to vote on the Plan. - Class 3 Liquidating Subclasses, Class 8, Class 9 (other than Class 9 Lodgian Subclasses), Class 10-A and Class 11 are impaired under the Plan, are deemed to have rejected the Plan and will not be entitled to vote on the Plan. See section II.B for a description of the Classes of Claims and Equity Interests and their treatment under the Plan. The Bankruptcy Code provides that only Claims and Equity Interests actually voted will be counted for purposes of determining whether the requisite acceptances of the Plan are received. Failure to timely deliver a properly completed ballot with respect to any Claim or Equity Interest entitled to vote will constitute an abstention and that Claim or Equity Interest will not be counted for the purpose of approving the Plan. VOTING DEADLINE AND RECORD DATE THE LAST DAY TO VOTE TO ACCEPT OR REJECT THE PLAN IS OCTOBER 28, 2002. ALL VOTES MUST BE RECEIVED BY THE VOTING AGENT BY 5:00 P.M. (PACIFIC TIME) ON THAT DAY. THE RECORD DATE FOR DETERMINING WHICH CREDITORS AND EQUITY INTEREST HOLDERS MAY VOTE ON THE PLAN IS SEPTEMBER 26, 2002 The Plan is based on extensive negotiations with holders of the various secured and unsecured Claims against the Debtors. The Plan Proponents believe that approval of the Plan is the best opportunity for each Debtor to emerge from chapter 11 and (other than for the Liquidating Debtors) return its business to profitability. The Committee, which includes holders of 54% of the Senior Subordinated Notes, 57% of the CRESTS, as well as holders of General Unsecured Claims, fully supports, and is a co-proponent of, the Plan. 3 VOTING RECOMMENDATIONS The Plan Proponents believe that confirmation of the Plan is the best opportunity for creditors and equity interest holders of the respective Debtors to maximize their recoveries and for the business operations of the Debtors to succeed. Each of the Debtors encourages its creditors and equity interest holders entitled to vote to accept the Plan. The Committee has participated fully in the reorganization process and, as a Plan Proponent, urges all creditors and equity interest holders of each Debtor entitled to vote to accept the Plan. Please contact the Voting Agent with any questions relating to voting on the Plan. Additional copies of this Disclosure Statement and, when filed, copies of the Plan Supplement are available upon request made to the Voting Agent, at the following address: IF BY OVERNIGHT OR HAND DELIVERY: IF BY STANDARD MAILING: POORMAN-DOUGLAS CORPORATION POORMAN-DOUGLAS CORPORATION 10300 S.W. ALLEN BOULEVARD P.O. BOX 4230 BEAVERTON, OREGON 97005 PORTLAND, OREGON 97208-4230 ATTN: LODGIAN BALLOTING CENTER ATTN: LODGIAN BALLOTING CENTER 4 II. TREATMENT OF CREDITORS AND SHAREHOLDERS UNDER THE PLAN The Plan governs the treatment of Claims against and Equity Interests in the Debtors. This section summarizes the new capital structures of the Reorganized Lodgian Debtors and the liquidation plan of the Liquidating Debtors, describes the Claims and Equity Interests in each Class established under the Plan, summarizes the treatment of each Class, and discusses legal issues affecting the trading of Plan Securities. A. NEW CAPITAL STRUCTURE OF THE REORGANIZED LODGIAN DEBTORS; LIQUIDATION PLAN OF LIQUIDATING DEBTORS The Plan provides for the continued operation of the Reorganized Lodgian Debtors. The Liquidating Debtors will have no continuing business operations after the Effective Date. 1. Reorganized Lodgian Debtors The following table summarizes the proposed capital structure of the Reorganized Lodgian Debtors, including the exit financing arrangements the Lodgian Debtors expect to enter into on the Effective Date to refinance certain Mortgage Financings, pay Administrative Expense Claims, including cure costs of the executory contracts and unexpired leases assumed by the Lodgian Debtors, and fund capital expenditures and other needs of their ongoing business operations. Lodgian, Inc. has entered into a commitment letter providing for a $286.2 million Exit Financing Facility secured by certain of the Lodgian Debtors' Hotel Properties. The principal terms of the proposed exit financing are described in section VII.A. Except as otherwise provided in the Plan and described herein, the Lodgian Debtors' existing Mortgage Financings will be reinstated on their original or amended terms and will continue to be secured by the underlying Hotel Properties. The principal terms of the continuing Mortgage Financings are summarized in the table in section II.D.1. The principal terms of the Priority Tax Claim Note are summarized in the table in section II.B. The Plan Securities to be issued on the Effective Date are described in section II.F. 5 REORGANIZED LODGIAN DEBTORS
INSTRUMENT DESCRIPTION COMMENTS ---------- ----------- -------- Secured Loan $286.2 million(1) (exit financing) Mortgage Financings Approximately $102.6(1) million (reinstated or amended) Priority Tax Claims Note Approximately $13.6 million (restructuring debt) New Preferred Stock $125 million (Plan Securities) New Common Stock 7,000,000 shares (Plan Securities) A Warrants To purchase up to 17.75% of the New Common (Plan Securities) Stock(2) To purchase up to 10.79% of the New Common (Plan Securities) B Warrants Stock(3)
- ---------------------------- 1 The Plan Proponents and the Exit Financing Lender have agreed in principal to increase the Exit Financing Facility by $5.3 million to be used to refinance the debt under Subclass 1-J. This would reduce the principal amount of the continuing Mortgage Financings by a corresponding amount. 2 Excludes (a) B Warrant Shares, (b) New Incentive Shares and (c) Other Future Shares. 3 Excludes (a) New Incentive Shares and (b) Other Future Shares. 2. Liquidation Plan of Liquidating Debtors The Plan Proponents have determined, in coordination with the applicable secured creditor, that the Liquidating Debtors' Hotel Properties are overleveraged and no longer economically valuable for those Debtors to continue to own or operate. As such, they have agreed that such Hotel Properties should be surrendered to the applicable secured creditor, which will seek to continue the business operations at the affected Hotel Properties independent from the Debtors' on-going businesses. The Plan provides for a consensual surrender of the Liquidating Debtors' Hotel Properties, as a going concern, to the holders of Secured Claims under the Liquidating Debtors' Mortgage Financings. The Liquidating Debtors anticipate that the terms of the consensual surrender will provide for the payment in full of all Allowed Administrative Expense Claims, Allowed Priority Tax Claims and Allowed Priority Non-Tax Claims against the Liquidating Debtors. If these Claims are not paid, the Plan cannot be confirmed as to the Liquidating Debtors, and the Liquidating Debtors shall evaluate their options to the disposition of their assets. Upon surrender of their respective Hotel Properties under the Plan, the Liquidating Debtors will hold no assets and will have no ongoing business operations. Because there is insufficient asset value to satisfy the Allowed Claims of the applicable secured creditors, no amounts will be available for distribution to holders of General Unsecured Claims against the Liquidating Debtors. 6 B. SUMMARY OF CLASSIFICATION AND TREATMENT The following table and the table in section II.D.1 divide the Claims against, and Equity Interests in, each of the Debtors into separate Classes, state the estimated aggregate amount of the Claims or Equity Interests in each Class and summarize the treatment of each Class. The tables also identify which Classes are entitled to vote on the Plan based on rules set forth in the Bankruptcy Code and the Voting Procedures Order. Finally, the tables indicate an estimated recovery for each Class. IMPORTANT NOTE ON ESTIMATES AND VALUATIONS The estimates of recovery amounts and percentages in the following tables and elsewhere in this Disclosure Statement may differ from actual distributions if the Debtors' estimates of Allowed Claims prove to be inaccurate. The Debtors' estimates of Allowed Claims reflect the Debtors' reasonable judgment based on current information as of the date of this Disclosure Statement and the Debtors make no representation as to the accuracy of these amounts. In addition, the estimated valuation of the Reorganized Lodgian Debtors and the Plan Securities, and the estimated recoveries to holders of Claims, are not intended to represent the value at which the Plan Securities could be sold if a market for those securities emerges. As described in section VIII.D, the hotel and lodging industry is affected by numerous uncertainties, including the economy in general and the levels of business and leisure travel at any given time. Those uncertainties and other risks related to the Debtors make it difficult to determine a precise value for the Debtors and the Plan Securities to be distributed under the Plan. The Claim amounts and recoveries described in the following tables and elsewhere in this Disclosure Statement represent the Debtors' best estimates of those values given the information available at this time. Approximately 4,299 proofs of claim were filed in the Debtors' Chapter 11 Cases and the CCA Debtors' Chapter 11 Cases as of the Bar Date. As of the date of this Disclosure Statement, the Debtors have completed a preliminary review of these Claims, including reconciliation with their own books and records. However, due to the number and amount of Claims in dispute, as well as the risk of error inherent in reconciling such a large number of proofs of claim with the books and records of 81 different entities, it is possible that the actual amount of Allowed Claims may differ materially from the Debtors' estimates. The Debtors continue to seek to resolve Disputed Claims and further refine their claims analysis. Unless otherwise specified, the estimated Claim amounts and recoveries in the following tables and elsewhere in this Disclosure Statement are based on the Debtors' claims analysis and financial projections as of the date of this Disclosure Statement. 7 The estimation of recoveries makes the following assumptions: - The consolidated business and operations of the Reorganized Lodgian Debtors does not include the Hotel Properties or other assets or liabilities of the CCA Debtors or the Liquidating Debtors. See section IV.B and Exhibit D for a description of the assumptions underlying the Debtors' financial projections for the Reorganized Lodgian Debtors. - The consolidated enterprise value of the Reorganized Lodgian Debtors is approximately $615 million. See section IV.C for a description of the basis of these valuations. - The aggregate amount of Allowed Secured Claims against the Lodgian Debtors is approximately $354.2 million. - The aggregate amount of Allowed General Unsecured Claims (excluding Inter-Company Claims) against the Lodgian Debtors is approximately $22.8 million. - The Initial New Common Stock has an aggregate value as of the Effective Date of approximately $85 million. See section IV.C for a description of the basis of this valuation. - The Warrants have an aggregate value as of the Effective Date of approximately $8 million using a standard computation methodology for the valuation of warrants. See section IV.C for a description of the basis of this valuation. Treatment of Claims and Equity Interests
CLASS DESCRIPTION TREATMENT ENTITLED ESTIMATED TO VOTE RECOVERY - - Debtor-in-Possession Credit Payment of all amounts outstanding, No 100% Agreement Claims and cash collateralization or replacement of outstanding letters Estimated Claim Amount: of credit. $0(1)
- ------------------------ 1 Excludes approximately $1.0 million in letters of credit issued and undrawn as of the date of this Disclosure Statement. These letters of credit will be replaced or cash collateralized on the Effective Date. 8
CLASS DESCRIPTION TREATMENT ENTITLED ESTIMATED TO VOTE RECOVERY ----- ----------- --------- -------- --------- - - Other Administrative Expense Paid in full. No 100% Claims Estimated Claim Amount: $22.4 million - - Priority Tax Claims Paid in full or paid over a period not to No 100% exceed 6 years from the date of Estimated Claim Amount: assessment of the tax, with interest at $13.8 million the Federal Judgment Rate as in effect on the Confirmation Date, payable monthly. 1 Secured Claims See section II.D.1. Yes See section II.D.1. 2 Priority Non-Tax Claims Paid in full. No 100% Estimated Claim Amount: $0.1 million 3 General Unsecured Claims New Preferred Stock: $7,735,000 Yes 53.4% against Lodgian Debtors Initial New Common Stock: 5.24% Estimated Claim Amount: $22.8 million General Unsecured Claims No Distribution No (deemed to None against Liquidating Debtors reject) Estimated Claim Amount: $1.7 million 4 Senior Subordinated Notes Claims New Preferred Stock: $117,265,000 Yes 87.7% Initial New Common Stock: 79.39% Estimated Claim Amount: $210.5 million 5 Convenience Claims Paid in full. Yes 100% Estimated Claim Amount: $0.5 million 6 [Reserved] 6A [Reserved]
9
CLASS DESCRIPTION TREATMENT ENTITLED ESTIMATED TO VOTE RECOVERY ----- ----------- --------- -------- --------- 7 CRESTS Claims Initial New Common Stock: 12.40% Yes 7.8% A Warrants: 83.33% Estimated Claim Amount: B Warrants: 24.39% $197.2 million 8 Old Lodgian Common Stock Initial New Common Stock: 2.97% No (deemed to NA Interests A Warrants: 16.67% reject) B Warrants: 75.61% Estimated Interests: 28.5 million shares 9 Debtor Owned Old Subsidiary In Lodgian Debtors: Unaltered. No (deemed to NA Equity Interests accept) In Liquidating Debtors: No distribution No (deemed to NA reject) 10 Third Party Owned Old 10-A: No distribution. No (deemed to NA Subsidiary Equity Interests reject) 10-B: Reduced percentage of New Yes NA Subsidiary Equity 10-C: Unaltered No (deemed to NA accept) 11 Subordinated Claims No distribution. No (deemed to None reject) Estimated Claim Amount: $0
C. LODGIAN DEBTORS - ALLOCATION OF VALUE UNDER THE PLAN The Plan provides for distributions of Plan Securities to holders of General Unsecured Claims against Lodgian Debtors (Class 3), Senior Subordinated Notes (Class 4), CRESTS (Class 7) and Old Lodgian Common Stock (Class 8). The Plan Securities consist of $125 million aggregate liquidation preference of New Preferred Stock, 100% of the Initial New Common Stock and the Warrants to purchase up to an additional 26.62% of New Common Stock on a fully diluted basis excluding (a) New Incentive Shares and (b) Other Future Shares. The distributions of Plan Securities under the Plan reflect a reallocation of value from the Senior Subordinated Notes to the General Unsecured Claims against Lodgian Debtors, CRESTS and Old Lodgian Common Stock, as described below. The Plan allocations are the result of extensive negotiations between the Debtors and the Committee, which includes the holders of 54% of the Senior Subordinated Notes and 57% of the CRESTS, as well as holders of General Unsecured Claims. Further, the Plan embodies the Class 4 Compromise, which compromises a number of issues between the Debtors and the holders of Senior Subordinated 10 Notes, including the amount of such holders' Allowed Claims against each Guarantor Debtor and the determination of the Debtors that are liable as Guarantor Debtors, as well as the valuation of the Debtors on which recoveries should be based. The Debtors and the Committee believe that the proposed terms offer the best opportunity for the expeditious completion of a consensual restructuring, which is likely to afford greater recoveries to all creditors and shareholders, including the holders of Senior Subordinated Notes, than would result from protracted and costly bankruptcy proceedings. The treatment of General Unsecured Claims against Lodgian Debtors, CRESTS and Old Lodgian Common Stock under the Plan is not an admission by the holders of Senior Subordinated Notes, the Debtors, the Committee or any other party that those Claims and Equity Interests would otherwise be entitled to the recovery provided in the Plan. The Debtors and the Committee do not believe the recoveries provided in the Plan for these Classes would likely be realized other than pursuant to the Plan. The following table compares the estimated recoveries under the Plan with those to which the holders of Senior Subordinated Notes, General Unsecured Claims against Lodgian Debtors, CRESTS and Old Lodgian Common Stock would otherwise be entitled. Recoveries for General Unsecured Claims against Lodgian Debtors, which range from 0% to 100% depending upon the Lodgian Debtor against which the Claim is made, are shown on a combined basis for all Lodgian Debtors. The recovery shown for the Senior Subordinated Notes is an aggregate of the recoveries from Lodgian Financing Corp., the issuer of the Senior Subordinated Notes, and each Guarantor Debtor. All dollar amounts are in millions.
RECOVERY PER PLAN ------------------------- STRICT ALLOCATIONS ADJUSTMENT AMOUNT % ------------------ ---------- -------- ------ SENIOR SUBORDINATED NOTES $207.2 ($1.4) to Gen Unsecured ($15.3) to CRESTS ($5.8) ------ to Old Equity $184.7 87.7% GENERAL UNSECURED CLAIMS AGAINST $10.8 LODGIAN DEBTORS from Sen Sub $1.4 --- $12.2 53.4% CRESTS $0 from Sen Sub $15.3 ---- $15.3 7.8% OLD LODGIAN COMMON STOCK $0 from Sen Sub $5.8 --- $5.8 --
11 The value reallocated to CRESTS and Old Lodgian Common Stock is composed of 15.37% of the Initial New Common Stock and 100% of the Warrants. The reallocation to the holders of General Unsecured Claims against Lodgian Debtors represents a 20% premium on the recovery to which they are otherwise entitled and is composed of an additional $0.9 million aggregate liquidation preference of New Preferred Stock and an additional 0.59% of the Initial New Common Stock. The estimated recovery amounts of Inter-Company Claims of one Lodgian Debtor against another Lodgian Debtor is taken into account in determining the estimated reorganization value of the Lodgian Debtor to which the Claim is due. As a result, the recovery value of these Inter-Company Claims is reflected in the recovery amounts realized by the holders of Claims against and Equity Interests in the Lodgian Debtors to which the Claims are due. No separate distribution will be made on account of Allowed Inter-Company Claims of any Lodgian Debtor against another Lodgian Debtor. The Debtors have estimated the recovery to the holders of each Class of Claims against, and Equity Interests in, each Debtor based on the estimated value of the Debtor against which such holders' Claims or Equity Interests are asserted and the estimated amount and relative priorities of Allowed Claims against that Debtor. Exhibit B to this Disclosure Statement sets forth for each Debtor an analysis of estimated recoveries. D. DESCRIPTION OF THE CLASSES Unless otherwise indicated, the characteristics and amount of the Claims or Equity Interests in the following Classes are based on the books and records of each of the applicable Debtors. Each Subclass is treated as a separate Class for purposes of the Plan and the Bankruptcy Code. However, the following discussion may refer to a group of Subclasses as a single Class for ease of reference. INTEREST WILL NOT ACCRUE AFTER COMMENCEMENT DATE Unless otherwise specified in the Plan or by order of the Bankruptcy Court, no interest will accrue or be paid on an Allowed Claim, for any purpose, on or after the Commencement Date. 1. Secured Claims (Class 1) Description. Class 1 is a group of 16 Subclasses, including estimated aggregate Secured Claims of approximately $383.2 million as of the date of this Disclosure Statement. Claims in these Subclasses are, for the most part, mortgage financings of the Hotel Properties. Each Subclass represents a separate Mortgage Financing (or other secured financing) and collateral pool. The table below describes the Subclasses in Class 1 by Mortgage Financing and the number of underlying Hotel Properties. The Mortgage Financings and collateral pools are further described in section V.A.5. Treatment. Class 1 is impaired. On or as soon as reasonably practicable after the Effective Date, each holder of an Allowed Claim in a Class 1 Subclass will receive (i) the 12 treatment for such Subclass summarized in the following table, except to the extent the holder and the applicable Debtor have agreed to a different treatment, or (ii) such other treatment as the Bankruptcy Court may approve in connection with confirmation of the applicable Debtor's Plan through a "cram down" of such Subclass under section 1129(b) of the Bankruptcy Code. The Debtors desire to enter into separate consensual stipulations with the secured creditors in each Class 1 Subclass regarding the treatment of their Claims. The applicable Debtors are continuing negotiations with each Subclass. In the event that these negotiations result in a treatment of any Class 1 Subclass different from that provided in the Plan, the Plan Proponents intend to enter into a stipulation and order with the applicable creditors which will provide for such agreed treatment and constitute a modification of the Plan. The estimated claim amount for each Class 1 Subclass shown in the following table is the amount of principal and unpaid interest on the Commencement Date and does not reflect an estimated valuation of the underlying collateral or constitute an admission by the Debtors of the amount of the Allowed Secured Claim.
- --------------------------------------------------------------------------------------------------------------------------- ENTITLED ESTIMATED SUBCLASS DESIGNATION TREATMENT TO VOTE RECOVERY - --------------------------------------------------------------------------------------------------------------------------- 1-A BO Agreements Repaid in full in cash. Yes 100% Hotel Properties Securing Claim: 1 Estimated Claim Amount: $6.0 million - --------------------------------------------------------------------------------------------------------------------------- 1-B BO/Rockbridge Agreements Repaid in full in cash. Yes 100% Hotel Properties Securing Claim: 5 Estimated Claim Amount: $54.8 million - --------------------------------------------------------------------------------------------------------------------------- 1-C [Reserved] - --------------------------------------------------------------------------------------------------------------------------- 1-D Chase Agreements Reinstated on original terms, except Yes Reinstated Hotel Properties Securing Claim: 2 $492,000 arrearage in principal as amended payments is rescheduled for payment at Estimated Claim Amount: final maturity; secured by existing $11.7 million collateral. - --------------------------------------------------------------------------------------------------------------------------- 1-E Column/Criimi Mae Agreements Reinstated on original terms, except Yes Reinstated Hotel Properties Securing Claim: 1 $132,000 arrearage in principal as amended payments is rescheduled for payment at Estimated Claim Amount: final maturity; secured by existing $3.4 million collateral. - ---------------------------------------------------------------------------------------------------------------------------
13
- --------------------------------------------------------------------------------------------------------------------------- ENTITLED ESTIMATED SUBCLASS DESIGNATION TREATMENT TO VOTE RECOVERY - --------------------------------------------------------------------------------------------------------------------------- 1-F DLJ/Column Agreements Reinstated on original terms, except Yes Reinstated Hotel Properties Securing Claim: 1 $388,000 arrearage in principal as amended payments is rescheduled for payment at Estimated Claim Amount: final maturity; secured by existing $9.4 million collateral. - --------------------------------------------------------------------------------------------------------------------------- 1-G DLJ/Column/Criimi Mae Agreements Reinstated on original terms, except Yes Reinstated Hotel Properties Securing Claim: 9 $2,157,000 arrearage in principal as amended payments is rescheduled for payment at Estimated Claim Amount: final maturity; secured by existing $29.8 million collateral. - --------------------------------------------------------------------------------------------------------------------------- 1-H DDL Kinser Agreements Five-year note; principal equal to Yes See Hotel Properties Securing Claim: 1 amount of Allowed Claim with interest treatment at 7.0% per annum, payable monthly; Estimated Claim Amount: amortization after year one equivalent $2.5 million to 48-year straight line amortization schedule, with balance payable at maturity; secured by existing collateral. - --------------------------------------------------------------------------------------------------------------------------- 1-I First Union Agreements Reinstated on original terms, except Yes Reinstated Hotel Properties Securing Claim: 1 $48,000 arrearage in principal as amended payments is rescheduled for payment at Estimated Claim Amount: final maturity; secured by existing $3.4 million collateral. - --------------------------------------------------------------------------------------------------------------------------- 1-J GMAC Agreements At the election of the applicable Yes See Hotel Properties Securing Claim: 1 Debtor (i) repaid in full in cash, or treatment (ii) reinstated on original terms, Estimated Claim Amount: except $103,000 arrearage in principal $5.3 million payments is rescheduled for payment at final maturity; secured by existing collateral. - --------------------------------------------------------------------------------------------------------------------------- 1-K GMAC-Orix Agreements Consensual surrender of underlying Yes See Hotel Properties Securing Claim: 8 Hotel Properties and other existing treatment collateral. Estimated Claim Amount: $27.1 million - --------------------------------------------------------------------------------------------------------------------------- 1-L Lehman/Criimi Mae Agreements Reinstated on original terms, except Yes Reinstated Hotel Properties Securing Claim: 5 $471,000 arrearage in principal as amended payments is rescheduled for payment at Estimated Claim Amount: final maturity; final maturity $24.0 million extended to November 30, 2005; secured by existing collateral. - ---------------------------------------------------------------------------------------------------------------------------
14
- --------------------------------------------------------------------------------------------------------------------------- ENTITLED ESTIMATED SUBCLASS DESIGNATION TREATMENT TO VOTE RECOVERY - --------------------------------------------------------------------------------------------------------------------------- 1-M MSSF Pre-Petition Credit Facility Repaid in full in cash. Yes 100% Hotel Properties Securing Claim: 50 Estimated Claim Amount: $196.0 million - --------------------------------------------------------------------------------------------------------------------------- 1-N Roundabout Agreements Consensual surrender of underlying Yes See Hotel Properties Securing Claim: 1 Hotel Properties and other existing treatment collateral. Estimated Claim Amount: $1.9 million - --------------------------------------------------------------------------------------------------------------------------- 1-O Wells Fargo Agreements Five-year note; principal equal to Yes See Hotel Properties Securing Claim: 1 amount of Allowed Claim with interest treatment at 7.0% per annum, payable monthly; Estimated Claim Amount: amortization after year one equivalent $5.8 million to 48-year straight line amortization schedule, with balance payable at maturity; secured by existing collateral. - --------------------------------------------------------------------------------------------------------------------------- 1-P Miscellaneous At the election of the applicable Depends on Depends on Debtor, holder will receive treatment. treatment. (i) payment in full of Allowed Claim; (ii) net proceeds of sale of collateral up to the amount of Allowed Claim; (iii) the collateral securing the Claim; (iv) a note with periodic cash payments having a present value equal to the amount of the Allowed Claim and secured by the existing collateral; (v) such treatment that leaves unaltered the legal, equitable and contractual rights of the holder; or (vi) such other distribution as is necessary to satisfy the requirements of the Bankruptcy Code. In the event that a Debtor treats a Claim as described under clause (i) or (ii), the liens securing the Claim will be deemed released - ---------------------------------------------------------------------------------------------------------------------------
If the creditors in any Class 1 Subclass reject the Plan, the applicable Debtors reserve the right to (i) request the Bankruptcy Court to confirm its Plan through a "cram down" of the dissenting creditors under section 1129(b) of the Bankruptcy Code and modify the Plan, to the extent, if any confirmation under section 1129(b) of the Bankruptcy Code requires modification, or (ii) defer confirmation of its Plan and continue with its Chapter 11 Case in order 15 to further analyze its options under the Bankruptcy Code (even though the other Debtors will proceed with confirmation of their Plans and emergence from their Chapter 11 Cases). 2. Priority Non-Tax Claims (Class 2) Description. The Claims in Class 2 are the types of Claims identified in section 507(a) of the Bankruptcy Code that are entitled to priority in payment (other than Administrative Expense Claims and Priority Tax Claims). For each of the Debtors, these Claims relate primarily to pre-petition wages and employee benefit plan contributions that had not yet been paid as of the Commencement Date. Each of the Debtors believes that all of these Claims have already been paid pursuant to an order entered by the Bankruptcy Court on the Commencement Date. Treatment. Allowed Claims in Class 2 are unimpaired. To the extent that they have not already been paid, they will be paid in full on or as soon as reasonably practicable after the Effective Date, except to the extent that the holders of such Claims agree to a different treatment. 16 IMPORTANT NOTES ON DISTRIBUTIONS TO CLASSES 3, 4, 7 AND 8 INITIAL NEW COMMON STOCK AND WARRANT SHARES ARE SUBJECT TO DILUTION The Initial New Common Stock to be distributed to holders of General Unsecured Claims against Lodgian Debtors (Class 3), Senior Subordinated Notes (Class 4), CRESTS (Class 7) and Old Lodgian Common Stock (Class 8), and the Warrant Shares issuable upon exercise of the Warrants to be distributed to holders of CRESTS (Class 7) and Old Lodgian Common Stock (Class 8), are subject to dilution by future share issuances. See section II.F.4. REALLOCATIONS PURSUANT TO CLASS 4 COMPROMISE Pursuant to the Class 4 Compromise, the distributions under the Plan reflect a reallocation to holders of General Unsecured Claims against Lodgian Debtors (Class 3), CRESTS (Class 7) and Old Lodgian Common Stock (Class 8) of a portion of the value to which the holders of Senior Subordinated Notes (Class 4) would otherwise be entitled. The treatment of Classes 3, 4, 7 and 8, however, is not an admission by the holders of the Senior Subordinated Notes, the Debtors, the Committee or any other party that such Classes would otherwise be entitled to the recovery provided in the Plan. See section II.C. RESOLUTION OF DISPUTED CLAIMS MAY AFFECT CLASS 3 RECOVERIES The allocations of Plan Securities to holders of General Unsecured Claims against Lodgian Debtors (Class 3) are based on the Debtors' estimates of Allowed Claims in Class 3 as of the date of this Disclosure Statement. The distributions received by holders of General Unsecured Claims against Lodgian Debtors could differ from the estimated percentage recoveries described in this Disclosure Statement if the Debtors' estimate of Allowed Claims in Class 3 proves to be inaccurate. Pursuant to the Class 4 Compromise, the Plan Securities allocated to the holders of Senior Subordinated Notes will not be affected by any increase or decrease in the actual amount of General Unsecured Claims. 3. General Unsecured Claims (Class 3) Description. Class 3 consists of the Claims of suppliers and other vendors, personal injury and other litigation claimants to the extent not covered by insurance, parties to executory contracts or unexpired leases with the respective Debtors that are being rejected, any applicable Inter-Company Claims and other General Unsecured Claims. Class 3 includes Claims that are covered in whole or in part by insurance maintained by the Debtors. However, such Claims will share in the treatment of this Class only to the extent of the allowed amount of such Claims that is less than or equal to the Debtor's self-insured retention or deductible amount under the applicable insurance policy and not satisfied from proceeds of insurance payable to the holder of the Claim. 17 For purposes of the initial distribution, and as part of the distribution mechanism under the Plan for holders of Claims in Class 3, the applicable Debtor will be required to estimate the total amount of Allowed Claims in Class 3. The aggregate amount of General Unsecured Claims (excluding Inter-Company Claims) filed against the Debtors on or before the Bar Date was approximately $153.2 million.(2) However, the respective Debtors estimate that, after deducting duplicate Claims, Claims not supported by the respective Debtors' books and records, Claims that are (or will be) covered by insurance and Claims that are subject to other objections, the aggregate amount of Allowed Claims in Class 3 Lodgian Subclasses will be approximately $22.8 million. Allowed Inter-Company Claims have been taken into account in determining the distributions to Class 3 Subclasses. No separate distribution will be made on account of any Allowed Inter-Company Claims. For convenience of identification, the Plan classifies the Allowed Claims in Class 3 as a single Class. Class 3 actually consists of 81 separate Subclasses, one for the allowed Class 3 Claims against each Debtor. Each Subclass is treated under the Plan as a separate class for voting and distribution purposes. Treatment of Class 3 Claims against Lodgian Debtors. Class 3 Lodgian Subclasses are impaired. The holders of Allowed Claims in each Class 3 Lodgian Subclass will receive the Plan Securities allocated to their Subclass Debtor. The aggregate Plan Securities available for all Class 3 Lodgian Subclasses, referred to as the "Class 3 Plan Securities", consists of: - $7,735,000 of New Preferred Stock - 5.24% of the Initial New Common Stock Each Lodgian Debtor will be allocated a pro rata share of the Class 3 Plan Securities on the basis of the estimated recovery value of estimated Allowed General Unsecured Claims against such Debtor, except that these allocations will be adjusted so that: - no Lodgian Debtor will be allocated Class 3 Plan Securities representing a recovery value of more than 100% of the estimated Allowed General Unsecured Claims against it; and - each Lodgian Debtor will be allocated Class 3 Plan Securities representing a recovery value of at least 10% of the estimated Allowed General Unsecured Claims against it. Exhibit C sets forth for each Lodgian Debtor the estimated Allowed Claims and estimated recovery percentage and amount for Claims in that Debtor's Class 3 Lodgian Subclass and the percentage of Class 3 Plan Securities allocated to that Debtor. These allocations - --------------- (2) This amount excludes any potential deficiency claims that holders of Allowed Secured Claims may have. See sections II.D.1 and VIII.A.2. 18 are based on the Debtors' estimates of Allowed Claims in Class 3 Lodgian Subclasses as of the date of this Disclosure Statement. The distributions to be received by holders of General Unsecured Claims against Lodgian Debtors could differ from the estimated percentage recovery if the Debtors' estimate of Allowed Claims in Class 3 Lodgian Subclasses proves to be inaccurate. Pursuant to the Class 4 Compromise, the Plan Securities allocated to the holders of Senior Subordinated Notes will not be affected by any increase or decrease in the actual amount of Allowed General Unsecured Claims against Lodgian Debtors. Treatment of Class 3 Claims against Liquidating Debtors. Class 3 Liquidating Subclasses are impaired. Because the value of the Liquidating Debtors' assets are fully encumbered, no property will be distributed to or retained by the holders of Allowed Claims in any Class 3 Liquidating Subclass on account of such Allowed Claims. 4. Senior Subordinated Notes Claims (Class 4) Description. Class 4 consists of the Claims of the holders of the Senior Subordinated Notes, including Claims under the related Senior Subordinated Notes Guarantees. Treatment. Class 4 is impaired. The holders of Allowed Claims in Class 4 will receive in the aggregate: - $117,265,000 of New Preferred Stock - 79.39% of the Initial New Common Stock This distribution reflects the aggregate recovery to Allowed Class 4 Claims from Lodgian Financing Corp., the issuer of the Senior Subordinated Notes, and each Guarantor Debtor. 5. Convenience Claims (Class 5) Description. Class 5 consists of (a) Allowed General Unsecured Claims of a holder in an amount equal to $200 or less, (b) Allowed General Unsecured Claims of a holder that has irrevocably elected on its ballot to reduce its Claims to the amount of $200, or (c) a disputed General Unsecured Claim that becomes an Allowed General Unsecured Claim of $200 or less with the consent of, and in the amount agreed to by, the applicable Debtor or pursuant to a Final Order. Treatment. Class 5 is impaired. Class 5 Claims will receive cash in an amount equal to the Allowed amount of their Claim on or as soon as reasonably practicable after the Effective Date. 6. CRESTS Claims (Class 7) Description. Class 7 consists of the Allowed Claims of LCT I as the holder of the CRESTS Junior Subordinated Debentures, together with the Allowed Claims of the holders of the CRESTS under certain guarantees in respect of the CRESTS. 19 Treatment. Class 7 is impaired. LCT I, the issuer of the CRESTS, will receive the following Plan Securities, which it will in turn distribute to the holders of the CRESTS in accordance with the terms of the CRESTS: - 12.40% of the Initial New Common Stock - 83.33% of the A Warrants - 24.39% of the B Warrants 7. Old Lodgian Common Stock Interests (Class 8) Description. Class 8 consists of the Equity Interests of the holders of Old Lodgian Common Stock. Treatment. Class 8 is impaired. The holders of Allowed Equity Interests in Class 8 will receive in the aggregate: - 2.97% of the Initial New Common Stock - 16.67% of the A Warrants - 75.61% of the B Warrants All Old Lodgian Common Stock, and all instruments representing it, will be deemed canceled on the Effective Date. The holders of Old Lodgian Common Stock will receive the Plan Securities described above as a result of the reallocation from the holders of the Senior Subordinated Notes pursuant to the Class 4 Compromise. However, the holders of Old Lodgian Common Stock are not otherwise entitled to receive or retain any property on account of their Equity Interests. Accordingly, the holders of Old Lodgian Common Stock are deemed to reject the Plan and are not entitled to vote and the Debtors will not solicit their vote. 8. Debtor Owned Old Subsidiary Equity Interests (Class 9) Description. Class 9 consists of the Equity Interests owned by any Debtor in each of the 80 other Debtors, other than Lodgian, Inc. For convenience of identification, the Plan classifies the Allowed Equity Interests in Class 9 as a single Class. Class 9 actually consists of 80 separate Subclasses, one for the Allowed Equity Interests in each of the Debtors other than Lodgian, Inc., including 76 Debtors that are 100% owned, directly or indirectly, by Lodgian, Inc., and the Equity Interests owned by Debtors in four Debtors in which an Equity Interest is owned by a Person other than a Debtor. These third party owned Equity Interests are classified in Class 10. Each Subclass is treated under the Plan as a separate class for voting and distribution purposes. 20 Treatment of Class 9 Equity Interests in Lodgian Debtors. Class 9 Lodgian Subclasses are unimpaired. Except as may otherwise be determined by the applicable Debtor, the legal, equitable and contractual rights of holders of Allowed Equity Interests in each Class 9 Lodgian Subclass shall remain unaltered, except as provided in section II.D.9. Treatment of Class 9 Equity Holders in Liquidating Debtors. Class 9 Liquidating Subclasses are impaired and have no estimated recovery value. Because the value of the Liquidating Debtors' assets is less then the total value of its debts and liabilities, it is not anticipated that the holders of Allowed Equity Interests in Class 9 Liquidating Subclasses will receive any distributions on account of such Equity Interests. The Plan Proponents will request that the Bankruptcy Court make a finding that these Equity Interests have no value for purposes of the "best interest" test under section 1129(a)(7) of the Bankruptcy Code. On the date the Liquidating Debtors are dissolved in accordance with the Plan, the instruments evidencing Equity Interests in the Liquidating Debtors shall be deemed cancelled without further act or action under any applicable agreement, law, regulation, order or rule, and the Equity Interests in the Liquidating Debtors evidenced thereby shall be extinguished. 9. Third Party Owned Old Subsidiary Equity Interests (Class 10) Description Class 10 consists of the Equity Interests in a Debtor that are owned by any Person other than a Debtor. For convenience of identification, the Plan classifies the Allowed Equity Interests in Class 10 as a single Class. Class 10 actually consists of four separate Subclasses, one for the Allowed Equity Interests in each of the Debtors identified in the table below. Each Subclass is treated under the Plan as a separate class for voting and distribution purposes. These Subclasses are further grouped in three Divisions, depending on the estimated recovery value of those Equity Interests. Division A of Class 10 consists of the Equity Interests in those Debtors in which an Equity Interest is owned by a Person other than a Debtor and which are estimated to have no recovery value. Division B of Class 10 consists of the Equity Interests in those Debtors in which an Equity Interest is owned by a Person other than a Debtor and which are estimated to have a positive recovery value. Division C of Class 10 consists of the Equity Interests in those Debtors in which an Equity Interest is owned by a Person other than a Debtor, which are estimated to have a positive recovery value and which the applicable Debtor and the holders of such Equity Interests have agreed to leave unimpaired. The Debtors in Divisions A, B and C of Class 10 are identified below: 21
% OF NEW SUBSIDIARY EQUITY OF REORGANIZED CLASS 10 SUBCLASS DEBTOR DIVISION SUBCLASS 10 DEBTOR ------------------------------------------ -------- --------------------- Columbus Hospitality Associates, L.P. B 34.3% Melbourne Hospitality Associates, L.P. C 50.0% New Orleans Airport Motel Associates, B 13.4% L.P. Servico Centre Associates, Ltd. A 0.0%
Treatment. Subclasses in Division A of Class 10 are impaired. Except to the extent the applicable Debtor and the holders of Allowed Equity Interests in the Subclasses otherwise agree, no property will be distributed to or retained by the holders of Allowed Equity Interests in these Subclasses on account of those Equity Interests and the Debtor holding Equity Interests in the Subclass Debtor will receive 100% of the New Subsidiary Equity in such Reorganized Subclass Debtor. All old Equity Interests in the Subclass Debtor, and all instruments representing it, will be deemed canceled on the Effective Date. The holders of Allowed Equity Interests in these Subclasses are deemed to reject the Plan and are not entitled to vote and the Debtors will not solicit their vote. Subclasses in Division B of Class 10 are impaired. Except to the extent the applicable Debtor and the holders of Allowed Equity Interests in these Subclasses otherwise agree, holders of Allowed Equity Interests in these Subclasses will receive the percentage of New Subsidiary Equity in the Subclass Debtor indicated in the table above, and the Debtor holding Equity Interests in such Subclass Debtor will receive the balance of the New Subsidiary Equity in such Subclass Debtor. All old Equity Interests in the Subclass Debtor, and all instruments representing it, will be deemed canceled on the Effective Date. The applicable Debtors are continuing discussions with the holders of Equity Interests in Subclasses in Division A and B of Class 10 and have offered such holders the opportunity to make additional capital contributions to maintain their percentage ownership in the applicable Reorganized Debtor. To the extent a holder makes all or a portion of the required contribution, its percentage ownership will be greater than that shown in the preceding table. The Subclass in Division C of Class 10 is unimpaired. The legal, equitable and contractual rights of holders of Allowed Equity Interests in the Subclass in Division C of Class 10 shall remain unaltered. 10. Subordinated Claims (Class 11) Description. Class 11 consists of any Claim against any of the Debtors for any fine, penalty, forfeiture or attorneys' fees (but only to the extent such attorneys' fees are punitive in nature), or for multiple, exemplary or punitive damages, to the extent that such fine, penalty, forfeiture, attorneys' fees or damages are not compensation for actual pecuniary loss suffered by the holder of such Claim and not statutorily prescribed. In general, punitive or exemplary 22 damage Claims are intended to punish or make an example of a wrongdoer. However, in the context of an insolvent entity, such as each of the Debtors, the enforcement of punitive Claims would have the effect of punishing unsecured creditors by diluting the ultimate recovery to all unsecured creditors. Moreover, punitive and exemplary damage Claims differ significantly from other general unsecured Claims which are based upon pecuniary losses. For these reasons, such Claims have been classified separately from other unsecured Claims. The Debtors do not believe that there will be any Allowed Claims in this Class. However, several proofs of claim have been filed concerning personal injury or wrongful death Claims that include punitive or exemplary damage amounts and this Class has been included in the Plan for completeness. Treatment. Class 11 is impaired. To the extent that there are any Allowed Claims in Class 11, they are subordinated to the Claims in other Classes. No property will be distributed to or retained by the holders of Allowed Claims in this Class on account of these Claims. Class 11 is therefore deemed to reject the Plan and the Debtors will not solicit their vote. E. ADMINISTRATIVE EXPENSES OF THE DEBTORS In order to confirm the Plan, Administrative Expense Claims and Allowed Tax Claims entitled to priority under the Bankruptcy Code must be paid in full or in a manner otherwise agreeable to the holders of those Claims. Administrative expenses are the actual and necessary costs and expenses of the Chapter 11 Cases of each of the respective Debtors. Those expenses include, but are not limited to, cure payments in connection with the assumption of certain contracts, post-petition salaries and other benefits for employees, post-petition rent for facilities and offices, amounts owed to vendors providing goods and services during the Chapter 11 Cases, tax obligations incurred after the commencement of the Chapter 11 Cases, and certain statutory fees and expenses. Other administrative expenses include the actual, reasonable and necessary professional fees and expenses of the professionals retained by each of the Debtors and the Committee, as well as the obligations outstanding under the DIP financing facility. Consistent with the requirements of the Bankruptcy Code, the Plan generally provides for Allowed Administrative Expense Claims to be paid in full on the later of the Effective Date and the first business day after the date that is 30 days after the date such Administrative Expense Claim becomes Allowed, except for Administrative Expense Claims relating to ordinary course of business transactions or for money borrowed, both of which will be paid in accordance with the past practice of the applicable Debtor and the terms of the agreements governing such obligations. Administrative Expense Claims relating to compensation of the professionals retained by the applicable Debtors or the Committee or for the reimbursement of expenses of certain members of the Committee will, unless otherwise agreed by the claimant, be paid on the later of the Effective Date and the date on which an order allowing such Administrative Expense Claim is entered. Unless otherwise specified in the Plan or by order of the Bankruptcy Court, no interest will accrue or be paid in connection with an Allowed Administrative Expense Claim for any purpose, on or after the Commencement Date. 23 Allowed Tax Claims entitled to priority under the Bankruptcy Code will be paid over a period not exceeding six years from the date of assessment of the tax, with interest at a fixed annual rate so that the periodic payments have a value, as of the Effective Date, equal to the Allowed amount of the Claim. 1. Debtor-in-Possession Financing The Debtors estimate that there will be $0 outstanding under the DIP Financing Facility on the Effective Date. Obligations under the DIP Financing Facility will be paid in full on the Effective Date. After the Allowed Claims of the DIP Lenders are paid in full, the DIP Financing Facility and any agreements or instruments related to it will terminate, subject to any exceptions that the Bankruptcy Court may approve. There is approximately $1.0 million of letters of credit issued and undrawn as of the date of this Disclosure Statement. These letters of credit will be replaced or cash collateralized on the Effective Date. 2. Fees and Expenses of Professionals The Debtors estimate that the fees and expenses of the various professionals in the Chapter 11 Cases will be approximately $15.1 million, including amounts paid on an interim basis during the Chapter 11 Cases and certain restructuring fees payable (subject to Bankruptcy Court approval) to the Debtors' and the Committee's financial advisors. See sections V.A.2 and V.A.3. 3. Indenture Trustee Claims. Deutsche Bank Trust Company of America, the Indenture Trustee for the Senior Subordinated Notes, shall be granted, pursuant to section 503(b) of the Bankruptcy Code, an Administrative Claim for its reasonable fees and expenses in performing its duties as Indenture Trustee from the Commencement Date through the Effective Date to the extent that such fees and expenses are either (i) not in dispute by the Plan Proponents or (ii) in the event of any dispute, determined by a Final Order of the Bankruptcy Court. F. SECURITIES TO BE ISSUED UNDER THE PLAN 1. New Preferred Stock On the Effective Date, Reorganized Lodgian will issue 5,000,000 shares of New Preferred Stock with an initial aggregate liquidation preference of $125,000,000. The shares will be distributed on behalf of the applicable Debtor to the holders of General Unsecured Claims against Lodgian Debtors (Class 3) and Senior Subordinated Notes (Class 4). The following table shows the allocation: 24
SHARES OF NEW % OF NEW PREFERRED CLASS PREFERRED STOCK STOCK ----------------------------------- --------------- ------------------ General Unsecured Claims against 309,400 6.19% Lodgian Debtors (Class 3) Senior Subordinated Notes (Class 4) 4,690,600 93.81% --------- ------ Total 5,000,000 100.00%
The New Preferred Stock will accrue cumulative dividends, compounded annually, at the annual rate of 12.25% and will have a liquidation preference equal to the initial liquidation preference plus accumulated unpaid dividends. The dividends will be paid in the manner described in section VIII.B.4. The New Preferred Stock is subject to redemption at any time at Reorganized Lodgian's option (including a premium during the first five years) and to mandatory redemption on the tenth anniversary of the Effective Date. 2. New Common Stock On the Effective Date, Reorganized Lodgian will issue the Initial New Common Stock. The shares will be distributed on behalf of the applicable Debtor to the holders of General Unsecured Claims against Lodgian Debtors (Class 3), Senior Subordinated Notes (Class 4), CRESTS (Classes 7) and Old Lodgian Common Stock (Class 8). The Initial New Common Stock will consist of 7,000,000 shares. The following table shows the allocation of the Initial New Common Stock:
SHARES OF NEW % OF INITIAL NEW CLASS COMMON STOCK COMMON STOCK --------------------------------------------- ------------- ---------------- General Unsecured Claims against Lodgian 366,589 5.24% Debtors (Class 3) Senior Subordinated Notes (Class 4) 5,557,511 79.39% CRESTS (Class 7) 868,000 12.40% Old Lodgian Common Stock (Class 8) 207,900 2.97% --------- ------ Total 7,000,000 100.00%
The New Common Stock will vote as a single class for the election of directors and on other matters that require shareholder approval. The Initial New Common Stock will be subject to dilution by (a) the Warrant Shares, (b) New Incentive Shares and (c) Other Future Shares. The effect of these issuances is described in section II.F.4. The Plan will provide for authorization of sufficient shares of New Common Stock to accomplish these purposes. 3. Warrants A Warrants. On the Effective Date, Reorganized Lodgian will issue A Warrants to purchase up to 17.75% of the New Common Stock on a fully diluted basis, excluding 25 (a) B Warrant Shares, (b) New Incentive Shares and (c) Other Future Shares. The effect of these issuances is described in section II.F.4. The A Warrants will be distributed on behalf of the applicable Debtor to the holders of CRESTS (Class 7) and Old Lodgian Common Stock (Class 8). The following table shows the allocation of the A Warrants:
% OF CLASS A WARRANTS A WARRANTS ---------------------------------- ---------- ---------- CRESTS (Class 7) 1,258,815 83.33% Old Lodgian Common Stock (Class 8) 251,823 16.67% --------- ------ Total 1,510,638 100.00%
The A Warrants initially provide for the purchase of up to 1,510,638 shares of New Common Stock at an exercise price of $18.29 per share, subject to adjustment. The A Warrants will expire on the fifth anniversary of the Effective Date. The current estimated valuation of the A Warrants is $3.16 per A Warrant and is based on (i) a volatility of 40%, (ii) a market price of $12.14 per share of New Common Stock, (iii) an exercise price of $18.29 per share, (iv) a five-year expiration and (v) a risk free rate of 2.8%. B Warrants. On the Effective Date, Reorganized Lodgian will issue B Warrants to purchase up to 10.79% of the New Common Stock on a fully diluted basis, excluding (a) New Incentive Shares and (b) Other Future Shares. The effect of these issuances is described in section II.F.4. The B Warrants will be distributed on behalf of the applicable Debtor to the holders of CRESTS (Class 7) and Old Lodgian Common Stock (Class 8). The following table shows the allocation of the B Warrants:
% OF CLASS B WARRANTS B WARRANTS ----------------------------------- ---------- ---------- CRESTS (Class 7) 251,062 24.39% Old Lodgian Common Stock (Class 8) 778,304 75.61% --------- ------ Total 1,029,366 100.00%
The B Warrants initially provide for the purchase of up to 1,029,366 shares of New Common Stock at an exercise price of $25.44 per share, subject to adjustment. The B Warrants will expire on the seventh anniversary of the Effective Date. The current estimated valuation of the B Warrants is $3.17 per B Warrant and is based on (i) a volatility of 40%, (ii) a market price of $12.14 per share of New Common Stock, (iii) an exercise price of $25.44 per share, (iv) a seven-year expiration and (v) a risk free rate of 3.4%. 4. Equity Ownership of Reorganized Lodgian The following table shows the percentage equity ownership of Reorganized Lodgian held by the holders of General Unsecured Claims against Lodgian Debtors (Class 3), Senior Subordinated Notes (Class 4), CRESTS (Class 7) and Old Lodgian Common Stock (Class 8): 26 - on the Effective Date; - after issuance of the A Warrant Shares; - after issuance of the B Warrant Shares; and - after issuance of the maximum number of New Incentive Shares. The table does not show the effect of possible issuances of Other Future Shares.
PERCENTAGE EQUITY OWNERSHIP -------------------------------------------------------------------- AFTER ISSUANCE OF -------------------------------------------------- AS OF NEW EFFECTIVE A WARRANT B WARRANT INCENTIVE CLASS DATE SHARES SHARES SHARES - ----------------------------------- -------------- -------------- ----------- ------------ GENERAL UNSECURED CLAIMS AGAINST LODGIAN DEBTORS (CLASS 3) New Common Stock 5.2% 4.3% 3.8% 3.5% SENIOR SUBORDINATED NOTES (CLASS 4) New Common Stock 79.4% 65.3% 58.3% 52.3% CRESTS (CLASS 7) New Common Stock 12.4% 10.2% 9.1% 8.2% A Warrants -- 14.8% 13.2% 11.9% B Warrants -- -- 2.6% 2.4% ---- ---- ---- ---- 12.4% 25.0% 24.9% 22.5% OLD LODGIAN COMMON STOCK (CLASS 8) New Common Stock 3.0% 2.4% 2.2% 2.0% A Warrants -- 3.0% 2.6% 2.4% B Warrants -- -- 8.2% 7.3% ---- ---- ---- ---- 3.0% 5.4% 13.0% 11.7% NEW EQUITY INCENTIVE PLAN -- -- -- 10.0% ----- ----- ----- ----- TOTAL 100.0% 100.0% 100.0% 100.0%
27 G. SECURITIES LAW MATTERS THE ISSUANCE AND RESALE OF THE PLAN SECURITIES RAISE ISSUES UNDER FEDERAL AND STATE SECURITIES LAWS The issuance of Plan Securities under the Plan and resales of the Plan Securities raise securities law issues under the Bankruptcy Code and federal and state securities laws that are discussed in this section. The applicability and effect of relevant laws and regulations depend heavily on facts and circumstances relating to each recipient of Plan Securities and any proposed transfer by such person. ACCORDINGLY, THE DEBTORS MAKE NO REPRESENTATION AS TO THESE MATTERS, INCLUDING WHETHER ANY PLAN SECURITIES MAY BE FREELY TRANSFERRED, AND URGE POTENTIAL RECIPIENTS OF PLAN SECURITIES TO CONSULT THEIR OWN COUNSEL. Holders of Allowed Claims in Classes 3, 4, 7 and 8 will receive Plan Securities pursuant to the Plan. Section 1145 of the Bankruptcy Code provides certain exemptions from the securities registration requirements of federal and state securities laws with respect to the distribution of securities under a Plan. 1. Issuance and Resale of Securities Plan Under section 1145(a) of the Bankruptcy Code, the issuance of the Plan Securities, as well as the issuance of New Common Stock pursuant to the Warrants, and the subsequent resale of such securities by entities which are not "underwriters" (as defined in section 1145(b) of the Bankruptcy Code), are not subject to the registration requirements of section 5 of the Securities Act. In addition, such securities generally may be resold without registration under state securities or "blue sky" laws pursuant to various exemptions provided by the respective laws of the several states. HOWEVER, RECIPIENTS OF SECURITIES ISSUED UNDER THE PLAN ARE ADVISED TO CONSULT WITH THEIR OWN LEGAL ADVISORS AS TO THE AVAILABILITY OF ANY SUCH EXEMPTION FROM REGISTRATION UNDER STATE LAW IN ANY GIVEN INSTANCE AND AS TO ANY APPLICABLE REQUIREMENTS OR CONDITIONS TO SUCH AVAILABILITY. Section 1145(b)(l) of the Bankruptcy Code defines "underwriter" for purposes of the Securities Act as one who, except with respect to "ordinary trading transactions" of an entity that is not an "issuer," (A) purchases a claim against, equity interest in, or claim for an administrative expense, with a view to distribution of any security to be received in exchange for the claim or equity interest, or (B) offers to sell securities issued under a plan to the holders of such securities, or (C) offers to buy securities issued under a plan from the holders of such securities, if the offer to buy is made with a view to distribution of such securities and under an agreement made in connection with the plan, the consummation of the plan, or the offer or sale of securities under the plan, or (D) is an issuer of the securities within the meaning of section 2(11) of the Securities Act. The term "issuer" is defined in section 2(4) of the Securities Act; however, the reference contained in section 1145(b)(l)(D) of the Bankruptcy Code to section 2(11) of the Securities Act purports to include as statutory underwriters all persons who, directly or 28 indirectly, through one or more intermediaries, control, are controlled by, or are under common control with, an issuer of securities. "Control" (as defined in Rule 405 under the Securities Act) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise. Accordingly, an officer or director of a reorganized debtor or its successor under a Plan may be deemed to be a "control person" of such debtor or successor, particularly if the management position or directorship is coupled with ownership of a significant percentage of the reorganized debtor's or its successor's voting securities. Moreover, the legislative history of section 1145 of the Bankruptcy Code suggests that a creditor who owns ten percent or more of the securities of a reorganized debtor may be presumed to be a "control person." To the extent that persons deemed to be "underwriters" receive Plan Securities pursuant to the Plan, resales by such persons would not be exempted by section 1145 of the Bankruptcy Code from registration under the Securities Act or other applicable law. Persons deemed to be "underwriters" for purposes of section 1145 of the Bankruptcy Code may, however, be able to sell securities pursuant to a registration statement (see discussion of registration rights below) or, under certain conditions described below, without registration pursuant to the resale provisions of Rule 144 under the Securities Act or any other exemption from registration requirements. Pursuant to Rule 144 under the Securities Act, "affiliates" of the issuer who resell securities which are not restricted, will be deemed not to be engaged in a distribution of such securities and therefore not to be "underwriters" of such securities as defined in section 2(11) of the Securities Act, if they comply with certain conditions including, in general terms: (a) the availability of adequate current public information with respect to the issuer, (b) limiting the amount of securities sold within any three-month period to the greater of one percent of the shares outstanding or the average weekly trading volume and (c) selling the securities only through "brokers' transactions." Pursuant to the Plan, certificates evidencing Plan Securities received by a holder of ten percent or more of the New Common Stock and New Preferred Stock will bear a legend substantially in the form below in the event that the Debtors reasonably believe that such holder is an underwriter: THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR SALE, OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH REGISTRATION OR QUALIFICATION IS NOT REQUIRED. Any person or entity that would receive legended securities as provided above may instead receive certificates evidencing Plan Securities without such legend if, prior to the Effective Date, such person or entity delivers to Reorganized Lodgian (i) an opinion of counsel reasonably satisfactory to Reorganized Lodgian to the effect that the Plan Securities to be received by such person or entity are not subject to the restrictions applicable to "underwriters" under section 1145 29 of the Bankruptcy Code and may be sold without registration under the Securities Act and (ii) a certification that such person or entity is not an "underwriter" within the meaning of section 1145 of the Bankruptcy Code. Any holder of a certificate evidencing Plan Securities bearing such legend may present such certificate to the transfer agent for the shares of Reorganized Lodgian in exchange for one or more new certificates not bearing such legend or for transfer to a new holder without such legend at such time as (i) such shares are sold pursuant to an effective registration statement under the Securities Act, or (ii) such holder delivers to Reorganized Lodgian an opinion of counsel reasonably satisfactory to Reorganized Lodgian to the effect that such shares are no longer subject to the restrictions applicable to "underwriters" under section 1145 of the Bankruptcy Code and may be sold without registration under the Securities Act or to the effect that such transfer is exempt from registration under the Securities Act, in which event the certificate issued to the transferee shall not bear such legend, unless otherwise specified in such opinion. 2. Listing Reorganized Lodgian will use commercially reasonable efforts to cause the shares of New Common Stock and, in the sole discretion of the Board of Directors of Reorganized Lodgian, New Preferred Stock to be listed on a national securities exchange or a qualifying interdealer quotation system. The Reorganized Debtors will have no such obligation to list or seek to have listed or qualified the equity securities of any other Reorganized Debtor. 3. Registration Rights The Plan provides for the execution of a registration rights agreement, under which Reorganized Lodgian will grant registration rights to certain holders of Plan Securities on the terms provided in such agreement. A copy of the registration rights agreement will be part of the Plan Supplement. 4. Subsequent Transfers Under State Law The state securities laws generally provide registration exemptions for subsequent transfers by a bona fide owner for his or her own account and subsequent transfers to institutional or accredited investors. Such exemptions are generally expected to be available for subsequent transfers of New Preferred Stock, New Common Stock and Warrants. Any person intending to rely on these exemptions is urged to consult his or her own counsel as to their applicability to his or her circumstances. H. RESERVATION OF "CRAM DOWN" RIGHTS The Bankruptcy Code permits the Bankruptcy Court to confirm a chapter 11 plan over the dissent of any class of claims or equity interests as long as the standards in section 1129(b) are met. This power to confirm a plan over dissenting classes - often referred to as "cram down" - is an important part of the reorganization process. It assures that no single group (or multiple groups) of claims or equity interests can block a restructuring that otherwise 30 meets the requirements of the Bankruptcy Code and is in the interests of the other constituents in the case. Each of the Debtors reserves the right to seek confirmation of the Plan, notwithstanding the rejection of the Plan by any Class entitled to vote. In the event that a Class votes to reject the Plan, the applicable Debtor may request the Bankruptcy Court to rule that the Plan meets the requirements specified in section 1129(b) of the Bankruptcy Code with respect to such Class. The applicable Debtor will also seek such a ruling with respect to each Class that is deemed to reject the Plan. Additionally, the Plan Proponents reserve the right to delay seeking confirmation of the Plan as to any Debtor(s) and proceed with confirmation of the Plan as to other Debtor(s) in order to continue to avail themselves of the protection of the Chapter 11 Cases in the context of a non-consensual Plan for any of the Debtors. III. VOTING PROCEDURES AND REQUIREMENTS Detailed voting instructions are provided with the ballot accompanying this Disclosure Statement. The following Classes are the only Classes entitled to vote to accept or reject the Plan.
CLASS DESCRIPTION --------------------------------------------- 1 Secured Claims 3 General Unsecured Claims (other than Class 3 Liquidating Subclasses) 4 Senior Subordinated Notes Claims 5 Convenience Claims 7 CRESTS Claims 10-B Third Party Owned Old Subsidiary Equity Interests in Division B of Class 10
If your Claim or Equity Interest is not in one of these Classes, you are not entitled to vote. If your Claim or Equity Interest is in one of these Classes, you should read your ballot and follow the listed instructions carefully. Please only use the ballot that accompanies this Disclosure Statement. BALLOT INFORMATION NUMBER: (888) 697-3594 31 A. VOTE REQUIRED FOR ACCEPTANCE BY A CLASS The Debtors have filed a motion seeking entry of the Voting Procedures Order to set certain procedures in connection with voting on the Plan. If the Voting Procedures Order is approved, it will set forth the procedures to be employed in tabulating acceptances and rejections of the Plan. CLASS VOTE REQUIRED TO ACCEPT A PLAN Acceptance of the Plan by a Class of Claims or Equity Interests will be determined by calculating the number and the amount of Claims and the amount of Equity Interests voting to accept, based only on the Claims or Equity Interests in the Class actually voting. Acceptance by a Class of Claims requires an affirmative vote of a majority of the total Claims voting and two-thirds in amount of the total Claims in the Class voting. Acceptance by a Class of Equity Interests requires an affirmative vote of two-thirds in amount of the total Equity Interests in the Class voting. Any impaired Class that fails to achieve the specified majority vote will be deemed to have rejected the Plan. B. CLASSES NOT ENTITLED TO VOTE Under the Bankruptcy Code, holder of Claims or Equity Interests are not entitled to vote if their contractual rights are unimpaired by the Plan or if they will not receive any property under the Plan. Based on this standard, the holders of Claims in Class 2 and the holders of Equity Interests in Class 9 Lodgian Subclasses and Subclasses in Division C of Class 10 are not being affected by the Plan and thus are not entitled to vote on the Plan. In addition, the holders of Equity Interests in Class 8 are not entitled to receive (but for the reallocation of value described in section II.C), and the holders of Equity Interests in Class 9 Liquidating Subclasses and Subclasses in Division A of Class 10 and Claims in Class 3 Liquidating Subclasses and in Class 11 will not receive, any property under the Plan. Therefore, they are deemed to reject the Plan and are not entitled to vote. For a summary of the Classes entitled to vote, see the tables in sections II.B and II.D.1. C. VOTING In order for your vote to be counted, your vote must be received by the Voting Agent at the following address before the voting deadline of 5:00 p.m., Pacific Time, on October 28, 2002: 32 IF BY OVERNIGHT OR HAND DELIVERY: IF BY STANDARD MAILING: POORMAN-DOUGLAS CORPORATION POORMAN-DOUGLAS CORPORATION 10300 S.W. ALLEN BOULEVARD P.O. BOX 4330 BEAVERTON, OREGON 97005 PORTLAND, OREGON 97208-4330 ATTN: LODGIAN BALLOTING CENTER ATTN: LODGIAN BALLOTING CENTER If the instructions on your ballot require you to return the ballot to your bank, broker or other nominee, or to their agent, you must deliver your ballot to them in sufficient time for them to process it and return it to the Voting Agent before the voting deadline. If a ballot is damaged or lost, you may contact the Voting Agent at (888) 697-3594. Any ballot that is executed and returned but which does not indicate an acceptance or rejection of the Plan will not be counted. IV. FINANCIAL INFORMATION, PROJECTIONS AND VALUATION ANALYSIS This section provides summary information concerning the recent financial performance of the Debtors, three-year financial projections for the Debtors and discusses an estimated reorganization valuation for the Debtors. Because the Plan provides for the liquidation of the Liquidating Debtors and the orderly transfer of the ownership and on-going business operation of the affected Hotel Properties to the applicable secured lenders (or their designees), no such information is provided for the Liquidating Debtors. The projections and reorganization value are based on information available as of the date of this Disclosure Statement. The significant assumptions underlying the projections and valuation and the basis of their preparation are discussed below. A. OPERATING PERFORMANCE For a recent description of the operating performance of Debtors on a consolidated basis, see Lodgian, Inc.'s annual report on Form 10-K for the fiscal year ended December 31, 2001, and quarterly reports on Form 10-Q for the fiscal quarters ended March 31, 2002 and June 30, 2002. Copies of these reports will be included in the Plan Supplement and may be obtained over the Internet at www.sec.gov or www.freeedgar.com. 33 B. THREE-YEAR PROJECTIONS OF THE REORGANIZED LODGIAN DEBTORS IMPORTANT NOTE ON FINANCIAL PROJECTIONS The projections included in this Disclosure Statement (the "Projections") are based on a number of important assumptions, which are subject to significant business, economic and competitive risks and uncertainties that are not within the Lodgian Debtors' control and could cause actual results to differ materially and adversely from the Projections. These factors include the impact of the Chapter 11 Cases on the Lodgian Debtors' businesses and operations; the Debtors' ability to maintain their existing franchise affiliations, to confirm the Plan in a timely manner, to access adequate financing and to generate cash flow from operations to meet their obligations; the effect of general economic conditions; and other factors. See section VIII, "Risk Factors". The Projections are not, and should not be regarded as, a representation that the Projections can or will be achieved. As a condition to confirmation of a plan of reorganization, the Bankruptcy Code requires, among other things, that the Bankruptcy Court determine that confirmation is not likely to be followed by the liquidation or the need for further financial reorganization of the debtor. In connection with the development of the Plan and for the purpose of determining whether the Plan satisfies this feasibility standard, the Debtors developed the Projections, including certain income statement, cash flows and balance sheet projections for the fiscal years 2003 through 2005 (the "Projection Period") for the Reorganized Lodgian Debtors. Projections for the Reorganized Lodgian Debtors on a consolidated basis, including the principal assumptions on which they are based, are attached as Exhibit D hereto. Based on the Projections, the Lodgian Debtors believe that the Reorganized Lodgian Debtors will be able to make all payments required pursuant to the Plan and, therefore, that confirmation of the Plan is not likely to be followed by liquidation or the need for further reorganization. The Projections should be read in conjunction with the assumptions and notes set forth in Exhibit D. 34 C. REORGANIZATION VALUATION OF THE REORGANIZED LODGIAN DEBTORS IMPORTANT NOTE ON ESTIMATES OF REORGANIZATION VALUE The estimates of reorganization value discussed below are not, and do not purport to be, appraisals or liquidation values of the Reorganized Lodgian Debtors or their assets, or estimates of the market value that could be realized through a sale of any Plan Securities should a market for those securities develop. Such estimates were developed solely for purposes of formulating and negotiating a plan of reorganization for the Debtors and analyzing the projected recoveries under the Plan. The Debtors have been advised by Chilmark Partners LLC ("Chilmark") with respect to the range of estimated reorganization values of the Reorganized Lodgian Debtors. Chilmark's valuations reflect a number of other assumptions, including a successful reorganization in a timely manner of the businesses and finances of the Lodgian Debtors, the continuation of the Reorganized Lodgian Debtors as the owner and operator of their businesses and assets from and after the Effective Date, the projections reflected in the Projections, the amount of available cash, market conditions and the Plan becoming effective in accordance with its terms on a basis consistent with the estimates and other assumptions discussed herein. 1. Reorganized Lodgian Debtors The reorganization value of the Reorganized Lodgian Debtors discussed in this section (i) includes the operating businesses and the estimated value of certain non-operating assets of the Reorganized Lodgian Debtors and (ii) excludes the Hotel Properties and other assets and liabilities of the Liquidating Debtors. The midpoint of the total reorganization value range for the Reorganized Lodgian Debtors was estimated by Chilmark to be approximately $615 million as of an assumed Effective Date of December 31, 2002. The midpoint of the reorganization common equity value range, which takes into account the estimated debt balances and the New Preferred Stock at and beyond the Effective Date, was estimated by Chilmark to be approximately $93 million as of an assumed Effective Date of December 31, 2002. The foregoing reorganization equity value (ascribed as of the date of this Disclosure Statement) reflects, among other factors discussed below, current financial market conditions and the inherent uncertainty as to the achievement of the Projections. Based on the assumed reorganization equity value set forth above, the midpoint value of the 7,000,000 shares of New Common Stock to be issued under the Plan, adjusted for the estimated value of the Warrants, is estimated to be approximately $12.14 per share. The Plan contemplates the distribution of Warrants to holders of Allowed Claims in Class 7 and Allowed Equity Interests in Class 8. The exercise price of each Warrant issued under the Plan exceeds the estimated reorganization equity value per share, and the exercise of the Warrants requires the payment to Reorganized Lodgian of cash in the amount of the exercise 35 price. While warrants may be valued using complex mathematical computations, these computations are based upon highly subjective assumptions, including, among others, the estimated trading prices of the equity securities for which the warrants may be exercised and the projected volatility of price movements of those equity securities. Based on an assumed trading price equal to the estimated reorganization common equity value of $12.14 per share and an estimated trading volatility of 40%, Chilmark computed the theoretical value of the Warrants, using a standard computation methodology for the valuation of warrants, to be $3.16 per A Warrant and $3.17 per B Warrant. There can be no assurance that the New Common Stock will trade at the estimated reorganization equity value per share, that the trading volatility of the New Common Stock will be or will be perceived to be 40% or that the market value of an A Warrant will be $3.16 or that the market value of a B Warrant will be $3.17. Finally, actual trading values for warrants frequently differ materially from those values derived from mathematical computations. Accordingly, the foregoing computation of value cannot be relied upon as a measure of realizable value of the Warrants. 2. Valuation Methodology In preparing the estimated reorganization value, Chilmark: (a) reviewed certain historical financial information of Lodgian, Inc. and its subsidiaries for recent years and interim periods; (b) reviewed certain internal financial and operating data of Lodgian, Inc. and its subsidiaries and their financial projections relating to their businesses and prospects; (c) met with certain members of senior management of Lodgian, Inc. to discuss the operations and future prospects of Lodgian, Inc. and its subsidiaries; (d) reviewed publicly available financial data and considered the market values of public companies that Chilmark deemed generally comparable to the operating businesses of Lodgian, Inc.; (e) reviewed the financial terms of assets sold by Lodgian, Inc. in recent years; (f) reviewed the financial terms, to the extent publicly available, of certain recent acquisitions of companies that Chilmark believes were comparable to the operating businesses of Lodgian, Inc.; (g) considered certain economic and industry information relevant to the operating businesses of Lodgian, Inc.; and (h) conducted such other analyses as Chilmark deemed appropriate. Although Chilmark conducted a review and analysis of the businesses, operating assets and liabilities and business plans of Lodgian, Inc. and its subsidiaries, Chilmark assumed and relied on the accuracy and completeness of all financial and other information furnished to it by the Debtors and publicly available information. In addition, Chilmark did not independently verify the assumptions underlying the Projections in connection with such valuation. The estimated reorganization value reflects work performed by Chilmark on the basis of information in respect of the business and assets of Lodgian, Inc. available to Chilmark as of August 30, 2002. The estimates of reorganization value prepared by Chilmark reflect the application of various valuation techniques, including, among others: (a) a comparable company analysis, in which Chilmark analyzed the enterprise value of public companies that Chilmark deemed generally comparable to the operating businesses of the Debtors as a multiple of earnings before interest, taxes, depreciation and 36 amortization ("EBITDA") and then applied multiples provided by such analysis to the EBITDA of Lodgian, Inc. and its subsidiaries; (b) a discounted cash flow analysis, in which Chilmark, using a weighted average cost of capital, computed the present value of free cash flows and terminal value of Lodgian, Inc. and its subsidiaries; and (c) a comparable transaction analysis, in which Chilmark analyzed the financial terms of certain acquisitions of companies and sales of assets that Chilmark believed were comparable to the operating businesses of the Debtors and then applied the EBITDA multiples provided by such analysis to the EBITDA of Lodgian, Inc. and its subsidiaries. An estimate of reorganization value is not entirely mathematical, but involves complex consideration and judgments concerning various factors that could affect the value of an operating business. As a result, the estimate of reorganization value set forth herein is not necessarily indicative of actual outcomes, which may be significantly more or less favorable than those set forth herein. Because such estimates are inherently subject to uncertainties, none of the Debtors, Chilmark, the Committee nor any other person assumes responsibility for their accuracy. Depending on the results of the Debtors' operations or changes in the financial markets, Chilmark's valuation analysis as of the Effective Date may differ from that disclosed herein. In addition, the valuation of newly-issued securities is subject to additional uncertainties and contingencies, all of which are difficult to predict. Actual market prices of such securities at issuance will depend upon, among other things, prevailing interest rates, conditions in the financial markets, the anticipated initial securities holdings of pre-petition creditors, some of which may prefer to liquidate their investment rather than hold it on a long-term basis, and other factors that generally influence the prices of securities. Actual market prices of such securities also may be affected by the Debtors' history in Chapter 11, conditions affecting the Debtors' competitors or the industry generally in which the Debtors participate or by other factors not possible to predict. Accordingly, the reorganization value estimated by Chilmark does not necessarily reflect, and should not be construed as reflecting, values that will be attained in the public or private markets. The equity value ascribed in Chilmark's analysis does not purport to be an estimate of the post-reorganization market trading value. Such trading value may be materially different from the reorganization equity value ranges associated with Chilmark's valuation analysis. Indeed, there can be no assurance that a trading market will develop for the New Common Stock. See section VIII.B.3, "Risk Factors - Risks Relating to the Plan Securities - Lack of Trading Market." Furthermore, in the event that the actual Allowed Claims and the actual distributions to holders of Allowed Claims in Class 3 differ from those assumed by the Debtors in their recovery analysis, the actual recoveries realized by holders of Allowed Claims in Class 3 could be significantly higher or lower than estimated by the Debtors. 37 V. BUSINESS DESCRIPTION AND REASONS FOR CHAPTER 11 A. HISTORICAL BACKGROUND The following is a discussion of pertinent events that have occurred during the Chapter 11 Cases in connection with the overall restructuring of each Debtor's financial obligations. Where relevant, the following discussion addresses pertinent events prior to the commencement of the Chapter 11 Cases. 1. Commencement of Cases On December 20, 2001, Lodgian, Inc. and seventy-seven of its subsidiaries commenced their cases under chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The following four Debtors commenced their Chapter 11 Cases on December 21, 2001: Worcester Hospitality, L.P., Lodgian Hotels, Inc., Brecksville Hospitality, L.P. and Sioux City Hospitality, L.P. On April 17, 2002, an affiliate of the Debtors, New Orleans Airport Motel Associates, L.P., filed its voluntary case under chapter 11 of the Bankruptcy Code. The Chapter 11 Cases are being jointly administered for procedural purposes only. 2. Employment of the Debtors' Professionals On the Commencement Date, the Debtors filed applications to retain each of Cadwalader, Wickersham & Taft ("CW&T") and Curtis, Mallet-Prevost, Colt & Mosle LLP ("CM-P") as co-attorneys for the Debtors; Chilmark Partners LLC ("Chilmark") as investment bankers to the Debtors; Richard Cartoon LLC ("Cartoon") as Chief Financial Officer to the Debtors; and PKF Consulting ("PKF") as real estate and business appraisers to the Debtors. Applications to retain PricewaterhouseCoopers LLP ("PWC") as accountants and tax advisors to the Debtors and Arthur Andersen, LLP ("Arthur Andersen") as accountants and auditors to the Debtors were filed on January 15, 2002 and January 31, 2002, respectively. On December 21, 2001, the Bankruptcy Court approved the retention of CW&T, CM-P, PKF, Chilmark and Cartoon on an interim basis. By final Orders dated March 13, 2002, the Bankruptcy Court approved the retention of CW&T, CM-P, PKF and Cartoon. By a final Order dated April 15, 2002, the Bankruptcy Court approved the retention of Chilmark. By final Orders of the Bankruptcy Court dated March 13, 2002, Arthur Andersen and PWC were retained effective as of the Commencement Date. The Debtors intend to file a motion with the Bankruptcy Court seeking to replace Arthur Anderson with Deloitte & Touche ("D&T") as the Debtors' accountants. By motion filed on August 21, 2002, the Debtors are seeking authorization to pay Chilmark, upon consummation of the Plan, the restructuring fee provided under Chilmark's retention agreement. 3. Formation of the Committee On January 8, 2002, the United States Trustee for the Southern District of New York appointed the Committee. The Committee currently consists of the following seven members: (i) Northeast Investors Trust, (ii) BRE/HY Funding, L.L.C., (iii) OCM Real Estate Opportunities Fund II, L.P., (iv) Bankers Trust Company, (v) Third Avenue Funds, (vi) U.S. 38 Foodservice, Inc. and (vii) Hospitality Restoration Builders. By Order of the Bankruptcy Court dated March 7, 2002, the Committee retained Debevoise & Plimpton as its attorneys. On August 21, 2002, the Committee filed an application seeking an interim order to retain Evercore Partners L.P. ("Evercore") as its financial advisors. By motion filed on that same date, the Debtors are seeking authorization to pay Evercore, upon consummation of the Plan and subject to entry of a final Order approving Evercore's retention, the restructuring fee provided under Evercore's retention agreement. By Order dated September 9, 2002, the Bankruptcy Court approved the retention of Evercore on an interim basis. 4. Debtors' Businesses and Management The Debtors are one of the largest owners and operators of both full and limited-service hotels in the United States with 88 hotels under the Debtors' ownership or management, containing approximately 17,500 rooms located in 28 states and one hotel in Windsor, Canada. The CCA Debtors own 18 hotels, containing approximately 2,500 rooms located in 12 states. The Debtors' hotels include 73 wholly-owned hotels and four hotels in which they have a 50% or greater equity interest. The CCA Debtors' hotels are wholly-owned by the CCA Debtors. In addition, the Debtors manage one hotel in which they own less than a 50% equity interest. The Debtors' 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. Substantially all of the Debtors' hotels are affiliated with nationally recognized hospitality franchises. The Debtors own 58 hotels under franchise agreements with Six Continents, which includes the Holiday Inn, Holiday Inn Express and Crowne Plaza brands; nine hotels under franchise agreements with Marriott International, Inc. ("Marriott"), which includes the Courtyard by Marriott and Fairfield Inn brands; and seven hotels under franchise agreements with Hilton, which includes the Hampton Inn and Doubletree brands. The remaining franchise hotels are operated under franchise agreements with Radisson, Starwood and Choice. The CCA Debtors own ten hotels under franchise agreements with Six Continents; seven under franchise agreements with Marriott and one independent. Lodgian, Inc. was formed in December 1998 through the merger of Servico, Inc. and Impac Hotel Group, L.L.C. Prior to the merger, both companies had portfolios consisting of full-and limited-service properties.(3) The Debtors are a sizable lodging company and for the year ended December 31, 2001, they generated revenues of approximately $395.6 million and an operating profit of approximately $11.6 million (before interest expense of $67.9 million and an impairment charge of $19.1 million) and, on a consolidated basis with the CCA Debtors, $448 million and an operating profit of approximately $16 million (before interest expense of $75 million and an impairment charge of $67 million). The hotel business is highly competitive. The Debtors compete with other facilities on various bases, including room price, quality, service, location and amenities customarily offered to the traveling public. The demand for accommodations and the resulting - ------------------------------- 3 In September 1990, Servico filed for chapter 11 protection in the United States Bankruptcy Court for the Southern District of Florida. In August 1992, Servico emerged from the reorganization proceedings as Servico, Inc., a Florida corporation. 39 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 Debtors' hotels depend upon both commercial and tourist travelers for revenues, and generally, the Debtors' hotels operate in areas that contain numerous other competitive lodging facilities. An important feature of the Debtors is that the management of all 106 properties is closely coordinated and integrated. Like any other national scale business, the Debtors do not operate as independent and individualized hotels. Instead, the Debtors operate on a centralized basis, thereby enabling the Debtors to achieve numerous operating efficiencies, including: (i) national vendor contracts with food companies, telecommunications companies and software companies; and (ii) centralized management of hotel operations, consisting of human resources, payroll, federal and state taxes, general ledger accounting and bank reconciliations, accounts payable processing and payment, operation of an integrated computer system, planning, negotiation and execution of capital expenditures and maintaining franchisor relationships. As an important part of operating all of the individual hotels, the Debtors have been able to negotiate preferential terms and treatment for their properties as a result of their consolidated buying power. 5. Debtors' Debt Structure Prior to the Commencement Date, the Debtors financed their growth and development through a variety of means, principally including entering into the Mortgage Financings and issuing the Senior Subordinated Notes and the CRESTS. (a) Mortgage Financings The Debtors estimate that approximately $381.1 million in aggregate principal amount and unpaid interest was outstanding under their Mortgage Financings, and $108.8 million under the CCA Debtors' Mortgage Financings, as of the Commencement Date. The Mortgage Financings of the Debtors and the CCA Debtors are described below. In each case, the Mortgage Financings are principally secured by mortgages (including, as applicable, leasehold mortgages) on the Hotel Properties identified below. In addition, in many cases, the Mortgage Financings are secured by additional collateral including, among other things, personal property located on the Hotel Property premises and certain monies and accounts. (i) Loans from Morgan Stanley Senior Funding, Inc. ("MSSF") Approximately $196.0 million was outstanding on the Commencement Date under loan agreements entered into on or about July 23, 1999 between MSSF as agent for a group of lenders and Lodgian Financing Corp. as borrower. Such loans are guaranteed by Lodgian, Inc., Impac Hotel Group, L.L.C., Servico, Inc., Impac Hotels I, L.L.C. and certain other affiliates of the borrower. The Hotel Properties securing the MSSF Mortgage Financing are: 40 Holiday Inn - Sheffield, AL Holiday Inn - Dothan, AL Hampton Inn - Dothan, AL Holiday Inn Express - Gadsden, AL Courtyard by Marriott - Bentonville, AR Residence Inn - Little Rock, AR Holiday Inn - East Hartford, CT Crowne Plaza - West Palm Beach, FL Holiday Inn Express - Pensacola, FL Holiday Inn - University Mall, FL Holiday Inn - Winter Haven, FL Hampton Inn - Pensacola, FL Holiday Inn - Brunswick, GA Courtyard by Marriott - Atlanta, GA Holiday Inn Hotel & Suites - Marietta, GA Fairfield Inn - Valdosta, GA Holiday Inn - Rolling Meadows, IL Quality Hotel - Metairie, LA Hilton Inn - Columbia, MD Holiday Inn - Silver Spring, MD Holiday Inn - Frederick, MD Holiday Inn - Cromwell Bridge, MD Holiday Inn - Belmont, MD Crowne Plaza - Cedar Rapids, IA Holiday Inn Arden Hills - St. Paul, MN Courtyard by Marriott - Paducah, KY Courtyard by Marriott - Florence, KY Hurstbourne Hotel - Louisville, KY Holiday Inn - St. Louis North, MO Crowne Plaza - Albany, NY Holiday Inn Select - Niagara Falls, NY Four Points Niagara Falls, NY Holiday Inn - Grand Island, NJ Holiday Inn - Select Strongsville, OH Holiday Inn - Greentree, PA Holiday Inn - Parkway East, PA Doubletree Club - Philadelphia, PA Holiday Inn - York, PA Hilton Inn - Northfield, MI Clarion - Charleston, SC Holiday Inn Sunspree - Myrtle Beach, SC French Quarter Suites - Memphis, TN Crowne Plaza - Houston, TX Courtyard by Marriott - Abilene, TX Holiday Inn - Austin, TX Holiday Inn Market Center - Dallas, TX Holiday Inn Select - DFW Airport, TX Holiday Inn Select - Windsor, Ontario Holiday Inn - Valdosta, GA Holiday Inn - Jamestown, NY

(ii) Loans from Capital Corporation of America LLC ("CCA") Approximately $108.8 million was outstanding on the Commencement Date under loan agreements entered into on or about August 31, 2000 between CCA as lender and Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C. as borrowers. Up to $10.2 million of this loan is guaranteed on a limited basis by Impac Hotel Group, L.L.C. and Lodgian, Inc. (the "CCA Guarantee"). See section V.A.9. The Hotel Properties purported to secure the CCA Mortgage Financing are: 41 Holiday Inn - Cincinnati, OH Mayfair House - Miami, FL Holiday Inn - Fort Mitchell, KY Marriott Denver Airport - Denver CO Holiday Inn - Sycamore View, Memphis, TN Holiday Inn - Clarksburg, WV Holiday Inn - Morgantown, WV Fairfield Inn - Augusta, GA Holiday Inn - Fairmont, WV Courtyard by Marriott - Lafayette, LA Holiday Inn - Florence, KY Fairfield Inn - Merrimack, NH Holiday Inn - Farrell Road, Syracuse, NY Courtyard by Marriott - Tulsa, OK Holiday Inn - Miami, FL Fairfield Inn - Jackson, TN Holiday Inn - Hamburg, NY Fairfield Inn - Colchester, VT

(iii) Loans from Banc One Capital Funding Corporation/RockBridge Capital, Inc. ("BO/RockBridge") Approximately $54.8 million was outstanding on the Commencement Date under cross-collateralized loan agreements entered into on or about December 8, 1998 between Nationwide Life Insurance Company as lender and Lodgian AMI, Inc. as borrower. Such loans are guaranteed by Penmoco, Inc. and Island Motel Enterprises, Inc. and, on a limited basis, by Lodgian, Inc. The Hotel Properties securing the BO/RockBridge Mortgage Financing are: Holiday Inn - Lancaster, PA Holiday Inn - Jekyll Island, GA Holiday Inn - Glen Burnie North, MD Holiday Inn - BWI Airport, MD Holiday Inn - Inner Harbor (iv) Cities of Manhattan and Lawrence, Kansas Commercial Development Revenue Refunding Bonds/Chase ("Chase") Approximately $11.7 million was outstanding on the Commencement Date under promissory notes issued in connection with the Mortgage Financings entered into on or about January 1, 1997 among Chase, the City of Manhattan, Kansas, the City of Lawrence, Kansas, Lawrence Hospitality Associates, L.P. and Manhattan Hospitality Associates, L.P. The "reserve funds" to pay the principal and interest on the promissory notes are guaranteed by Servico, Inc. on a limited basis and in a limited amount. The Hotel Properties securing the Lawrence/Chase Mortgage Financing are: Holiday Inn - Lawrence, KS Holiday Inn - Manhattan, KS (v) Loans from Lehman Brothers Holdings, Inc./Criimi Mae ("Lehman/Criimi Mae") Approximately $24.0 million was outstanding in the aggregate on the Commencement Date under cross-collateralized loan agreements entered into on or about April 11, 1997 and June 30, 1997 between Lehman Brothers Holdings, Inc. as lender, and Melbourne Hospitality Associates, L.P., Fort Wayne Hospitality Associates II, L.P., Servico Frisco, Inc., Worcester Hospitality, L.P. and Apico Inns of Pittsburgh, Inc. as borrowers. Such loans are guaranteed on a limited basis by Servico, Inc. The Hotel Properties securing the Lehman/Criimi Mae Mortgage Financing are: 42 Holiday Inn - Fort Wayne, IN Holiday Inn - Monroeville, PA Crowne Plaza - Worcester, MA Holiday Inn - Melbourne, FL Holiday Inn - Frisco, CO (vi) Loans from Banc One ("BO") Approximately $6.0 million was outstanding on the Commencement Date under loan agreements entered into on or about April 26, 1999 between Nationwide Insurance Company as lender and Dedham Lodging Associates I, L.P. Such loans are guaranteed on a limited basis by Lodgian, Inc. The Hotel Property securing the Banc One Mortgage Financing is Residence Inn - Dedham, MA. (vii) Loans from First Union Bank of North Carolina ("First Union") Approximately $3.4 million was outstanding on the Commencement Date under loan agreements entered into on or about March 18, 1997 between First Union as lender and Atlanta-Boston Lodging L.L.C. as borrower. Such loans are guaranteed by Impac Hotel Group, L.L.C. The Hotel Property securing the First Union Mortgage Financing is Courtyard by Marriott - Boston/Revere, MA. (viii) Loans from GMAC Commercial Mortgage Corporation and Orix Corp. ("GMAC-Orix") Approximately $27.1 million was outstanding in the aggregate on the Commencement Date under cross-collateralized loan agreements entered into on or about January 17, 1996 and July 18, 1996 between GMAC Commercial Mortgage Corporation as lender, and Servico Council Bluffs, Inc., Servico West Des Moines, Inc., Servico Omaha, Inc., Servico Omaha Central, Inc., Servico Wichita, Inc., Brecksville Hospitality, L.P., Sioux City Hospitality, L.P. and 1075 Hospitality, L.P. as borrowers. Such loans are guaranteed on a limited basis by Servico, Inc. The Hotel Properties securing the GMAC/Orix Mortgage Financings are: Clarion - West Des Moines, IA Clarion - Omaha, NE Quality - Council Bluffs, IA Clarion Central - Omaha, NE Holiday Inn - Wichita Airport, KS Hilton Hotel - Sioux City, IA Holiday Inn - Richfield, OH Holiday Inn - Augusta, GA (ix) Loans from GMAC Commercial Mortgage Corporation ("GMAC") Approximately $5.3 million was outstanding on the Commencement Date under loan agreements entered into on or about May 9, 1996 between GMAC as lender and Servico Lansing, Inc. as borrower. Such loans are guaranteed by Servico, Inc. on a limited basis. The Hotel Property securing the GMAC Mortgage Financing is Holiday Inn - West Lansing, MI. 43 (x) Loans from DLJ/Column Financial, Inc. and Criimi Mae ("DLJ/Column/Criimi Mae") Approximately $29.8 million was outstanding in the aggregate on the Commencement Date under cross-collateralized loan agreements entered into on or about January 31, 1995 between Column Financial, Inc. ("Column") as lender, and Hilton Head Motel Enterprises, Inc., Servico Hotels I, Inc., Servico Hotels II, Inc., Moon Airport Motel, Inc., Servico Fort Wayne, Inc., Washington Motel Enterprises, Inc., Servico Hotels III, Inc., Servico Hotels IV, Inc. and New Orleans Airport Motel Associates, L.P. as borrowers. The Hotel Properties securing the DLJ/Column/Criimi Mae Mortgage Financing are: Holiday Inn - Phoenix, AZ Holiday Inn - Santa Fe, NM Radisson - Phoenix, AZ Crowne Plaza - Pittsburgh, PA Holiday Inn Express - Palm Desert, CA Holiday Inn Meadowlands - Washington, PA Fort Wayne Hilton - Fort Wayne, IN Holiday Inn - Hilton Head, SC New Orleans Airport Hotel & Conference Center, LA

(xi) Loans from DLJ/Column Financial, Inc. ("DLJ/Column") Approximately $9.4 million was outstanding on the Commencement Date under loan agreements entered into on or about June 29, 1995 between Column as lender and East Washington Hospitality Limited Partnership as borrower. The Hotel Property securing the DLJ/Column Mortgage Financing is Holiday Inn Airport East - Phoenix, AZ. (xii) Loans from Roundabout Partners ("Roundabout") Approximately $1.9 million was outstanding on the Commencement Date under lease agreements between Roundabout as lender and Raleigh-Downtown Enterprises, Inc. as borrower. The Hotel Property securing the Roundabout Mortgage Financing is Clarion Downtown - Raleigh, NC. (xiii) Loans from Column Financial, Inc./Criimi Mae ("Column/Criimi Mae") Approximately $3.4 million was outstanding on the Commencement Date under loan agreements entered into on or about January 31, 1995 between Column as lender and McKnight Motel, Inc. as borrower. The Hotel Property securing the Column/Criimi Mae Mortgage Financing is Holiday Inn - McKnight Road, PA. (xiv) Loans from DDL Kinser Partners LLC ("DDL Kinser") Approximately $2.5 million was outstanding on the Commencement Date under loan agreements entered into on or about December 29, 1986 between Westinghouse Credit Corporation as lender and Kinser Motel Enterprises as borrower, as modified on May 7, 1992 by 44 order confirming Servico Inc.'s Plan of Reorganization and ultimately assigned to DDL Kinser. The Hotel Property securing the DDL Kinser Mortgage Financing is in Bloomington, Indiana. (xv) Loans from Wells Fargo Bank Minnesota National Association ("Wells Fargo") Approximately $5.8 million was outstanding on the Commencement Date under loan agreements dated as of December 22, 1997 between Wells Fargo (known as and successor by merger to Norwest Bank Minnesota, National Association) as lender and Columbus Hospitality Associates, L.P. (of which 70% of the limited partnership interests are owned by a third party) as borrower. The Hotel Property securing the Wells Fargo Mortgage Financing is Holiday Inn - Columbus, OH. (b) Senior Subordinated Notes The Debtors are indebted on the Senior Subordinated Notes, which were issued on or about July 23, 1999 by Lodgian Financing Corp. and guaranteed by Lodgian, Inc. and 36 Guarantor Debtors together with nine non-debtor subsidiaries of the Debtors. On the Commencement Date, an aggregate $200,000,000 principal amount of Senior Subordinate Notes were outstanding with an annualized interest expense of $24.5 million. The Guarantor Debtors are: Albany Hotel, Inc. AMI Operating Partners, LP Apico Hills, Inc. Apico Inns of Green Tree, Inc. Atlanta-Hillsboro Lodging, LLC Brunswick Motel Enterprises, Inc. Dothan Hospitality 3053, Inc. Dothan Hospitality 3071, Inc. Gadsden Hospitality, Inc. Impac Hotels I, L.L.C. Little Rock Lodging Associates, Limited Lodgian Mount Laurel, Inc. Partnership Lodgian Ontario, Inc. Lodgian Richmond, LLC. Minneapolis Motel Enterprises, Inc. NH Motel Enterprises, Inc. Servico Austin, Inc. Servico Cedar Rapids, Inc. Servico Centre Associates, Ltd. Servico Columbia, Inc. Servico Grand Island, Inc. Servico Houston, Inc. Servico Jamestown, Inc. Servico Market Center, Inc. Servico Maryland, Inc. Servico Metairie, Inc. Servico New York, Inc. Servico Niagara Falls, Inc. Servico Northwoods, Inc. Servico Pensacola 7200, Inc. Servico Pensacola 7330, Inc. Servico Rolling Meadows, Inc. Servico Windsor, Inc. Servico Winter Haven, Inc. Sheffield Motel Enterprises, Inc.

45 Third party holders of 50% of the limited partnership interests in Servico Centre Associates, Ltd. have asserted that Servico Centre Associates, Ltd.'s guarantee of the Senior Subordinated Notes was not properly authorized and is, therefore, unenforceable. The Debtors are investigating the authorization of the guarantee, but believe that under applicable law, the lack of proper authorization would not affect the enforceability of the guarantee. (c) CRESTS In June of 1998, LCT I issued 3,500,000 CRESTS with an aggregate liquidation amount of $175,000,000, plus accrued interest. LCT I used the proceeds of the CRESTS to purchase the CRESTS Junior Convertible Debentures. Lodgian, Inc. is the holder of LCT I's common securities and has guaranteed payments of distributions on the CRESTS and payments on liquidation of LCT I or the redemption of the CRESTS, to the extent that LCT I has available funds therefor and fails to make such payments. On the Commencement Date, the liquidation amount plus accumulated distributions on the CRESTS was approximately $197,218,000 and an equal amount was due in respect of the CRESTS Junior Subordinated Debentures. The CRESTS are convertible into shares of Old Lodgian Common Stock and are redeemable upon the repayment of the CRESTS Junior Subordinated Debentures on June 30, 2010. 6. Events Leading up to the Chapter 11 Cases and the Need to Reorganize. The Debtors' chapter 11 filings were precipitated by the weaker U.S. economy, the decline in travel since the events of September 11, 2001 and the Debtors' heavy debt load. The Debtors' businesses have been negatively impacted by the general economic slowdown, and in particular, the dramatic decline in both business and leisure travel. On a comparative basis, occupancy of the Debtors' hotels declined from 64.7% occupancy to 59.9% occupancy for the twelve months ended December 31, 2000 and December 31, 2001, respectively, and average daily rates declined by approximately 2% during this same period. The events of September 11, 2001 and the weakened U.S. economy have exacerbated the pressure on each of the Debtors' revenues because of a virtual standstill in travel demand. Although travel and occupancy usage has increased in the months following September 11, each of the Debtors expects the negative impact on travel to continue for the foreseeable future. As of December 31, 2001, the Debtors' books and records (on a consolidated basis) reflected assets totaling approximately $975 million (at book value) and liabilities totaling approximately $982 million. In the months preceding the filing of the Chapter 11 Cases, certain of the Debtors began discussions with certain of their secured lenders, as well as with an Ad Hoc Committee of holders of the Senior Subordinated Notes to review the respective Debtors' financial condition and outline possible restructuring alternatives. However, the combination of the general 46 economic decline, as well as the low season of each of the Debtors' business cycle, left the respective Debtors without sufficient immediate liquidity to service their debt on the Commencement Date in accordance with its terms and, thus, without sufficient time to continue their pre-petition negotiations. 7. Debtors' Debtor-In-Possession Financing and Use of Cash Collateral As noted above, as of the Commencement Date, the Debtors had executed more than 100 hotel mortgages under the Mortgage Financings in favor of more than 15 separate lenders or lender groups. On December 20, 2001, the Debtors sought authorization from the Bankruptcy Court to use "cash collateral" (as such term is defined in section 363(a) of the Bankruptcy Code) to sustain each of the Debtors' business operations. In addition, to supplement the liquidity that each of the Debtors anticipated would be provided through their use of cash collateral, the respective Debtors sought approval of a post-petition financing facility (the "DIP Financing Facility"). The DIP Financing Facility provides for financing by the DIP Lenders in the amount of up to $25 million. Each of the Debtors required the DIP Financing Facility in order to, among other things, have sufficient liquidity to meet their post-petition obligations. Because of seasonal variations in cash flow from their hotel properties, each of the Debtors anticipated that it would need financing in order to meet its day to day working capital needs and to fund certain capital expenditures. On December 20, 2001, the Bankruptcy Court entered interim Orders (i) approving the DIP Financing Facility on an interim basis; (ii) authorizing the Debtors to obtain post-petition financing in an aggregate amount not to exceed $10 million; (iii) granting adequate protection; and (iv) authorizing the use of cash collateral in accordance with certain terms and conditions regarding such use, pending a final hearing on the DIP motion. On February 14, 2002, the Bankruptcy Court entered final Orders authorizing and approving the DIP Financing Facility, and continuing the respective Debtors' authorization to use cash collateral upon substantially the same terms as those contained in the interim Order, on a permanent basis. In addition, on February 14, 2002, the Bankruptcy Court approved three different stipulations between the respective Debtors and certain lenders, limiting the respective Debtors' use of the respective lenders' cash collateral to the terms and conditions delineated in each of such stipulations.(4) As of the date of this Disclosure Statement, $24.05 million of the $25 million DIP Financing remains available for the respective Debtors' use. The respective Debtors expended $950,000 of the DIP Financing to establish letters of credit to meet the needs of the largest vendor of each of the Debtors. - ------------------------------- 4 The Debtors have entered into cash collateral stipulations with each of the following secured lenders: CCA, Criimi Mae Services L.P. as Special Servicer, JPMorgan Chase Bank as successor Indenture Trustee and Lennar Partners, Inc. as Special Servicer. Each of the cash collateral stipulations between the applicable Debtors and their secured lenders are on file with the Bankruptcy Court and available electronically through the Bankruptcy Court's website: www.nysb.uscourts.gov. 47 8. Continuation of Business After the Commencement Date Since the Commencement Date, the Debtors have continued to operate their businesses in the ordinary course as debtors-in-possession under sections 1107 and 1108 of the Bankruptcy Code. As described in greater detail below, a variety of steps have been taken to strengthen and enhance the value of the Debtors' businesses during these cases. Both before and after the Commencement Date, the Debtors have taken action to stabilize operations. The Debtors' management is actively and regularly reaching out to its vendors to assure them that these cases will not affect the Debtors' ability to operate and honor trade terms on a going-forward basis. At the same time, management has addressed and will continue to address the many emergencies and other matters which are incidental to the commencement of complex Chapter 11 cases, including responding to a multitude of inquiries by employees, unsecured creditors, the Committee and its professionals, holders of Secured Claims and their professionals, and others. In addition, the Debtors have moved quickly to ensure liquidity during the pendency of these cases by seeking authorization from the court to use cash collateral and by obtaining the DIP Financing Facility as described above. The Debtors believe that establishing the DIP Financing Facility has been and will be viewed by third parties as a means of providing stability and improving cash flow and enhancing the long term competitiveness of the Debtors. In addition, post-petition financing has enabled the Debtors to increase their available financial resources and engender confidence in their vendors such that the Debtors were and are able to purchase goods and services on normal trade terms. 9. Disputes with CCA Since the commencement of the Chapter 11 cases, the Debtors have been negotiating with CCA a consensual treatment of its Claims. CCA had disputed the amount of its Allowed Secured Claim and the related CCA Guarantee Claims. In addition, CCA had challenged allocation to the CCA Debtors of responsibility for costs of the Chapter 11 cases and the ability of the Debtors to use CCA's cash collateral to satisfy these expenses as they relate to and benefited the estates of the CCA Debtors. At the Debtors' request, the parties are currently in court mandated mediation. On September 24, 2002, as a result of the mediation, the parties reached an agreement in principle for the consensual resolution of CCA's claims against the CCA Debtors and CCA's Guarantee Claims against certain of the Debtors (the "Settlement"). The Debtors, the CCA Debtors and CCA are presently documenting the Settlement, which will be subject to court approval. The Settlement provides, inter alia, for the removal of the CCA Debtors from the Plan. The CCA Debtors shall proceed separately with respect to their Hotel Properties in their chapter 11 cases, which are contemplated to continue after the Effective Date of the Debtors' Plan. The Debtors, the CCA Debtors and the Committee believe that the proposed Settlement is in the best interests of the CCA Debtors' estates. In the event that the Settlement with the Debtors and the CCA Debtors were not approved, CCA would likely assert its claims under the CCA Guarantee against the Debtors which, if allowed, would dilute the distribution to the Debtors' General Unsecured Creditors under the Plan. See Section V.A.5(a)(ii). 48 B. FILING OF SCHEDULES/BAR DATE FOR FILING PROOFS OF CLAIM AND EQUITY INTERESTS On March 5, 2002, each of the Debtors filed their Statement of Financial Affairs and Schedules of Assets and Liabilities (collectively, as amended, the "Schedules"). Certain of the Schedules were amended on April 5, 2002. The Debtors reserve their rights to further amend the Schedules as may be necessary. The Schedules with respect to New Orleans Airport Motel Associates, L.P. were filed on May 2, 2002. Each of the Debtors' Schedules are available on the Bankruptcy Court's website: www.nysb.uscourts.gov. In accordance with the Local Bankruptcy Rules, June 3, 2002 was fixed as the Bar Date, the last date and time upon which proofs of claim or equity interest could be filed against the Debtors' estates. On or about April 4, 2002, Poorman-Douglas Corporation, the Debtors' Bankruptcy Court appointed claims agent, mailed a notice of entry of the order establishing the Bar Date to all creditors listed on the creditor matrix for each of the Debtors filed with the Bankruptcy Court. The notice included the Bar Date, a proof of claim form, and instructions for completing such form as well as notice of the meeting of creditors in connection with section 341 of the Bankruptcy Code. Pursuant to Bankruptcy Rule 3003(c)(2), any creditor: (a) whose Claim (i) was not scheduled by the Debtors or (ii) was scheduled as disputed, contingent or unliquidated, and (b) who failed to file a proof of claim on or before the Bar Date, will not be treated as a creditor with respect to that Claim for purposes of voting on the Plan or receiving a distribution under the Plan. The Debtors received approximately 4,299 proofs of claim as of the Bar Date. VI. GOVERNANCE OF THE REORGANIZED DEBTORS A. BOARDS OF DIRECTORS OF THE REORGANIZED DEBTORS The Board of Directors of Reorganized Lodgian shall consist initially of nine members, of whom eight (including three independent directors) will be designated by the Committee and one will be the Chief Executive Officer of the Reorganized Debtors. B. SENIOR MANAGEMENT OF THE REORGANIZED DEBTORS The officers of the Reorganized Debtors immediately before the Effective Date, including David Hawthorne, Chief Executive Officer of Lodgian, Inc., shall continue to serve immediately after the Effective Date in their respective capacities. The Debtors have assumed Mr. Hawthorne's employment agreement by Order of the Bankruptcy Court dated April 17, 2002. Mr. Hawthorne will continue to be employed under the terms of that agreement as it may be amended in connection with the consummation of the Plan. On September 5, 2002, the Debtors filed a motion with the Bankruptcy Court seeking authorization to pay emergence bonuses on the Effective Date to certain members of the Debtors' senior management. 49 C. LIQUIDATING DEBTORS As discussed above, the Plan is a chapter 11 Plan of Liquidation for the Liquidating Debtors. Upon the distribution of all assets of the Liquidating Debtors' Estates pursuant to the Plan and the filing by or on behalf of the Liquidating Debtors of a certification to that effect with the Bankruptcy Court, the Liquidating Debtors shall be deemed dissolved for all purposes without the necessity for any other or further actions to be taken by or on behalf of each of the Liquidating Debtors or payments to be made in connection therewith; provided, however, that Liquidating Debtors may (but shall not be required to) file with the Office of the Secretary of State for the applicable State a certificate of dissolution. From and after the Effective Date, the Liquidating Debtors shall not be required to file any document, or take any other action, to withdraw their business operation from any states in which the Liquidating Debtors previously conducted their business operations. From and after the Confirmation Date, the Liquidating Debtors shall continue in existence (and shall consult with the Committee as specifically provided for in the Plan) for the purpose of (i) winding up their affairs as expeditiously as reasonably possible, (ii) liquidating, by conversion to Cash or other methods, any remaining assets of their Estates, as expeditiously as reasonably possible, (iii) enforcing and prosecuting claims, interests, rights and privileges of the Liquidating Debtors, including, without limitation, the prosecution of avoidance actions in conjunction with the marshalling of the Liquidating Debtors' assets, as agreed upon by the Plan Proponents (iv) resolving Disputed Claims, (v) administering the Plan, and (vi) filing appropriate tax returns. From and after the Confirmation Date, and subject to the Effective Date, the then current officers of each of the Liquidating Debtors shall continue to serve in their respective capacities through the earlier of the date such Liquidating Debtor is dissolved in accordance with the Plan and the date such officer resigns, is replaced or is terminated. VII. OTHER ASPECTS OF THE PLAN A. EXIT FINANCING FACILITY - CONDITION PRECEDENT TO THE EFFECTIVE DATE By Order dated August 8, 2002, the Bankruptcy Court authorized the Debtors to perform their obligations under a Commitment Letter with Merrill Lynch Mortgage Capital Inc. ("MLMC"), which provides for a $286.2 million loan from MLMC and/or affiliates (the "Exit Financing Facility"), secured by the MSSF Hotel Properties, the BO Hotel Property and the BO/Rockbridge Hotel Properties. A copy of the Commitment Letter, including a Summary of the Principal Terms of the Exit Financing Facility, is attached as Exhibit E. Of the amounts available under the Exit Financing Facility, $256.6 million will be used to refinance the Mortgage Financings under the MSSF Agreements, the BO Agreements and the BO/Rockbridge Agreements, with the $29.6 million balance available to fund other required payments at consummation of the Plan and for general corporate purposes, including on-going capital expenditures of the Reorganized Lodgian Debtors.(5) 50 B. DISTRIBUTIONS UNDER THE PLAN One of the key concepts under the Bankruptcy Code is that only claims against, and equity interests in, a debtor that are "allowed" may receive distributions under a chapter 11 plan. This term is used throughout the Plan and the descriptions below. In general, an "allowed" claim or "allowed" equity interest simply means that the debtor agrees, or in the event of a dispute, that the Bankruptcy Court determines, that the claim or equity interest, and the amount thereof, is in fact a valid obligation of the debtor. 1. Disbursing Agent Lodgian, Inc. will contribute the Plan Securities to be distributed under the Plan to each other Debtor as a capital contribution to allow such Debtor to discharge the Claims against it. Lodgian, Inc. will act as Disbursing Agent, on behalf of itself and each other Debtor, with respect to the Plan Securities to be distributed under this Plan. All distributions under the Plan (other than distribution of Plan Securities) shall be made by the applicable Reorganized Debtor as Disbursing Agent (or such other entity designated by the Reorganized Debtor as a Disbursing Agent on or after the Effective Date). 2. Timing and Conditions of Distributions (a) Date of Distribution Except as otherwise provided for in the Plan, distribution on account of Allowed Claims and Equity Interests will be made on or as soon as practicable after the later of the Effective Date and the date an order allowing a Disputed Claim or Equity Interest becomes a Final Order. Disputed Claims and Equity Interests will be treated as set forth below. (b) Surrender of Certain Securities Necessary for Distribution Plans of reorganization generally require a holder of an instrument or security of a debtor to surrender such instrument or security prior to receiving a new instrument or security in exchange therefor under a plan. This rule avoids disputes regarding who is the proper recipient of instruments or securities under a plan. As a condition to participating in the distributions under the Plan, a holder of a certificated instrument or note must surrender such instrument or note prior to the first anniversary of the Effective Date or provide the Disbursing Agent with a satisfactory affidavit of loss and/or indemnity and bond. Failure to do so will result in the forfeiture of such holder's right to receive any distribution relating to such instrument or note. This requirement does not apply to certificated instruments or notes that are being reinstated under the Plan. Any other - ------------------------------- 5 The Plan Proponents and MLMC have agreed in principal to increase the Exit Financing Facility by $5.3 million to be used to refinance the Mortgage Financing under the GMAC Agreements. 51 holder of an Allowed Claim who fails to take such action required by the Disbursing Agent or its designee to receive its distribution under the Plan before the first anniversary of the Effective Date, or such earlier time as otherwise provided for in the Plan, may not participate in any distribution under the Plan in respect of such Claim. Any distribution so forfeited shall become property of the applicable Reorganized Debtor. (c) Fractional Shares No fractional shares of New Preferred Stock, New Common Stock or Warrants (or cash in lieu thereof) will be distributed. For purposes of distribution, fractional shares of New Preferred Stock or New Common Stock, and Warrants shall be rounded down to the next whole number or zero, as appropriate. Fractional shares or Warrants that are not distributed because of this rounding will be returned to Reorganized Lodgian and canceled. (d) Final Distribution of New Preferred Stock, New Common Stock and Warrants Upon the resolution or determination of all Disputed Claims and Equity Interests, the Disbursing Agent shall distribute to all holders of Allowed Claims and Equity Interests entitled to receive New Preferred Stock, New Common Stock and Warrants the amount of such securities that such holders would have received if the resolution of all Disputed Claims and Equity Interests had been known on the Effective Date. In the event that dividend distributions have been made with respect to the New Preferred Stock and/or New Common Stock, such holder shall be entitled to receive the allocable portion of such dividends without any interest with respect thereto. (e) De Minimis Distributions The applicable Reorganized Debtor as Disbursing Agent or such other entity designated by such Reorganized Debtor as a Disbursing Agent on or after the Effective Date will not be required to distribute cash to the holder of an Allowed Claim in an impaired Class if the amount of cash to be distributed on any distribution date under the Plan (including the Effective Date and the Final Distribution Date) on account of such Claim is less than $50. Any holder of an Allowed Claim on account of which the amount of cash to be distributed is less than $50 will have its Claim for such distribution discharged and will be forever barred from asserting any such Claim against the Reorganized Debtors or their respective property. Any cash not distributed pursuant to this section VII.B.1.(e) will become the property of the Reorganized Debtors, free of any restrictions thereon, and any such cash held by a third-party Disbursing Agent will be returned to the Reorganized Debtors. 3. Procedures for Treating Disputed Claims and Equity Interests Under the Plan For purposes of the following discussion, the term "Allowed" when it applies to a Claim or Equity Interest means that the Claim or Equity Interest has been recognized as a valid Claim or Equity Interest against the respective Debtor and is entitled to participate in the Class to which such Claim or Equity Interest belongs. 52 (a) Disputed Claims and Equity Interests Disputed Claims include those Claims or Equity Interests (i) listed by any Debtor in such Debtor's schedules of assets and liabilities, as may be amended from time to time, as not liquidated in amount or contingent or disputed, (ii) to which an objection or request for estimation has been filed and not withdrawn or determined, (iii) for which a proof of claim or equity interest has been filed and with respect to which no corresponding Claim or Equity Interest is listed in the schedules or the corresponding Claim or Equity Interest is listed as other than contingent, disputed, or unliquidated but for which the nature or amount of the Claim or Equity Interest as filed differs from that listed in the schedules, or (iv) asserting tort Claims. (b) Objections to Claims and Equity Interests Each of the Debtors shall be entitled to object to all Claims and Equity Interests. Any objections to Claims or Equity Interests shall be served and filed on or before one hundred and twenty (120) days after the Effective Date or such later date as may be fixed by the Bankruptcy Court. (c) No Distributions Pending Allowance If any portion of a Claim or Equity Interest is a Disputed Claim or Equity Interest, no payment or distribution shall be made on account of the Claim or Equity Interest until the disputed portion of the Claim or Equity Interest becomes an Allowed Claim or Equity Interest or is otherwise resolved. Pending the allowance or disallowance of the Disputed Claims or Equity Interests, the applicable Debtor shall withhold from the payments and distributions made pursuant to the Plan to the holders of Allowed Claims or Equity Interests the payments and distributions allocable to the Disputed Claims or Equity Interests as if the Disputed Claims or Equity Interests had been Allowed Claims or Equity Interests. (d) Distributions After Allowance Once a Disputed Claim or Equity Interest becomes an Allowed Claim or Equity Interest, the holder of such Allowed Claim or Equity Interest shall receive a distribution in accordance with the provisions of the Plan. If the holder is entitled to a cash distribution under the Plan, the cash distribution shall include interest, calculated at the average rate received by the respective Debtor in its deposit accounts, from the Effective Date until the date of distributions. Cash distributions shall be made as soon as practicable after the order allowing the Disputed Claim becomes a Final Order. If the holder of a Disputed Claim or Equity Interest which becomes Allowed after the Effective Date is entitled to New Preferred Stock, New Common Stock or Warrants, the Disbursing Agent may distribute to such holder the amount of shares of such securities as such holder would have received had such holder's Claim or Equity Interest been Allowed in such amount on the Effective Date. In the event that dividend distributions have been made with respect to the New Preferred Stock or New Common Stock, such holder shall be entitled to receive such previously distributed dividends without any interest with respect thereto. 53 (e) No Recourse With Respect to Disputed Claims and Equity Interests Notwithstanding that the Allowed amount of any particular Disputed Claim or Equity Interest is reconsidered under the applicable provisions of the Bankruptcy Code and Bankruptcy Rules, no Claim or Equity Interest holder will have recourse against the Disbursing Agent, the Debtors, the Committee, the Reorganized Debtors, or any of their professional consultants, officers, directors or members or their successors or assigns, or any of their property. However, nothing in the Plan will modify any right of a holder of a Claim under section 502(j) of the Bankruptcy Code. C. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES 1. Contracts and Leases Not Expressly Assumed Are Rejected All executory contracts and unexpired leases, except for those expressly assumed by the Plan or by separate motion, are rejected pursuant to the Plan. The Plan provides for the applicable Debtor to assume those executory contracts and unexpired leases specifically designated as a contract or lease to be assumed as specified in the Schedule of Assumed Contracts included in the Plan Supplement. Any time prior to the first Business Day prior to the commencement of the hearing on confirmation of the Plan, any Debtor may modify that list. The applicable Debtor will provide notice to the parties affected by any such amendment. Each of the applicable Debtors expressly reserves the right to reject any contract in the event that there is a dispute concerning the amount necessary to cure defaults, notwithstanding the fact that such dispute may arise after the confirmation of the Plan. 2. Cure of Defaults Generally, if there has been a default (other than a default specified in section 365(b)(2) of the Bankruptcy Code) under an executory contract or unexpired lease, the debtor can assume the contract or lease only if the debtor cures the default. Accordingly, a condition to the assumption of an executory contract or unexpired lease is that any default under an executory contract or unexpired lease that is to be assumed pursuant to the Plan will be cured in a manner consistent with the Bankruptcy Code and as set forth in the Plan. 3. Rejection Claims If an entity with a claim for damages arising from the rejection of an executory contract or unexpired lease under the Plan has not filed a proof of claim for such damages within 20 days after the Effective Date, that Claim shall be barred and shall not be enforceable against any of the Debtors or the Reorganized Debtors. 4. Franchise Agreements At the present time, the Lodgian Debtors intend to continue operating each of their respective Hotel Properties under the Plan and intend to assume any franchise agreements relating to those Hotel Properties. In connection therewith, the applicable Debtors hope to reach consensual resolution with each applicable franchisor on the terms of the assumption of its franchise agreement. In the event that the applicable Debtor and franchisor are unable to reach 54 an agreement over such terms, including the cure of any defaults as and to the extent required by section 365 of the Bankruptcy Code, then the applicable Debtor shall request that the Court resolve such disputes. The Liquidating Debtors intend to effect under the Plan a consensual surrender of their Hotel Properties to their secured creditors. Accordingly, the Liquidating Debtors shall seek to enter into a consensual transfer of the applicable franchise agreement. If such a consensual treatment cannot be reached by the parties, then, either the applicable Debtor shall seek to assume and assign the applicable franchise agreement or, alternatively, reject the same. The Debtors do not believe that any such rejection and corresponding rejection damage claims shall have a material adverse impact upon the unsecured creditors of the applicable Liquidating Debtor as, under the Plan, such unsecured creditors are not otherwise receiving a distribution. Lodgian, Inc. has guaranteed the rejection damage claims under certain of the Liquidating Debtors' franchise agreements. Accordingly, a rejection of such franchise agreements could result in a dilution of the recoveries to unsecured creditors of Lodgian, Inc. Because the Plan excludes the estates of the CCA Debtors, the Plan does not address the assumption or rejection of any executory contracts and unexpired leases, including franchise agreements, for the CCA Debtors. Any such agreements shall be treated in the context of the CCA Chapter 11 cases, including any Chapter 11 plan relating thereto. Lodgian, Inc. has guaranteed the rejection damage claims under certain of the CCA Debtors' franchise agreements. Accordingly, a rejection of such franchise agreements could result in a dilution of the recoveries to unsecured creditors of Lodgian, Inc. D. NEW EQUITY INCENTIVE PLAN Reorganized Lodgian will adopt the New Equity Incentive Plan, a new long term management incentive plan under which up to 10.0% of the New Common Stock on a fully diluted basis will be available for issuance to management employees. A copy of the New Equity Incentive Plan is part of the Plan Supplement. E. RELEASES The Plan provides for a release of all claims by each of the Debtors against (i) any director, officer, agent or employee of any Debtor who was employed or otherwise serving in such capacity on the Confirmation Date, (ii) the Committee, and (iii) any member of the Committee, any member, director, officer, agent or employee of a member of the Committee, or any of the Debtors' or the Committee's attorneys or advisors, in each case who were acting, employed or otherwise serving in such capacity on the Confirmation Date, with respect to the activities of such releasees in the Chapter 11 Cases, except for (x) claims resulting from the willful misconduct or gross negligence of such releasees and (ii) claims against directors, officers or employees of any Debtor in respect of any loan or other contractual obligation owed by these individuals person to any Debtor. This provision is intended to release all claims of each Debtor, whether arising pre-petition or post-petition, and based on any theory (other than willful misconduct or gross negligence) against these individuals. The release is limited to claims that could be asserted by the respective Debtors and only applies to claims against such parties in their representative capacity. 55 The purpose of the release of the personnel of each of the Debtors is to prevent a collateral attack against those individuals based on derivative actions. It is the intent of the Plan to bring finality to the disruption caused by the reorganization of these companies. Despite many obstacles, management of the respective Debtors has not only continued to stay with the company, but also made enormous contributions to the reorganization efforts and the compromises set forth in the Plan. None of the Debtors are aware of any pending or threatened actions, whether civil or criminal, against the management of the Debtors. However, in order to continue to retain the Debtors' management, it is important that they be relieved of the threat of any derivative actions against them personally by parties in the Chapter 11 Cases that may be dissatisfied with the treatment provided in the Plan. The purpose of the release of the representatives of the other major constituency in these cases, the Committee, is to protect the chapter 11 process for individuals who have contributed to the restructuring process. None of the Debtors are aware of any pending or threatened actions against the representatives of the Committee. F. EFFECT OF CONFIRMATION 1. Discharge of Claims and Cancellation of Equity Interests Except as otherwise provided in the Plan, confirmation of the Plan will discharge all existing debts and Claims and cancel all Equity Interests, of any kind, nature or description whatsoever, against or in each of the Debtors or any of their assets or properties, to the full extent permitted by section 1141 of the Bankruptcy Code (except for certain interdebtor Equity Interests that the Reorganized Debtors will continue to maintain for corporate organizational purposes). All holders of existing Claims against and Equity Interests in the Debtors will be enjoined from asserting against the Reorganized Debtors, or any of their assets or properties, any other or further Claim or Equity Interest based upon any act or omission, transaction, or other activity that occurred prior to the Effective Date, whether or not such holder has filed a proof of claim or proof of equity interest. In addition, upon the Effective Date, each holder of a Claim against or Equity Interest in the Debtors shall be forever precluded and enjoined from prosecuting or asserting any discharged Claim against or canceled Equity Interest in the Debtors or the Reorganized Debtors. 2. Indemnification The Plan provides for the assumption and continuation of normal corporate indemnification provisions related to the protection of officers and directors. 3. Waiver of Contractual Subordination Rights The distributions under the Plan take into account the relative priority of the Claims in each Class in connection with any applicable contractual subordination provisions. For this reason, the distributions to the holders of Senior Subordinated Note Claims in Class 4 will not be subject to levy, garnishment, attachment or other legal process by any holder of indebtedness senior to the indebtedness represented by Senior Subordinated Note Claims because of contractual subordination rights. On the Effective Date, all holders of Claims will be deemed to have waived any and all contractual subordination rights that they may have with 56 respect to a distribution, and the Confirmation Order will permanently enjoin, effective as of the Effective Date, all holders of Claims from enforcing or attempting to enforce any such rights with respect to the distributions under the Plan to the holders of Senior Subordinated Note Claims in Class 4. G. MISCELLANEOUS PROVISIONS The Plan contains provisions relating to the cancellation of existing securities, corporate actions, the Disbursing Agent, delivery of distributions, manner of payment, vesting of assets, binding effect, term of injunctions or stays, injunction against interference with the Plan, payment of statutory fees, recognition of guaranty rights, substantial consummation, compliance with tax requirements, severability, revocation, and amendment of the Plan, governing law, and timing. For more information regarding these items, see the Plan attached hereto as Exhibit A. VIII. RISK FACTORS Holders of Claims against and Equity Interests in the Debtors should read and consider carefully the following risk factors and the other information in this Disclosure Statement, the Plan, the Plan Supplement and the other documents delivered or incorporated by reference in this Disclosure Statement and the Plan, before voting to accept or reject the Plan. These risk factors should not, however, be regarded as constituting the only risks involved in connection with the Plan and its implementation. Additional risks and other information about Lodgian, Inc. and the other Debtors can be found in Lodgian, Inc.'s annual report on Form 10-K for the fiscal year ended December 31, 2001, and quarterly reports on Form 10-Q for the fiscal quarters ended March 31, 2002 and June 30, 2002, and its other filings from time to time with the Securities and Exchange Commission, which are incorporated into this Disclosure Statement by reference. Copies of the Debtors' most recent annual and quarterly reports will be included in the Plan Supplement and may also be obtained over the Internet at www.sec.gov or www.freeedgar.com. A. CERTAIN BANKRUPTCY CONSIDERATIONS 1. General Risks Relating to Confirmation and Consummation Although each of the Debtors believes that the Plan will satisfy all requirements necessary for confirmation by the Bankruptcy Court, there can be no assurance that the Bankruptcy Court will reach the same conclusion. Moreover, there can be no assurance that modifications of the Plan will not be required for confirmation or that such modifications would not necessitate the resolicitation of votes. In addition, although each of the Debtors believes that the Effective Date will occur soon after the Confirmation Date, there can be no assurance as to such timing. 57 The Plan does not provide for any distribution to Class 3 Liquidating Subclasses, Class 9 Liquidating Subclasses, Class 10-A or Class 11. The Bankruptcy Code conclusively deems these Classes to have rejected the Plan. Notwithstanding the fact that these Classes are deemed to have rejected the Plan, the Bankruptcy Court may confirm the Plan if at least one impaired Class votes to accept the Plan (with such acceptance being determined without including the vote of any "insider" in such Class). Thus, for the Plan to be confirmed, one of the impaired Classes must vote to accept the Plan. As to each impaired Class that has not accepted the Plan, the Plan may be confirmed if the Bankruptcy Court determines that the Plan "does not discriminate unfairly" and is "fair and equitable" with respect to these Classes. Each of the Debtors believes that the Plan satisfies these requirements. For more information, see section IX.F. 2. Risks Relating to Plan Treatment of Mortgage Financings At this time, the Projections do not reflect a reduction in the principal amount of any Class 1 Claim. Further, the Debtors believe that it will reach agreement with its secured creditors that will not give rise to deficiency Claims. However, if the Debtors determine, based on a valuation of the underlying collateral, that any Class 1 Claim should be bifurcated into a reduced Secured Claim and an unsecured deficiency Claim, the affected secured creditor could raise potential issues with respect to its right to make an election under section 1111(b) of the Bankruptcy Code which would require the Debtor to give the applicable secured creditor a note in the full principal amount of the debt with the present value of the collateral. If the applicable secured creditor were to make this election, the total debt obligations of the applicable Reorganized Debtor(s) would be increased accordingly. However, the Debtors do not believe that the increase in principal amount would impair the feasibility of the Plan as it relates to any affected Debtors. 3. Matters Affecting Recoveries The estimates of recovery amounts and percentages in this Disclosure Statement are based on a number of assumptions including the Debtors' estimates of Allowed Claims in each Class. Actual recoveries may differ from such estimates if the Debtors' estimates of Allowed Claims prove to be inaccurate. The Debtors' estimates of Allowed Claims reflect the Debtors' reasonable judgment based on current information as of the date of this Disclosure Statement and the Debtors make no representation as to the accuracy of these amounts. 4. Loss of Franchise Agreements As discussed above, if any of the Debtors were required to terminate or reject any of their franchise agreements on a non-consensual basis, and if such franchisor were to assert a claim against such Debtor (either as franchisee or as a guarantor of obligations under the franchise agreement), then any Allowed Claim relating to such termination or rejection could reduce recoveries (if any) to the holders of Allowed General Unsecured Claims against such Debtors. The Plan Proponents do not believe that such risks are any greater than that attendant to the resolution of Disputed Claims generally. In addition, as of the date hereof, one franchisor, Marriott International Inc., has filed a motion for permission for relief from the automatic stay to terminate a "Fairfield" franchise agreement covering a Hotel Property owned by a Lodgian 58 Debtor (as well as a "Fairfield" franchise agreement covering a Hotel Property owned by a CCA Debtor). The affected Lodgian Debtor and the affected CCA Debtor are in discussions with Marriott regarding a consensual resolution of the motion but, in the absence of any agreement with Marriott, will contest the relief sought. In the event that the affected Lodgian Debtor and the affected CCA Debtor are unable to prevail in their defense of such motion, if prosecuted by Marriott, the Plan Proponents do not believe that the loss of this "flag" at the affected Hotel Property will affect their ability to confirm the Plan. Lodgian, Inc. has guaranteed the obligations under the Marriott franchise agreement. If that agreement is terminated as a result of Marriott's motion or otherwise, the resulting claim under Lodgian, Inc.'s guarantee of rejection damages could result in a dilution of the recoveries to unsecured creditors of Lodgian, Inc. 5. No Assurance of Feasibility The Debtors cannot assure you that the Reorganized Lodgian Debtors will be able to achieve the revenue or cash flow levels reflected in the Projections, which the Debtors have relied on to project their future business prospects. If any or all of the Reorganized Lodgian Debtors do not achieve the revenue or cash flow levels reflected in the Projections, such Debtor or Debtors may lack sufficient liquidity to continue operating as planned after the Effective Date. Failure to meet specified financial results would be likely to result in an event of default under the Exit Financing Facility. The Projections represent management's view as of the date of this Disclosure Statement based on current known facts as to the projected operations of the Reorganized Lodgian Debtors and the assumptions stated in section IV.B. However, while management believes that the assumptions underlying the Projections are reasonable, the Projections do not attempt to demonstrate the viability of the business in a "worst case" environment. Additionally, approximately 4,299 proofs of claim were filed as of the Bar Date against the Debtors and the CCA Debtors. As of the date of this Disclosure Statement, the Debtors have completed a preliminary review of these Claims, including reconciliation to their own books and records. However, due to the number and amount of Claims in dispute, as well as the risk of error inherent in reconciling such a large number of proofs of claim with the books and records of 81 different entities, it is possible that the actual amount of Allowed Claims may differ materially from the Debtors' estimates. The Debtors continue to seek to resolve Disputed Claims and further refine their claims analysis. Because distributions under the Plan and the Projections and the estimated valuation of the Reorganized Lodgian Debtors are linked to the amount and value of the Allowed Claims, any change in the Debtors' estimates of Allowed Claims resulting from further analysis of the proofs of claim filed as of the Bar Date could impact the Projections. Claim estimates for purposes of effectuating the reserve for Disputed Claims will ultimately be established, after notice and hearing, by the Bankruptcy Court. See section IV, "Financial Information, Projections and Valuation Analysis". Moreover, the Projections may not adequately account for continuing or unforeseen effects on the Reorganized Lodgian Debtors' operations that may result from the terrorist attacks that occurred on September 11, 2001 or from extended weakening in the U.S. economy. The long-term effects of these events on the overall global and U.S. economies, the Debtors' areas of business and the Debtors' operations cannot be predicted. Further, the Projections do not take into account any changes in interest rates during the Projection Period. 59 B. RISKS RELATING TO THE PLAN SECURITIES 1. Variances from Projections The Projections included in this Disclosure Statement reflect numerous assumptions concerning the anticipated future performance of the Reorganized Debtors and with respect to the prevailing market and economic conditions that are beyond the control of the Reorganized Debtors and that may not materialize. Each of the Debtors believes that the assumptions underlying the Projections are reasonable. However, unanticipated events and circumstances occurring subsequently to the preparation of the Projections may affect the actual financial results of each of the Debtors. Therefore, the actual results achieved throughout the periods covered by the Projections necessarily will vary from the projected results, which variations may be material and adverse. The impact, if any, that the Chapter 11 Cases may have on the operations of the Reorganized Debtors cannot be accurately predicted or quantified. The Debtors believe that the consummation of the Plan in an expeditious manner will have a minimal further adverse impact on relationships with customers, employees and suppliers, especially in view of the fact that the Plan is supported by the Committee. If confirmation and consummation of the Plan do not occur expeditiously, the Chapter 11 Cases could further adversely affect the Debtors' relationships with their customers, employees and suppliers. However, even expedited Chapter 11 Cases could have a detrimental impact on future sales and patronage due to the possibility that the Chapter 11 Cases may have created a negative image of the Debtors in the eyes of their customers and suppliers. Notwithstanding the support offered by the Committee for the Plan, the Debtors' continuation of the Chapter 11 Cases could further adversely affect the Debtors' relationships with their customers, suppliers and employees. Prolonged Chapter 11 Cases may make it more difficult for the Debtors to retain and attract management and other key personnel and would require senior management to spend an excessive amount of time and effort dealing with the Debtors' financial problems instead of focusing on the operation of their businesses. 2. Significant Holders Under the Plan, certain holders of Allowed Claims may receive distributions of shares in Reorganized Lodgian representing in excess of 5% of the outstanding shares of New Common Stock. If holders of a significant number of shares of Reorganized Lodgian were to act as a group, such holders may be in a position to control the outcome of actions requiring shareholder approval, including the election of directors. Further, the possibility that one or more of the holders of a number of shares of Reorganized Lodgian may determine to sell all or a large portion of their shares in a short period of time may adversely affect the market price of the stock of Reorganized Lodgian. 3. Lack of Trading Market Reorganized Lodgian will use reasonable commercial efforts to cause the shares of New Common Stock and, in the sole discretion of the Board of Directors of Reorganized Lodgian, shares of New Preferred Stock to be listed on a national securities exchange or a 60 qualifying interdealer quotation system as soon as practicable following the Effective Date. There can be no assurance, however, that the New Preferred Stock and New Common Stock will be listed on such exchange or system. Accordingly, there can be no assurance that a holder of such securities will be able to sell such shares in the future or as to the price at which such shares might trade. Even if such securities are subsequently listed, the Debtors cannot assure you that an active market for such securities will develop or, if any such market does develop, that it will continue to exist, or as to the degree of price volatility in any such market that does develop. 4. Dividend Policies Because all of the respective Debtors' cash flows will be used in the foreseeable future to make payments under the Exit Financing Facility and the restructured Mortgage Financings, Reorganized Lodgian does not anticipate paying dividends on the New Common Stock in the near future. As to the New Preferred Stock, dividends will be cumulative and compounded annually at the annual rate of 12.25%. For the first year following the Effective Date, such dividends will be declared and paid via the issuance of additional shares of New Preferred Stock, and for the second and third years following the Effective Date, the Board of Directors of Reorganized Lodgian will declare such dividends and will have the option to pay such dividends in cash or in kind with additional shares of New Preferred Stock. For a more detailed description of the New Preferred Stock, see section II.F.1. 5. Restrictions on Transfer Holders of Plan Securities who are deemed to be "underwriters" as defined in section 1145(b) of the Bankruptcy Code, including holders who are deemed to be "affiliates" or "control persons" within the meaning of the Securities Act, will be unable freely to transfer or to sell their securities except pursuant to (i) "ordinary trading transactions" by a holder that is not an "issuer" within the meaning of section 1145(b), (ii) an effective registration of such securities under the Securities Act and under equivalent state securities or "blue sky" laws, or (iii) pursuant to the provisions of Rule 144 and Rule 144A under the Securities Act or another available exemption from registration requirements. For a more detailed description of these matters, see section II.G, above. 6. Trading Values of the Plan Securities The estimated valuation of the Reorganized Lodgian Debtors used in this Disclosure Statement has been prepared based on commonly accepted valuation analysis and is not intended to represent the trading values of the Plan Securities in public or private markets. The estimated recoveries to Classes 3, 4, 7 and 8 are based on this theoretical valuation analysis. This valuation analysis is based on capital and financial market conditions as of the date of this Disclosure Statement and numerous assumptions, (the realization of many of which is beyond the control of the Reorganized Lodgian Debtors), including: the ability of the Reorganized Lodgian Debtors to (a) meet the Projections included in this Disclosure Statement; (b) maintain sufficient financial flexibility to fund operations, working capital requirements and capital expenditures; and (c) attract and retain key managers. 61 Even if the Reorganized Lodgian Debtors successfully achieves the Projections included in this Disclosure Statement, the trading market values for the Plan Securities could be adversely impacted by: (a) lack of trading liquidity for such securities; (b) lack of institutional research coverage; and (c) concentrated selling by recipients of the Plan Securities. C. FINANCING RISKS 1. Post-Reorganization Obligations The Reorganized Debtors may not be able to meet their post-reorganization debt obligations, operating expenses, working capital and other capital expenditures. The Debtors are currently highly leveraged. The Reorganized Debtors will be substantially less leveraged; however, the Debtors cannot assure you that the operating cash flow of the Reorganized Debtors will be adequate to pay the principal and interest payments under their post-reorganization indebtedness when due, as well as to fund all capital expenditures contemplated in the cash-flow Projections. 2. Limited Access to Working Capital The Reorganized Debtors' businesses are expected to require certain amounts of working capital. While the Projections assume that sufficient funds to meet their working capital needs for the foreseeable future will be available from the cash generated by the businesses of the Reorganized Lodgian Debtors and from the proceeds of the Exit Financing Facility, the ability of the Reorganized Debtors to gain access to additional capital, if needed, cannot be assured, particularly in view of competitive factors, industry conditions and the terms of the Exit Financing Facility and the restructured Mortgage Financings. The Lodgian Debtors expect that the Exit Financing Facility will contain restrictive financial and operating covenants and prohibitions, including provisions that will limit the ability of the Reorganized Lodgian Debtors to make capital expenditures and pay cash dividends and make other distributions to holders of New Preferred Stock and New Common Stock. Restrictions on capital investment are expected to be more restrictive if Reorganized Lodgian's cash flow is lower than projected. As noted above, failure to make necessary capital expenditures could have an adverse effect on the ability of the Reorganized Lodgian Debtors to remain competitive. D. RISKS ASSOCIATED WITH THE BUSINESSES The following categories of risks associated with each of the Debtors' businesses are set forth in their Registration Statement on Form S-4 filed with the Securities and Exchange Commission on August 13, 1999 (as amended on September 7, 1999): Risk Associated With The Lodging Industry - Economic Conditions, Oversupply, Travel Patterns and Other Conditions Beyond the Debtors' Control and Risk Related to Development of New Projects, Acquisitions and Renovations. Please refer to such filing for further discussion on this topic. 62 1. Certain Tax Implications Certain tax implications of the Debtors' bankruptcy and reorganization may increase the tax liability of the Reorganized Group. The U.S. federal income tax consequences of consummation of the Plan to holders of Claims or Equity Interests are complex and subject to uncertainty. Certain U.S. tax attributes of the Debtors, including net operating loss carryovers ("NOLs"), may be reduced or eliminated as a consequence of the Plan. The elimination or reduction of NOLs and such other tax attributes may increase the amount of tax payable by the Reorganized Group following the consummation of the Plan as compared with the amount of tax payable had no such reduction been required. See section XI, "Certain Federal Income Tax Consequences of the Plan", for a discussion of the U.S. federal income tax consequences for certain holders of Claims and Equity Interests and certain Debtors resulting from the consummation of the Plan. IX. CONFIRMATION OF THE PLAN A. CONFIRMATION HEARING CONFIRMATION HEARING The Court will hold the confirmation hearing at the following time and place: DATE AND TIME: commencing at 10:00 a.m. (Eastern time), on November 5, 2002. PLACE: The United States Bankruptcy Court, Southern District of New York, Alexander Hamilton Custom House, One Bowling Green, New York, New York 10004. JUDGE: The Honorable Burton R. Lifland The confirmation hearing may be adjourned from time to time by the respective Debtors or the Bankruptcy Court without further notice except for an announcement of the adjourned date made at the confirmation hearing or any subsequent adjourned confirmation hearing. 63 Section 1128(b) of the Bankruptcy Code provides that any party in interest may object to confirmation of a plan. Any objection to confirmation of the Plan must be in writing, state the name and address of the objecting party and the nature of the Claim or Equity Interest of such party, provide a concise statement of the basis for such objection or proposed modification, including, if applicable: (i) the specific page number of the Plan to which the objection refers; (ii) the specific language proposed to be deleted, if a deletion is sought; (iii) a draft of the precise language that the objecting party proposes be added or substituted; and (iv) the reasons and 64 statutory or other authority therefor and be filed, together with proof of service, with the Bankruptcy Court (with a copy to the chambers of the Honorable Judge Burton R. Lifland), and must further be served upon the following parties: (1) Cadwalader, Wickersham & Taft, 100 Maiden Lane, New York, New York 10038, Attn: Adam C. Rogoff, Esq., counsel to the Debtors and Debtors-in-Possession; (2) Curtis, Mallet-Prevost Colt & Mosle LLP, 101 Park Avenue, New York, New York 10178, Attn: Steven J. Reisman, Esq., co-counsel to the Debtors and Debtors-in-Possession; (3) Debevoise & Plimpton, 919 Third Avenue, New York, New York 10022, Attn: George E.B. Maguire, Esq., counsel for the Committee; and (4) Lodgian, Inc., et al., 3445 Peachtree Road, Suite 700, Atlanta, Georgia 30326, Attn: Daniel Ellis, Esq., in each case SO AS -- -- TO BE ACTUALLY RECEIVED NO LATER THAN 4 P.M. (EASTERN TIME) ON OCTOBER 28, 2002. Objections to confirmation of the Plan are governed by Rule 9014 of the Federal Rules of Bankruptcy Procedure. UNLESS AN OBJECTION TO CONFIRMATION IS TIMELY SERVED AND FILED, IT MAY NOT BE CONSIDERED BY THE BANKRUPTCY COURT. B. GENERAL REQUIREMENTS OF SECTION 1129 At the confirmation hearing, the Bankruptcy Court will determine whether the following confirmation requirements specified in section 1129 of the Bankruptcy Code have been satisfied: 1. The Plan complies with the applicable provisions of the Bankruptcy Code. 2. Each of the Debtors has complied with the applicable provisions of the Bankruptcy Code. 3. The Plan has been proposed in good faith and not by any means proscribed by law. 4. Any payment made or promised by each of the Debtors or by a person issuing securities or acquiring property under the Plan for services or for costs and expenses in, or in connection with, the Chapter 11 Cases, or in connection with the Plan and incident to the Chapter 11 Cases, has been disclosed to the Bankruptcy Court, and any such payment made before the confirmation of the Plan is reasonable or if such payment is to be fixed after confirmation of the Plan, such payment is subject to the approval of the Bankruptcy Court as reasonable. 5. Each of the Debtors has disclosed the identity and affiliations of any individual proposed to serve, after confirmation of the Plan, as a director, officer or voting trustee of the respective Debtors, affiliates of each of the Debtors participating in the Plan with each of the Debtors, or a successor to each of the Debtors under the Plan, and the appointment to, or continuance in, such office of such individual is consistent with the interests of creditors and equity holders and with public policy, and each of the Debtors has disclosed the identity of any insider that will be employed or retained by each of the Debtors, and the nature of any compensation for such insider. 65 6. With respect to each Class of Claims or Equity Interests, each holder of an impaired Claim or impaired Equity Interest either has accepted the Plan or will receive or retain under the Plan, on account of such holder's Claim or Equity Interest, property of a value, as of the Effective Date, that is not less than the amount such holder would receive or retain if the applicable Debtor was liquidated on the Effective Date under chapter 7 of the Bankruptcy Code. See discussion of "Best Interests Test," below. 7. Except to the extent that the Plan meets the requirements of section 1129(b) of the Bankruptcy Code (discussed below), each Class of Claims or Equity Interests has either accepted the Plan or is not impaired under the Plan. Class 3 Liquidating Subclasses, Class 8 (Old Lodgian Common Stock Interests), Class 9 Liquidating Subclasses, Subclasses in Division A of Class 10 (Third Party Owned Old Subsidiary Equity Interests) and Class 11 (Subordinated Claims), are deemed to have rejected the Plan and thus the Plan can be confirmed only if the requirements of section 1129(b) of the Bankruptcy Code are met. 8. Except to the extent that the holder of a particular Claim has agreed to a different treatment of such Claim, the Plan provides that Administrative Expense Claims and Priority Non-Tax Claims will be paid in full on the Effective Date and that Priority Tax Claims will receive on account of such Claims deferred cash payments, over a period not exceeding six years after the date of assessment of such Claims, of a value, as of the Effective Date, equal to the Allowed amount of such Claims. 9. At least one Class of impaired Claims has accepted the Plan, determined without including any acceptance of the Plan by any insider holding a Claim in such Class. 10. Confirmation of the Plan is not likely to be followed by the liquidation or the need for further financial reorganization of any of the Debtors or any successor to the Debtors under the Plan, unless such liquidation or reorganization is proposed in the Plan. See discussion of "Feasibility," below. C. BEST INTERESTS TESTS As described above, the Bankruptcy Code requires that each holder of an impaired Claim or Equity Interest either (i) accept the Plan or (ii) receive or retain under the Plan property of a value, as of the Effective Date, that is not less than the value such holder would receive if the applicable Debtor was liquidated under chapter 7 of the Bankruptcy Code. The first step in determining whether this test has been satisfied is to determine the dollar amount that would be generated from the liquidation of the applicable Debtor's assets and properties in the context of a chapter 7 liquidation case. The gross amount of cash that would be available for satisfaction of Claims and Equity Interests would be the sum consisting of the proceeds resulting from the disposition of the unencumbered assets and properties of the 66 applicable Debtor, augmented by the unencumbered cash held by the applicable Debtor at the time of the commencement of the liquidation case. The next step is to reduce that gross amount by the costs and expenses of liquidation and by such additional administrative and priority Claims that might result from the termination of the applicable Debtor's business and the use of chapter 7 for the purposes of liquidation. Any remaining net cash would be allocated to creditors and shareholders in strict priority in accordance with section 726 of the Bankruptcy Code. Finally, the present value of such allocations (taking into account the time necessary to accomplish the liquidation) are compared to the value of the property that is proposed to be distributed under the Plan on the Effective Date. The applicable Debtor's costs of liquidation under chapter 7 would include the fees payable to a trustee in bankruptcy, as well as those fees that might be payable to attorneys and other professionals that such a trustee might engage. Other liquidation costs include the expenses incurred during the Chapter 11 Cases that are Allowed Claims in the chapter 7 case, such as compensation for attorneys, financial advisors, appraisers, accountants and other professionals for the applicable Debtor and the Committee, and costs and expenses of members of the Committee, as well as other compensation Claims. In addition, Claims would arise by reason of the breach or rejection of obligations incurred and leases and executory contracts assumed or entered into by the applicable Debtor during the pendency of the Chapter 11 Cases. The foregoing types of Claims, costs, expenses, fees and such other Claims that may arise in a liquidation case would be paid in full from the liquidation proceeds before the balance of those proceeds would be made available to pay pre-petition secured, priority and unsecured Claims. Each of the Debtors believes that in a chapter 7 case, Class 3 Liquidating Subclasses, Class 8 (Old Lodgian Common Stock Interests), Class 9 Liquidating Subclasses, Subclasses in Division A of Class 10 (Third Party Owned Old Subsidiary Equity Interests) and Class 11 (Subordinated Claims) would receive no distribution of property. After consideration of the effects that a chapter 7 liquidation would have on the ultimate proceeds available for distribution to creditors in the Chapter 11 Cases, including (i) the increased costs and expenses of a liquidation under chapter 7 arising from fees payable to a trustee in bankruptcy and professional advisors to such trustee, (ii) additional costs associated with the rapid transfer or cessation of operations at the facilities and the erosion in value of assets in a chapter 7 case in the context of the expeditious liquidation required under chapter 7 and the "forced sale" atmosphere that would prevail, and (iii) the substantial increases in Claims that would be satisfied on a priority basis, each of the Debtors has determined that confirmation of the Plan will provide each holder of an Allowed Claim and Equity Interest with a recovery that is not less than such holder would receive pursuant to liquidation of each of the Debtors under chapter 7. Each of the Debtors also believes that the value of any distributions to each Class of Allowed Claims and Equity Interests in a chapter 7 case, including all secured Claims, would be less than the value of distributions under the Plan because such distributions in a chapter 7 case would not occur for a substantial period of time. In this regard, it is possible that distribution of the proceeds of the liquidation could be delayed for one year or more after the 67 completion of such liquidation in order to resolve Claims and Equity Interests and prepare for distributions. In the event that litigation was necessary to resolve Claims and Equity Interests asserted in a chapter 7 case, the delay could be prolonged and administrative expenses increased. D. LIQUIDATION ANALYSIS IMPORTANT NOTE ON THE DEBTORS' LIQUIDATION ANALYSIS The Liquidation Analysis presented below is an estimate, based on a number of significant assumptions, of the proceeds that may be generated in a hypothetical chapter 7 liquidation of each of the Debtors. The Liquidation Analysis is not, and does not purport to be, a valuation of the Debtors' assets or indicative of the values that may be realized in an actual liquidation. Attached as Exhibit B is a separate liquidation analysis for each Debtor (the "Liquidation Analysis"). Attached as Exhibit F are the assumptions underlying the Liquidation Analysis and a summary of liquidation recovery by Class. The Debtors have prepared the Liquidation Analysis in consultation with Chilmark. The Liquidation Analysis reflects the projected outcome of a hypothetical, orderly liquidation under chapter 7 of the Bankruptcy Code. In each case, the projected liquidation proceeds to each Class was less than or equal to the estimated recoveries under the Plan. Underlying the Liquidation Analysis are a number of estimates and assumptions that, although developed and considered reasonable by management, are inherently subject to economic, competitive and other contingencies beyond the control of the Debtors and management. It is possible that the time needed to dispose of the assets could exceed the timeframes assumed in this analysis, causing an adverse impact on the recoveries depicted herein. Similarly, other assumptions with respect to the liquidation process may be subject to change. Upon a liquidation, there is a general risk of unanticipated events which could have a significant impact upon projected cash receipts and disbursements. Cash flows could be impaired due to events such as: (i) an adverse impact on customers' perceptions; (ii) disruptions in the employee base; (iii) a loss of vendor support and/or change in terms; (iv) an adverse affect on the relationship with franchisors; (v) the inability to find a purchaser for a specific property within the six month liquidation period; and (vi) significant changes in the economy during the liquidation period. In addition, the proceeds from the liquidation have not been discounted to reflect any delay in distributions following the completion of the liquidation process. Applying an additional discount factor to the proceeds from the liquidation to account for any such delay would result in a lower range of recoveries for certain creditors. For all of the foregoing reasons, there can be no assurance that the values reflected in the Liquidation Analysis or recovery percentages would be realized if the Debtors were, in fact, liquidated in chapter 7 cases, and actual results could vary materially from those shown in this analysis. E. FEASIBILITY As a condition to confirmation of the Plan, the Bankruptcy Code requires, among other things, that the Bankruptcy Court determine that confirmation is not likely to be followed 68 by the liquidation or the need for further financial reorganization of the Debtors. In connection with the development of the Plan and for the purpose of determining whether the Plan satisfies this feasibility standard, the Debtors developed the Projections, which include certain income statement, cash flows and balance sheet projections for the Projection Period consisting of the fiscal years 2003 through 2005 for the Reorganized Lodgian Debtors on a consolidated basis. The Projections, together with a discussion of the assumptions underlying the Projections, are included in section IV.B, above, and Exhibit D, "Projections". Based on the Projections, the Debtors believe that the Reorganized Lodgian Debtors will be able to make all payments required pursuant to the Plan and, therefore, that confirmation of the Plan is not likely to be followed by liquidation or the need for further reorganization. Because the Plan contemplates an orderly liquidation of the Liquidating Debtors, there are no Projections required or provided for such Debtors. F. SECTION 1129(B) The Bankruptcy Court may confirm the Plan over the rejection or deemed rejection of the Plan by a Class of Claims or Equity Interests if the Plan "does not discriminate unfairly" and is "fair and equitable" with respect to such Class. 1. No Unfair Discrimination This test applies to Classes of Claims or Equity Interests that are of equal priority and are receiving different treatment under the Plan. The test does not require that the treatment be the same or equivalent, but that such treatment be "fair." 2. Fair and Equitable Test This test applies to Classes of different priority and status (e.g., secured versus unsecured) and includes the general requirement that no Class of Claims receive more than 100% of the amount of the Allowed Claims in such Class. As to the dissenting Class, the test sets different standards, depending on the type of Claims or Equity Interests in such Class: - Secured Creditors. Each holder of an impaired Secured Claim either (i) retains its liens on the property, to the extent of the amount of its Allowed Secured Claim and receives deferred cash payments having a value, as of the effective date, of at least the amount of such Allowed Claim, (ii) has the right to credit bid the amount of its Claim if its property is sold and retains its liens on the proceeds of the sale or (iii) receives the "indubitable equivalent" of its Allowed Secured Claim. - Unsecured Creditors. Either (i) each holder of an impaired unsecured Claim receives or retains under the plan property of a value equal to the amount of its Allowed Claim, or (ii) the holders of Claims and Equity Interests that are junior to the Claims of the dissenting Class will not receive any property under the Plan. 69 - Equity Interests. Either (i) each Equity Interest holder receives or retains under the Plan property of a value equal to the greater of (a) the fixed liquidation preference or redemption price, if any, of such Equity Interest and (b) the value of the Equity Interest, or (ii) the holders of Equity Interests that are junior to the Equity Interests of the dissenting Class will not receive or retain any property under the Plan. These requirements are in addition to other requirements established by case law interpreting the statutory requirement. Each of the Debtors believes that the Plan will satisfy the "fair and equitable" requirement notwithstanding that Class 3 Liquidating Subclasses, Class 8 (Old Lodgian Common Stock Interests), Class 9 Liquidating Subclasses, Subclasses in Division A of Class 10 (Third Party Owned Old Subsidiary Equity Interests) and Class 11 (Subordinated Claims) are deemed to reject the Plan because no Class that is junior to such Classes and Subclasses will receive or retain any property on account of the Claims or Equity Interests in such Class. X. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN A. LIQUIDATION UNDER CHAPTER 7 If no chapter 11 plan can be confirmed for any Debtor(s), the applicable Chapter 11 Cases may be converted to cases under chapter 7 of the Bankruptcy Code in which a trustee would be elected or appointed to liquidate the assets of the Debtors for distribution in accordance with the priorities established by the Bankruptcy Code. A discussion of the effect that a chapter 7 liquidation would have on the recoveries of holders of Claims is set forth in sections IX.C and IX.D, above. Each of the Debtors believes that liquidation under chapter 7 would result in smaller distributions being made to the respective holders of Claims and Equity Interests than those provided for in the Plan because of (i) the likelihood that other assets of each of the Debtors would have to be sold or otherwise disposed of in a less orderly fashion, (ii) additional administrative expenses attendant to the appointment of a trustee and the trustee's employment of attorneys and other professionals, and (iii) additional expenses and Claims, some of which would be entitled to priority, which would be generated during the liquidation and from the rejection of leases and other executory contracts in connection with a cessation of each of the Debtors' operations. In a chapter 7 liquidation, each of the Debtors believes that there would be no distribution to holders of Claims in Class 3 Liquidating Subclasses, Class 8 (Old Lodgian Common Stock Interests), Subclasses in Division A of Class 10 (Third Party Owned Old Subsidiary Equity Interests) and Class 11 (Subordinated Claims). B. ALTERNATIVE PLAN If the Plan is not confirmed, each of the Debtors or any other party in interest (if the applicable Debtor's exclusive period in which to file a Plan has expired) could attempt to formulate a different plan. Such a plan might involve either a reorganization and continuation of 69 the applicable Debtor's business or an orderly liquidation of the Debtor's assets under chapter 11. Each of the Debtors has concluded that the Plan enables creditors and equity holders to realize the most value under the circumstances. In a liquidation under chapter 11, each of the Debtors would still incur the expenses associated with closing or transferring to new operators numerous facilities. The process would be carried out in a more orderly fashion over a greater period of time. Further, if a trustee were not appointed, because such appointment is not required in a chapter 11 case, the expenses for professional fees would most likely be lower than those incurred in a chapter 7 case. Although preferable to a chapter 7 liquidation, each of the Debtors believes that liquidation under chapter 11 is a much less attractive alternative to creditors and equity holders than the Plan because of the greater return provided by the Plan. XI. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN The following discussion summarizes certain federal income tax consequences of the implementation of the Plan to certain Debtors and certain holders of Claims and Equity Interests. The following summary does not address the federal income tax consequences to (i) holders whose Claims are entitled to reinstatement or payment in full in cash, or are otherwise unimpaired under the Plan, (ii) holders of Equity Interests or Claims which are extinguished without a distribution in exchange therefor, and (iii) holders of Equity Interests which are otherwise unimpaired under the Plan. The following summary is based on the Internal Revenue Code of 1986, as amended (the "Tax Code"), Treasury Regulations promulgated thereunder, judicial decisions, and published administrative rules and pronouncements of the Internal Revenue Service ("IRS") as in effect on the date hereof. Changes in such rules or new interpretations thereof may have retroactive effect and could significantly affect the federal income tax consequences described below. The federal income tax consequences of the Plan are complex and are subject to significant uncertainties. None of the Debtors have requested or will request a ruling from the IRS or an opinion of counsel with respect to any of the tax aspects of the Plan. Thus, no assurance can be given as to the interpretation that the IRS will adopt. In addition, this summary does not address foreign, state or local tax consequences of the Plan, nor does it purport to address all federal income tax consequences of the Plan that may be relevant to specific taxpayers in light of their particular circumstances or to special classes of taxpayers (such as foreign taxpayers, broker-dealers, mutual funds, insurance companies, financial institutions, small business investment companies, regulated investment companies, tax-exempt organizations, investors in pass-through entities, dealers in securities, U.S. expatriates or persons who have acquired the Claims or the Equity Interests as part of a straddle, hedge, conversion transaction or other integrated investment). This discussion assumes that the various debt and other arrangements to which each of the Debtors is currently a party and any consideration issued by each of the Debtors under the Plan will be respected for federal income tax purposes in accordance with their form. 70 ACCORDINGLY, THE FOLLOWING SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING AND ADVICE BASED UPON THE INDIVIDUAL CIRCUMSTANCES PERTAINING TO A HOLDER OF A CLAIM OR AN EQUITY INTEREST. ALL HOLDERS OF CLAIMS OR EQUITY INTERESTS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS FOR THE FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES TO THEM OF THE IMPLEMENTATION OF THE PLAN. A. CONSEQUENCES TO CERTAIN DEBTORS The Debtors, other than those Debtors that are treated as partnerships for federal income tax purposes, file a consolidated federal income tax return (such Debtors filing a consolidated federal income tax return, collectively, the "Lodgian Group"). For federal income tax purposes, the Lodgian Group has consolidated net operating loss ("NOL") carryforwards of roughly $263 million as of December 31, 2001. As discussed below, the Lodgian Group's current year NOLs, if any, and NOL carryforwards will be substantially reduced, and may be subject to additional limitations upon implementation of the Plan. In addition, certain other tax benefits may be reduced, or subject to limitation, upon implementation of the Plan. The amount of such losses and other tax benefits may be adjusted during the course of the preparation of the Debtors' tax returns and remain subject to examination by the IRS. 1. Cancellation of Debt In general, the discharge of a debt obligation by a debtor for an amount less than the remaining balance of the debt obligation (as determined for federal income tax purposes) gives rise to cancellation of debt ("COD") income which must be included in the debtor's income, subject to certain exceptions. One of the exceptions applies to corporate and certain other debtors if the discharge is granted in a title 11 bankruptcy case or pursuant to a plan approved by a bankruptcy court. In general, no portion of the COD income recognized by debtors in bankruptcy is includable in income; however, a debtor must still reduce certain of its tax attributes - such as NOL carryforwards, current year NOLs, capital loss carryforwards, current year capital losses, tax credits and tax basis in assets - by the amount of any COD income. To the extent that the amount of COD income exceeds the tax attributes available for reduction, the remaining excludable COD income is simply forgiven. It is unclear whether the reduction in certain tax attributes (especially with respect to NOLs) should occur on a consolidated group or separate company basis, since the Debtors (other than Debtors treated as partnerships) file consolidated federal income tax returns with the other members of their group, and the IRS has, in certain cases, asserted that such reduction generally should occur on a consolidated basis. Any reduction in tax attributes does not occur until the first day of the taxable year following the year during which the COD income is realized. If advantageous, a debtor could elect to reduce the basis of depreciable property prior to any reduction in its NOL carryforwards. In the case of a partnership (or a limited liability company treated as a partnership for federal income tax purposes), the above described bankruptcy exception to COD income 71 applies at the partner level, rather than the partnership level, and is determined on the basis of the financial status of each partner. Thus, a corporate partner that is itself in bankruptcy should be able to apply the above bankruptcy exception to its allocable share of the COD income of the partnership. As a result of the discharge of Claims pursuant to the Plan, certain of the Debtors will incur COD income, resulting in a reduction of the NOL carryforwards, and, possibly, the tax basis in the assets of the Lodgian Group, effective as of the beginning of the taxable year following the taxable year in which the Effective Date occurs. The extent of such COD income and resulting tax attribute reduction will depend, in part, on the fair market value of the New Common Stock, New Preferred Stock and Warrants, the amount of cash distributed and the dollar amount of claims ultimately allowed. Based on the estimated enterprise value of the Reorganized Debtors (see section IV.C, above), it is anticipated that the Reorganized Debtors will incur approximately $230 million of COD income. As of the date of the filing of the Plan and Disclosure Statement, the Debtors estimate that after reducing the Lodgian Group's NOLs by the amount of COD income realized, at least $30 million of Lodgian Group NOL carryforwards will remain. Due to the magnitude of the NOL carryforwards, it is not anticipated that the Debtors' tax basis in their depreciable or amortizable assets will be significantly reduced, if at all. Accordingly, for purposes of calculating the Projections included in this Disclosure Statement (see section IV.B, above, and Exhibit D, "Projections"), it has been assumed that any reduction in the tax basis in depreciable or amortizable assets of the Debtors would be insignificant. 2. Limitations on NOL Carryforwards and Other Tax Benefits Following the implementation of the Plan, the NOLs, NOL carryforwards and certain other tax attributes of the Lodgian Group allocable to the period prior to the Effective Date of the Plan will be subject to the limitations imposed by Section 382 of the Tax Code. Under Section 382, after a corporation undergoes an "ownership change", the amount of its pre-change losses that may be utilized to offset future taxable income is, in general, subject to an annual limitation. Such limitation also may apply to certain losses or deductions that are "built-in" (i.e., economically accrued but unrecognized) as of the date of the ownership change that are subsequently recognized. The Debtors anticipate that an ownership change will occur with respect to the Lodgian Group upon implementation of the Plan. a. General Section 382 Limitation. The amount of the annual limitation to which a loss corporation may be subject (i) depends, in part, on whether the corporation is in bankruptcy and the ownership change occurs pursuant to a Plan confirmed by the bankruptcy court, and (ii) generally applies on a consolidated basis to an affiliated group of corporations that file a consolidated federal income tax return. In general, the amount of the annual limitation to which a corporation (or consolidated group) would be subject would be equal to the product of (i) the fair market value of the stock of the corporation (or, in the case of a consolidated group, the common parent) immediately before the ownership change (with certain adjustments) multiplied by (ii) the 72 "long-term tax-exempt rate" in effect for the month in which the ownership change occurs (4.91% for ownership changes occurring in September 2002). For a corporation in bankruptcy and, presumably, as in the case of the Debtors, when a consolidated group's parent corporation is in bankruptcy and undergoes the ownership change pursuant to a confirmed bankruptcy plan, and if certain other conditions are met, the stock value generally is determined immediately after (rather than before) the ownership change, and some of the adjustments that ordinarily would apply do not apply. For example, the annual limitation applicable to a corporation not in bankruptcy is generally determined after reduction of its stock value for any capital infusions within the two year period ending on the date of the ownership change, whereas the stock value of each of the Debtors for purposes of computing the annual limitation generally would not be so reduced. Regardless of whether the ownership change occurs pursuant to a confirmed plan, certain "anti-duplication" rules apply. These rules principally are intended to prevent the value of a nonconsolidated, more than 50% owned subsidiary from being taken into account both in the determination of such subsidiary's own annual limitation and, as a result of being an asset of the controlling corporation, indirectly in the determination of the annual limitation of the controlling corporation (or group). Similar rules or principles can apply within a consolidated group in those cases where the consolidated return regulations continue to require separate company (or subgroup) annual limitations. Any unused limitation may be carried forward, thereby increasing the annual limitation in the subsequent taxable year. However, if the corporation (or consolidated group) does not continue its historic business or use a significant portion of its assets in a new business for two years after the ownership change, the annual limitation resulting from the ownership change is zero. b. Built-In Gains and Losses. If a loss corporation (or consolidated group) has a net unrealized built-in gain at the time of an ownership change (determined by taking into account most assets and all items of "built-in" income and deductions), any built-in gains recognized during the following five years (up to the amount of the original net unrealized built-in gain) generally will increase the annual limitation in the year recognized, such that the loss corporation (or consolidated group) would be permitted to use its pre-change losses against such built-in gain income in addition to its regular annual allowance. On the other hand, if the loss corporation (or consolidated group) has a net unrealized built-in loss at the time of an ownership change, any built-in losses recognized during the following five years (up to the amount of the original net unrealized built-in loss) generally will be treated as a pre-change loss and will be subject to the annual limitation in the same fashion as a pre-change NOL carryforward. In addition, although this net built-in loss rule generally applies to consolidated groups on a consolidated basis, any corporation that joins the consolidated group within the preceding five years may have to be excluded from the group computation and tested for a net built-in loss on a separate company basis. Accordingly, even though a consolidated group of corporations may not have a net unrealized built-in loss on an overall group basis, the group may have a net unrealized built-in loss if certain members of the group are required to be excluded. Additionally, if the excluded member has a net built-in loss when tested on a separate company basis, any subsequently recognized built-in losses of such 73 corporation may be subject to a more restrictive annual limitation based on the separate value of such member. A loss corporation's (or consolidated group's) net unrealized built-in gain or loss generally will be deemed to be zero unless it is greater than the lesser of (i) $10 million or (ii) 15% of the fair market value of its gross assets (with certain adjustments) immediately before the ownership change. It is currently unclear whether each of the Debtors will be in a net unrealized built-in loss position or a net unrealized built-in gain position as of the Effective Date. 3. Alternative Minimum Tax In general, an alternative minimum tax ("AMT") is imposed on a corporation's "alternative minimum taxable income" ("AMTI") at a 20% rate to the extent that such tax exceeds the corporation's regular federal income tax for the year. AMTI is generally equal to regular taxable income with certain adjustments. For purposes of computing AMTI, certain tax deductions and other beneficial allowances are modified or eliminated. In particular, even though a corporation otherwise might be able to offset all of its taxable income for regular tax purposes by available NOL carryforwards, a corporation (or consolidated group) is generally entitled to offset no more than 90% of its AMTI with NOLs as recomputed for AMT purposes ("AMTNOLs"). Under a new law, however, up to 100% of AMTI can be offset with carrybacks of AMTNOLs generated in 2001 or 2002 and AMTNOLs carried forward to 2001 or 2002. In addition, if a corporation (or consolidated group) undergoes an "ownership change" within the meaning of Section 382 and is in a net unrealized built-in loss position on the date of the ownership change, the corporation's (or group's) aggregate tax basis in its assets would be reduced for certain AMT purposes to reflect the fair market value of such assets as of the change date. The application of this provision is unaffected by whether the special bankruptcy exception to the Section 382 annual limitation (and built-in loss) rules applies. Any AMT that the corporation pays generally will be allowed as a nonrefundable credit against its regular federal income tax liability in future taxable years when the corporation is no longer subject to AMT. B. CONSEQUENCES TO HOLDERS OF CERTAIN CLAIMS The federal income tax consequences of the Plan to holders of Claims against Lodgian, Inc. depend, in part, on whether such claims constitute "securities" for federal income tax purposes. For purposes of this discussion and the following sections, "Lodgian, Inc." includes any entity that is treated as a disregarded entity not separate from Lodgian, Inc. for federal income tax purposes. The term "security" is not defined in the Tax Code or in the regulations issued thereunder and has not been clearly defined by judicial decisions. The determination of whether a particular debt constitutes a "security" depends on an overall evaluation of the nature of the debt. One of the most significant factors considered in determining whether a particular debt is a security is its original term. In general, debt obligations issued with a weighted average maturity at issuance of five years or less (e.g., trade 74 debt and revolving credit obligations) do not constitute securities, whereas debt obligations with a weighted average maturity at issuance of ten years or more constitute securities. The following discussion does not necessarily apply to holders who have claims in more than one class relating to the same underlying obligation (such as where the underlying obligation is classified as partially secured and partially unsecured). Such holders should consult their tax advisors regarding the effect of such dual status obligations on the federal income tax consequences of the Plan to them. 1. Consequences to Holders of General Unsecured Claims Against Lodgian, Inc. That Do Not Constitute "Securities" Who Receive New Common Stock and New Preferred Stock In general, holders of General Unsecured Claims against Lodgian, Inc. that do not constitute "securities", who receive New Common Stock and New Preferred Stock, would recognize gain or loss in an amount equal to the difference between (i) the "amount realized" by the holder in satisfaction of its claim (other than any claim for accrued but unpaid interest) and (ii) the holder's adjusted tax basis in its claim (other than any claim for accrued but unpaid interest). For a discussion of the tax consequences of any claims for accrued interest, see section XI.B.7, below. For these purposes, the "amount realized" by a holder will equal the sum of the aggregate of (i) cash, if any, (ii) the fair market value of any New Preferred Stock, and (iii) the fair market value of any New Common Stock received by the holder (less any portion of such distribution required to be treated as imputed interest as a result of any such distribution being made after the Effective Date). Due to the possibility that a holder of a General Unsecured Claim may receive a distribution of New Preferred Stock and New Common Stock subsequent to the Effective Date in respect of any subsequently allowed disputed claims, the imputed interest provisions of the Tax Code may apply to treat a portion of the distribution to such holders as imputed interest. With respect to certain holders, such imputed interest may accrue over time using the constant interest method, in which case such holders may be required to include such imputed interest in income prior to the actual distribution. In addition, because distributions of New Preferred Stock and New Common Stock to such holders may be made after the Effective Date, recognition of any loss, and a portion of any gain, realized by a holder in satisfaction of its claim may be deferred until all such subsequent distributions are made. Such holders are urged to consult their tax advisors regarding the possible application of (or ability to elect out of) the "installment method" of reporting any gain that may be recognized by such holder with respect to its claim. Where gain or loss is recognized by a holder, the character of such gain or loss as long-term or short-term capital gain or loss or as ordinary income or loss will be determined by a number of factors, including the tax status of the holder, whether the claim constitutes a capital asset in the hands of the holder and how long it has been held, whether the claim was acquired 75 with market discount, and whether and to what extent the holder had previously claimed a bad debt deduction. A holder's aggregate tax basis in any New Preferred Stock and New Common Stock received will equal the fair market value of such New Preferred Stock and New Common Stock. The holding period for any New Preferred Stock and New Common Stock generally will begin the day following the issuance of such New Preferred Stock and New Common Stock. 2. Consequences to Holders of General Unsecured Claims Against Lodgian, Inc. That Constitute "Securities" Who Receive New Common Stock and New Preferred Stock The receipt of New Common Stock and New Preferred Stock in satisfaction of a General Unsecured Claim against Lodgian, Inc. that constitutes a "security" likely would constitute a "recapitalization" for federal income tax purposes. Assuming such exchange constitutes a "recapitalization," in general, the holder of a General Unsecured Claim against Lodgian, Inc. that constitutes a "security" will not recognize loss upon such exchange, but will recognize any gain to the extent of the fair market value of any consideration received other than New Preferred Stock and New Common Stock (such as proceeds from insurance). The character and timing of such gain would be determined in accordance with the principles discussed in the preceding section. The portion of any consideration allocable to a claim for accrued but unpaid interest (see section XI.B.7, below) or required to be treated as imputed interest due to the distribution of additional consideration after the Effective Date (see section XI.B.1, above), is excluded from the above calculation and taxed under separate rules. In the case of a recapitalization, a holder's aggregate tax basis in any New Preferred Stock and New Common Stock received in satisfaction of its claim (other than a claim or portion thereof for accrued but unpaid interest) will equal the holder's aggregate adjusted tax basis in its claim increased by any gain recognized with respect to such claim and decreased by the fair market value of any consideration other than New Preferred Stock and New Common Stock received with respect to such claim. Such tax basis would be allocated between the New Preferred Stock and New Common Stock based on their relative fair market values. In general, the holder's holding period for the New Preferred Stock and New Common Stock received will include the holder's holding period for the claim except to the extent that the New Preferred Stock and New Common were issued in respect of a claim for accrued but unpaid interest or treated as imputed interest. Notwithstanding the foregoing, it is possible that the IRS may seek to treat the receipt of New Preferred Stock and New Common Stock as part of a non-recognition transaction under Section 351 of the Tax Code. If the satisfaction of claims were so treated, holders would not recognize any loss, but would recognize any gain to the extent of the greater of (i) the fair market value of any consideration received other than New Common Stock (including the New Preferred Stock received and any proceeds from insurance) and (ii) the accrued market discount, if any (see section XI.B.8, below). The character and timing of such gain would be determined in accordance with the principles discussed in section XI.B.1, above. The portion of any consideration allocable to a claim for accrued but unpaid interest (see section XI.B.7, below) or required to be treated as imputed interest due to the distribution of additional consideration after 76 the Effective Date (see section XI.B.1, above), would be excluded from the above calculation and taxed under separate rules. A holder's aggregate tax basis in New Common Stock received in satisfaction of its claim would equal the holder's aggregate adjusted tax basis in such claim increased by any gain recognized with respect to such claim and decreased by the fair market value of any consideration other than New Common Stock received with respect to such claim. A holder's aggregate tax basis in New Preferred Stock received would equal the fair market value of such stock. In general, the holder's holding period for the New Common Stock received will include the holder's holding period for the claim except to the extent that the New Common Stock was issued with respect to a claim for accrued but unpaid interest or treated as imputed interest. Although the issue is not free from doubt, the Debtors intend to treat the transfer of New Common Stock and New Preferred Stock in satisfaction of a General Unsecured Claim against Lodgian, Inc. that constitutes a "security" as a "recapitalization" for federal income tax purposes. 3. Consequences to Holders of General Unsecured Claims Against Lodgian Debtors Other Than Lodgian, Inc. The receipt of New Preferred Stock and New Common Stock in exchange for General Unsecured Claims against Lodgian Debtors other than Lodgian, Inc. likely would not constitute a "recapitalization" or other "reorganization" transaction for federal income tax purposes. Accordingly, holders may recognize gain or loss in an amount equal to the difference between (i) the "amount realized" by the holder in satisfaction of its claim (other than any claim for accrued but unpaid interest), and (ii) the holder's adjusted tax basis in its claim (other than any claim for accrued but unpaid interest). See section XI.B.1, above for a discussion of the character and timing of gain or loss. For a discussion of the tax consequences of the portion of any claim attributable to accrued interest, see section XI.B.7, below. Assuming the exchange is taxable, the "amount realized" by a holder will equal the sum of the fair market values of New Preferred Stock and New Common Stock received by the holder (less any portion of such distribution required to be treated as imputed interest as a result of any such distribution being made after the Effective Date). See section XI.B.1, above for a discussion of the imputed interest rules. A holder's tax basis in the New Preferred Stock and New Common Stock received will equal the fair market value of such New Preferred Stock and New Common Stock, respectively, assuming the exchange of the holder's claim is taxable. Furthermore, the holding period for such New Preferred Stock and New Common Stock generally will begin the day following the issuance of such New Preferred Stock and New Common Stock. Notwithstanding the foregoing, it is possible that the IRS may seek to treat the receipt of New Preferred Stock and New Common Stock as part of a non-recognition transaction under Section 351 of the Tax Code. If the transaction were so treated, a holder would not be permitted to recognize any loss, but such holder would still be required to recognize any gain to the extent of the greater of (i) the fair market value of the New Preferred Stock received and (ii) the accrued market discount, if any (see section XI.B.8, below). The holder's tax basis and holding period in the New Preferred Stock will generally be the same as that of the New Preferred Stock received by a holder in a fully taxable transaction as described above. However, 77 the holder's tax basis in its New Common Stock will generally equal its tax basis in the claims surrendered, increased by the amount of gain recognized and decreased by the fair market value of the New Preferred Stock received. In addition, the holder's holding period in the New Common Stock would include its holding period in the claims. Although the issue is not free from doubt, the Debtors intend to treat the satisfaction of General Unsecured Claims against Lodgian Debtors other than Lodgian, Inc. for New Common Stock and New Preferred Stock as a fully taxable transaction, in which holders would recognize both gain and loss, as applicable. 4. Consequences to Holders of Senior Subordinated Notes Claims Because the Senior Subordinated Notes were issued by Lodgian Financing Corp. (rather than Lodgian, Inc.), the receipt of New Preferred Stock and New Common Stock in exchange for Senior Subordinated Notes likely would not constitute a "recapitalization" or other "reorganization" transaction for federal income tax purposes. Accordingly, holders may recognize gain or loss in an amount equal to the difference between (i) the "amount realized" by the holder in satisfaction of its claim (other than any claim for accrued but unpaid interest), and (ii) the holder's adjusted tax basis in its claim (other than any claim for accrued but unpaid interest). See section XI.B.1, above for a discussion of the character and timing of gain or loss. For a discussion of the tax consequences of the portion of any claim attributable to accrued interest, see section XI.B.7, below. Assuming the exchange is taxable, the "amount realized" by a holder will equal the sum of the fair market values of New Preferred Stock and New Common Stock received by the holder (less any portion of such distribution required to be treated as imputed interest as a result of any such distribution being made after the Effective Date). See section XI.B.1, above for a discussion of the imputed interest rules. A holder's tax basis in the New Preferred Stock and New Common Stock received will equal the fair market value of such New Preferred Stock and New Common Stock, respectively, assuming the exchange of the holder's claim is taxable. Furthermore, the holding period for such New Preferred Stock and New Common Stock generally will begin the day following the issuance of such New Preferred Stock and New Common Stock. Notwithstanding the foregoing, it is possible that the IRS may seek to treat the receipt of New Preferred Stock and New Common Stock as part of a non-recognition transaction under Section 351 of the Tax Code. If the transaction were so treated, a holder would not be permitted to recognize any loss, but such holder would still be required to recognize any gain to the extent of the greater of (i) the fair market value of the New Preferred Stock received and (ii) the accrued market discount, if any (see section XI.B.8, below). The holder's tax basis and holding period in the New Preferred Stock will generally be the same as that of the New Preferred Stock received by a holder in a fully taxable transaction as described above. However, the holder's tax basis in its New Common Stock will generally equal its tax basis in the Senior Subordinated Notes surrendered, increased by the amount of gain recognized and decreased by the fair market value of the New Preferred Stock received. In addition, the holder's holding period in the New Common Stock would include its holding period in its Senior Subordinated Notes. Although not free from doubt, the Debtors intend to treat the satisfaction by Lodgian Financing Corp. of Senior Subordinated Notes Claims for New Common Stock and New 78 Preferred Stock as a fully taxable transaction, in which holders would recognize both gain and loss, as applicable. 5. Consequences to Holders of CRESTS Junior Subordinated Debentures Claims Assuming that the CRESTS Junior Subordinated Debentures are treated as debt for federal income tax purposes, such debentures will constitute "securities," and the receipt of New Common Stock and Warrants in satisfaction of CRESTS Junior Subordinated Debentures likely would constitute a "recapitalization" for federal income tax purposes. Assuming such exchange is treated as a "recapitalization," in general, the holder of a CRESTS Junior Subordinated Debentures Claim will not recognize loss upon such exchange, but will recognize gain, if any, to the extent of any consideration received other than the New Common Stock and Warrants (such as proceeds from insurance). The portion of any consideration allocable to a claim for accrued but unpaid interest (see section XI.B.7, below) or required to be treated as imputed interest due to the distribution of such consideration after the Effective Date (see section XI.B.1, above) is excluded from the above calculation and taxed under separate rules. In addition, a holder's aggregate tax basis in any New Common Stock and Warrants received in satisfaction of its claim (other than a claim or portion thereof for accrued but unpaid interest) will equal the holder's aggregate adjusted tax basis in such claim increased by any gain recognized with respect to such claim and decreased by the fair market value of any consideration other than the New Common Stock and Warrants received with respect to such claim. Such tax basis would be allocated between the New Common Stock and Warrants based on relative fair market value. In general, the holder's holding period for the New Common Stock and Warrants received will include the holder's holding period for the claim except to the extent that the New Common Stock and Warrants were issued in respect of a claim for accrued but unpaid interest or treated as imputed interest. Notwithstanding the foregoing, it is possible that the IRS may seek to treat the receipt of New Common Stock and Warrants as part of a non-recognition transaction under Section 351 of the Tax Code. If so treated, holders would not recognize any loss, but would recognize any gain to the extent of the greater of (i) the fair market value of any consideration received other than New Common Stock (including the Warrants received and any proceeds from insurance) and (ii) the accrued market discount, if any (see section XI.B.8, below). The character and timing of such gain would be determined in accordance with the principles discussed in section XI.B.1, above. The portion of any consideration allocable to a claim for accrued but unpaid interest (see section XI.B.7, below) or required to be treated as imputed interest due to the distribution of additional consideration after the Effective Date (see section XI.B.1, above), would be excluded from the above calculation and taxed under separate rules. A holder's aggregate tax basis in New Common Stock received in satisfaction of its claim would equal the holder's aggregate adjusted tax basis in such claim increased by any gain recognized with respect to such claim and decreased by the fair market value of any consideration other than New Common Stock received with respect to such claim. A holder's aggregate tax basis in the Warrants received would equal the fair market value of such warrants. In general, the holder's holding period for the New Common Stock received will include the holder's holding period for the claim except to the extent that the New Common Stock was issued with respect to a claim for 79 accrued but unpaid interest or treated as imputed interest. Although the issue is not free from doubt, the Debtors intend to treat the issuance of New Common Stock and Warrants in satisfaction of CRESTS Junior Subordinated Debentures as a "recapitalization" for federal income tax purposes. 6. Consequences to Holders of Old Lodgian Common Stock Interests The receipt of New Common Stock, A Warrants and B Warrants in exchange for Old Lodgian Common Stock likely would be treated as a "recapitalization" for federal income tax purposes. Assuming such exchange constitutes a "recapitalization," in general, the holder of an Old Lodgian Common Stock Interest will not recognize loss upon such exchange, but will recognize gain, if any, to the extent of any consideration received other than New Common Stock, A Warrants and B Warrants (such as proceeds from insurance). The portion of any consideration required to be treated as imputed interest due to the distribution of such consideration after the Effective Date is excluded from the above calculation and taxed under separate rules (see section XI.B.1, above). In addition, a holder's aggregate tax basis in New Common Stock, A Warrants and B Warrants received in exchange for its Old Lodgian Common Stock Interest will equal the holder's aggregate adjusted tax basis in such interest, increased by any gain recognized with respect to such interest and decreased by any consideration other than New Common Stock, A Warrants and B Warrants received with respect to such interest. Such tax basis would be allocated between the New Common Stock, A Warrants and B Warrants based on their relative fair market values. In general, the holder's holding period for the New Common Stock, A Warrants and B Warrants received will include the holder's holding period for its Old Lodgian Common Stock Interest. Notwithstanding the foregoing, it is possible that the IRS may seek to treat the receipt of New Common Stock, A Warrants and B Warrants as part of a non-recognition transaction under Section 351 of the Tax Code. If so treated, holders would not recognize any loss, but would recognize any gain to the extent of the fair market value of any consideration received other than New Common Stock (including the A Warrants and B Warrants received and any proceeds from insurance). The character and timing of such gain would be determined in accordance with the principles discussed in section XI.B.1, above. The portion of any consideration allocable to a claim for accrued but unpaid interest (see section XI.B.7, below) or required to be treated as imputed interest due to the distribution of additional consideration after the Effective Date (see section XI.B.1, above), would be excluded from the above calculation and taxed under separate rules. A holder's aggregate tax basis in New Common Stock received in satisfaction of its claim would equal the holder's aggregate adjusted tax basis in such claim increased by any gain recognized with respect to such claim and decreased by the fair market value of any consideration other than New Common Stock received with respect to such claim. A holder's aggregate tax basis in the A Warrants and B Warrants received would equal the fair market value of such warrants. In general, the holder's holding period for the New Common Stock received will include the holder's holding period for the claim except to the extent that the New Common Stock was issued with respect to a claim for accrued but unpaid interest or treated as imputed interest. Although the issue is not free from doubt, the Debtors intend to treat the 80 issuance of New Common Stock, A Warrants and B Warrants in satisfaction of Old Lodgian Common Stock as a "recapitalization" for federal income tax purposes. 7. Distributions in Discharge of Accrued Interest Pursuant to the Plan, all distributions in respect of an allowed claim will be allocated first to the principal amount of the claim, with any excess allocated to the remaining portion of the claim. However, there is no assurance that such allocation would be respected by the IRS for federal income tax purposes. In general, to the extent that any amount received (whether stock, cash, or other property) by a holder of a debt is treated as received in satisfaction of accrued interest during its holding period, such amount will be taxable to the holder as interest income (if and to the extent not previously included in the holder's gross income). Conversely, a holder would generally recognize a deductible loss to the extent any accrued interest claimed was previously included in its gross income and is not paid in full. However, it is possible that the IRS may seek to deny loss recognition with respect to claims allocable to accrued interest held against Debtors other than Lodgian, Inc. by treating such claims as having been transferred in a non-recognition transaction. Although the issue is not free from doubt, the Debtors intend not to treat such claims as having been transferred in a non-recognition transaction. Each holder of a claim is urged to consult its tax advisor regarding the allocation of consideration and the deductibility of unpaid interest for tax purposes. 8. Market Discount A holder that purchased its claim from a prior holder with market discount will be subject to the market discount rules of the Tax Code. Under those rules, assuming that the holder has made no election to amortize the market discount into income on a current basis with respect to any market discount instrument, any gain recognized on the exchange of its claim (subject to a de minimis rule) generally would be characterized as ordinary income to the extent of the accrued market discount on such claim as of the date of the exchange. To the extent that a holder's claim is exchanged in a "recapitalization" for federal income tax purposes, any accrued market discount not treated as ordinary income upon such exchange should carry over, on an allocable basis, to any New Common Stock, New Preferred Stock, and/or Warrants received, such that any gain recognized by the holder upon a subsequent disposition of such New Common Stock, New Preferred Stock, or Warrants would be treated as ordinary income to the extent of any accrued market discount not previously included in income. 9. Treatment of Subsequent Distributions on New Preferred Stock and New Common Stock Distributions - In General. The amount of distributions, other than any constructive distributions on the New Preferred Stock (see discussion below), if any, by the Reorganized Debtors in respect of the New Common Stock and the New Preferred Stock will be equal to the amount of cash and the fair market value as of the date of distribution of any property distributed. Subject to the discussion in section XI.B.11, below, regarding redemption of New Preferred Stock, distributions generally will be treated for federal income tax purposes first as a taxable dividend to the extent of Reorganized Debtors' current and accumulated 81 earnings and profits (as determined for federal income tax purposes) and then as a tax-free return of capital to the extent of the holder's tax basis in its stock, with any excess treated as capital gain from the sale or exchange of the stock. PIK Distributions. Distributions on the New Preferred Stock will, for the first year following the Effective Date, and may, for the later years, be paid in kind with additional shares of New Preferred Stock. Any such distribution of additional shares of New Preferred Stock generally will be taxed under the general distribution rules described above. Under these rules, the amount of any such distribution generally will equal the fair market value of the New Preferred Stock so received on the distribution date and be treated for federal income tax purposes first as a taxable dividend to the extent of the Reorganized Debtors' current and accumulated earnings and profits (as determined for federal income tax purposes) and then as a tax-free return of capital to the extent of the holder's tax basis in its stock, with any excess treated as capital gain from the sale or exchange of the stock. In addition, a holder's tax basis in the New Preferred Stock so received will equal the fair market value of such stock on the distribution date, and such holder's holding period for such stock will commence on the day following the distribution date. Constructive Distributions on New Preferred Stock. Because the New Preferred Stock is mandatorily redeemable on the tenth anniversary of the Effective Date, if the New Preferred Stock is treated as having more than a de minimis "redemption premium" (i.e., an excess of the "issue price" of the New Preferred Stock over its redemption price), holders would be treated as receiving distributions totaling the amount of such "redemption premium" over the period of time during which the New Preferred Stock is held, based on a constant yield-to-maturity method that reflects compounding. The applicable sections of the Tax Code and Treasury Regulations do not state how the "issue price" of preferred stock is to be determined. If, as the Debtors believe, the "issue price" of preferred stock is determined in the same manner as the issue price of debt instruments, and the New Preferred Stock is not publicly traded within 30 days after the Effective Date, the "issue price" of the New Preferred Stock should equal its liquidation preference. However, there can be no assurance that the IRS will agree with the Debtors on the correct manner of determining the "issue price" of preferred stock. In addition, because the New Preferred Stock provides for cumulative dividends and its liquidation preference will increase by the amount of any accrued, unpaid dividends, the IRS may take the position that the amount of cumulative dividends must be added to the redemption price of the New Preferred Stock, thus creating a redemption premium. Although the issue is not free from doubt, the Debtors intend to take the position that the New Preferred Stock has no redemption premium. Distributions to Corporate Shareholders. In general, distributions to corporate shareholders that constitute dividends for federal income tax purposes will qualify for the 70% dividends received deduction, which is available to corporate shareholders that own less than 20% of the voting power or value of the outstanding stock of the distributing corporation (other than certain preferred stock not applicable here). A corporate shareholder holding 20% or more of the distributing corporation (other than certain preferred stock not applicable here) may be eligible for an 80% dividends received deduction. For purposes of applying the 20% ownership test, the New Preferred Stock likely would not be taken into account. No assurance can be given that the Reorganized Debtors will have sufficient earnings and profits (as determined for federal 82 income tax purposes) to cause any distributions to be eligible for a dividends received deduction. Dividend income that is not subject to regular federal income tax as a consequence of the dividends received deduction may be subject to the federal alternative minimum tax. The dividends received deduction is only available if certain holding periods and other taxable income requirements are satisfied. The length of time that a shareholder has held stock is reduced by any period during which the shareholder's risk of loss with respect to the stock is diminished by reason of the existence of certain options, contracts to sell, short sales, or similar transactions. Also, to the extent that a corporation incurs indebtedness that is directly attributable to an investment in the stock on which the dividend is paid, all or a portion of the dividends received deduction may be disallowed. In addition, any dividend received by a corporation may also be subject to the "extraordinary distribution" provisions of the Tax Code. 10. Subsequent Sale of New Common Stock or New Preferred Stock Any gain recognized by a holder upon a subsequent taxable disposition of New Preferred Stock or New Common Stock (including any New Common Stock received upon exercise of a Warrant) received pursuant to the Plan (or any stock or property received for it in a later tax-free exchange) will be treated as ordinary income to the extent of (i) any bad debt deductions (or additions to a bad debt reserve) claimed with respect to its claim and any ordinary loss deductions incurred upon satisfaction of its claim, less any income (other than interest income) recognized by the holder upon satisfaction of its claim, and (ii) with respect to a cash-basis holder, also any amounts which would have been included in its gross income if the holder's claim had been satisfied in full but which was not included by reason of the cash method of accounting. In addition, a portion of any gain recognized by a holder upon a subsequent taxable disposition of New Preferred Stock or New Common Stock may be treated as ordinary income under the "market discount" rules of the Tax Code. See section XI.B.8, above. 11. Redemption of New Preferred Stock The federal income tax treatment of a redemption to a holder of New Preferred Stock will depend on the particular facts relating to such holder at the time of the redemption. If, after applying certain constructive stock ownership rules, the redemption of such stock (i) is "not essentially equivalent to a dividend" with respect to the holder (taking into account any ownership of common stock), (ii) is "substantially disproportionate" with respect to the holder (defined generally as a greater than 20% reduction in a holder's voting stock interest in a corporation), or (iii) results in a "complete termination" of all such holder's equity interest in the corporation, then the receipt of cash or property by such holder will be treated as a taxable exchange with respect to which gain or loss will be recognized. In such a case, any gain recognized by a holder will nonetheless be treated as ordinary income to the extent of (i) any bad debt deductions (or additions to a bad debt reserve) claimed with respect to its claim and any ordinary loss deductions incurred upon satisfaction of its claim, less any income (other than interest income) recognized by the holder upon satisfaction of its claim, and (ii) any amounts received by cash-basis holders which would have been included in 83 the holder's gross income if the holder's claim had been satisfied in full but which was not included by reason of the cash method of accounting. If none of the above tests giving rise to taxable exchange treatment is satisfied in respect of a redemption of New Preferred Stock, the holder will be treated as having received an ordinary distribution with respect to such stock. The amount of such distribution generally will equal the amount of cash and the fair market value of property received in the redemption, and will be treated first as a taxable dividend to the extent of the Reorganized Debtors' current and accumulated earnings and profits, if any, and then as a tax-free return of capital to the extent of the holder's tax basis in the stock redeemed, with any excess treated as capital gain from the sale or exchange of such stock. See the discussion in section XI.B.9, above with respect to distributions to corporate shareholders. 12. Ownership and Disposition of Warrants A holder of a Warrant will not recognize gain or loss upon the exercise of such warrant (except possibly in respect of any cash received in lieu of fractional shares). A holder's tax basis in the New Common Stock received upon exercise of a Warrant will be equal to the sum of the holder's tax basis in the Warrant and the exercise price (less the portion of the holder's tax basis allocable to any fractional shares as to which the holder receives cash, as discussed below). The holding period of the New Common Stock received upon exercise of a Warrant will commence on the day following the exercise of such warrant. A holder who receives cash in lieu of a fractional share upon exercise of a Warrant should recognize capital gain or loss equal to the difference between the amount of cash received and the portion of the holder's tax basis in the Warrant allocable to such fractional share, assuming the Warrant is a capital asset in the hands of such holder. The presence of an adjustment to the exercise price of the Warrants under anti-dilution provisions may, under certain circumstances, result in constructive distributions to the holder. Conversely, the absence of an adjustment to the exercise price of the Warrants may result in a constructive distribution to the holders of the New Common Stock. Upon the lapse or disposition of a Warrant, the holder generally should recognize gain or loss equal to the difference between the amount received (nothing in the case of a lapse) and its tax basis in the warrant. In general, such gain or loss should be a capital gain or loss, long-term or short-term, depending on whether the Warrant was held as a capital asset and whether the requisite holding period was satisfied. 13. Information Reporting and Withholding All distributions to holders of allowed claims under the Plan are subject to any applicable withholding (including employment tax withholding). Under federal income tax law, interest, dividends, and other reportable payments may, under certain circumstances, be subject to "backup withholding" at a rate not to exceed 31%. Backup withholding generally applies if the holder (i) fails to furnish its social security number or other taxpayer identification number ("TIN"), (ii) furnishes an incorrect TIN, (iii) fails properly to report interest or dividends, or (iv) under certain circumstances, fails to provide a certified statement, signed under penalty of 84 perjury, that the TIN provided is its correct number and that it is not subject to backup withholding. Backup withholding is not an additional tax but merely an advance payment of tax, which may be refunded to the extent it results in an overpayment of tax. Certain persons are exempt from backup withholding, including, in certain circumstances, corporations and financial institutions. THE FOREGOING SUMMARY HAS BEEN PROVIDED FOR INFORMATIONAL PURPOSES ONLY. ALL HOLDERS OF CLAIMS AND EQUITY INTERESTS ARE URGED TO CONSULT THEIR TAX ADVISORS CONCERNING THE FEDERAL, STATE, LOCAL, and OTHER TAX CONSEQUENCES APPLICABLE UNDER THE PLAN. XII. CONCLUSION Each of the Debtors believes that the Plan is in the best interests of all of its creditors and equity holders and urges the holders of impaired Claims in Classes 1, 3, 4, 5, 10-A and 11 to vote to accept the Plan and to evidence such acceptance by returning their Ballots so that they will be received by the Voting Agent NOT LATER THAN 5:00 P.M. (PACIFIC TIME) ON OCTOBER 28, 2002. Dated: As of September 25, 2002 Respectfully submitted, LODGIAN, INC. By: /s/ David Hawthorne ------------------------------------ Name: David Hawthorne Title: Chief Executive Officer LODGIAN FINANCING 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. 85 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. ISLAND MOTEL ENTERPRISES, INC. KINSER MOTEL ENTERPRISES LAWRENCE HOSPITALITY ASSOCIATES, L.P. LITTLE ROCK LODGING ASSOCIATES, LIMITED PARTNERSHIP LODGIAN AMI, INC. LODGIAN HOTELS, INC. LODGIAN MOUNT LAUREL, INC. LODGIAN ONTARIO, INC. LODGIAN RICHMOND, LLC. MANHATTAN HOSPITALITY ASSOCIATES, L.P. MCKNIGHT MOTEL, INC. MELBOURNE HOSPITALITY ASSOCIATES, L.P. MINNEAPOLIS MOTEL ENTERPRISES, INC. MOON AIRPORT MOTEL, INC. NEW ORLEANS AIRPORT MOTEL ASSOCIATES, L.P. NH MOTEL ENTERPRISES, INC. PENMOCO, INC. RALEIGH-DOWNTOWN ENTERPRISES, INC. SAGINAW HOSPITALITY, L.P. SECOND FAYETTEVILLE MOTEL ENTERPRISES, INC. SERVICO AUSTIN, INC. SERVICO CEDAR RAPIDS, INC. SERVICO CENTRE ASSOCIATES, LTD. SERVICO COLUMBIA, INC. SERVICO COUNCIL BLUFFS, INC. SERVICO FORT WAYNE, INC. SERVICO FRISCO, INC. SERVICO GRAND ISLAND, INC. SERVICO HOTELS I, INC. SERVICO HOTELS II, INC. 86 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. SIOUX CITY HOSPITALITY, L.P. WASHINGTON MOTEL ENTERPRISES, INC. WORCESTER HOSPITALITY, L.P. By: /s/ Daniel Ellis ------------------------------------ Name: Daniel Ellis Title: Authorized Officer OFFICIAL COMMITTEE OF UNSECURED CREDITORS By: /s/ Sean Armstrong ------------------------------------ Name: Sean Armstrong Title: Chairman 87 EXHIBIT A DEBTORS' JOINT PLAN OF REORGANIZATION Please see the attached. 88 EXHIBIT B ESTIMATED PLAN RECOVERIES AND LIQUIDATION ANALYSIS BY DEBTOR The material contained in this Exhibit B reflects the financial analysis conducted by the Debtors and their financial advisor. For each Debtor, this Exhibit contains a set of columns labeled "Recovery" setting forth the estimated reorganization value of the Debtor, the categories and estimated amount of Claims against such Debtor, and the estimated percentage recovery on those Claims using the Bankruptcy Code's strict priority scheme for payment of Claims. A similar analysis is provided in the second set of columns labeled "Liquidation" assuming a hypothetical liquidation of the Debtors in a chapter 7 bankruptcy proceeding, utilizing the assumptions set forth in Exhibit F to the Disclosure Statement. For the "Recovery" case, the estimated reorganization value of individual Debtors (the amount shown on the line labeled "Total Estimated Value") is composed mainly of the estimated value of hotel assets, which is reflected in the line labeled "Hotel Assets Estimated Value" and was generally determined by applying a consistent valuation multiple to each Debtor's trailing twelve month EBITDA (the amount shown on the line labeled "Operating Profit"), subject to certain adjustments. The estimated value of any non-hotel assets is shown on the line labeled "Non-Hotel Assets Estimated Value." For the "Liquidation" case, the estimated liquidation value of individual Debtors was calculated using approximately 80% of the "Recovery" value to reflect the reduced proceeds that the Debtors believe would result in a liquidation auction sale as compared to going concern value. Also, in the "Liquidation" case, liquidation costs estimated at 10% of gross proceeds are deducted reflecting the payment of chapter 7 trustee fees and other direct sale costs, including other professional fees. Please see the attached. 89 EXHIBIT C ESTIMATED CLASS 3 ALLOWED CLAIMS AND RECOVERIES AND ALLOCATIONS OF CLASS 3 PLAN SECURITIES Please see the attached. 90 EXHIBIT D PROJECTIONS PRINCIPAL ASSUMPTIONS Overall 1. The Effective Date of the Plan is December 31, 2002. 2. The recoveries and treatment of each Class of Claims and Equity Interests are those set forth in the Plan. 3. From and after the Effective Date: 1. The consolidated results, assets and liabilities of the Reorganized Lodgian Debtors exclude the respective results, assets and liabilities of the Liquidating Debtors and the CCA Debtors. 2. The Reorganized Lodgian Debtors' 30% ownership interest in Columbus Hospitality Associates, L.P., a Debtor, is increased to greater than 50% and therefore the results, assets and liabilities of Columbus Hospitality Associates, L.P. are included in the Projections for the Reorganized Lodgian Debtors. 3. The Reorganized Lodgian Debtors' majority ownership interests in each of New Orleans Airport Motel Associates, L.P. and Servico Centre Associates, Ltd., each a Debtor and owner of a Hotel Property, is increased to 85% or greater. 4. No purchases or sales of hotels occur during the Projection Period. 5. The mortgage financing on the hotel property owned by Macon Hotel Associates, LLC, which matures in September 2003, is extended on the same terms through the end of the Projection Period. The Lodgian Debtors currently have a 60% ownership interest in Macon Hotel Associates, LLC, which is not a Debtor. Accordingly, the results, assets and liabilities of Macon Hotel Associates, LLC are included in the Projections for the Reorganized Lodgian Debtors. Income Statement 6. The income statements for 2002 are comprised of six months actual and six months forecast operating results and exclude the Liquidating Debtors and the CCA Debtors. Depreciation is based upon historical cost, whereas depreciation expense for the Projection Period is based upon the fair value of assets calculated under the fresh-start accounting methodology. 7. Present economic conditions continue through the 3rd quarter of 2003 and then improve gradually during the remainder of the Projection Period. Accordingly, occupancy and 91 average daily rate ("ADR") are assumed to increase gradually through the Projection Period. 8. Market share (as reflected in annual change in revenue per available room ("RevPAR") compared with competing hotels) remains constant. 9. Annual increases in operating profit result from increased revenues rather than improved efficiencies. 10. Management fees for all hotels are 4% of total revenues. 11. The cost of property and general liability insurance has been increased by more than 20% for the year ending 2003 to reflect increased industry costs. No further changes are assumed for 2004 and 2005. 12. Current interest rates have been used for variable rate financing and have been held constant throughout the Projection Period. 13. Depreciation has been calculated on the fair value of the fixed assets as shown in the fresh start balance sheet using management's estimate of the remaining useful life on a straight line basis consistent with prior years. 14. The costs of the Exit Financing Facility, estimated at approximately $8 million, have been charged to the Reorganized Lodgian Debtors and are amortized over two years, which is the original term of the Exit Financing Facility. 15. Unusual expenses in 2003 include an estimated $2.6 million for the Reorganized Lodgian Debtors for residual Chapter 11 reorganization costs. 16. Federal taxable income for the Reorganized Lodgian Debtors during the Projection Period is assumed to be offset by net operating losses brought forward and accordingly no payment is shown for taxes nor is any charge or credit shown for Federal tax provisions during the Projection Period. A charge for and payment of State taxes has been assumed at $0.5 million in fiscal 2003 increasing to $1 million in fiscal 2005. Pro Forma Balance Sheet 1. The pro forma balance sheets show (a) the fresh start accounting treatment of anticipated Allowed Claims and Equity Interests as contemplated by the Plan and (2) debt discharge contemplated by the Plan. The pro forma balance sheets illustrate the pro forma unaudited pre-confirmation balance sheets and pro forma adjustments to record the Plan confirmation which, when combined, form the pro forma unaudited balance sheets of the Reorganized Lodgian Debtors as of December 31, 2002. 2. Fixed assets have been restated to fair value in accordance with reorganization fresh start principles - the effect has been to reduce the net book value by approximately $162 million. 92 3. Long term secured debt of the Reorganized Lodgian Debtors includes (a) the variable rate Exit Financing Facility, which is secured by 56 Hotel Properties, (b) the Mortgage Financings (other than the GMAC-Orix Mortgage Financing, the Roundabout Mortgage Financing and the CCA Mortgage Financing), which, as restructured pursuant to the Plan, accrue interest at their pre-petition rates or, in the case of the DDL Kinser and Wells Fargo Mortgage Financings, at the modified rate specified herein and (c) the mortgage financing on the Macon Hotel Associates, LLC hotel property, which continues at the existing interest rate. 4. $13.6 million of priority tax claims payable over 5 years at an assumed rate of interest of 3.5% are included in other long term debt of the Reorganized Lodgian Debtors. Interest is paid currently on all other long term debt. 5. Stockholders' equity of the Reorganized Lodgian Debtors has been valued at a total of $214 million ($89 million for common equity and $125 million for preferred stock). The New Preferred Stock has a 12.25% coupon, which accrues from the Effective Date with the first cash dividend payments commencing in the first quarter of 2004. PROJECTIONS Please see the attached income statement, balance sheet, cash flow statement, pro forma consolidated balance sheet and related notes. 93 LODGIAN, INC. PROJECTED CONSOLIDATED FINANCIAL STATEMENTS ($ MILLIONS)
PREDECESSOR REORGANIZED LODGIAN DEBTORS ----------- -------------------------------------------- 2002 2003 2004 2005 ----------- ---------- ---------- ---------- INCOME STATEMENT Available Rooms (1) 5,715,293 5,715,293 5,730,951 5,715,293 Revenues: Rooms $ 253.3 $ 265.6 $ 284.7 $ 300.0 Food and beverage 77.6 79.7 83.1 85.2 Other 13.6 13.1 13.7 14.0 ---------- ---------- ---------- ---------- Total revenues 344.5 358.3 381.5 399.2 ---------- ---------- ---------- ---------- Operating expenses: Direct 135.2 138.5 143.6 147.9 General, administrative and other 144.4 148.7 154.7 159.0 Depreciation & amortization 49.7 44.9 47.1 44.8 Restructuring expenses 21.7 2.6 -- -- ---------- ---------- ---------- ---------- Total operating expenses 351.1 334.6 345.4 351.7 ---------- ---------- ---------- ---------- Operating profit (6.6) 23.7 36.1 47.5 Other (income)/expense: Interest income and other (0.3) -- -- -- Interest expense 31.9 28.0 26.7 24.5 Minority interest (0.4) -- -- -- ---------- ---------- ---------- ---------- Income/(loss) before taxes (37.8) (4.3) 9.5 23.0 Provision for income taxes (0.4) (0.5) (0.8) (1.0) ---------- ---------- ---------- ---------- Net income/(loss) (38.2) (4.8) 8.7 22.0 Less preferred stock dividends -- (16.0) (17.3) (17.3) ---------- ---------- ---------- ---------- Net income/(loss) attributable to common shareholders $ (38.2) $ (20.9) $ (8.5) $ 4.7 ========== ========== ========== ========== EBITDA 44.0 68.5 83.2 92.3 Unusual Expenses 21.7 2.6 -- -- ---------- ---------- ---------- ---------- EBITDA before unusual expenses $ 65.7 $ 71.1 $ 83.2 $ 92.3 ========== ========== ========== ==========
Notes: (1) Increase in available rooms in 2004 due to leap year (2) Excludes CCA, GMAC/Orix, and Roundabout Debtors Please refer to Principal Assumptions 94 LODGIAN, INC. PROJECTED CONSOLIDATED FINANCIAL STATEMENTS- REORGANIZED LODGIAN DEBTORS ($ MILLIONS)
2002 2003 2004 2005 ------ ------ ------ ------ BALANCE SHEET Cash balance $ 15.5 $ 14.2 $ 5.0 $ 5.0 Cash - restricted 9.3 9.3 9.3 9.3 Accounts receivable 11.7 12.2 13.0 13.6 Inventories 5.5 6.0 6.1 6.2 Prepaid expenses 10.0 9.1 9.1 9.1 ------ ------ ------ ------ Total current assets 52.0 50.8 42.5 43.2 Property & equipment, net 604.9 591.0 565.3 538.4 Capex escrows 4.2 4.4 4.4 4.4 Other assets 8.1 4.1 -- -- ------ ------ ------ ------ TOTAL ASSETS $669.2 $650.3 $612.2 $586.1 ====== ====== ====== ====== Accounts payable $ 9.3 $ 9.9 $ 10.5 $ 11.0 Accrued liabilities 35.6 31.1 33.0 34.6 Advance deposits 1.8 1.7 1.8 1.9 ------ ------ ------ ------ Total current liabilities 46.7 42.7 45.3 47.5 Merrill Lynch financing 286.2 283.2 273.5 247.4 Other long term secured debt 105.1 100.7 80.9 76.6 Other long term debt 13.6 10.9 8.2 5.4 Minority Interest 3.7 3.7 3.7 3.7 Preferred Stock 125.0 141.0 141.0 141.0 Stockholders' equity 89.0 68.1 59.6 64.3 ------ ------ ------ ------ TOTAL LIABILITIES & EQUITY $669.2 $650.3 $612.2 $586.1 ====== ====== ====== ======
Please refer to Principal Assumptions 95 LODGIAN, INC. PROJECTED CONSOLIDATED FINANCIAL STATEMENTS- REORGANIZED LODGIAN DEBTORS ($ MILLIONS)
2003 2004 2005 ----- ----- ----- CASH FLOWS Net income/(loss) $(4.8) $ 8.7 $22.0 Depreciation & amortization 44.9 47.1 44.8 Changes in operating assets & liabilities: Accounts receivable (0.5) (0.7) (0.6) Inventory (0.5) (0.1) (0.1) Accounts payable 0.6 0.6 0.5 Accrued liabilities (4.5) 1.9 1.6 Advance deposits (0.1) 0.1 0.1 ----- ----- ----- Net cash from operations 35.9 57.6 68.3 Investing: Capital improvements, gross (26.9) (17.3) (18.0) Net funding to capex escrow (0.1) -- -- ----- ----- ----- Net cash from investing (27.1) (17.3) (18.0) Financing: Additional repayment of ML financing -- (5.2) (20.1) Repayment of long term debt (7.4) (24.3) (10.3) Repayment of other debt (2.7) (2.7) (2.7) Preferred stock dividends -- (17.3) (17.3) ----- ----- ----- Net cash from financing (10.1) (49.5) (50.3) ----- ----- ----- Net change in cash (1.3) (9.2) -- Cash balance, beginning 15.5 14.2 5.0 ----- ----- ----- Cash balance, ending $14.2 $ 5.0 $ 5.0 ===== ===== =====
Please refer to Principal Assumptions 96 REORGANIZED LODGIAN DEBTORS PRO FORMA CONSOLIDATED BALANCE SHEET DECEMBER 31, 2002 (Unaudited) (Dollars in millions)
Projected Projected Precon- Precon- firmation firmation Deduct Balance Balance Deduct Round- Add Deduct Sheet (as Sheet CCA about Columbus GMAC/Orix adjusted) --------- ------ ------ -------- --------- ---------- ASSETS Current assets: Cash and cash equivalents ..................................... $ 17.9 $ 1.7 $ 0.9 $ 0.2 $ 16.9 Cash restricted (including cash escrows for LC backing) ............................................ 7.6 3.5 0.4 3.7 Accounts receivable, net of allowances ........................ 14.1 1.8 0.2 0.8 11.7 Inventories ................................................... 7.4 1.2 0.1 0.1 0.7 5.5 Prepaid expenses and other current assets ..................... 8.2 0.5 0.7 7.0 ------ ------ ----- ----- ------ ------ Total current assets ................................... 55.2 8.7 0.1 1.2 2.8 44.8 Property and equipment, net ........................................ 895.5 107.8 1.7 7.0 26.3 766.7 Deposits for capital expenditures .................................. 5.8 1.5 0.1 4.2 Other assets, net .................................................. 2.7 0.1 0.1 2.5 ------ ------ ----- ----- ------ ------ $959.3 $118.1 $ 1.8 $ 8.2 $ 29.3 $818.3 ====== ====== ===== ===== ====== ====== LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable ............................................. $ 11.4 $ 1.0 $ 0.2 $ 0.1 $ 1.0 9.3 Other accrued liabilities ................................... 39.8 2.1 0.4 1.5 36.6 Advance deposits ............................................ 2.0 0.1 0.1 1.8 Current portion of long-term debt and capital lease obligations ........................................ 0.3 -- -- 0.3 ------ ------ ----- ----- ------ ------ Total current liabilities ................................... 53.5 3.2 0.2 0.5 2.6 48.0 Other long-term debt and capital lease obligations............................................. 7.3 -- 7.3 Liabilities Subject to Compromise ................................. 928.7 111.4 1.9 6.2 27.7 793.9 Merrill Lynch financing ........................................... -- -- GMAC/Orix financing ............................................... -- Other Long Term Secured Debt ...................................... -- -- Other Long Term Debt .............................................. -- -- Minority interests ................................................ 6.7 6.7 Stockholders' (deficit) equity: Common stock (old) ............................................. 0.3 0.3 Common stock (new) ............................................. -- Preferred stock ................................................ -- -- Additional paid-in capital ..................................... 263.3 263.3 Accumulated deficit ............................................ (299.1) 3.5 (0.3) 1.5 (1.0) (299.8) Accumulated other comprehensive loss ........................... (1.4) (1.4) ------ ------ ----- ----- ------ ------ Total stockholders' deficit ............................. (36.9) 3.5 (0.3) 1.5 (1.0) (37.6) ------ ------ ----- ----- ------ ------ $959.3 $118.1 $ 1.8 $ 8.2 $ 29.3 $818.3 ====== ====== ===== ===== ====== ====== Debt Merrill For- Lynch giveness & Reorganized Financing Fresh Start Other Balance Sheet --------- ----------- ----- ------------- ASSETS Current assets: Cash and cash equivalents ..................... $ (1.9) $ 0.5 $ 15.5 Cash restricted (including cash escrows for LC backing) ............................ 7.1(b) (0.5) (1.0)(e) 9.3 Accounts receivable, net of allowances ........ 11.7 Inventories ................................... 5.5 Prepaid expenses and other current assets ..... 2.0(b) 1.0(e) 10.0 ------ ------- ------ ------ Total current assets ................... 7.2 -- -- 52.0 Property and equipment, net ........................ (161.8)(d) 604.9 Deposits for capital expenditures .................. 4.2 Other assets, net .................................. 8.1(a) (2.5)(d) 8.1 ------ ------- ------ ------ $ 15.3 $(164.3) $ -- $669.2 ====== ======= ====== ====== LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable ............................. 9.3 Other accrued liabilities ................... (1.0)(b) 35.6 Advance deposits ............................ 1.8 Current portion of long-term debt and capital lease obligations ........................ (0.3) -- Total current liabilities ................... (1.0) (0.3) 46.7 Other long-term debt and capital lease obligations ............................ (7.3) -- Liabilities Subject to Compromise ................. (262.3)(b) (111.1)(f) -- Merrill Lynch financing ........................... 286.2 286.2 GMAC/Orix financing ............................... -- Other Long Term Secured Debt ...................... 105.1(f) 105.1 Other Long Term Debt .............................. 13.6 13.6 Minority interests ................................ (3.0)(d) 3.7 Stockholders' (deficit) equity: Common stock (old) ............................. (0.3) -- Common stock (new) ............................. 89.0(c) 89.0 Preferred stock ................................ 125.0(c) 125.0 Additional paid-in capital ..................... (263.3)(d) -- Accumulated deficit ............................ (7.6)(b) 307.4(d) -- Accumulated other comprehensive loss ........... 1.4(d) -- ------ ------- ------ ------ Total stockholders' deficit ............. (7.6) 259.2 -- 214.0 ------ ------- ------ ------ $ 15.3 $(164.3) $ -- $669.2 ====== ======= ====== ======
The Projections should be read only in conjunction with the assumptions, qualifications and explanations under the caption "- Projected Financial Information". 97 LODGIAN, INC. NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET a) Reflects financing fees and expenses associated with the establishment of the Exit Financing Credit Facility. b) Reflects the payment of (i) cure payments for assumptions of executory contracts; (ii) repayment of certain secured debt; (iii) certain professional fees, deposits and other expenses related to the Reorganization Cases; (iv) cash collateralization of letters of credit; and (v) management bonuses. c) Reflects distribution of equity under the Plan. d) Reflects the write-down of identifiable assets to fair value in accordance with fresh-start reporting as well as other fresh start reporting adjustments. e) Reflects reclassification of deposit. f) Reflects the following treatment of debt: Lehman/CriimiMae $ 23.9 Local Federal 2.5 GMAC 5.3 First Union 3.4 DLJ/Column/CriimiMae 29.6 DLJ/Column 9.4 Column/CriimiMae 3.4 Chase 11.7 Wells Fargo 5.8 United Capital/Hudson United 0.2 Albany - deferred rent 2.3 Promissory note (priority tax claims) 13.6 ------ LIABILITIES SUBJECT TO COMPROMISE 111.1 Plus Macon (previously not subject to compromise) 7.6 Less Priority tax claims (shown separately) (13.6) ------ OTHER LONG TERM SECURED DEBT $105.1 ======

98 EXHIBIT E COMMITMENT LETTER AND SUMMARY OF PRINCIPAL TERMS OF EXIT FINANCING FACILITY Please see the attached. 99 EXHIBIT F LIQUIDATION ANALYSIS ASSUMPTIONS AND SUMMARY OF LIQUIDATION RECOVERY BY CLASS The following major assumptions have been made in the liquidation analysis set forth in this Exhibit F: 1. The liquidation of assets commences on January 1, 2003 and is completed by June 30, 2003. 2. No additional income tax liabilities or other claims arise from the liquidation of the Debtors' assets. 3. During the liquidation process, the Debtors continue to operate their hotels as a going concern. 4. The Debtors are liquidated under the direction of a trustee appointed by the Bankruptcy Court who will be entitled to 3% of the gross liquidation proceeds as fees. 5. Other professionals, such as real estate brokers, attorneys and other advisors, will be utilized in order to expedite the liquidation process. In addition, corporate office and regional employees are assumed to assist in the liquidation process and receive severance payments. These and other direct costs related to the sales of the individual properties are estimated at 7% of the gross liquidation values. 6. Liens against the properties, such as property taxes, are deducted from the gross liquidation proceeds to arrive at the net liquidation proceeds available for creditors. 7. Any cash generated by the hotels during the liquidation period and since the Chapter 11 petitions were filed is assumed to be consumed by operating expenses, management fees, capital expenditures, administrative costs and interest expense on secured debt. 8. Proceeds from Hotel Properties have been calculated assuming that (i) all operations are sold through auctions in the Bankruptcy Court as "going-concerns" and (ii) all executory contracts and unexpired leases that have not been rejected or terminated by the Debtors are assigned to the purchasers. As a result, all cure costs related to these executory contracts and unexpired leases are paid out of the gross liquidation proceeds. 9. Hotel employees will be employed by the new hotel owners and therefore will not be entitled to severance or other termination benefits. 10. Estimated gross proceeds from asset sales are valued at a 30% discount to the reorganization value for the "Low" scenario and a 20% discount for the "High" scenario. Please see the attached summary of liquidation recoveries by Class. 100 EX-10.7 30 g87458exv10w7.txt EX-10.7 FIRST AMENDED JOINT PLAN OF REORGANIZATION EXHIBIT 10.7 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK - ---------------------------------------x In re : Chapter 11 LODGIAN, INC., et al., : Case No. 01-16345 (BRL) Debtors. : Jointly Administered - ---------------------------------------x FIRST AMENDED JOINT PLAN OF REORGANIZATION OF LODGIAN, INC., ET AL. (OTHER THAN THE CCA DEBTORS), TOGETHER WITH THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE --------------------------------- CADWALADER, WICKERSHAM & TAFT CURTIS, MALLET-PREVOST, COLT Attorneys for the Debtors and & MOSLE LLP Debtors-In-Possession Co-Attorneys for the Debtors and 100 Maiden Lane Debtors-In-Possession New York, New York 10038 101 Park Avenue (212) 504-6000 New York, New York 10178 (212) 696-6000 - and - DEBEVOISE & PLIMPTON Attorneys for the Official Committee of Unsecured Creditors 919 Third Avenue New York, New York 10022 (212) 909-6000 Dated: As of November 1, 2002 SECTION 1. DEFINITIONS AND INTERPRETATION.........................................................1 A. Definitions............................................................................1 1.1 A Warrants.............................................................................1 1.2 A Warrant Agreement....................................................................2 1.3 Administrative Expense Claim...........................................................2 1.4 Allowed................................................................................2 1.5 Amended Organizational Documents.......................................................2 1.6 B Warrants.............................................................................2 1.7 B Warrant Agreement....................................................................3 1.8 Bankruptcy Code........................................................................3 1.9 Bankruptcy Court.......................................................................3 1.10 Bankruptcy Rules.......................................................................3 1.11 BO Agreements..........................................................................3 1.12 BO/Rockbridge Agreements...............................................................3 1.13 Business Day...........................................................................3 1.14 Cash...................................................................................3 1.15 Catch-up Distribution..................................................................3 1.16 CCA....................................................................................3 1.17 CCA Debtors............................................................................4 1.18 Chapter 11 Cases.......................................................................4 1.19 Chase..................................................................................4 1.20 Chase Agreements.......................................................................4 1.21 Claim..................................................................................4 1.22 Class..................................................................................4 1.23 Class 1 Amended Note...................................................................4 1.24 Class 3 Liquidating Subclasses.........................................................5 1.25 Class 3 Lodgian Subclasses.............................................................5 1.26 Class 3 Lodgian Plan Securities........................................................5 1.27 Class 3 Lodgian Subclass Plan Securities...............................................5 1.28 Class 4 Compromise.....................................................................5 1.29 Class 4 Plan Securities................................................................5 1.30 Class 7 Plan Securities................................................................5 1.31 Class 8 Plan Securities................................................................5 1.32 Collateral.............................................................................5 1.33 Column.................................................................................5 1.34 Column Agreements......................................................................5 1.35 Column/Criimi Mae Agreements...........................................................6 1.36 Commencement Date......................................................................6

i 1.37 Committee..............................................................................6 1.38 Confirmation Date......................................................................6 1.39 Confirmation Hearing...................................................................6 1.40 Confirmation Order.....................................................................6 1.41 Convenience Claim......................................................................6 1.42 CRESTS.................................................................................6 1.43 CRESTS Claims..........................................................................6 1.44 CRESTS Guarantee.......................................................................6 1.45 CRESTS Guarantee Agreement.............................................................7 1.46 CRESTS Indenture.......................................................................7 1.47 CRESTS Junior Subordinated Debentures..................................................7 1.48 DDL Kinser.............................................................................7 1.49 DDL Kinser Agreements..................................................................7 1.50 Debtors................................................................................7 1.51 Debtor Owned Old Subsidiary Equity Interest............................................7 1.52 Deutsche Bank..........................................................................7 1.53 DIP Financing Facility.................................................................7 1.54 DIP Lenders............................................................................7 1.55 Disbursing Agent.......................................................................7 1.56 Disputed Claim.........................................................................8 1.57 Disputed Equity Interest...............................................................8 1.58 Distribution Record Date...............................................................8 1.59 Division...............................................................................8 1.60 DLJ/Column/Criimi Mae Agreements.......................................................8 1.61 Effective Date.........................................................................8 1.62 Equity Interest........................................................................9 1.63 Equity Security........................................................................9 1.64 Estate.................................................................................9 1.65 Exit Financing Agreements..............................................................9 1.66 Exit Financing Borrowers...............................................................9 1.67 Exit Financing Lender..................................................................9 1.68 Final Distribution Date................................................................9 1.69 Final Order............................................................................9 1.70 First Union...........................................................................10 1.71 First Union Agreements................................................................10 1.72 GMAC..................................................................................10 1.73 GMAC Agreements.......................................................................10 1.74 GMAC-Orix Agreements..................................................................10 1.75 GMAC-Orix Debtors.....................................................................10 1.76 General Unsecured Claim...............................................................10 1.77 Inter-Company Claim...................................................................10 1.78 LCT I.................................................................................10 1.79 LCT I Declaration of Trust............................................................10

ii 1.80 Lehman................................................................................10 1.81 Lehman/Criimi Mae Agreements..........................................................11 1.82 Liquidating Debtors...................................................................11 1.83 Lodgian Debtors.......................................................................11 1.84 Mortgage Financing Agreements.........................................................11 1.85 MSSF..................................................................................11 1.86 MSSF Pre-Petition Credit Facility.....................................................11 1.87 MSSF Pre-Petition Credit Facility Lenders.............................................11 1.88 Nationwide............................................................................11 1.89 New Common Stock......................................................................11 1.90 New Equity Incentive Plan.............................................................11 1.91 New Preferred Stock...................................................................12 1.92 New Preferred Stock Certificate of Designation........................................12 1.93 New Subsidiary Equity.................................................................12 1.94 Old Equity Interest...................................................................12 1.95 Old Equity Security...................................................................12 1.96 Old Lodgian Common Stock..............................................................12 1.97 Old Lodgian Common Stock Interest.....................................................12 1.98 Old Subsidiary Equity Interest........................................................12 1.99 Person................................................................................12 1.100 Plan..................................................................................12 1.101 Plan Documents........................................................................13 1.102 Plan Proponents.......................................................................13 1.103 Plan Securities ......................................................................13 1.104 Plan Supplement.......................................................................13 1.105 Priority Non-Tax Claim................................................................13 1.106 Priority Tax Claim....................................................................13 1.107 Pro Rata Share........................................................................13 1.108 Registration Rights Agreement.........................................................14 1.109 Releasees.............................................................................14 1.110 Reorganized Debtor....................................................................14 1.111 Reorganized Lodgian...................................................................14 1.112 Roundabout Debtor.....................................................................14 1.113 Schedule of Assumed Contracts.........................................................14 1.114 Schedules.............................................................................14 1.115 Secured Claim.........................................................................14 1.116 Senior Subordinated Notes.............................................................15 1.117 Senior Subordinated Notes Claim.......................................................15 1.118 Senior Subordinated Notes Guarantees..................................................15 1.119 Senior Subordinated Notes Guarantor Debtors...........................................15 1.120 Senior Subordinated Notes Indenture...................................................15 1.121 Subclass..............................................................................15 1.122 Subclass 1-H Note.....................................................................15

iii 1.123 Subclass 1-O Note.....................................................................15 1.124 Subclass Debtor.......................................................................15 1.125 Subordinated Claim....................................................................16 1.126 Third Party Owned Old Subsidiary Equity Interest......................................16 1.127 Tort Claim............................................................................16 1.128 Warrants..............................................................................16 1.129 Warrant Agreements....................................................................16 1.130 Wells Fargo...........................................................................16 1.131 Wells Fargo Agreements................................................................16 1.132 Wilmington Trust......................................................................16 B. Interpretation; Application of Definitions and Rules of Construction..................16 SECTION 2. ADMINISTRATIVE EXPENSE CLAIMS AND PRIORITY TAX CLAIMS.................................17 2.1 Administrative Expense Claims.........................................................17 2.2 Compensation and Reimbursement Claims.................................................17 2.3 Priority Tax Claims...................................................................18 2.4 DIP Financing Facility Claims.........................................................18 2.5 Indenture Trustee Claims..............................................................18 SECTION 3. CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS.........................................19 3.1 Classes...............................................................................20 3.2 Subclasses for Class 1................................................................20 3.3 Subclasses for Class 3................................................................21 3.4 Subclasses for Class 10...............................................................21 SECTION 4. TREATMENT OF CLAIMS AND EQUITY INTERESTS..............................................21 4.1 Secured Claims (Class 1)..............................................................21 4.2 Priority Non-Tax Claims (Class 2).....................................................23 4.3 General Unsecured Claims (Class 3)....................................................23 4.4 Senior Subordinated Notes Claims (Class 4)............................................24 4.5 Convenience Claims (Class 5)..........................................................24 4.6 CRESTS Claims (Class 7)...............................................................24 4.7 Old Lodgian Common Stock Interests (Class 8)..........................................25 4.8 Debtor Owned Old Subsidiary Equity Interests (Class 9)................................25 4.9 Third Party Owned Old Subsidiary Equity Interests (Class 10)..........................25 4.10 Subordinated Claims (Class 11)........................................................26

iv SECTION 5. ACCEPTANCE OR REJECTION OF PLAN.......................................................26 5.1 Voting of Claims or Equity Interests..................................................26 5.2 Acceptance by a Class.................................................................27 5.3 Presumed Acceptance of Plan...........................................................27 5.4 Presumed Rejection of Plan............................................................27 SECTION 6. MEANS FOR IMPLEMENTATION..............................................................27 6.1 Exit Financing........................................................................27 6.2 Authorization of Plan Securities......................................................27 6.3 Warrant Agreements....................................................................28 6.4 Waiver of Subordination...............................................................28 6.5 Registration Rights Agreement.........................................................28 6.6 Listing of Plan Securities............................................................28 6.7 New Equity Incentive Plan.............................................................28 6.8 Cancellation of Existing Securities and Agreements....................................29 6.9 Board of Directors and Executive Officers.............................................29 6.10 Amended Organizational Documents......................................................29 6.11 Request for Approval of Class 4 Compromise............................................30 6.12 Authorization of Notes................................................................30 6.13 Liquidating Debtors...................................................................30 SECTION 7. DISTRIBUTIONS.........................................................................31 7.1 Distribution Record Date..............................................................31 7.2 Date of Distributions.................................................................31 7.3 Distributions to Classes..............................................................31 7.4 Disbursing Agent......................................................................32 7.5 Rights and Powers of Disbursing Agent.................................................32 7.6 Surrender of Instruments..............................................................32 7.7 Delivery of Distributions.............................................................33 7.8 Manner of Payment Under Plan..........................................................33 7.9 Fractional Shares and Fractional Warrants.............................................34 7.10 De Minimis Distributions..............................................................34 7.11 Exemption from Securities Laws........................................................34 7.12 Setoffs...............................................................................34 7.13 Allocation of Plan Distribution Between Principal and Interest........................35 7.14 Withholding and Reporting Requirements................................................35 7.15 Time Bar to Cash Payments.............................................................35 7.16 Transactions on Business Days.........................................................35 7.17 Closing of Chapter 11 Cases...........................................................35

v SECTION 8. PROCEDURES FOR RESOLVING AND TREATING DISPUTED CLAIMS AND EQUITY INTERESTS............36 8.1 Payments and Distributions with Respect to Disputed Claims and Equity Interests.......36 8.2 Preservation of Insurance.............................................................36 8.3 Resolution of Disputed Claims and Equity Interests....................................37 8.4 Distributions After Allowance.........................................................38 8.5 Estimation of Claims and Equity Interests.............................................38 8.6 No Recourse...........................................................................38 8.7 Mediation of Disputed Claims and Equity Interests.....................................39 8.8 Interest and Dividends................................................................40 SECTION 9. EXECUTORY CONTRACTS AND UNEXPIRED LEASES..............................................40 9.1 General Treatment.....................................................................40 9.2 Cure of Defaults......................................................................41 9.3 Approval of Rejection of Executory Contracts and Unexpired Leases.....................41 9.4 Bar Date for Filing Proofs of Claim Relating to Executory Contracts and Unexpired Leases Rejected Pursuant to Plan............................................41 9.5 Survival of Debtors' Corporate Indemnities............................................42 SECTION 10. CONDITIONS PRECEDENT TO EFFECTIVE DATE................................................42 10.1 Conditions to Effective Date..........................................................42 10.2 Waiver of Conditions..................................................................42 SECTION 11. EFFECT OF CONFIRMATION................................................................42 11.1 Vesting of Assets.....................................................................42 11.2 Discharge of Claims and Cancellation of Equity Interests..............................43 11.3 Discharge of Debtors..................................................................43 11.4 Binding Effect........................................................................43 11.5 Term of Injunctions or Stays..........................................................44 11.6 Injunction Against Interference with Plan.............................................44 11.7 Exculpation...........................................................................44 11.8 Rights of Action......................................................................44 11.9 Release by Debtors....................................................................45 11.10 Release of Releasees by Other Releasees...............................................45 11.11 Claims of the United States Government................................................45

vi SECTION 12. RETENTION OF JURISDICTION.............................................................46 SECTION 13. MISCELLANEOUS PROVISIONS..............................................................47 13.1 Retiree Benefits......................................................................47 13.2 Deletion of Classes and Subclasses....................................................47 13.3 Addition of Classes and Subclasses. ..................................................48 13.4 Committee.............................................................................48 13.5 Exemption from Transfer Taxes.........................................................48 13.6 Substantial Consummation..............................................................48 13.7 Payment of Statutory Fees.............................................................48 13.8 Amendments............................................................................49 13.9 Revocation or Withdrawal of Plan......................................................49 13.10 Cramdown..............................................................................49 13.11 Severability..........................................................................49 13.12 Request for Expedited Determination of Taxes..........................................50 13.13 Courts of Competent Jurisdiction......................................................50 13.14 Governing Law.........................................................................50 13.15 Time..................................................................................50 13.16 Headings..............................................................................50 13.17 Exhibits..............................................................................51 13.18 Notices...............................................................................51

EXHIBITS Exhibit A: List of Debtors Exhibit B: List of Class 10 Subclass Debtors vii UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK - --------------------------------------------x In re : Chapter 11 LODGIAN, INC., et al., : Case No. 01-16345 (BRL) Debtors. : Jointly Administered - --------------------------------------------x DEBTORS' FIRST AMENDED JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE Lodgian, Inc. and the other above-captioned debtors and debtors-in-possession (other than the CCA Debtors), together with the official committee of unsecured creditors appointed in these chapter 11 cases, propose the following joint chapter 11 plan of reorganization pursuant to section 1121(a) of title 11 of the United States Code. WHILE THIS IS A JOINT PLAN FOR EACH OF THE DEBTORS, IT DOES NOT PROVIDE THAT THESE CHAPTER 11 CASES WILL BE SUBSTANTIVELY CONSOLIDATED. ACCORDINGLY, TO THE EXTENT APPLICABLE TO A DEBTOR, ALL OF THE PROVISIONS OF THIS PLAN, INCLUDING WITHOUT LIMITATION THE DEFINITIONS AND DISTRIBUTIONS TO CREDITORS AND EQUITY INTEREST HOLDERS, SHALL APPLY TO THE RESPECTIVE ASSETS OF, CLAIMS AGAINST, AND EQUITY INTERESTS IN, SUCH DEBTOR'S SEPARATE ESTATE. THE PROPONENTS OF THIS PLAN RESERVE THE RIGHT TO PROCEED WITH CONFIRMATION OF THIS PLAN AS TO SOME BUT NOT ALL OF THE DEBTORS AT THE SAME TIME. SECTION 1. .DEFINITIONS AND INTERPRETATION A. DEFINITIONS. The following terms used herein shall have the respective meanings defined below (such meanings to be equally applicable to both the singular and plural): 1.1 A WARRANTS means warrants, substantially in the form set forth in the A Warrant Agreement, to purchase shares of New Common Stock representing in the aggregate up to 17.75% of the sum of (i) shares of New Common Stock issued on the Effective Date and (ii) shares of New Common Stock issuable upon the exercise of the A Warrants, to be issued by Reorganized Lodgian pursuant to the Plan and the A Warrant Agreement. 1.2 A WARRANT AGREEMENT means the warrant agreement between Reorganized Lodgian and the warrant agent named therein, substantially in the form set forth in the Plan Supplement. 1.3 ADMINISTRATIVE EXPENSE CLAIM means any right to payment constituting a cost or expense of administration of the Chapter 11 Cases allowed under sections 503(b) and 507(a)(1) of the Bankruptcy Code, including, without limitation, any actual and necessary costs and expenses of preserving the applicable Debtor's Estate, any actual and necessary costs and expenses of operating the applicable Debtor's businesses, any indebtedness or obligations incurred or assumed by the applicable Debtor, as a debtor-in-possession, during the Chapter 11 Cases (including, without limitation, for the acquisition or lease of property or an interest in property or the rendition of services), any allowances of compensation and reimbursement of expenses to the extent allowed by a Final Order under section 330 or 503 of the Bankruptcy Code, and any fees or charges assessed against the Estate of the applicable Debtor under section 1930 of chapter 123 of title 28 of the United States Code. 1.4 ALLOWED means, with reference to any Claim or Equity Interest, (i) any Claim against or Equity Interest in any Debtor which has been listed by such Debtor in the Schedules, as such Schedules may be amended by the applicable Debtor from time to time in accordance with Bankruptcy Rule 1009, as liquidated in amount and not disputed or contingent and for which no contrary proof of claim or equity interest has been filed, (ii) any timely filed Claim or Equity Interest as to which no objection to allowance has been interposed in accordance with Section 8.3 hereof or such other applicable period of limitation fixed by the Bankruptcy Code, the Bankruptcy Rules or the Bankruptcy Court, or as to which any objection has been determined by a Final Order to the extent that such objection is determined in favor of the respective holder, or (iii) any Claim or Equity Interest expressly allowed by a Final Order or hereunder. 1.5 AMENDED ORGANIZATIONAL DOCUMENTS means the corporate, partnership or limited liability company organizational documents, as applicable, of each Debtor as amended and adopted on the Effective Date as necessary to comply with the requirements of the Bankruptcy Code and effect the terms of this Plan (including the implementation of the Exit Financing), substantially in the form set forth in the Plan Supplement for Reorganized Lodgian and, to the extent material, each other Reorganized Debtor. 1.6 B WARRANTS means warrants, substantially in the form set forth in the B Warrant Agreement, to purchase shares of New Common Stock representing in the aggregate up to 10.79% of the sum of (i) shares of New Common Stock issued on the -2- Effective Date and (ii) shares of New Common Stock issuable upon the exercise of the A Warrants and the B Warrants, to be issued by Reorganized Lodgian pursuant to the Plan and the B Warrant Agreement. 1.7 B WARRANT AGREEMENT means the warrant agreement between Reorganized Lodgian and the warrant agent named therein, substantially in the form set forth in the Plan Supplement. 1.8 BANKRUPTCY CODE means title 11 of the United States Code, as amended from time to time, as applicable to the Chapter 11 Cases. 1.9 BANKRUPTCY COURT means the United States District Court for the Southern District of New York having jurisdiction over the Chapter 11 Cases and, to the extent of the reference of the Chapter 11 Cases pursuant to 28 U.S.C.ss. 157(a), the United States Bankruptcy Court for the Southern District of New York. 1.10 BANKRUPTCY RULES means the Federal Rules of Bankruptcy Procedure as promulgated by the United States Supreme Court under section 2075 of title 28 of the United States Code, as amended from time to time, as applicable to the Chapter 11 Cases, and any Local Rules of the Bankruptcy Court. 1.11 BO AGREEMENTS means the Mortgage Financing Agreements dated as of April 26, 1999 between Nationwide and Dedham Lodging Associates I, L.P. 1.12 BO/ROCKBRIDGE AGREEMENTS means the Mortgage Financing Agreements dated as of December 8, 1998 between Nationwide and the following Debtors: Lodgian AMI, Inc., Island Motel Enterprises, Inc. and Penmoco, Inc. 1.13 BUSINESS DAY means any day other than a Saturday, a Sunday, or any other day on which banking institutions in New York, New York are required or authorized to close by law or executive order. 1.14 CASH means legal tender of the United States of America. 1.15 CATCH-UP DISTRIBUTION means with respect to each holder of an Allowed Claim in any Class 3 Subclass, the difference between (i) the aggregate number of shares of New Preferred Stock and New Common Stock that such holder would have received if the resolution of all Disputed Claims in such Subclass had been known on the Effective Date, and (ii) the aggregate number of shares of New Preferred Stock and New Common Stock previously received by such holder. 1.16 CCA means The Capital Company of America LLC. -3- 1.17 CCA DEBTORS means IMPAC Hotels II, L.L.C. and IMPAC Hotels III, L.L.C., as debtors and debtors in possession in chapter 11 cases No. 01-16367 and No. 01-16375, respectively. 1.18 CHAPTER 11 CASES means individually, the voluntary case commenced by each Debtor under its respective case number as listed in Exhibit A, and collectively, the voluntary cases under chapter 11 of the Bankruptcy Code commenced by each Debtor on the Commencement Date in the United States Bankruptcy Court for Southern District of New York, styled In re Lodgian, Inc., et al., Case No. 01-16345 (BRL), which are currently pending before the Bankruptcy Court. 1.19 CHASE means JPMorgan Chase Bank, as successor indenture trustee to Texas Commerce Bank National Association. 1.20 CHASE AGREEMENTS means the Mortgage Financing Agreements dated as of January 1, 1997 among Chase, the City of Manhattan, Kansas, the City of Lawrence, Kansas, and the following Debtors: Manhattan Hospitality Associates, L.P. and Lawrence Hospitality Associates, L.P. 1.21 CLAIM means (i) any right to payment from any of the Debtors, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, known or unknown, or (ii) any right to an equitable remedy for breach of performance if such breach gives rise to a right of payment from any of the Debtors, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured, known or unknown. 1.22 CLASS means a class of Claims or Equity Interests established pursuant to Section 3. 1.23 CLASS 1 AMENDED NOTE means, with respect to any Class 1 Subclass, an amendment and restatement of the applicable Debtor's payment obligations under the applicable Mortgage Financing Agreements, in a principal amount equal to 100% of the amount of the applicable Allowed Claim and, except to the extent otherwise agreed by the holder of the Allowed Claim and the Applicable Debtor, providing for the same interest rate and maturity and periodic debt service payments on the same dates and in the same amounts as provided under the existing Mortgage Financing Agreements, except that the amount of any originally scheduled principal payments overdue as of the Effective Date shall be payable at final maturity, provided that the final maturity of the Class 1 Amended Note for Subclass 1-L shall be extended to November 30, 2005. Except to the extent otherwise agreed by the holder of the Allowed Claim and the Applicable Debtor, each Amended Class 1 Note shall continue to be secured by the -4- Collateral securing the applicable Allowed Claim. The definitive terms of each Class 1 Amended Note shall be provided in a separate stipulation and order. 1.24 CLASS 3 LIQUIDATING SUBCLASSES means Class 3 Subclasses consisting of General Unsecured Claims against a Liquidating Debtor. 1.25 CLASS 3 LODGIAN SUBCLASSES means Class 3 Subclasses consisting of General Unsecured Claims against a Lodgian Debtor. 1.26 CLASS 3 LODGIAN PLAN SECURITIES means (i) 309,400 shares of New Preferred Stock and (ii) 366,589 shares of New Common Stock. 1.27 CLASS 3 LODGIAN SUBCLASS PLAN SECURITIES means for each Class 3 Lodgian Subclass, the percentage of Class 3 Lodgian Plan Securities specified for the Subclass Debtor in Exhibit A. 1.28 CLASS 4 COMPROMISE means the overall compromise and settlement embodied in this Plan of certain issues between the Debtors and the holders of the Senior Subordinated Notes Claims, including the amount of Allowed Senior Subordinated Notes Claims against each Senior Subordinated Notes Guarantor Debtor, the determination of the Debtors that are liable as Senior Subordinated Notes Guarantor Debtors, as well as the valuation of the Debtors on which recoveries on account of Allowed Claims and Allowed Equity Interests should be based. 1.29 CLASS 4 PLAN SECURITIES means (i) 4,690,600 shares of New Preferred Stock and (ii) 5,557,511 shares of New Common Stock. 1.30 CLASS 7 PLAN SECURITIES means (i) 868,000 shares of New Common Stock, (ii) 83.33% of the A Warrants and (iii) 24.39% of the B Warrants. 1.31 CLASS 8 PLAN SECURITIES means (i) 207,900 shares of New Common Stock, (ii) 16.67% of the A Warrants and (iii) 75.61% of the B Warrants. 1.32 COLLATERAL means any property or interest in property of the Estate of any Debtor subject to a lien, charge or other encumbrance to secure the payment or performance of a Claim, which lien, charge or other encumbrance is not subject to avoidance under the Bankruptcy Code. 1.33 COLUMN means Column Financial, Inc. 1.34 COLUMN AGREEMENTS means the Mortgage Financing Agreements dated as of June 29, 1995 between Column and East Washington Hospitality Limited Partnership. -5- 1.35 COLUMN/CRIIMI MAE AGREEMENTS means the Mortgage Financing Agreements dated as of January 31, 1995 between Column and McKnight Motel, Inc. 1.36 COMMENCEMENT DATE means December 20, 2001 with respect to all of the Debtors; provided, however, that "Commencement Date" means (i) December 21, 2001 with respect to Worcester Hospitality, L.P., Lodgian Hotels, Inc., Brecksville Hospitality, L.P. and Sioux City Hospitality, L.P., and (ii) April 17, 2002 with respect to New Orleans Airport Motel Associates, L.P. 1.37 COMMITTEE means the official committee of general unsecured creditors appointed by the Office of the United States Trustee in the Chapter 11 Cases pursuant to section 1102 of the Bankruptcy Code, as the membership of such Committee may be altered from time to time. 1.38 CONFIRMATION DATE means the date on which the Clerk of the Bankruptcy Court enters the Confirmation Order. 1.39 CONFIRMATION HEARING means the hearing to be held by the Bankruptcy Court regarding confirmation of this Plan, as such hearing may be adjourned or continued from time to time. 1.40 CONFIRMATION ORDER means the order of the Bankruptcy Court confirming this Plan pursuant to section 1129 of the Bankruptcy Code. 1.41 CONVENIENCE CLAIM means (i) an Allowed General Unsecured Claim against any of the Debtors in an amount equal to $200 or less, (ii) the Allowed General Unsecured Claim against any of the Debtors of a holder that has irrevocably elected on its ballot to reduce such Claim against such Debtor(s) to the amount of $200, or (iii) a Disputed Claim against any of the Debtors that becomes an Allowed General Unsecured Claim of $200 or less with the consent of, and in the amount agreed to by, the applicable Debtor or pursuant to a Final Order. 1.42 CRESTS means the 7% Convertible Redeemable Equity Structured Trust Securities issued by LCT I. 1.43 CRESTS CLAIMS means, collectively, the Claims of LCT I as holder of the CRESTS Junior Subordinated Debentures and the Claims of the holders of the CRESTS under the CRESTS Guarantee. 1.44 CRESTS GUARANTEE means the guarantee of certain payments in respect of the CRESTS originally made by Servico, Inc., and assumed by Lodgian, Inc., pursuant to the CRESTS Guarantee Agreement. -6- 1.45 CRESTS GUARANTEE AGREEMENT means the Guarantee Agreement dated as of June 17, 1998 by Servico, Inc., Lodgian, Inc. and Wilmington Trust, as the same may be amended or supplemented from time to time to and including the Effective Date. 1.46 CRESTS INDENTURE means the Indenture dated as of June 17, 1998, as supplemented by the First Supplemental Indenture dated as of June 17, 1998, among Servico, Inc., Lodgian, Inc. and Wilmington Trust, as the same may be amended or supplemented from time to time to and including the Effective Date. 1.47 CRESTS JUNIOR SUBORDINATED DEBENTURES means the 7% Convertible Junior Subordinated Debentures due 2010 originally issued by Servico, Inc., and assumed by Lodgian, Inc., pursuant to the CRESTS Indenture. 1.48 DDL KINSER means DDL Kinser Partners LLC. 1.49 DDL KINSER AGREEMENTS means the Mortgage Financing Agreements dated as of December 29, 1986 between Kinser Motel Enterprises and Westinghouse Credit Corporation, as modified on May 7, 1992 by order confirming Servico Inc.'s Plan of Reorganization and ultimately assigned to DDL Kinser. 1.50 DEBTORS means, collectively, Lodgian, Inc. and the debtors identified in Exhibit A, including in their capacity as debtors-in-possession pursuant to sections 1101, 1107(a) and 1108 of the Bankruptcy Code. 1.51 DEBTOR OWNED OLD SUBSIDIARY EQUITY INTEREST means an Old Subsidiary Equity Interest held by any Debtor. 1.52 DEUTSCHE BANK means Deutsche Bank Trust Company Americas, as Trustee under the Senior Subordinated Notes Indenture. 1.53 DIP FINANCING FACILITY means that certain Revolving Credit and Guaranty Agreement, dated as of December 31, 2001, among Lodgian, Inc., the other Debtors named therein and the DIP Lenders, together with all other Loan Documents (as defined therein), as each of the foregoing may be amended or modified from time to time to and including the Effective Date. 1.54 DIP LENDERS means entities from time to time party to the DIP Financing Facility as lenders and MSSF, as administrative agent and collateral agent. 1.55 DISBURSING AGENT means any entity (including any applicable Debtor if it acts in such capacity) in its capacity as a disbursing agent under Section 7.4 hereof. -7- 1.56 DISPUTED CLAIM means any Claim which has not been Allowed pursuant to this Plan or a Final Order, and (a) if no proof of claim has been filed by the applicable deadline: (i) a Claim that has been or hereafter is listed on the Schedules as disputed, contingent or unliquidated; or (ii) a Claim that has been or hereafter is listed on the Schedules as other than disputed, contingent or unliquidated, but as to which the applicable Debtor(s) or the Reorganized Debtors or any other party in interest has interposed an objection or request for estimation which has not been withdrawn or determined by a Final Order; or (b) if a proof of claim or request for payment of an Administrative Expense Claim has been filed by the applicable deadline: (i) a Claim for which no corresponding Claim has been or hereafter is listed on the Schedules; (ii) a Claim for which a corresponding Claim has been or hereafter is listed on the Schedules as other than disputed, contingent or unliquidated, but for which the nature or amount of the Claim as asserted in the proof of claim varies from the nature and amount of such Claim as listed on the Schedules; (iii) a Claim for which a corresponding Claim has been or hereafter is listed on the Schedules as disputed, contingent or unliquidated and which has not been resolved by written agreement of the parties or a Final Order; (iv) a Claim for which a timely objection or request for estimation is interposed by the applicable Debtor(s) or the Reorganized Debtors or any other party in interest, which has not been withdrawn or determined by a Final Order; or (v) any Tort Claim. 1.57 DISPUTED EQUITY INTEREST means any Equity Interest, or any portion thereof, that has not been Allowed. 1.58 DISTRIBUTION RECORD DATE means the date fixed as the "Distribution Record Date" by order of the Bankruptcy Court approving, inter alia, procedures to solicit acceptances or rejections of this Plan. 1.59 DIVISION means a division of a Class of Claims or Equity Interests established pursuant to Section 3. 1.60 DLJ/COLUMN/CRIIMI MAE AGREEMENTS means the Mortgage Financing Agreements dated as of January 31, 1995 between Column and the following Debtors: Hilton Head Motel Enterprises, Inc., Servico Hotels I, Inc., Servico Hotels II, Inc., Moon Airport Motel, Inc., Servico Fort Wayne, Inc., Washington Motel Enterprises, Inc., Servico Hotels III, Inc., Servico Hotels IV, Inc. and New Orleans Airport Motel Associates, L.P. 1.61 EFFECTIVE DATE means a Business Day on or after the Confirmation Date specified by the Plan Proponents on which (i) no stay of the Confirmation Order is in effect and (ii) the conditions to the effectiveness of this Plan specified in Section 10.1 -8- hereof have been satisfied or waived. The Plan Proponents may specify different Effective Dates for one or more Debtors 1.62 EQUITY INTEREST means the rights of a holder of an Equity Security. 1.63 EQUITY SECURITY means, with respect to any Debtor, its authorized capital stock, membership interests, partnership interests or similar ownership interests, whether or not transferable, including any option, warrant or right, contractual or otherwise, to acquire any such interest. 1.64 ESTATE means, as to each Debtor, the estate created pursuant to section 541 of the Bankruptcy Code upon the commencement of such Debtor's Chapter 11 Case. 1.65 EXIT FINANCING AGREEMENTS means the Mortgage Financing Agreements to be entered into on the Effective Date among the Exit Financing Lender, Reorganized Lodgian and the Exit Financing Borrowers and, in the case of the principal agreements, substantially in the form set forth in the Plan Supplement. 1.66 EXIT FINANCING BORROWERS means the Reorganized Debtors to be named as the borrowers under the Exit Financing Agreements. 1.67 EXIT FINANCING LENDER means the Person(s) named as the lender(s) under the Exit Financing Agreements. 1.68 FINAL DISTRIBUTION DATE means, in the event that there exist on the Effective Date any Disputed Claims or Equity Interests, a date selected by the Plan Proponents, in their sole discretion, on which all such Disputed Claims or Equity Interests have been resolved by Final Order. 1.69 FINAL ORDER means an order or judgment of the Bankruptcy Court entered by the Clerk of the Bankruptcy Court on the docket in the Chapter 11 Cases, which has not been reversed, vacated or stayed and as to which (i) the time to appeal, petition for certiorari or move for a new trial, reargument or rehearing has expired and as to which no appeal, petition for certiorari or other proceedings for a new trial, reargument or rehearing shall then be pending, or (ii) if an appeal, writ of certiorari, new trial, reargument or rehearing thereof has been sought, such order or judgment of the Bankruptcy Court shall have been affirmed by the highest court to which such order was appealed, or certiorari shall have been denied, or a new trial, reargument or rehearing shall have been denied or resulted in no modification of such order, and the time to take any further appeal, petition for certiorari or move for a new trial, reargument or rehearing shall have expired; provided, however, that the possibility that a motion under Rule 60 of the Federal Rules of Civil Procedure, or any analogous rule under the Bankruptcy Rules, may be filed relating to such order shall not cause such order to not be a Final Order. -9- 1.70 FIRST UNION means First Union Bank of North Carolina. 1.71 FIRST UNION AGREEMENTS means the Mortgage Financing Agreements dated as of March 18, 1997 between First Union and Atlanta-Boston Lodging L.L.C. 1.72 GMAC means GMAC Commercial Mortgage Corporation. 1.73 GMAC AGREEMENTS means the Mortgage Financing Agreements dated as of May 9, 1996 between GMAC and Servico Lansing, Inc. 1.74 GMAC-ORIX AGREEMENTS means the Mortgage Financing Agreements (i) dated as of July 18, 1996 between GMAC and the following Debtors: Servico Council Bluffs, Inc., Servico West Des Moines, Inc., Servico Omaha, Inc., Servico Omaha Central, Inc. and Servico Wichita, Inc., and (ii) dated as of January 17, 1996 between Loan Services, Inc. and the following Debtors: Brecksville Hospitality, L.P., Sioux City Hospitality, L.P. and 1075 Hospitality, L.P. 1.75 GMAC-ORIX DEBTORS means Brecksville Hospitality, L.P., Servico Council Bluffs, Inc., Servico Omaha, Inc., Servico Omaha Central, Inc., Servico West Des Moines, Inc., Servico Wichita, Inc., Sioux City Hospitality, L.P. and 1075 Hospitality, L.P. 1.76 GENERAL UNSECURED CLAIM means any Claim against the applicable Debtor that (i) is not an Administrative Expense Claim, a Priority Tax Claim, a Secured Claim, a Priority Non-Tax Claim, a Senior Subordinated Notes Claim, a CRESTS Claim or a Subordinated Claim, or (ii) is otherwise determined by the Bankruptcy Court to be a General Unsecured Claim. 1.77 INTER-COMPANY CLAIM means any General Unsecured Claim held by a Debtor against another Debtor. 1.78 LCT I means Lodgian Capital Trust I, a Delaware statutory business trust. 1.79 LCT I DECLARATION OF TRUST means the Declaration of Trust dated May 15, 1998, as amended by the Amended and Restated Declaration of Trust dated as of June 17, 1998, by and among the Regular Trustees named therein and Wilmington Trust Company, as the Initial Property Trustee and initial Delaware Trustee, as the same may be amended or supplemented from time to time to and including the Effective Date. 1.80 LEHMAN means Lehman Brothers Holdings, Inc. -10- 1.81 LEHMAN/CRIIMI MAE AGREEMENTS means the Mortgage Financing Agreements (i) dated as of June 30, 1997 between Lehman and the following Debtors: Melbourne Hospitality Associates, L.P. and Fort Wayne Hospitality Associates II, L.P., (ii) dated as of April 11, 1997 between Lehman and Servico Frisco, Inc., and (iii) dated as of October 21, 1996 between Lehman and the following Debtors: Worcester Hospitality, L.P. and Apico Inns of Pittsburgh, Inc. 1.82 LIQUIDATING DEBTORS means the GMAC-Orix Debtors and the Roundabout Debtor. 1.83 LODGIAN DEBTORS means the Debtors other than the Liquidating Debtors. 1.84 MORTGAGE FINANCING AGREEMENTS means, with respect to any financing arrangements secured by any Debtor's interest in any hotel property (including any leasehold interest), the applicable loan agreements and all related agreements, instruments and other documents, including all promissory notes, mortgages (including leasehold mortgages), security agreements and assignments of leases and rents, as the same may be amended or modified from time to time. 1.85 MSSF means Morgan Stanley Senior Funding, Inc. 1.86 MSSF PRE-PETITION CREDIT FACILITY means that certain Credit Agreement dated as of July 23, 1999 among Lodgian Finance Corp., Lodgian, Inc., the other Debtors named therein and the Pre-Petition Credit Facility Lenders, together with all other Loan Documents (as defined therein), as each of the foregoing may be amended or modified from time to time to and including the Effective Date. 1.87 MSSF PRE-PETITION CREDIT FACILITY LENDERS mean entities from time to time party to the MSSF Pre-Petition Credit Facility as lenders and MSSF, as administrative agent and collateral agent. 1.88 NATIONWIDE means Nationwide Life Insurance Company. 1.89 NEW COMMON STOCK means the shares of common stock, par value $0.01 per share, of Reorganized Lodgian to be authorized pursuant to Reorganized Lodgian's Amended Organizational Documents, including 7,000,000 shares to be issued by Reorganized Lodgian on the Effective Date and additional shares issuable under the New Equity Incentive Plan and upon exercise of the Warrants. 1.90 NEW EQUITY INCENTIVE PLAN means the equity incentive plan to be adopted by Reorganized Lodgian on the Effective Date, under which shares of New Common Stock representing in the aggregate up to 10.0% of the New Common Stock on -11- a fully diluted basis will be available for issuance, substantially in the form set forth in the Plan Supplement. 1.91 NEW PREFERRED STOCK means the 5,000,000 shares of 12.25% preferred stock of Reorganized Lodgian, having the rights, powers and preferences set forth in the New Preferred Stock Certificate of Designation, to be issued by Reorganized Lodgian on the Effective Date in an initial aggregate liquidation preference of $125,000,000. 1.92 NEW PREFERRED STOCK CERTIFICATE OF DESIGNATION means the certificate of designation for the New Preferred Stock to be adopted by Reorganized Lodgian on the Effective Date, substantially in the form set forth in the Plan Supplement. 1.93 NEW SUBSIDIARY EQUITY means, with respect to each Reorganized Debtor other than Reorganized Lodgian, the Equity Securities to be authorized pursuant to such Reorganized Debtor's Amended Organizational Documents, including Equity Securities to be issued by such Reorganized Debtor on the Effective Date. 1.94 OLD EQUITY INTEREST means an Equity Interest represented by an Old Equity Security. 1.95 OLD EQUITY SECURITY means an Equity Security of any Debtor issued by such Debtor and outstanding immediately prior to the Effective Date, including Old Lodgian Common Stock. 1.96 OLD LODGIAN COMMON STOCK means the authorized common stock, par value $0.01 per share, of Lodgian, Inc., or any option, warrant or right, contractual or otherwise, to acquire any such common stock, issued by Lodgian, Inc. and outstanding immediately prior to the Effective Date. 1.97 OLD LODGIAN COMMON STOCK INTEREST means an Equity Interest represented by Old Lodgian Common Stock. 1.98 OLD SUBSIDIARY EQUITY INTEREST means an Equity Interest represented by an Old Equity Security of any Debtor other than Lodgian, Inc. 1.99 PERSON means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority, governmental unit or other entity of whatever nature. 1.100 PLAN means this first amended joint chapter 11 plan of reorganization of the Debtors, to the extent applicable to any Debtor, including the Plan Supplement and the exhibits hereto and thereto, as the same may be amended or modified -12- from time to time in accordance with the provisions of the Bankruptcy Code and the terms hereof. 1.101 PLAN DOCUMENTS means the documents to be executed, delivered, assumed or performed in conjunction with the consummation of this Plan on the Effective Date, including (i) the Amended Organizational Documents, (ii) the New Preferred Stock Certificate of Designation, (iii) the Warrant Agreements, (iv) the Registration Rights Agreement, (v) the New Equity Incentive Plan, (vi) the Exit Financing Agreements, (vii) the Class 1 Amended Notes, (viii) the Subclass 1-H Note and (ix) the Subclass 1-O Note. Each of the Plan Documents to be entered into or adopted as of the Effective Date will be filed in draft form in the Plan Supplement. 1.102 PLAN PROPONENTS means each Debtor and the Committee. 1.103 PLAN SECURITIES means, collectively, the New Preferred Stock, the New Common Stock and the Warrants. 1.104 PLAN SUPPLEMENT means a supplemental appendix to this Plan that will contain (i) the draft form of the Plan Documents to be entered into as of the Effective Date and (ii) the Schedule of Assumed Contracts as of the date of the Plan Supplement, to be filed seven (7) days before the date of the Confirmation Hearing, and in any event no later than five (5) days prior to the last date by which votes to accept or reject this Plan must be submitted. 1.105 PRIORITY NON-TAX CLAIM means any Claim other than an Administrative Expense Claim or a Priority Tax Claim, entitled to priority in payment as specified in section 507(a)(3), (4), (5), (6), (7) or (9) of the Bankruptcy Code. 1.106 PRIORITY TAX CLAIM means any Claim of a governmental unit of the kind entitled to priority in payment as specified in sections 502(i) and 507(a)(8) of the Bankruptcy Code. 1.107 PRO RATA SHARE means, with respect to: (i) an Allowed Claim in a Class 3 Lodgian Subclass, a fractional share of the Class 3 Lodgian Subclass Plan Securities, as the case may be, for that Subclass, equal to (x) the amount of such Allowed Claim divided by (y) the aggregate amount of Allowed Claims in that Subclass; (ii) an Allowed Claim in Class 4, a fractional share of the Class 4 Plan Securities equal to (x) the principal amount of Senior Subordinated Notes underlying such Allowed Claim divided by (y) $200,000,000; -13- (iii) an Allowed Claim in Class 7, a fractional share of the Class 7 Plan Securities equal to (x) the number of CRESTS underlying such Allowed Claim divided by (y) 3,500,000; and (iv) an Allowed Equity Interest in Class 8, a fractional share of the Class 8 Plan Securities equal to (x) the number of shares of Old Lodgian Common Stock comprising such Allowed Equity Interest divided by (y) 28,479,837. 1.108 REGISTRATION RIGHTS AGREEMENT means the registration rights agreement between Reorganized Lodgian and certain holders of Plan Securities, substantially in the form set forth in the Plan Supplement. 1.109 RELEASEES means, collectively, (i) any director, officer, agent or employee of any Debtor who was employed or otherwise serving in such capacity on the Confirmation Date, (ii) the Committee and (iii) any member of the Committee, any member, director, officer, agent or employee of a member of the Committee, or any of the Debtors' or the Committee's attorneys or advisors, in each case who were acting, employed or otherwise serving in such capacity on the Confirmation Date. 1.110 REORGANIZED DEBTOR means each Debtor on or after the Effective Date, including without limitation Reorganized Lodgian. 1.111 REORGANIZED LODGIAN means Lodgian, Inc., on and after the Effective Date. 1.112 ROUNDABOUT DEBTOR means Raleigh-Downtown Enterprises, Inc. 1.113 SCHEDULE OF ASSUMED CONTRACTS means the schedule listing the executory contracts and unexpired leases to be assumed by any Debtor, to be filed in the Plan Supplement. 1.114 SCHEDULES means the schedules of assets and liabilities and the statement of financial affairs filed by each Debtor under section 521 of the Bankruptcy Code, Bankruptcy Rule 1007 and the Official Bankruptcy Forms of the Bankruptcy Rules, as such schedules and statements have been or may be supplemented or amended through the Confirmation Date. 1.115 SECURED CLAIM means a Claim to the extent (i) secured by Collateral, the amount of which is equal to or less than the value of such Collateral (A) as set forth in this Plan, (B) as agreed to by the holder of such Claim and the applicable Debtor(s), or (C) as determined by a Final Order in accordance with section 506(a) of the Bankruptcy Code, or (ii) secured by the amount of any rights of setoff of the holder thereof under section 553 of the Bankruptcy Code. -14- 1.116 SENIOR SUBORDINATED NOTES means the 12 1/4% Senior Subordinated Notes due 2009 issued by Lodgian Financing Corp., and guaranteed by Lodgian, Inc. and certain other Debtors, pursuant to the Senior Subordinated Notes Indenture. 1.117 SENIOR SUBORDINATED NOTES CLAIM means, collectively, the Claims of a holder of Senior Subordinated Notes under the Senior Subordinated Notes and the Senior Subordinated Notes Guarantees. 1.118 SENIOR SUBORDINATED NOTES GUARANTEES means the guarantee of the Senior Subordinated Notes by Lodgian, Inc. and the Senior Subordinated Notes Guarantor Debtors pursuant to the Senior Subordinated Notes Indenture. 1.119 SENIOR SUBORDINATED NOTES GUARANTOR DEBTORS means the Debtors that are party to the Senior Subordinated Notes Guarantees. 1.120 SENIOR SUBORDINATED NOTES INDENTURE means the Indenture dated as of July 23, 1999 between Lodgian Financing Corp., Lodgian, Inc., the other Debtors named therein and Bankers Trust Company, as trustee, as the same may be amended or modified from time to time to and including the Effective Date. 1.121 SUBCLASS means a subclass of a Class of Claims or Equity Interests established pursuant to Section 3. 1.122 SUBCLASS 1-H NOTE means a note in the principal amount of the Allowed Claims in Subclass 1-H, with an interest rate of 7.0% per annum and maturing on the fifth anniversary of the Effective Date. Interest on the Subclass 1-H Note will be payable monthly. Beginning after the first anniversary of the Effective Date, the Subclass 1-H Note will require principal payments equivalent to a 48-year straight line amortization schedule, with the unpaid balance payable at final maturity. The Subclass 1-H Note will be secured by the Collateral securing the Allowed Claims in Subclass 1-H. 1.123 SUBCLASS 1-O NOTE means a note in the principal amount of the Allowed Claims in Subclass 1-O, with an interest rate of 7.0% per annum and maturing on the fifth anniversary of the Effective Date. Interest on the Subclass 1-O Note will be payable monthly. Beginning after the first anniversary of the Effective Date, the Subclass 1-O Note will require principal payments equivalent to a 48-year straight line amortization schedule, with the unpaid balance payable at final maturity. The Subclass 1-O Note will be secured by the Collateral securing the Allowed Claims in Subclass 1-O. 1.124 SUBCLASS DEBTOR means, with respect to any Subclass of Claims or Equity Interests, the Debtor against or in which such Claims or Equity Interests are Allowed. -15- 1.125 SUBORDINATED CLAIM means any Claim against a Debtor, whether secured or unsecured, for any fine, penalty, forfeiture, attorneys' fees (to the extent that such attorneys' fees are punitive in nature), or for multiple, exemplary or punitive damages, to the extent that such fine, penalty, forfeiture, attorneys' fees or damages are not compensation for actual pecuniary loss suffered by the holder of such Claim and not statutorily prescribed, and all claims against any of the Debtors of the type described in Section 510(b) of the Bankruptcy Code relating to equity interests (including all Equity Interests). 1.126 THIRD PARTY OWNED OLD SUBSIDIARY EQUITY INTEREST means an Old Subsidiary Equity Interest held by any Person other than a Debtor. 1.127 TORT CLAIM means any Claim related to personal injury, property damage, products liability, wrongful death, employment litigation or other similar Claims against any of the Debtors arising out of events that occurred, in whole or in part, prior to the Commencement Date, which have not previously been compromised and settled or otherwise resolved. 1.128 WARRANTS means the A Warrants and the B Warrants. 1.129 WARRANT AGREEMENTS means the A Warrant Agreement and the B Warrant Agreement. 1.130 WELLS FARGO means Wells Fargo Bank Minnesota National Association, formerly known as and successor by merger to Norwest Bank Minnesota, National Association. 1.131 WELLS FARGO AGREEMENTS means the Mortgage Financing Agreements dated as of December 22, 1997 between Columbus Hospitality Associates, L.P. and Wells Fargo. 1.132 WILMINGTON TRUST. means Wilmington Trust Company, as Trustee under the CRESTS Indenture, the CRESTS Guarantee and the LCT I Declaration of Trust. B. INTERPRETATION; APPLICATION OF DEFINITIONS AND RULES OF CONSTRUCTION. Unless otherwise specified, all section or exhibit references in this Plan are to the respective section in, or exhibit to, this Plan, as the same may be amended, waived or modified from time to time. The words "herein," "hereof," "hereto," "hereunder," and other words of similar import refer to this Plan as a whole and not to any particular section, subsection or clause contained therein. A term used herein that is not defined herein shall have the meaning assigned to that term in the Bankruptcy Code. The rules of -16- construction contained in section 102 of the Bankruptcy Code shall apply to this Plan. The headings in this Plan are for convenience of reference only and shall not limit or otherwise affect the provisions hereof. SECTION 2. ADMINISTRATIVE EXPENSE CLAIMS AND PRIORITY TAX CLAIMS 2.1 ADMINISTRATIVE EXPENSE CLAIMS. Except to the extent that the applicable Debtor and a holder of an Allowed Administrative Expense Claim agree to a different treatment, each Debtor shall pay to each holder of an Allowed Administrative Expense Claim against such Debtor, in full satisfaction of such Claim, Cash in an amount equal to such Claim on, or as soon thereafter as is reasonably practicable, the later of (i) the Effective Date and (ii) the first Business Day after the date that is thirty (30) calendar days after the date such Administrative Expense Claim becomes an Allowed Administrative Expense Claim; provided, however, that Allowed Administrative Expense Claims representing liabilities incurred in the ordinary course of business by such Debtor, as a debtor-in-possession, or liabilities arising under loans or advances to or other obligations incurred by such Debtor, as debtor-in-possession, whether or not incurred in the ordinary course of business, shall be paid by such Debtor in the ordinary course of business, consistently with past practice and in accordance with the terms and subject to the conditions of any agreements governing, instruments evidencing, or other documents relating to such transactions. 2.2 COMPENSATION AND REIMBURSEMENT CLAIMS. All entities seeking an award by the Bankruptcy Court of compensation for services rendered or reimbursement of expenses incurred through and including the Confirmation Date under section 503(b)(2), 503(b)(3), 503(b)(4) or 503(b)(5) of the Bankruptcy Code (i) shall file their respective final applications for allowance of compensation for services rendered and reimbursement of expenses incurred by the date that is forty-five (45) days after the Effective Date, and (ii) shall be paid in full in such amounts as are allowed by the Bankruptcy Court (A) upon the later of (i) the Effective Date and (ii) the date upon which the order relating to any such Administrative Expense Claim is entered, or (B) upon such other terms as may be mutually agreed upon between the holder of such an Administrative Expense Claim and the Plan Proponents or, on and after the Effective Date, the Reorganized Debtors. Each Debtor is authorized to pay compensation for services rendered or reimbursement of expenses incurred after the Confirmation Date and until the Effective Date in the ordinary course of business and without the need for Bankruptcy Court approval. -17- 2.3 PRIORITY TAX CLAIMS. Except to the extent that a holder of an Allowed Priority Tax Claim and the applicable Debtor agree to a different treatment, each holder of an Allowed Priority Tax Claim shall receive, in full satisfaction of such Claim, payment in Cash of the Allowed Amount of such Claim over a period not exceeding six (6) years after the date of assessment of such Claim, with interest at a rate equal to the Federal Judgment Rate as of the Confirmation Date, payable monthly, in periodic payments having a value, as of the Effective Date, equal to the amount of such Allowed Priority Tax Claim. All Allowed Priority Tax Claims that are not due and payable on or before the Effective Date shall be paid in the ordinary course of business as such obligations become due. 2.4 DIP FINANCING FACILITY CLAIMS. On the Effective Date, the applicable Debtors shall pay or arrange for the payment of all amounts outstanding under the DIP Financing Facility. Once such payments have been made, the DIP Financing Facility, except to the extent that any letters of credit remain outstanding thereunder as provided herein, shall be deemed terminated (subject in all respects to any carve-out approved by the Bankruptcy Court in the Final Order approving the DIP Financing Facility), and the DIP Lenders shall take all reasonable action to confirm the removal of any liens on the properties of the applicable Debtors securing the DIP Financing Facility. On the Effective Date, any outstanding letters of credit issued under the DIP Financing Facility shall be either replaced or cash collateralized under the Exit Financing Agreements. 2.5 INDENTURE TRUSTEE CLAIMS. Each of Deutsche Bank and Wilmington Trust shall be granted, pursuant to section 503(b) of the Bankruptcy Code, an Administrative Claim for their reasonable fees, costs and expenses in performing their duties as Trustee including, but not limited to, reasonable fees, costs and expenses of their respective professionals, from the Commencement Date (including accrued and unpaid trustees fees as of the Commencement Date) through the Effective Date to the extent that such fees and expenses are either (i) not in dispute by the Plan Proponents or (ii) in the event of any dispute, determined by a Final Order of the Bankruptcy Court. The Reorganized Debtors will pay the reasonable fees, costs and expenses of Deutsche Bank and Wilmington Trust incurred after the Effective Date in connection with the making of any distribution under the Plan to the extent that such fees and expenses are either (i) not in dispute by the Plan Proponents or (ii) in the event of any dispute, determined by a Final Order of the Bankruptcy Court. -18- SECTION 3. CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS This Plan constitutes a separate chapter 11 plan of reorganization for each Debtor. Except for Administrative Expense Claims and Priority Tax Claims, all Claims against and Equity Interests in a particular Debtor are placed in the following Classes for each of the Debtors. In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Expense Claims and Priority Tax Claims, as described in Section 2, have not been classified and thus are excluded from the following Classes. The following tables designate the Classes of Claims against and Equity Interests in each Debtor (as and to the extent that such Class of Claims or Equity Interests is applicable to such Debtor) and specify which of those Classes are (i) impaired or unimpaired by this Plan and (ii) entitled to vote to accept or reject this Plan in accordance with section 1126 of the Bankruptcy Code or deemed to reject this Plan. -19- 3.1 CLASSES.
- ----------------------------- --------------------------------------- ----------------------- ------------------------ CLASS DESIGNATION IMPAIRMENT ENTITLED TO VOTE - ----------------------------- --------------------------------------- ----------------------- ------------------------ CLASS 1 Secured Claims Impaired Yes SUBCLASSES 1-A THROUGH See Section 3.2 1-P CLASS 2 Priority Non-Tax Claims Unimpaired No (deemed to accept) CLASS 3 CLASS 3 LODGIAN General Unsecured Claims against Impaired Yes SUBCLASSES Lodgian Debtors CLASS 3 LIQUIDATING General Unsecured Claims against Impaired No (deemed to reject) SUBCLASSES Liquidating Debtors CLASS 4 Senior Subordinated Notes Claims Impaired Yes CLASS 5 Convenience Claims Impaired Yes CLASS 6 [Reserved] CLASS 6A [Reserved] CLASS 7 CRESTS Claims Impaired Yes CLASS 8 Old Lodgian Common Stock Interests Impaired No (deemed to reject) CLASS 9 CLASS 9 LODGIAN Debtor Owned Old Subsidiary Equity Unimpaired No (deemed to accept) SUBCLASSES Interests in Lodgian Debtors CLASS 9 LIQUIDATING Debtor Owned Old Subsidiary Equity Impaired No (deemed to reject) SUBCLASSES Interests in Liquidating Debtors CLASS 10 Third Party Owned Old Subsidiary Equity Interests DIVISIONS 10-A THROUGH See Section 3.4 10-A Impaired Yes 10-D 10-B Impaired Yes 10-C Unimpaired No (deemed to accept) 10-D Impaired Yes CLASS 11 Subordinated Claims Impaired No (deemed to reject) - ----------------------------- --------------------------------------- ----------------------- ------------------------
3.2 SUBCLASSES FOR CLASS 1. For convenience of identification, this Plan classifies the Allowed Claims in Class 1 as a single Class. This Class is actually a group of 16 Subclasses, depending on the Collateral securing such Allowed Claims. Each Subclass is treated under this Plan as a separate class for voting and distribution purposes. The following table identifies the Subclasses for Class 1. -20-
- ------------------ -------------------------------------------------- ----------------------- ------------------------ SUBCLASS DESIGNATION IMPAIRMENT ENTITLED TO VOTE - ------------------ -------------------------------------------------- ----------------------- ------------------------ 1-A BO Agreements Impaired Yes 1-B BO/Rockbridge Agreements Impaired Yes 1-C [Reserved] 1-D Chase Agreements Impaired Yes 1-E Column/Criimi Mae Agreements Impaired Yes 1-F DLJ/Column Agreements Impaired Yes 1-G DLJ/Column/Criimi Mae Agreements Impaired Yes 1-H DDL Kinser Agreements Impaired Yes 1-I First Union Agreements Impaired Yes 1-J GMAC Agreements Impaired Yes 1-K GMAC-Orix Agreements Impaired Yes 1-L Lehman/Criimi Mae Agreements Impaired Yes 1-M MSSF Pre-Petition Credit Facility Impaired Yes 1-N [Reserved] 1-O Wells Fargo Agreements Impaired Yes 1-P Miscellaneous Depends on treatment Depends on treatment
3.3 SUBCLASSES FOR CLASS 3. For convenience of identification, this Plan classifies the Allowed Claims in Class 3 as a single Class. This Class is actually a group of 81 Subclasses, one for the Allowed Class 3 Claims against each Debtor. Each Subclass is treated under this Plan as a separate class for voting and distribution purposes. 3.4 SUBCLASSES FOR CLASS 10. For convenience of identification, this Plan classifies the Allowed Equity Interests in Class 10 as a single Class. This Class is actually a group of 4 Subclasses, one for the Allowed Class 10 Equity Interests in each Debtor identified in Exhibit B. Each Subclass is treated under this Plan as a separate class for voting and distribution purposes. SECTION 4. TREATMENT OF CLAIMS AND EQUITY INTERESTS In full satisfaction and discharge of all of the Claims against or Equity Interests in the Debtors: 4.1 SECURED CLAIMS (CLASS 1). (a) On or as soon as reasonably practicable after the Effective Date, each holder of an Allowed Claim in a Class 1 Subclass shall receive (i) the treatment specified for such Subclass in the following table, except to the extent that a holder of an -21- Allowed Claim in such Subclass and the applicable Debtor have agreed to a different treatment, or (ii) such other treatment as the Bankruptcy Court shall approve in connection with confirmation of applicable Debtor's Plan through a "cram down" of such Subclass under section 1129(b) of the Bankruptcy Code.
- -------------- --------------------------------------- --------------------------------------------------------------- SUBCLASS DESIGNATION TREATMENT - -------------- --------------------------------------- --------------------------------------------------------------- 1-A BO Agreements Repaid in full in Cash. 1-B BO/Rockbridge Agreements Repaid in full in Cash. 1-C [Reserved] 1-D Chase Agreements Class 1 Amended Note. 1-E Column/Criimi Mae Agreements Class 1 Amended Note. 1-F DLJ/Column Agreements Class 1 Amended Note. 1-G DLJ/Column/Criimi Mae Agreements Class 1 Amended Note. 1-H DDL Kinser Agreements Subclass 1-H Note. 1-I First Union Agreements Class 1 Amended Note. 1-J GMAC Agreements At the election of the applicable Debtor (i) repaid in full in Cash or (ii) a Class 1 Amended Note. 1-K GMAC-Orix Agreements The Collateral securing the Allowed Claim. 1-L Lehman/Criimi Mae Agreements Class 1 Amended Note. 1-M MSSF Pre-Petition Credit Facility Repaid in full in Cash. 1-N [Reserved] 1-O Wells Fargo Agreements Subclass 1-O Note. 1-P Miscellaneous At the election of the applicable Debtor, holder will receive (i) Cash equal to 100% of the amount of the Allowed Claim; (ii) the net proceeds of sale of collateral up to the amount of Allowed Claim; (iii) the collateral securing the Allowed Claim; (iv) a note with periodic Cash payments having a present value equal to the amount of the Allowed Claim and secured by the existing collateral; (v) such treatment that leaves unaltered the legal, equitable and contractual rights of the holder; or (vi) such other distribution as is necessary to satisfy the requirements of the Bankruptcy Code. In the event that a Debtor treats a Claim as described under clause (i) or (ii), the liens securing the Claim will be deemed released.
(b) Class 1 Claims are impaired, and the holders of Allowed Claims in Class 1 are entitled to vote to accept or reject this Plan. In the event that any Class 1 Subclass rejects this Plan, the applicable Subclass Debtor(s) reserves the right to (i) request, pursuant to Section 13.10, confirmation of its Plan through a "cram down" of such Subclass under section 1129(b) of the Bankruptcy Code and modification of the -22- Plan to the extent, if any, confirmation under section 1129(b) requires modification, or (ii) defer confirmation of its Plan and continue with its Chapter 11 Case in order to further analyze its options under the Bankruptcy Code (even though the other Debtors will proceed with confirmation of their Plans and emergence from their Chapter 11 Cases). 4.2 PRIORITY NON-TAX CLAIMS (CLASS 2). On or as soon as reasonably practicable after the Effective Date, to the extent not already paid, each holder of an Allowed Claim in Class 2 shall receive Cash equal to the amount of the Allowed Claim, except to the extent that a holder of an Allowed Claim in Class 2 and the applicable Debtor have agreed to a different treatment. 4.3 GENERAL UNSECURED CLAIMS (CLASS 3). (a) On or as soon as reasonably practicable after the Effective Date, each holder of an Allowed Claim in each Class 3 Lodgian Subclass (other than an Allowed Inter-Company Claim) shall receive its Pro Rata Share of the Class 3 Lodgian Subclass Plan Securities for that Subclass. (b) No property will be distributed to or retained by the holders of Allowed Claims in any Class 3 Liquidating Subclass on account of such Allowed Claims. (c) Allowed Inter-Company Claims have been taken into account in determining the distributions to Class 3 Subclasses. No separate distribution will be made on account of Allowed Inter-Company Claims. Each holder of an Allowed Inter-Company Claim will be deemed to have accepted this Plan. (d) Any Tort Claim determined and liquidated pursuant to a judgment obtained in accordance with Section 8.1(b) and applicable non-bankruptcy law, which is no longer appealable or subject to review, shall be deemed an Allowed Claim in Class 3 against the applicable Debtor in such liquidated amount, provided that only the amount of such Allowed Claim that is less than or equal to the Debtor's self-insured retention or deductible in connection with the applicable insurance policy and is not satisfied from proceeds of insurance payable to the holder of such Allowed Claim under the Debtor's insurance policies shall be treated as an Allowed Claim for the purposes of distributions under this Plan. (e) Plan Securities distributable under this Section 4.3 in respect of Allowed Claims in any Class 3 Lodgian Subclass may be subject to increase or decrease based upon the actual amount of Allowed Claims in such Subclass after resolving all Disputed Claims in such Subclass. -23- (f) A portion of the distributions to be made hereunder on account of Allowed Claims in Class 3 Lodgian Subclasses represents a reallocation of Plan Securities from the holders of Allowed Claims in Class 4. Pursuant to the Class 4 Compromise, the Plan Securities distributable to holders of Allowed Claims in Class 4 will not be affected by any increase or decrease in the actual amount of Allowed Claims in Class 3 Lodgian Subclasses. 4.4 SENIOR SUBORDINATED NOTES CLAIMS (CLASS 4). (a) On or as soon as reasonably practicable after the Effective Date, each holder of an Allowed Claim in Class 4 shall receive its Pro Rata Share of the Class 4 Plan Securities. (b) The distributions to be made hereunder on account of Allowed Claims in Class 4 reflect a reallocation to Class 3 Lodgian Subclasses and Classes 7 and 8 of a portion of the Plan Securities which the holders of Allowed Claims in Class 4 would otherwise have received based on the estimated recovery values of such Class 4 Claims. The reallocated Plan Securities consist of (i) 11.2% of the Class 3 Plan Securities, (ii) 100% of the Class 7 Plan Securities and (iii) 100% of the Class 8 Plan Securities. 4.5 CONVENIENCE CLAIMS (CLASS 5). On or as soon as reasonably practicable after the Effective Date, each holder of an Allowed Claim in Class 5 shall be paid an amount in Cash equal to one-hundred percent (100%) of such Allowed Claim; provided, however, that, in the sole discretion of the applicable Debtor, such Cash payment may be made by the Debtors in one or more installment payments over a period not to exceed twelve (12) months after the Effective Date. 4.6 CRESTS CLAIMS (CLASS 7). (a) On the Effective Date, the CRESTS Claims shall be deemed Allowed in the aggregate amount of $203,700,640.82, which includes accrued and unpaid interest on the CRESTS claims relating to the period up to, but not including, the Petition Date. (b) On or as soon as reasonably practicable after the Effective Date, LCT I, the issuer of the CRESTS, will receive the Class 7 Plan Securities, which LCT I will in turn distribute to the holders of the CRESTS their Pro Rata Share. (c) The distributions to be made hereunder on account of Allowed Claims in Class 7 represent a reallocation of Plan Securities from the holders of Allowed Claims in Class 4. -24- 4.7 OLD LODGIAN COMMON STOCK INTERESTS (CLASS 8). (a) On or as soon as reasonably practicable after the Effective Date, each holder of an Allowed Equity Interest in Class 8 shall receive its Pro Rata Share of the Class 8 Plan Securities. (b) All Old Lodgian Common Stock Interests, and all instruments representing such Equity Interests, shall be deemed canceled on the Effective Date. (c) The distributions to be made hereunder on account of Allowed Equity Interests in Class 8 represent a reallocation of Plan Securities from the holders of Allowed Claims in Class 4. 4.8 DEBTOR OWNED OLD SUBSIDIARY EQUITY INTERESTS (CLASS 9). (a) Except as may otherwise be determined by the applicable Debtor, the legal, equitable and contractual rights of holders of Allowed Equity Interests in Class 9 Lodgian Subclasses shall remain unaltered, except as set forth in Exhibit B. (b) Allowed Equity Interests in Class 9 Liquidating Subclasses will not receive any distributions on account of such Allowed Equity Interests. The Plan Proponents will request that the Bankruptcy Court make a finding that these Equity Interests have no value for purposes of the "best interest" test under section 1129(a)(7) of the Bankruptcy Code. On the date the Liquidating Debtors are dissolved in accordance with the Plan, the instruments evidencing Allowed Equity Interests in Class 9 Liquidating Subclasses shall be deemed cancelled without further act or action under any applicable agreement, law, regulation, order or rule, and the Equity Interests in the Liquidating Debtors evidenced thereby shall be extinguished. 4.9 THIRD PARTY OWNED OLD SUBSIDIARY EQUITY INTERESTS (CLASS 10). (a) Except to the extent the applicable Debtor and the holders of Allowed Equity Interests in Subclass A of Class 10 otherwise agree, the holders of Allowed Equity Interests in Subclass A of Class 10 will retain their Old Subsidiary Equity Interests in the Subclass Debtor in the aggregate percentage indicated in Exhibit B and the Debtor holding Equity Interests in such Subclass Debtor will retain the balance of the Old Subsidiary Equity Interests in such Subclass Debtor, provided that, on or as soon as reasonably practicable after the Effective Date, the Old Subsidiary Equity Interests will be amended to provide that, effective as of the Effective Date, the Old Subsidiary Equity Interests held by such Debtor will entitle the holder to a preferred income return and a preferred sale return (including insurance payments and condemnation awards). (b) Except to the extent the applicable Debtor and the holders of Allowed Equity Interests in Subclass B of Class 10 otherwise agree, on or as soon as -25- reasonably practicable after the Effective Date, the holders of Allowed Equity Interests in Subclass B of Class 10 will receive in the aggregate the percentage of the New Subsidiary Equity of the Subclass Debtor indicated in Exhibit B and the Debtor holding Equity Interests in such Subclass Debtor will receive the balance of the New Subsidiary Equity of such Subclass Debtor. All Third Party Owned Old Subsidiary Equity Interests in Subclass B of Class 10, and all instruments representing such Equity Interests, shall be deemed canceled on the Effective Date. (c) Except to the extent the applicable Debtor and the holders of Allowed Equity Interests in Subclass C of Class 10 otherwise agree, the legal, equitable and contractual rights of holders of Allowed Equity Interests in Subclass C of Class 10 shall remain unaltered. (d) Except to the extent the applicable Debtor and the holders of Allowed Equity Interests in Subclass D of Class 10 otherwise agree, (i) the holders of Allowed Equity Interests in Subclass D of Class 10 will retain their Old Subsidiary Equity Interests in the Subclass Debtor in the aggregate percentage indicated in Exhibit B and the Debtor holding Equity Interests in such Subclass Debtor will retain the balance of the Old Subsidiary Equity Interests in such Subclass Debtor, (ii) on or as soon as reasonably practicable after the Effective Date, the holders of Allowed Equity Interests in Subclass D of Class 10 will make an aggregate capital contribution to the Subclass Debtor in the amount of $284,440 and (iii) upon payment in full of such capital contribution, Adversary Proceeding No. 02-03086-brl will be dismissed with prejudice. 4.10 SUBORDINATED CLAIMS (CLASS 11). No property will be distributed to or retained by the holders of Allowed Claims in Class 11 on account of such Allowed Claims. All Allowed Claims in Class 11 shall be discharged as of the Effective Date. SECTION 5. ACCEPTANCE OR REJECTION OF PLAN 5.1 VOTING OF CLAIMS OR EQUITY INTERESTS. Each holder of an Allowed Claim or Equity Interest in an impaired Class or Subclass of Claims or Equity Interests (other than Class 3 Liquidating Subclasses, Class 8, Class 9 Liquidating Subclasses and Class 11) shall be entitled to vote to accept or reject this Plan. For purposes of calculating the number of Allowed Claims or Equity Interests in a Class of Claims or Equity Interests that have voted to accept or reject this Plan under section 1126(c) of the Bankruptcy Code, all Allowed Claims or Equity Interests in such Class held by one entity or any affiliate thereof (as defined in the Securities Act of 1933 and the rules and regulations promulgated thereunder) shall be aggregated and treated as one Allowed Claim or Equity Interest in such Class. -26- 5.2 ACCEPTANCE BY A CLASS. (a) Consistent with section 1126(c) of the Bankruptcy Code and except as provided for in section 1126(e) of the Bankruptcy Code, a Class of Claims shall have accepted this Plan if it is accepted by at least two-thirds in dollar amount, and more than one-half in number of the holders, of Allowed Claims of such Class that have timely and properly voted to accept or reject this Plan. (b) Consistent with section 1126(d) of the Bankruptcy Code and except as provided for in section (c) 1126(e) of the Bankruptcy Code, a Class of Equity Interests shall have accepted this Plan if it is accepted by at least two-thirds in amount of Allowed Equity Interests of such Class that have timely and properly voted to accept or reject this Plan. 5.3 PRESUMED ACCEPTANCE OF PLAN. Any Class that is unimpaired under this Plan is conclusively presumed to accept this Plan. 5.4 PRESUMED REJECTION OF PLAN. In accordance with section 1126 of the Bankruptcy Code, holders of Allowed Equity Interests in Class 8, Class 9 Liquidating Subclasses and holders of Allowed Claims in the Class 3 Liquidating Subclasses and Class 11 are conclusively presumed to reject this Plan and the votes of such holders will not be solicited with respect to such Claims and Equity Interests. SECTION 6. MEANS FOR IMPLEMENTATION 6.1 EXIT FINANCING. On the Effective Date, the Reorganized Debtors are authorized to enter into the Exit Financing Agreements. All Cash necessary for the Reorganized Debtors to make payments pursuant to this Plan will be obtained from the Reorganized Debtors' cash balances, operations and borrowings under the Exit Financing Agreements. 6.2 AUTHORIZATION OF PLAN SECURITIES. On the Effective Date, Reorganized Lodgian is authorized to issue the applicable Plan Securities without the need for any further corporate action. -27- 6.3 WARRANT AGREEMENTS. On the Effective Date, Reorganized Lodgian and the warrant agent under the Warrant Agreements will execute and deliver the Warrant Agreements without the need for any further corporate action. 6.4 WAIVER OF SUBORDINATION. The distributions under this Plan take into account the relative priority of the Claims in each Class in connection with any contractual, legal and equitable subordination rights or provisions relating thereto or, in the case of the distributions to be made on account of Allowed Claims of holders of Claims in Class 7, represent a reallocation of Plan Securities from the holders of Claims in Class 4. Accordingly, the distributions under this Plan to any holder of an Allowed Claim shall not be subject to levy, garnishment, attachment or other legal process by any holder of indebtedness senior by reason of claimed contractual subordination rights to the indebtedness of the holders of such Allowed Claim. On the Effective Date, all creditors shall be deemed to have waived any and all contractual subordination rights which they may have with respect to distributions under this Plan to any holder of an Allowed Claim, and the Confirmation Order shall permanently enjoin, effective as of the Effective Date, all Persons from enforcing or attempting to enforce any such rights with respect to the distributions under this Plan. 6.5 REGISTRATION RIGHTS AGREEMENT. On the Effective Date, Reorganized Lodgian shall execute and deliver the Registration Rights Agreement without the need for any further corporate action. 6.6 LISTING OF PLAN SECURITIES. Reorganized Lodgian shall use commercially reasonable efforts to cause the shares of its New Common Stock and, in the sole discretion of the Board of Directors of Reorganized Lodgian, its New Preferred Stock to be listed on a national securities exchange or a qualifying interdealer quotation system. The Reorganized Debtors will have no obligation to list or seek to have listed or qualified the Equity Securities of any other Reorganized Debtor. 6.7 NEW EQUITY INCENTIVE PLAN. On the Effective Date, Reorganized Lodgian is authorized to, and shall, adopt and implement the New Equity Incentive Plan without the need for any further corporate action. -28- 6.8 CANCELLATION OF EXISTING SECURITIES AND AGREEMENTS. Except for purposes of evidencing a right to distributions under this Plan or otherwise provided hereunder, on the Effective Date, all the agreements and other documents evidencing (i) any Claims or rights of any holder of a Claim (including Senior Subordinated Notes Claims and CRESTS Claims) against the applicable Debtor, including all indentures and notes evidencing such Claims and (ii) any options or warrants to purchase Equity Interests, obligating the applicable Debtor to issue, transfer or sell Equity Interests or any other capital stock of the applicable Debtor, shall be canceled and terminated and of no further force or effect.. Except with respect to the making of any distribution under the Plan, on the Effective Date, Deutsche Bank will be discharged and released from all obligations under the Senior Subordinated Notes Indenture and Wilmington Trust will be discharged and released from all obligations under the CRESTS Indenture and the CRESTS Guarantee. Notwithstanding the foregoing, the provisions of the agreements and other documents relating to Class 4 Claims will govern the relationships of Deutsche Bank and the holders of Class 4 Claims and the agreements and other documents relating to Class 7 Claims will govern the relationships of Wilmington Trust and the holders of Class 7 Claims. 6.9 BOARD OF DIRECTORS AND EXECUTIVE OFFICERS. (a) Prior to the confirmation of this Plan, in accordance with section 1129(a)(5) of the Bankruptcy Code, the Debtors shall disclose (i) the identity and affiliations of any individual proposed to serve, after the Effective Date, as a director or officer of the Reorganized Debtors, and (ii) the identity of any "insider" (as such term is defined in section 101(31) of the Bankruptcy Code) who shall be employed and retained by the Reorganized Debtors and the nature of any compensation for such insider. (b) The Board of Directors of Reorganized Lodgian shall consist initially of nine (9) members, of whom eight (8) (including three (3) independent directors) will be designated by the Committee and one will be the Chief Executive Officer of Reorganized Lodgian. (c) The officers of the Debtors immediately before the Effective Date shall continue to serve immediately after the Effective Date in their respective capacities as officers of the Reorganized Debtors. 6.10 AMENDED ORGANIZATIONAL DOCUMENTS. On the Effective Date, the Reorganized Debtors are authorized to, and shall, without the need for any further corporate action, adopt and, as applicable, file their respective Amended Organizational Documents with the applicable Secretary of State. The Amended Organizational Documents shall prohibit the issuance of nonvoting equity -29- securities, as required by sections 1123(a) and (b) of the Bankruptcy Code, subject to further amendment as permitted by applicable law. 6.11 REQUEST FOR APPROVAL OF CLASS 4 COMPROMISE. This Plan constitutes a request for approval of the Class 4 Compromise. 6.12 AUTHORIZATION OF NOTES. On the Effective Date, the applicable Reorganized Debtors are authorized to issue the Class 1 Amended Notes, the Subclass 1-H Note and the Subclass 1-O Note, and execute and deliver all related financing documents without the need for any further corporate action.. 6.13 LIQUIDATING DEBTORS. (a) The Plan is a chapter 11 Plan of Liquidation for the Liquidating Debtors. Upon the distribution of all assets of the Liquidating Debtors' Estates pursuant to the Plan and the filing by or on behalf of the Liquidating Debtors of a certification to that effect with the Bankruptcy Court, the Liquidating Debtors shall be deemed dissolved for all purposes without the necessity for any other or further actions to be taken by or on behalf of each of the Liquidating Debtors or payments to be made in connection therewith; provided, however, that Liquidating Debtors may (but shall not be required to) file with the Office of the Secretary of State for the applicable State a certificate of dissolution. From and after the Effective Date, the Liquidating Debtors shall not be required to file any document, or take any other action, to withdraw their business operation from any states in which the Liquidating Debtors previously conducted their business operations. (b) From and after the Confirmation Date, the Liquidating Debtors shall continue in existence (and shall consult with the Committee as specifically provided for in the Plan) for the purpose of (i) winding up their affairs as expeditiously as reasonably possible, (ii) liquidating, by conversion to Cash or other methods, any remaining assets of their Estates, as expeditiously as reasonably possible, (iii) enforcing and prosecuting claims, interests, rights and privileges of the Liquidating Debtors, including, without limitation, the prosecution of avoidance actions in conjunction with the marshalling of the Liquidating Debtors' assets, as agreed upon by the Plan Proponents (iv) resolving Disputed Claims, (v) administering the Plan, and (vi) filing appropriate tax returns. (c) From and after the Confirmation Date, and subject to the Effective Date, the then current officers of each of the Liquidating Debtors shall continue to serve in their respective capacities through the earlier of the date such Liquidating Debtor is -30- dissolved in accordance with the Plan and the date such officer resigns, is replaced or is terminated. SECTION 7. DISTRIBUTIONS 7.1 DISTRIBUTION RECORD DATE. As of the close of business on the Distribution Record Date, the applicable Debtor's books and records for each of the Classes of Claims or Equity Interests as maintained by such Debtor or its respective agent, or, in the case of the Senior Subordinated Notes and the CRESTS Junior Subordinated Debentures, the indenture trustee therefor, shall be deemed closed, and there shall be no further changes in the record holders of any of the Claims or Equity Interests. The applicable Debtor shall have no obligation to recognize any transfer of Claims or Equity Interests occurring on or after the Distribution Record Date. The applicable Debtor shall be entitled to recognize and deal for all purposes hereunder only with those record holders stated in the books and records of the applicable Debtor or its respective agent, or, in the case of the Senior Subordinated Notes and the CRESTS Junior Subordinated Debentures, the indenture trustee therefor, as of the close of business on the Distribution Record Date, to the extent applicable. 7.2 DATE OF DISTRIBUTIONS. Unless otherwise provided herein, any distributions and deliveries to be made hereunder shall be made on the Effective Date or as soon thereafter as is practicable. In the event that any payment or act under this Plan is required to be made or performed on a date that is not a Business Day, then the making of such payment or the performance of such act may be completed on or as soon as reasonably practicable on the next succeeding Business Day, but shall be deemed to have been completed as of the initial due date. 7.3 DISTRIBUTIONS TO CLASSES. The Disbursing Agent shall distribute to the applicable agent and/or recordholder for the individual holders of the applicable Allowed Claims and Equity Interests (i) the Cash allocable to Classes 1 and 2, and Class 5; and (ii) the New Preferred Stock and New Common Stock allocable to the Class 3 Lodgian Subclasses and Classes 4, 7 and 8. For the purpose of calculating the amount of shares of New Preferred Stock and New Common Stock to be initially distributed to holders of Allowed Claims in any Class 3 Lodgian Subclass, all Disputed Claims in such Subclass will be treated as though such Claims will be Allowed Claims in the amounts asserted, or as estimated by the Bankruptcy Court, as applicable. On the Final Distribution Date, each holder of an Allowed Claim in any Class 3 Lodgian Subclass shall receive, if applicable to such -31- Subclass, a Catch-up Distribution of New Preferred Stock and New Common Stock. After the Effective Date but prior to the Final Distribution Date, the applicable Reorganized Lodgian Debtor, in its sole discretion, may direct the Disbursing Agent to distribute shares of New Preferred Stock and New Common Stock to a holder of a Disputed Claim in a Class 3 Lodgian Subclass, which becomes an Allowed Claim after the Effective Date such that the holder of such Claim receives the same amount of shares of New Preferred Stock and New Common Stock that such holder would have received had its Claim been an Allowed Claim in such amount on the Effective Date. 7.4 DISBURSING AGENT. (a) Lodgian, Inc. will contribute the Plan Securities to be distributed under this Plan to each other Lodgian Debtor as a capital contribution to allow such Lodgian Debtor to discharge the Claims against it. Lodgian, Inc. will act as Disbursing Agent, on behalf of itself and each other Lodgian Debtor with respect to the Plan Securities to be distributed under this Plan. (b) All distributions under this Plan (other than distribution of Plan Securities) shall be made by the applicable Reorganized Debtor as Disbursing Agent (or such other entity designated by the Reorganized Debtor as a Disbursing Agent on or after the Effective Date). (c) A Disbursing Agent shall not be required to give any bond or surety or other security for the performance of its duties unless otherwise ordered by the Bankruptcy Court, and, in the event that a Disbursing Agent is so otherwise ordered, all costs and expenses of procuring any such bond or surety shall be borne by the applicable Reorganized Debtor. 7.5 RIGHTS AND POWERS OF DISBURSING AGENT. The Disbursing Agent shall be empowered to (i) effect all actions and execute all agreements, instruments and other documents necessary to perform its duties under this Plan, (ii) make all distributions contemplated hereby, (iii) employ professionals to represent it with respect to its responsibilities and (iv) exercise such other powers as may be vested in the Disbursing Agent by order of the Bankruptcy Court, pursuant to this Plan, or as deemed by the Disbursing Agent to be necessary and proper to implement the provisions hereof. 7.6 SURRENDER OF INSTRUMENTS. As a condition to receiving any distribution under this Plan, each holder of an Allowed Claim or Equity Interest represented by a certificated instrument or note must surrender such instrument or note held by it to the Disbursing Agent or its designee, unless such certificated instrument or note is being reinstated or being left unimpaired -32- under this Plan. Any holder of such instrument or note that fails to (i) surrender such instrument or note or (ii) execute and deliver an affidavit of loss and/or indemnity reasonably satisfactory to the Disbursing Agent and furnish a bond in form, substance and amount reasonably satisfactory to the Disbursing Agent before the first anniversary of the Effective Date, shall be deemed to have forfeited all rights and Claims or Equity Interests and may not participate in any distribution under this Plan in respect of such Claim or Equity Interest. Any other holder of an Allowed Claim or Equity Interest who fails to take such action required by the Disbursing Agent or its designee to receive its distribution hereunder before the first anniversary of the Effective Date, or such earlier time as otherwise provided for in this Plan, may not participate in any distribution under this Plan in respect of such Claim or Equity Interest. Any distribution forfeited hereunder shall become property of the applicable Reorganized Debtor. 7.7 DELIVERY OF DISTRIBUTIONS. Distributions to holders of Allowed Claims and Equity Interests shall be made at the address of each such holder as set forth on the Schedules filed with the Bankruptcy Court unless superseded by the address as set forth on the proofs of claim and equity interest filed by such holders or other writing notifying the applicable Reorganized Debtor of a change of address. If any holder's distribution is returned as undeliverable, notice shall be given to the Committee and no further distributions to such holder shall be made unless and until the applicable Reorganized Debtor is notified of such holder's then current address, at which time all missed distributions shall be made to such holder, without interest. All claims for undeliverable distributions shall be made on or before one hundred and twenty (120) days after the date such undeliverable distribution was initially made. After such date, all unclaimed property shall, in the applicable Reorganized Debtor's discretion, be used to satisfy the costs of administering and fully consummating this Plan or become property of the applicable Reorganized Debtor, and the holder of any such Claim or Equity Interest shall not be entitled to any other or further distribution under this Plan on account of such Claim or Equity Interest. 7.8 MANNER OF PAYMENT UNDER PLAN. (a) All distributions of Cash, New Preferred Stock, New Common Stock and Warrants to the holders of Allowed Claims against and Equity Interests in each of the Debtors under this Plan shall be made by, or on behalf of, the applicable Reorganized Debtor. Any distributions that revert to the applicable Reorganized Debtor or are otherwise canceled (such as pursuant to Section 7.6 or 7.7) shall revest solely in the applicable Reorganized Debtor. (b) At the option of the applicable Reorganized Debtor, any Cash payment to be made hereunder may be made by a check or wire transfer or as otherwise required or provided in applicable agreements. -33- 7.9 FRACTIONAL SHARES AND FRACTIONAL WARRANTS. No fractional shares of New Common Stock or New Preferred Stock, or fractional Warrants or Cash in lieu thereof, shall be distributed. For purposes of distribution, fractional shares of New Common Stock or New Preferred Stock and fractional Warrants shall be rounded down to the next whole number or zero, as applicable. 7.10 DE MINIMIS DISTRIBUTIONS. The applicable Reorganized Debtor as Disbursing Agent or such other entity designated by such Reorganized Debtor as a Disbursing Agent on or after the Effective Date will not be required to distribute Cash to the holder of an Allowed Claim in an impaired Class if the amount of Cash to be distributed on any distribution date under the Plan (including the Effective Date and the Final Distribution Date) on account of such Claim is less than $50. Any holder of an Allowed Claim on account of which the amount of Cash to be distributed is less than $50 will have its Claim for such distribution discharged and will be forever barred from asserting any such Claim against the Reorganized Debtors or their respective property. Any Cash not distributed pursuant to this Section 7.10 will become the property of the Reorganized Debtors, free of any restrictions thereon, and any such Cash held by a third-party Disbursing Agent will be returned to the Reorganized Debtors. 7.11 EXEMPTION FROM SECURITIES LAWS. The issuance of the Plan Securities pursuant to this Plan shall be exempt from any securities laws registration requirements to the fullest extent permitted by section 1145 of the Bankruptcy Code. 7.12 SETOFFS. Each Debtor may, in accordance with the provisions of this Plan, section 553 of the Bankruptcy Code and applicable non-bankruptcy law, set off against any Allowed Claim and the distributions to be made pursuant to this Plan on account of such Allowed Claim (before any distribution is made on account of such Allowed Claim), the Claims, rights and causes of action of any nature that such Debtor may hold against the holder of such Allowed Claim; provided, however, that neither the failure to effect such a setoff nor the allowance of any Claim hereunder shall constitute a waiver or release by the applicable Debtor of any such Claims, rights and causes of action that the applicable Debtor may possess against such holder; and provided further, however, that any Claims of each Debtor arising before the Commencement Date shall first be setoff against Claims against such Debtor arising before the Commencement Date. -34- 7.13 ALLOCATION OF PLAN DISTRIBUTION BETWEEN PRINCIPAL AND INTEREST. All distributions in respect of any Allowed Claim shall be allocated first to the principal amount of such Allowed Claim, as determined for federal income tax purposes, and thereafter, to the remaining portion of such Allowed Claim, if any. 7.14 WITHHOLDING AND REPORTING REQUIREMENTS. In connection with this Plan and all instruments issued in connection therewith and distributed thereon, the applicable Debtor shall comply with all applicable withholding and reporting requirements imposed by any federal, state or local taxing authority, and all distributions under this Plan shall be subject to any such withholding or reporting requirements. 7.15 TIME BAR TO CASH PAYMENTS. Checks issued by the Reorganized Debtors in respect of Allowed Claims shall be null and void if not negotiated within sixty (60) days after the date of issuance thereof. Requests for reissuance of any check shall be made to the applicable Reorganized Debtor by the holder of the Allowed Claim to whom such check originally was issued. Any Claim in respect of such a voided check shall be made on or before thirty (30) days after the expiration of the sixty day period following the date of issuance of such check. After such date, all funds held on account of such voided check shall, in the discretion of the applicable Reorganized Debtor, be used to satisfy the costs of administering and fully consummating this Plan or become property of the applicable Reorganized Debtor, and the holder of any such Allowed Claim shall not be entitled to any other or further distribution under this Plan on account of such Allowed Claim. 7.16 TRANSACTIONS ON BUSINESS DAYS. If the Effective Date or any other date on which a transaction may occur under this Plan shall occur on a day that is not a Business Day, the transactions contemplated by this Plan to occur on such day shall instead occur on the next succeeding Business Day. 7.17 CLOSING OF CHAPTER 11 CASES. When all Disputed Claims or Equity Interests filed against the Debtors have become Allowed Claims or Equity Interests or have been disallowed by Final Order, and all distributions in respect of Allowed Claims and Equity Interests have been made in accordance with this Plan, or at such earlier time as the Reorganized Debtors deem appropriate, the Reorganized Debtors shall seek authority from the Bankruptcy Court to close their respective Chapter 11 Cases in accordance with the Bankruptcy Code and the Bankruptcy Rules. -35- SECTION 8. PROCEDURES FOR RESOLVING AND TREATING DISPUTED CLAIMS AND EQUITY INTERESTS 8.1 PAYMENTS AND DISTRIBUTIONS WITH RESPECT TO DISPUTED CLAIMS AND EQUITY INTERESTS. (a) Notwithstanding any other provision hereof, if any portion of a Claim is a Disputed Claim or Equity Interest, no payment or distribution provided hereunder shall be made on account of such Claim or Equity Interest unless and until such Disputed Claim or Equity Interest becomes an Allowed Claim or Equity Interest. (b) All Tort Claims are Disputed Claims. At the applicable Debtor's option, any unliquidated Tort Claim as to which a proof of claim was timely filed in the Chapter 11 Cases shall be determined and liquidated in the administrative or judicial tribunal(s) in which it is pending on the Effective Date or, if no action was pending on the Effective Date, in any administrative or judicial tribunal of appropriate jurisdiction. Notwithstanding the foregoing, at all times prior to or after the Effective Date, the Bankruptcy Court shall retain jurisdiction relating to Tort Claims, including the applicable Debtor's right to have such Claims determined and liquidated in the Bankruptcy Court. Any Tort Claim determined and liquidated pursuant to a judgment obtained in accordance with this Section 8.1(b) and applicable non-bankruptcy law which is no longer appealable or subject to review shall be deemed an Allowed Claim in Class 3 against the applicable Debtor in such liquidated amount, provided that only the amount of such Allowed Claim that is less than or equal to the Debtor's self-insured retention or deductible in connection with the applicable insurance policy and is not satisfied from proceeds of insurance payable to the holder of such Allowed Claim under the Debtors' insurance policies shall be treated as an Allowed Claim for the purposes of distributions under this Plan. Nothing contained in this Section 8.1(b) shall constitute or be deemed a waiver of any Claim, right or cause of action that the applicable Debtor may have against any Person in connection with or arising out of any Tort Claim, including, without limitation, any rights under section 157(b)(5) of title 28 of the United States Code. This entire Section 8.1(b) is subject to the applicable Debtor's right to elect to follow the procedures provided for in Section 8.5. 8.2 PRESERVATION OF INSURANCE. Nothing in this Plan, including the discharge and release of the Debtors as provided in this Plan, shall diminish or impair the enforceability of any insurance policies that may cover Claims against any Debtor. -36- 8.3 RESOLUTION OF DISPUTED CLAIMS AND EQUITY INTERESTS. (a) Unless otherwise ordered by the Bankruptcy Court after notice and a hearing, and except as otherwise expressly provided for below, each Debtor, in coordination and consultation with the Committee, shall have the exclusive right (except as to applications for allowances of compensation and reimbursement of expenses under sections 330 and 503 of the Bankruptcy Code) to make and file objections to Claims and Equity Interests and shall serve a copy of each objection upon the holder of the Claim or Equity Interest to which the objection is made as soon as practicable, but in no event later than one hundred and twenty (120) days after the Effective Date; provided, however, that such one hundred and twenty (120) day period may be automatically extended by the applicable Debtor, without any further application to, or approval by, the Bankruptcy Court, for an additional thirty (30) days with the consent of the Committee (not to be unreasonably withheld). The foregoing deadlines for filing objections to Claims shall not apply to Tort Claims and, accordingly, no such deadline shall be imposed by this Plan. Notwithstanding any authority to the contrary, an objection to a Claim or Equity Interest shall be deemed properly served on the holder thereof if the Debtors effect service in any of the following manners: (i) in accordance with Federal Rule of Civil Procedure 4, as modified and made applicable by Bankruptcy Rule 7004; (ii) to the extent that counsel for the holder is unknown, by first class mail, postage prepaid, on the signatory on the proof of claim or equity interest or other representative identified in the proof of claim or equity interest or any attachment thereto; or (iii) by first class mail, postage prepaid, on any counsel that has appeared on the holder's behalf in the Chapter 11 Cases. (b) Notwithstanding the foregoing, the Committee shall also have the right to make and file objections to Claims and Equity Interests filed against any Debtor, which objections shall be made in consultation with such Debtor(s) and shall be made within the time frames provided for in this Section 8.3. From and after the Confirmation Date, subject to the Effective Date, all objections shall be litigated to a Final Order except to the extent that the applicable Debtor (with the consent of the Committee not to be unreasonably withheld) or the Committee (with the consent of the applicable Debtor not to be unreasonably withheld), as applicable, elects to withdraw any such objection or the applicable Debtor (with the consent of the Committee not to be unreasonably withheld) or the Committee (with the consent of the applicable Debtor not to be unreasonably withheld), as applicable, and the holder of the Disputed Claim or Equity Interest elect to compromise, settle or otherwise resolve any such objection, in which event they may settle, compromise or otherwise resolve any such Disputed Claim or Equity Interest without approval of the Bankruptcy Court. The applicable Debtor shall prepare, issue and deliver to the Committee, within forty-five (45) days following the end of each month, a report with respect to the status of the resolution of Disputed Claims and Equity Interests, in a form to be agreed upon by the professionals for the applicable Debtor and the Committee. -37- 8.4 DISTRIBUTIONS AFTER ALLOWANCE. If, on or after the Effective Date, any Disputed Claim or Equity Interest becomes, in whole or in part, an Allowed Claim or Equity Interest, the applicable Reorganized Debtor shall distribute to the holder thereof the distributions, if any, to which such holder is then entitled under this Plan. Any Cash distributions shall be made as soon as practicable after the date that the order or judgment of the Bankruptcy Court allowing such Disputed Claim or Equity Interest (or portion thereof) becomes a Final Order, but in no event more than thirty (30) days thereafter. Any shares of New Preferred Stock, New Common Stock or Warrants distributable to the holder of a Disputed Claim or Equity Interest which becomes an Allowed Claim or Equity Interest (in whole or in part) as a result of the entry of such order or judgment of the Bankruptcy Court allowing such Disputed Claim or Equity Interest (or portion thereof) shall be made in accordance with the next scheduled distribution date to the holders of Allowed Claims and Equity Interests. 8.5 ESTIMATION OF CLAIMS AND EQUITY INTERESTS. The applicable Debtor or the Committee may, at any time, and in consultation with each other, request that the Bankruptcy Court estimate any contingent, unliquidated or Disputed Claim or Equity Interest pursuant to section 502(c) of the Bankruptcy Code, regardless of whether the applicable Debtor previously objected to such Claim or Equity Interest or whether the Bankruptcy Court has ruled on any such objection, and the Bankruptcy Court will retain jurisdiction to estimate any Claim or Equity Interest at any time during litigation concerning any objection to any Claim or Equity Interest, including, without limitation, during the pendency of any appeal relating to any such objection. In the event that the Bankruptcy Court estimates any contingent, unliquidated or Disputed Claim or Equity Interest, the amount so estimated shall constitute either the allowed amount of such Claim or Equity Interest or a maximum limitation on such Claim or Equity Interest, as determined by the Bankruptcy Court. If the estimated amount constitutes a maximum limitation on the amount of such Claim or Equity Interest, the applicable Debtor or the Committee may pursue supplementary proceedings to object to the allowance of such Claim or Equity Interest. All of the aforementioned objection, estimation and resolution procedures are intended to be cumulative and not exclusive of one another. On and after the Confirmation Date, subject to the Effective Date, Claims and Equity Interests which have been estimated may be subsequently compromised, settled, withdrawn or otherwise resolved without further order of the Bankruptcy Court. 8.6 NO RECOURSE. No holder of any Disputed Claim or Equity Interest that becomes an Allowed Claim or Equity Interest in any applicable Class shall have recourse against any -38- Disbursing Agent, the Debtors, the Committee, the Reorganized Debtors or any other holder of an Allowed Claim or Equity Interest in such Class, or any of their respective professional consultants, officers, directors or members of their successors or assigns, or any of their respective property, if the Plan Securities allocated to such Class and not previously distributed are insufficient to provide a distribution to such holder in the same proportion to that received by other holders of Allowed Claims or Equity Interests in such Class. However, nothing in this Plan shall modify any right of a holder of a Claim or Equity Interest under section 502(j) of the Bankruptcy Code. 8.7 MEDIATION OF DISPUTED CLAIMS AND EQUITY INTERESTS. The automatic stay of section 362 of the Bankruptcy Code shall remain in effect after the Effective Date with respect to all Disputed Claims and Equity Interests. All holders of Disputed Claims (other than Tort Claims) and Equity Interests shall comply with the following procedures: (a) At its option, the applicable Debtor may (i) request that the holder of a Disputed Claim or Equity Interest provide documentation to evidence the validity and amount of such Claim or Equity Interest, and/or (ii) submit a written counter-proposal to the holder of a Disputed Claim or Equity Interest. In lieu of, or in addition to, the foregoing, the applicable Debtor may file an objection to such Disputed Claim or Equity Interest. (b) The holder of a Disputed Claim or Equity Interest may accept the applicable Debtor's counter-proposal at any time within fourteen (14) days of the applicable Debtor's mailing of such counter-proposal. (c) If no settlement is reached pursuant to paragraphs (a) and (b) above, the applicable Debtor, at its discretion (in consultation with the Committee), shall have the option to require the holder of a Disputed Claim or Equity Interest to participate in a non-binding mediation process. All mediation pursuant to this Section 8.7 shall be conducted at the applicable Debtor's option in either Atlanta, Georgia or New York, New York, pursuant to the Local Bankruptcy Rules of the Bankruptcy Court. In the event that a mediation is scheduled and the holder of the Disputed Claim or Equity Interest does not participate in the mediation, the Disputed Claim or Equity Interest shall be disallowed in its entirety. (d) If the applicable Debtor and the holder of a Disputed Claim or Equity Interest are unable to reach an agreement on a Claim or Equity Interest amount pursuant to the procedures set forth above, the Disputed Claim or Equity Interest shall be submitted to the Bankruptcy Court for resolution. If it is determined that the United States Bankruptcy Court for the Southern District of New York does not have jurisdiction to resolve any Disputed Claim or Equity -39- Interest, then the Disputed Claim or Equity Interest shall be submitted to the United States District Court for the Southern District of New York for resolution. (e) The applicable Debtor (with the consent of the Committee not to be unreasonably withheld) and the holder of a Disputed Claim or Equity Interest may seek to settle, compromise or otherwise resolve any Disputed Claim or Equity Interest at any time in accordance with this Plan or any order of the Bankruptcy Court approving a settlement procedure for Disputed Claims and Equity Interests for the applicable Debtor and the Committee. (f) At its option, the applicable Debtor may require the holder of a Disputed Tort Claim to either (i) comply with the mediation procedures provided for in this Section 8.7 or (ii) comply with any other separate mediation and/or arbitration procedures approved in the Chapter 11 Cases relating to Tort Claims. 8.8 INTEREST AND DIVIDENDS. To the extent that a Disputed Claim becomes an Allowed Claim after the Effective Date and is entitled to a Cash distribution under this Plan, the holder of such Claim shall be entitled to a Cash distribution plus interest thereon, calculated at the average rate received by the applicable Debtor in its deposit accounts, from the Effective Date to the date of distribution. In the event that dividend distributions have been made with respect to the New Preferred Stock or the New Common Stock distributable to a holder of a Disputed Claim or Equity Interest that later becomes Allowed, such holder shall be entitled to receive such previously distributed dividends without any interest with respect thereto. SECTION 9. EXECUTORY CONTRACTS AND UNEXPIRED LEASES 9.1 GENERAL TREATMENT. On the Effective Date, all executory contracts and unexpired leases to which each Debtor is a party shall be deemed rejected as of the Effective Date, except for an executory contract or unexpired lease that (i) has been assumed or rejected pursuant to a Final Order of the Bankruptcy Court, (ii) is specifically designated as a contract or lease to be assumed on the Schedule of Assumed Contracts set forth in the Plan Supplement, provided however, that the Debtors reserve the right to amend the Plan Supplement at any time on or before the Effective Date to amend the Schedule of Assumed Contracts to add or delete any executory contract or unexpired lease, thus providing for its assumption, assumption and assignment, or rejection, or (iii) is the subject of a separate motion to assume, assume and assign, or reject filed under section 365 of the Bankruptcy Code by the applicable Debtor on or before the Effective Date. -40- 9.2 CURE OF DEFAULTS. (a) Except to the extent that a different treatment has been agreed to by the non-Debtor party or parties to any executory contract or unexpired lease to be assumed pursuant to Section 9.1 hereof, the applicable Debtor shall, pursuant to the provisions of sections 1123(a)(5)(G) and 1123(b)(2) of the Bankruptcy Code and consistently with the requirements of section 365 of the Bankruptcy Code, within thirty (30) days after the Confirmation Date, file and serve a pleading with the Bankruptcy Court listing the cure amounts of all executory contracts or unexpired leases to be assumed. The parties to such executory contracts or unexpired leases to be assumed by the applicable Debtor shall have fifteen (15) days from service to object to the cure amounts listed by the applicable Debtor. If there are any objections filed, the Bankruptcy Court shall hold a hearing. The applicable Debtor shall retain its right to reject any of its executory contracts or unexpired leases, including contracts or leases that are subject to a dispute concerning amounts necessary to cure any defaults. Notwithstanding the foregoing, at all times through the date that is five (5) Business Days after the Bankruptcy Court enters an order resolving and fixing the amount of a disputed cure amount, the Debtors shall have the right to reject such executory contract or unexpired lease. (b) Subject to Section 9.1 of this Plan, the executory contracts and unexpired leases on the Schedule of Assumed Contracts shall be assumed by the respective Debtors as indicated on such Schedule. Except as may otherwise be ordered by the Bankruptcy Court, the Debtors shall have the right to cause any assumed executory contract or unexpired lease to vest in the Reorganized Debtor designated for such purpose by the Debtors. 9.3 APPROVAL OF REJECTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES. Entry of the Confirmation Order shall constitute the approval, pursuant to section 365(a) of the Bankruptcy Code, of the rejection of any executory contracts and unexpired leases to be rejected as and to the extent provided in Section 9.1 of this Plan. 9.4 BAR DATE FOR FILING PROOFS OF CLAIM RELATING TO EXECUTORY CONTRACTS AND UNEXPIRED LEASES REJECTED PURSUANT TO PLAN. Claims arising out of the rejection of an executory contract or unexpired lease pursuant to Section 9.1 of this Plan must be filed with the Bankruptcy Court no later than twenty (20) days after the Effective Date. Any Claims not filed within such time period will be forever barred from assertion against any of the applicable Debtors and/or the Estates. -41- 9.5 SURVIVAL OF DEBTORS' CORPORATE INDEMNITIES. Any obligations of any of the Debtors pursuant to the applicable Debtor's corporate charters and bylaws or agreements entered into any time prior to the Effective Date, to indemnify any Releasee, with respect to all present and future actions, suits and proceedings against such Debtor or such Releasee, based upon any act or omission for or on behalf of such Debtor, shall not be discharged or impaired by confirmation of this Plan. Such obligations shall be deemed and treated as executory contracts to be assumed by the applicable Debtor pursuant to this Plan, and shall continue as obligations of the applicable Reorganized Debtor. SECTION 10. CONDITIONS PRECEDENT TO EFFECTIVE DATE 10.1 CONDITIONS TO EFFECTIVE DATE. The following are conditions precedent to the Effective Date: (a) The Bankruptcy Court shall have entered the Confirmation Order, which shall include approval and authorization pursuant to Bankruptcy Rule 9019 of the Class 4 Compromise, in form and substance satisfactory to the Plan Proponents; (b) No stay of the Confirmation Order shall then be in effect; and (c) All documents, instruments and agreements, including, without limitation, the Exit Financing Agreements, in form and substance satisfactory to the Plan Proponents, provided for under or necessary to implement this Plan shall have been executed and delivered by the parties thereto, unless such execution or delivery has been waived by the parties benefited thereby. 10.2 WAIVER OF CONDITIONS. The Plan Proponents may waive the conditions to effectiveness of this Plan set forth in Section 10.1(c) of this Plan without leave of or notice to the Bankruptcy Court and without any formal action other than proceeding with confirmation of this Plan SECTION 11. EFFECT OF CONFIRMATION 11.1 VESTING OF ASSETS. Upon the Effective Date, pursuant to sections 1141(b) and (c) of the Bankruptcy Code, except for leases and executory contracts that have not yet been assumed or rejected (which leases and contracts shall be deemed vested when and if assumed), all property of each Debtor's Estate shall vest in the applicable Reorganized Debtor free and clear of all Claims, liens, encumbrances, charges and other interests, -42- except as provided herein. Each Reorganized Debtor may operate its businesses and may use, acquire and dispose of property free of any restrictions of the Bankruptcy Code or the Bankruptcy Rules and in all respects as if there were no pending cases under any chapter or provision of the Bankruptcy Code, except as provided herein. 11.2 DISCHARGE OF CLAIMS AND CANCELLATION OF EQUITY INTERESTS. Except as otherwise provided herein or in the Confirmation Order, the rights afforded in this Plan and the entitlement to receive payments and distributions to be made hereunder shall discharge all existing Claims, of any kind, nature or description whatsoever against each of the Debtors or any of their assets or properties to the fullest extent permitted by section 1141 of the Bankruptcy Code. Except as provided in this Plan, on the Effective Date, all existing Claims against each of the Debtors and Equity Interests in the Debtors shall be, and shall be deemed to be, discharged or canceled and all holders of Claims and Equity Interests shall be precluded and enjoined from asserting against then Reorganized Debtors, or any of their assets or properties, any other or further Claim or Equity Interest based upon any act or omission, transaction or other activity of any kind or nature that occurred prior to the Effective Date, whether or not such holder has filed a proof of claim or equity interest. 11.3 DISCHARGE OF DEBTORS. Upon the Effective Date and in consideration of the distributions to be made hereunder, except as otherwise expressly provided herein, each holder (as well as any trustees and agents on behalf of each holder) of a Claim or Equity Interest of such holder shall be deemed to have forever waived, released and discharged each of the Debtors, to the fullest extent permitted by section 1141 of the Bankruptcy Code, of and from any and all Claims, Equity Interests, rights and liabilities that arose prior to the Effective Date. Upon the Effective Date, all such Persons shall be forever precluded and enjoined, pursuant to section 524 of the Bankruptcy Code, from prosecuting or asserting any such discharged Claim against or canceled Equity Interest in each of the Debtors. 11.4 BINDING EFFECT. Except as otherwise provided in section 1141(d)(3) of the Bankruptcy Code, on and after the Confirmation Date, and subject to the Effective Date, the provisions of this Plan shall bind any holder of a Claim against, or Equity Interest in, the applicable Debtor and its respective successors and assigns, whether or not the Claim or Equity Interest of such holder is impaired under this Plan and whether or not such holder has accepted this Plan. -43- 11.5 TERM OF INJUNCTIONS OR STAYS. Unless otherwise provided herein, all injunctions or stays arising under section 105 or 362 of the Bankruptcy Code, any order entered during the Chapter 11 Cases under section 105 or 362 of the Bankruptcy Code or otherwise, and in existence on the Confirmation Date, shall remain in full force and effect until the later of the Effective Date and the date indicated in such order. 11.6 INJUNCTION AGAINST INTERFERENCE WITH PLAN. Upon the entry of the Confirmation Order, all holders of Claims and Equity Interests and other parties in interest, along with their respective present or former employees, agents, officers, directors or principals, shall be enjoined from taking any actions to interfere with the implementation or consummation of this Plan. 11.7 EXCULPATION. None of the Debtors nor any Releasee shall have or incur any liability to any holder of a Claim or Equity Interest for any act or omission (and in the case of any director, officer, agent or employee of any Debtor who was employed or otherwise serving in such capacity on the Confirmation Date, any claims against such Persons) in connection with, or arising out of, the Chapter 11 Cases, the pursuit of confirmation of this Plan, transactions or relationships with the applicable Debtor (either prior to or after the Commencement Date), the consummation of this Plan, the administration of this Plan or the property to be distributed under this Plan, except for willful misconduct or gross negligence, and, in all respects, the Plan Proponents and such Persons shall be entitled to rely upon the advice of counsel with respect to their duties and responsibilities during the Chapter 11 Cases and under this Plan. 11.8 RIGHTS OF ACTION. On and after the Effective Date, and except as may otherwise be agreed to by the Plan Proponents, the Reorganized Debtors will retain and have the exclusive right to enforce any and all present or future rights, claims or causes of action against any Person and rights of the Reorganized Debtors that arose before or after the Commencement Date, including, but not limited to, rights, claims, causes of action, avoiding powers, suits and proceedings arising under sections 544, 545, 548, 549, 550 and 553 of the Bankruptcy Code. The Reorganized Debtors may pursue, abandon, settle or release any or all such rights of action, as they deem appropriate, without the need to obtain approval or any other or further relief from the Bankruptcy Court. The Reorganized Debtors may, in their discretion, offset any such claim held against a Person against any payment due such Person under this Plan; provided, however, that any claims of any of the Reorganized Debtors arising before the Commencement Date shall first be -44- offset against Claims against any of the Reorganized Debtors arising before the Commencement Date. 11.9 RELEASE BY DEBTORS. From and after the Effective Date, the Releasees shall be released by each Debtor from any and all claims (as defined in section 101(5) of the Bankruptcy Code), obligations, suits, judgments, damages, rights, causes of action and liabilities whatsoever, whether known or unknown, foreseen or unforeseen, existing or hereafter arising, in law, equity or otherwise, that any Debtor is entitled to assert in its own right or on behalf of the holder of any Claim or Equity Interest or other Person, based in whole or in part upon any act or omission, transaction, agreement, event or other occurrence taking place on or prior to the Effective Date in any way relating to any Debtor, the Chapter 11 Cases or the negotiation, formulation and preparation of this Plan or any related document, except for (i) claims or causes of action against any Releasee resulting from the willful misconduct or gross negligence of such Releasee and (ii) claims against or liabilities of directors, officers or employees of any Debtor in respect of any loan, advance or similar payment by any Debtor to any such Person or any contractual obligation owed by such Person to any Debtor. 11.10 RELEASE OF RELEASEES BY OTHER RELEASEES. From and after the Effective Date, the Releasees shall release each other from any and all claims (as defined in section 101(5) of the Bankruptcy Code), obligations, suits, judgments, damages, rights, causes of action and liabilities whatsoever, whether known or unknown, foreseen or unforeseen, existing or hereafter arising, in law, equity or otherwise, that any Releasee is entitled to assert against any other Releasee, based in whole or in part upon any act or omission, transaction, agreement, event or occurrence taking place on or before the Effective Date in any way relating to any Debtor, the Chapter 11 Cases or the negotiation, formulation and preparation of this Plan or any related document, except for claims or causes of actions against any Releasee resulting from the willful misconduct or gross negligence of such Releasee. 11.11 CLAIMS OF THE UNITED STATES GOVERNMENT. Nothing in this Plan shall effect a release of any non-Debtor from any claim by the United States Government or any of its agencies; nor shall anything in this Plan enjoin the United States from bringing any claim, suit, action or other proceeding against any non-Debtor; provided, however, that this Section 11.11 shall in no way affect or limit the discharge granted to any Debtor under Chapter 11 of the Bankruptcy Code. -45- SECTION 12. RETENTION OF JURISDICTION On and after the Effective Date, the Bankruptcy Court shall retain jurisdiction over all matters arising in, arising under, or related to the Chapter 11 Cases and this Plan for, among other things, the following purposes: (a) To hear and determine motions for the assumption or rejection of executory contracts or unexpired leases and the allowance of Claims resulting therefrom; (b) To determine any motion, adversary proceeding, application, contested matter, and other litigated matter pending on or commenced after the Confirmation Date; (c) To ensure that distributions to holders of Allowed Claims and Equity Interests are accomplished as provided herein; (d) To consider Claims and Equity Interests or the allowance, classification, priority, compromise, estimation or payment of any Claim or Equity Interest, Administrative Expense Claim, Disputed Claim or Equity Interest; (e) To enter, implement or enforce such orders as may be appropriate in the event that the Confirmation Order is for any reason stayed, reversed, revoked, modified or vacated; (f) To issue injunctions, enter and implement other orders, and take such other actions as may be necessary or appropriate to restrain interference by any Person with the consummation, implementation or enforcement of this Plan, the Confirmation Order or any other order of the Bankruptcy Court; (g) To hear and determine any application to modify this Plan in accordance with section 1127 of the Bankruptcy Code, to remedy any defect or omission or reconcile any inconsistency in this Plan, the disclosure statement for this Plan, or any order of the Bankruptcy Court, including the Confirmation Order, in such a manner as may be necessary to carry out the purposes and effects thereof; (h) To hear and determine all applications under sections 330, 331 and 503(b) of the Bankruptcy Code for awards of compensation for services rendered and reimbursement of expenses incurred prior to the Confirmation Date; (i) To hear and determine disputes arising in connection with the interpretation, implementation or enforcement of this Plan, the Confirmation Order, any transactions or payments contemplated hereby, or any agreement, instrument, or other document governing or relating to any of the foregoing; -46- (j) To take any action and issue such orders as may be necessary to construe, enforce, implement, execute and consummate this Plan or to maintain the integrity of this Plan following consummation; (k) To hear any disputes arising out of, and to enforce, the order approving alternative dispute resolution procedures to resolve personal injury, employment litigation and similar Claims pursuant to section 105(a) of the Bankruptcy Code; (l) To determine such other matters and for such other purposes as may be provided in the Confirmation Order; (m) To hear and determine matters concerning state, local, and federal taxes in accordance with sections 346, 505 and 1146 of the Bankruptcy Code (including any requests for expedited determinations under section 505(b) of the Bankruptcy Code filed, or to be filed, with respect to tax returns for any and all taxable periods ending after the Commencement Date through, and including, the Final Distribution Date); (n) To hear and determine any other matters related hereto and not inconsistent with the Bankruptcy Code and title 28 of the United States Code; (o) To recover all assets of any of the Debtors and property of the applicable Debtor's Estate, wherever located; and (p) To enter a final decree closing the Chapter 11 Cases. SECTION 13. MISCELLANEOUS PROVISIONS 13.1 RETIREE BENEFITS. On and after the Effective Date, pursuant to section 1129(a)(13) of the Bankruptcy Code, the applicable Reorganized Debtors shall continue to pay any applicable retiree benefits of such Debtors (within the meaning of section 1114 of the Bankruptcy Code), at any such level established in accordance with section 1114 of the Bankruptcy Code, at any time prior to the Confirmation Date, for the duration of the period for which the applicable Debtor had obligated itself to provide any such benefits. 13.2 DELETION OF CLASSES AND SUBCLASSES. Any Class or Subclass of Claims or Equity Interests that does not contain as an element thereof an Allowed Claim or Equity Interest or a Claim or Equity Interest temporarily allowed under Bankruptcy Rule 3018 as of the date of the commencement of the confirmation hearing shall be deemed deleted from this Plan for purposes of voting to -47- accept or reject this Plan and for purposes of determining acceptance or rejection of this Plan by such Class or Subclass under section 1129(a)(8) of the Bankruptcy Code. 13.3 ADDITION OF CLASSES AND SUBCLASSES. In the event that Class 1 would contain as elements thereof two or more Secured Claims collateralized by different properties or interests in property or collateralized by liens against the same property or interest in property having different priority, such Claims shall be divided into separate Subclasses of Class 1. 13.4 COMMITTEE. (a) The Committee shall continue in existence from and after the Effective Date. In addition to the powers and duties ascribed to the Committee in this Plan, from and after the Effective Date, the Committee may perform such other functions as are consistent with discharging its duties to the holders of General Unsecured Claims. (b) References herein to the "Committee" shall include the Committee from and after the Effective Date. 13.5 EXEMPTION FROM TRANSFER TAXES. Pursuant to section 1146(c) of the Bankruptcy Code, neither (i) the issuance transfer or exchange of any security under, in furtherance of, or in connection with, this Plan, including the issuance of the Plan Securities, nor (ii) the assignment or surrender of any lease or sublease, or the delivery of any deed or other instrument of transfer under, in furtherance of, or in connection with, this Plan, including any deeds, bills of sale or assignments executed in connection with any disposition of assets contemplated by this Plan (including real and personal property), shall be subject to any stamp, real estate transfer, mortgage recording sales, use or other similar tax. 13.6 SUBSTANTIAL CONSUMMATION. On the Effective Date, this Plan shall be deemed to be substantially consummated under sections 1101 and 1127(b) of the Bankruptcy Code. 13.7 PAYMENT OF STATUTORY FEES. All fees payable pursuant to chapter 123 of title 28, United States Code, as determined by the Bankruptcy Court on the Confirmation Date, shall be paid on the Effective Date. Any statutory fees accruing after the Confirmation Date shall constitute Administrative Expense Claims and be paid in accordance with Section 2.1 of this Plan. -48- 13.8 AMENDMENTS. The Plan Proponents reserve the right, in accordance with the Bankruptcy Code and the Bankruptcy Rules, to amend or modify this Plan at any time prior to the entry of the Confirmation Order. After the entry of the Confirmation Order, the Plan Proponents may, upon order of the Bankruptcy Court, amend or modify this Plan, in accordance with section 1127(b) of the Bankruptcy Code, or remedy any defect or omission or reconcile any inconsistency in this Plan in such manner as may be necessary to carry out the purpose and intent of this Plan. A holder of an Allowed Claim or Equity Interest that is deemed to have accepted this Plan shall be deemed to have accepted this Plan as modified if the proposed modification does not materially and adversely change the treatment of the Claim or Equity Interest of such holder. 13.9 REVOCATION OR WITHDRAWAL OF PLAN. The Plan Proponents may withdraw or revoke this Plan at any time prior to the Confirmation Date. If the Plan Proponents revoke or withdraw this Plan prior to the Confirmation Date, or if the Confirmation Date does not occur, then this Plan shall be deemed null and void. In such event, nothing contained herein shall be deemed to constitute a waiver or release of any Claim by or against the respective Debtor or any other Person or to prejudice in any manner the rights of the respective Debtor or any other Person in any further proceedings involving the respective Debtor. 13.10 CRAMDOWN. The Plan Proponents request confirmation of the Plan under section 1129(b) of the Bankruptcy Code with respect to any Class that is deemed to have not accepted this Plan pursuant to section 1126(g) of the Bankruptcy Code. The Plan Proponents reserve the right to (i) request confirmation of this Plan under section 1129(b) of the Bankruptcy Code with respect to any Class or Subclass that does not accept this Plan pursuant to section 1126 of the Bankruptcy Code and (ii) to modify this Plan to the extent, if any, that confirmation of this Plan under section 1129(b) of the Bankruptcy Code requires modification. 13.11 SEVERABILITY. In the event that the Bankruptcy Court determines, prior to the Confirmation Date, that any provision of this Plan is invalid, void or unenforceable, the Bankruptcy Court shall, with the consent of the Plan Proponents, have the power to alter and interpret such term or provision to make it valid or enforceable to the maximum extent practicable, consistently with the original purpose of the term or provision held to be invalid, void or unenforceable, and such term or provision shall then be applicable as altered or interpreted. Notwithstanding any such holding, alteration or interpretation, the -49- remainder of the terms and provisions of this Plan shall remain in full force and effect and shall in no way be affected, impaired or invalidated by such holding, alteration or interpretation. The Confirmation Order shall constitute a judicial determination and shall provide that each term and provision of this Plan, as it may have been altered or interpreted in accordance with the foregoing, is valid and enforceable pursuant to its terms. 13.12 REQUEST FOR EXPEDITED DETERMINATION OF TAXES. Each Debtor shall have the right to request an expedited determination under section 505(b) of the Bankruptcy Code with respect to tax returns filed, or to be filed, for any and all taxable periods ending after the Commencement Date through and including the Final Distribution Date. 13.13 COURTS OF COMPETENT JURISDICTION. If the Bankruptcy Court abstains from exercising, or declines to exercise, jurisdiction or is otherwise without jurisdiction over any matter arising out of this Plan, such abstention, refusal or failure of jurisdiction shall have no effect upon and shall not control, prohibit or limit the exercise of jurisdiction by any other court having competent jurisdiction with respect to such matter. 13.14 GOVERNING LAW. Except to the extent that the Bankruptcy Code or Bankruptcy Rules are applicable, or to the extent that an Exhibit hereto or a Schedule in the Plan Supplement provides otherwise, the rights, duties and obligations arising under this Plan shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, without giving effect to the principles of conflict of laws thereof. 13.15 TIME. In computing any period of time prescribed or allowed by this Plan, unless otherwise set forth herein or determined by the Bankruptcy Court, the provisions of Bankruptcy Rule 9006 shall apply. 13.16 HEADINGS. Headings are used in this Plan for convenience and reference only and shall not constitute a part of this Plan for any other purpose. -50- 13.17 EXHIBITS. All Exhibits and Schedules to this Plan are incorporated into and are a part of this Plan as if set forth in full herein. 13.18 NOTICES. Any notices to or requests of the Plan Proponents by parties in interest under or in connection with this Plan shall be in writing and served either by (i) certified mail, return receipt requested, postage prepaid, (ii) hand delivery or (iii) reputable overnight delivery service, all charges prepaid, and shall be deemed to have been given when received by the following parties: Lodgian, Inc. 3445 Peachtree Road - Suite 700 Atlanta, Georgia 30326 Attn: Daniel E. Ellis, Esq. with copies to: CADWALADER, WICKERSHAM & TAFT Attorneys for the Debtors and Debtors-In-Possession 100 Maiden Lane New York, New York 10038 (212) 504-6000 Attn: Adam C. Rogoff, Esq. -and- CURTIS, MALLET-PREVOST, COLT & MOSLE, LLP Co-Attorneys for the Debtors and Debtors-In-Possession 101 Park Avenue New York, New York 10178 (212) 696-6000 Attn: Steven J. Reisman, Esq. -and- DEBEVOISE & PLIMPTON Attorneys for the Official Committee of Unsecured Creditors 919 Third Avenue New York, New York 10022 (212) 909-6000 Attn: George E.B. Maguire, Esq. -51- Dated: New York, New York As of November 1, 2002 LODGIAN, INC. By: s/ David Hawthorne ---------------------------------- Name: David Hawthorne Title: Chief Executive Officer LODGIAN FINANCING 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. ISLAND MOTEL ENTERPRISES, INC. KINSER MOTEL ENTERPRISES LAWRENCE HOSPITALITY ASSOCIATES, L.P. LITTLE ROCK LODGING ASSOCIATES, LIMITED PARTNERSHIP LODGIAN AMI, INC. LODGIAN HOTELS, INC. -52- LODGIAN MOUNT LAUREL, INC. LODGIAN ONTARIO, INC. LODGIAN RICHMOND, LLC. MANHATTAN HOSPITALITY ASSOCIATES, L.P. MCKNIGHT MOTEL, INC. MELBOURNE HOSPITALITY ASSOCIATES, L.P. MINNEAPOLIS MOTEL ENTERPRISES, INC. MOON AIRPORT MOTEL, INC. NEW ORLEANS AIRPORT MOTEL ASSOCIATES, L.P. NH MOTEL ENTERPRISES, INC. PENMOCO, INC. RALEIGH-DOWNTOWN ENTERPRISES, INC. SAGINAW HOSPITALITY, L.P. SECOND FAYETTEVILLE MOTEL ENTERPRISES, INC. SERVICO AUSTIN, INC. SERVICO CEDAR RAPIDS, INC. SERVICO CENTRE ASSOCIATES, LTD. SERVICO COLUMBIA, INC. SERVICO COUNCIL BLUFFS, INC. SERVICO FORT WAYNE, INC. SERVICO FRISCO, INC. SERVICO GRAND ISLAND, 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. -53- 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. SIOUX CITY HOSPITALITY, L.P. WASHINGTON MOTEL ENTERPRISES, INC. WORCESTER HOSPITALITY, L.P. By: s/ Daniel Ellis -------------------------------------- Name: Daniel Ellis Title: Authorized Officer OFFICIAL COMMITTEE OF UNSECURED CREDITORS By: Sean Armstrong ------------------------------------- Name: Title: -54- EXHIBIT A
CLASS 3 SUBCLASS DEBTOR CASE NO. % OF CLASS 3 PLAN SECURITIES ----------------------- -------- ---------------------------- Lodgian Financing Corp. 01-16344 0.05% 1075 Hospitality, L.P. 01-16415 Liquidating Debtor Albany Hotel, Inc. 01-16388 2.85% AMI Operating Partners, L.P. 01-16414 2.42% Apico Hills, Inc. 01-16392 0.42% Apico Inns of Green Tree, Inc. 01-16363 1.40% Apico Inns of Pittsburgh, Inc. 01-16364 1.74% Atlanta-Boston Holdings L.L.C. 01-16413 0.00% Atlanta-Boston Lodging L.L.C. 01-16365 0.09% Atlanta-Hillsboro Lodging, L.L.C. 01-16425 0.00% Brecksville Hospitality, L.P. 01-16456 Liquidating Debtor Brunswick Motel Enterprises, Inc. 01-16385 0.47% Columbus Hospitality Associates, L.P. 01-16427 1.40% Dedham Lodging Associates I, L.P. 01-16412 0.93% Dothan Hospitality 3053, Inc. 01-16386 0.39% Dothan Hospitality 3071, Inc. 01-16362 0.28% East Washington Hospitality Limited Partnership 01-16421 0.19% Fort Wayne Hospitality Associates II, L.P. 01-16423 0.14% Gadsden Hospitality, Inc. 01-16378 0.15% Hilton Head Motel Enterprises, Inc. 01-16377 1.80%

CLASS 3 SUBCLASS DEBTOR CASE NO. % OF CLASS 3 PLAN SECURITIES ----------------------- -------- ---------------------------- Impac Hotel Group, L.L.C. 01-16376 0.11% Impac Hotel Management L.L.C. 01-16372 0.00% Impac Hotels I, L.L.C. 01-16402 10.38% Island Motel Enterprises, Inc. 01-16368 0.10% Kinser Motel Enterprises 01-16366 1.01% Lawrence Hospitality Associates, L.P. 01-16416 0.13% Little Rock Lodging Associates, Limited Partnership 01-16422 0.63% Lodgian AMI, Inc. 01-16374 8.65% Lodgian Hotels, Inc. 01-16454 0.14% Lodgian, Inc. 01-16345 15.21% Lodgian Mount Laurel, Inc. 01-16395 0.00% Lodgian Ontario, Inc. 01-16391 0.00% Lodgian Richmond, LLC. 01-16419 0.00% Manhattan Hospitality Associates, L.P. 01-16424 0.10% McKnight Motel, Inc. 01-16373 1.57% Melbourne Hospitality Associates, L.P. 01-16417 1.54% Minneapolis Motel Enterprises, Inc. 01-16390 1.17% Moon Airport Motel, Inc. 01-16389 0.67% New Orleans Airport Motel Associates, L.P. 02-11859 0.48% NH Motel Enterprises, Inc. 01-16403 2.28%
-2-
CLASS 3 SUBCLASS DEBTOR CASE NO. % OF CLASS 3 PLAN SECURITIES ----------------------- -------- ---------------------------- Penmoco, Inc. 01-16404 0.00% Raleigh-Downtown Enterprises, Inc. 01-16405 Liquidating Debtor Saginaw Hospitality, L.P. 01-16426 0.04% Second Fayetteville Motel Enterprises, Inc. 01-16410 0.00% Servico Austin, Inc. 01-16406 1.28% Servico Cedar Rapids, Inc. 01-16380 1.08% Servico Centre Associates, Ltd. 01-16418 1.21% Servico Columbia, Inc. 01-16379 1.34% Servico Council Bluffs, Inc. 01-16371 Liquidating Debtor Servico Fort Wayne, Inc. 01-16370 1.86% Servico Frisco, Inc. 01-16396 0.25% Servico Grand Island, Inc. 01-16387 0.43% Servico Hotels I, Inc. 01-16398 1.35% Servico Hotels II, Inc. 01-16400 1.03% Servico Hotels III, Inc. 01-16401 0.57% Servico Hotels IV, Inc. 01-16384 1.26% Servico Houston, Inc. 01-16397 2.52% Servico Jamestown, Inc. 01-16394 0.63% Servico Lansing, Inc. 01-16411 7.44% Servico Management Corp. 01-16399 0.07% Servico Market Center, Inc. 01-16393 0.37%
-3-
CLASS 3 SUBCLASS DEBTOR CASE NO. % OF CLASS 3 PLAN SECURITIES ----------------------- -------- ---------------------------- Servico Maryland, Inc. 01-16407 1.67% Servico Metairie, Inc. 01-16408 1.16% Servico New York, Inc. 01-16409 1.44% Servico Niagara Falls, Inc. 01-16369 0.38% Servico Northwoods, Inc. 01-16381 2.89% Servico Omaha Central, Inc. 01-16382 Liquidating Debtor Servico Omaha, Inc. 01-16383 Liquidating Debtor Servico Pensacola 7200, Inc. 01-16420 0.56% Servico Pensacola 7330, Inc. 01-16360 0.22% Servico Pensacola, Inc. 01-16359 0.22% Servico Rolling Meadows, Inc. 01-16358 0.47% Servico West Des Moines, Inc. 01-16357 Liquidating Debtor Servico Wichita, Inc. 01-16356 Liquidating Debtor Servico Windsor, Inc. 01-16355 0.08% Servico Winter Haven, Inc. 01-16354 0.45% Servico, Inc. 01-16353 4.10% Sheffield Motel Enterprises, Inc. 01-16351 1.12% Sioux City Hospitality, L.P. 01-16459 Liquidating Debtor Washington Motel Enterprises, Inc. 01-16352 0.85% Worcester Hospitality, L.P. 01-16453 2.73%
-4- EXHIBIT B % OF NEW/OLD SUBSIDIARY EQUITY OF REORGANIZED CLASS
HOLDERS OF CLASS 10 HOLDERS OF CLASS 9 CLASS 10 SUBCLASS DEBTOR SUBCLASS EQUITY INTERESTS EQUITY INTERESTS - ------------------------ -------- ---------------------- ------------------- Columbus Hospitality Associates, L.P. D 70.0% 30.0% Melbourne Hospitality Associates, L.P. C 50.0% 50.0% New Orleans Airport Motel Associates, B 18.0% 82.0% L.P. Servico Centre Associates, Ltd. A 50.0% 50.0%
EX-10.8 31 g87458exv10w8.txt EX-10.8 ORDER CONFIRMING THE FIRST AMENDED EXHIBIT 10.8 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) FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER UNDER 11 U.S.C. SS. 1129(A) AND (B) AND FED. R. BANKR. P. 3020 CONFIRMING THE FIRST AMENDED JOINT PLAN OF REORGANIZATION OF LODGIAN, INC., ET AL., (OTHER THAN THE CCA DEBTORS), TOGETHER WITH THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE TABLE OF CONTENTS
PAGE INTRODUCTION......................................................................................................1 DISCLOSURE STATEMENT AND SOLICITATION.............................................................................2 PLAN CONFIRMATION.................................................................................................4 FINDINGS OF FACT AND CONCLUSIONS OF LAW...........................................................................5 (A) Exclusive Jurisdiction; Venue; Core Proceeding (28 U.S.C. ss.ss. 157(b)(2), 1334(a)).....................5 (B) Judicial Notice..........................................................................................5 (C) Burden of Proof..........................................................................................5 (D) Transmittal and Mailing of Materials; Notice.............................................................6 (E) Voting...................................................................................................6 (F) Classes deemed to have accepted the Plan.................................................................6 (G) Classes deemed to have rejected the Plan.................................................................6 (H) Plan Compliance with Bankruptcy Code (11 U.S.C. ss. 1129(a)(1))..........................................6 (1) Proper Classification (11 U.S.C. ss.ss. 1122, 1123(a)(1)).......................................6 (2) Specified Unimpaired Classes (11 U.S.C. ss. 1123(a)(2)).........................................7 (3) Specified Treatment of Impaired Classes (11 U.S.C. ss. 1123(a)(3))..............................7 (4) No Discrimination (11 U.S.C. ss. 1123(a)(4))....................................................7 (5) Implementation of Plan (11 U.S.C. ss. 1123(a)(5))...............................................8 (6) Non-Voting Equity Securities (11 U.S.C. ss. 1123(a)(6)).........................................8 (7) Designation of Directors (11 U.S.C. ss. 1123(a)(7)).............................................8 (8) Additional Plan Provisions (11 U.S.C. ss. 1123(b))..............................................9 (9) Bankruptcy Rule 3016(a).........................................................................9 (I) Debtors' Compliance with Bankruptcy Code (11 U.S.C. ss. 1129(a)(2))......................................9 (J) Plan Proposed in Good Faith (11 U.S.C. ss. 1129(a)(3))...................................................9 (K) Payments for Services or Costs and Expenses (11 U.S.C. ss. 1129(a)(4))..................................10 (L) Directors, Officers, and Insiders (11 U.S.C. ss. 1129(a)(5))............................................10 (M) No Rate Changes (11 U.S.C. ss. 1129(a)(6))..............................................................10 (N) Best Interests of Creditors (11 U.S.C. ss. 1129(a)(7))..................................................10 (O) Acceptance of Certain Classes (11 U.S.C. ss. 1129(a)(8))................................................11 (P) Treatment of Administrative and Tax Claims (11 U.S.C. ss. 1129(a)(9))...................................11
i TABLE OF CONTENTS (CONTINUED)
(Q) Treatment of Secured Tax Claims.........................................................................12 (R) Acceptance By Impaired Classes (11 U.S.C. ss. 1129(a)(10))..............................................12 (S) Feasibility (11 U.S.C. ss. 1129(a)(11)).................................................................13 (T) Payment of Fees (11 U.S.C. ss. 1129(a)(12)).............................................................13 (U) Continuation of Retiree Benefits (11 U.S.C. ss. 1129(a)(13))............................................13 (V) Fair and Equitable; No Unfair Discrimination (11 U.S.C. ss. 1129(b))....................................13 (W) Principal Purpose of the Plan (11 U.S.C. ss. 1129(d))...................................................14 (X) Modifications to the Plan...............................................................................14 (Y) Good Faith Solicitation (11 U.S.C. ss. 1125(e)).........................................................14 (Z) Assumption and Rejection................................................................................15 (AA) Class 4 Compromise......................................................................................15 (BB) Satisfaction of Confirmation Requirements...............................................................16 (CC) Retention of Jurisdiction...............................................................................16 DECREES..........................................................................................................17 1. Confirmation............................................................................................17 2. Amendments..............................................................................................17 3. Objections..............................................................................................17 4. Plan Classification Controlling.........................................................................17 5. Binding Effect..........................................................................................18 6. Vesting of Assets (11 U.S.C. ss. 1141(b) and (c)).......................................................18 7. Assumption or Rejection of Executory Contracts and Unexpired Leases (11 U.S.C. ss. 1123(b)(2))..........19 8. Bar Date for Rejection Damage Claims....................................................................19 9. General Authorizations..................................................................................20 10. Authorization in connection with Exit Financing Agreements..............................................20 (a) Impac Hotel Group, LLC.........................................................................20 (b) Servico Operations Corp........................................................................21 (c) Lodgian Financing Corp.........................................................................21 11. Authorization to enter into certain Stipulations........................................................21
ii TABLE OF CONTENTS (CONTINUED)
12. Authorization of Liquidating Debtors....................................................................22 13. Lennar Debtors..........................................................................................22 14. Corporate Action........................................................................................23 15. Issuance of New Securities..............................................................................23 16. Securities Laws Exemption...............................................................................23 17. DIP Financing Facility..................................................................................23 18. Exit Financing Agreements...............................................................................24 19. Plan Supplement.........................................................................................25 20. Governmental Approvals Not Required.....................................................................25 21. Exemption From Certain Taxes............................................................................26 22. Distributions...........................................................................................26 23. Waiver of Subordination.................................................................................27 24. Final Fee Applications..................................................................................28 25. Discharge of Claims and Termination of Equity Interests.................................................28 26. Discharge of Debtors....................................................................................29 27. Indenture Trustees' Fees and Expenses...................................................................29 28. Survival of Corporate Indemnitees.......................................................................29 29. Releases, Exculpations, and Injunctions.................................................................30 30. Termination of Injunctions and Automatic Stay...........................................................30 31. Disallowance of Adequate Protection Claims..............................................................30 32. Termination of Adequate Protection Liens................................................................30 33. Cancellation of Existing Securities and Agreements......................................................31 34. Chilmark Fees...........................................................................................31 35. Evercore Fees...........................................................................................31 36. Nonoccurrence of Effective Date.........................................................................32 37. Notice of Entry of Confirmation Order...................................................................32 38. Notice of Effective Date................................................................................33 39. Authorization to File Conformed Plan....................................................................33 40. Binding Effect..........................................................................................33
iii TABLE OF CONTENTS (CONTINUED)
41. Severability............................................................................................33 42. Conflicts Between Order and Plan........................................................................33
iv 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) FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER UNDER 11 U.S.C. SS. 1129(A) AND (B) AND FED. R. BANKR. P. 3020 CONFIRMING THE FIRST AMENDED JOINT PLAN OF REORGANIZATION OF LODGIAN, INC., ET AL., (OTHER THAN THE CCA DEBTORS), TOGETHER WITH THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE INTRODUCTION Lodgian, Inc. and certain of its direct and indirect subsidiaries (other than the CCA Debtors(1)), as debtors and debtors in possession (collectively, "Lodgian" or the "Debtors")(2) in the above-captioned chapter 11 cases (the "Chapter 11 Cases") and the Official Committee of Unsecured Creditors (the "Committee" and, together with the Debtors, the "Plan Proponents") have proposed the Joint Plan Of Reorganization Of Lodgian, Inc., et al., (Other Than The CCA Debtors), Together With The Official Committee Of Unsecured Creditors Under Chapter 11 Of The Bankruptcy Code, dated as of September 25, 2002 (the "Initial Plan"), as modified by that certain First Amended Joint Plan Of Reorganization Of Lodgian, Inc., et al., (Other Than The CCA Debtors), Together With The Official Committee Of Unsecured Creditors Under Chapter - --------- (1) Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C. (2) The Confirmation Hearing with respect to the Debtor Raleigh-Downtown Enterprises, Inc. (Case No. 01-16405) is being adjourned. Accordingly, this Order shall not apply to Raleigh-Downtown Enterprises, Inc.'s Chapter 11 Case. 11 Of The Bankruptcy Code, dated as of November 1, 2002 a true and correct copy of which is annexed hereto as Exhibit "A" (as amended, the "Plan").(3) DISCLOSURE STATEMENT AND SOLICITATION After hearings held on September 24, 2002 and September 26, 2002 (together, the "Disclosure Statement Hearing"), the Disclosure Statement in support of the Plan, dated as of September 25, 2002 (as transmitted to parties in interest, the "Disclosure Statement") was approved by an order this Court(4) as containing "adequate information" pursuant to section 1125 of the Bankruptcy Code (the "Disclosure Statement Approval Order"). On or before October 8, 2002, the Debtors having mailed or caused to be mailed, by first class mail, the solicitation packages (the "Solicitation Packages") containing copies of, inter alia, (1) the Disclosure Statement Approval Order, (2) the Disclosure Statement Approval Notice, setting forth, among other things, (a) notice of entry of the Disclosure Statement Approval Order, (b) the Voting Deadline for the submission of Ballots to accept or reject the Plan, (c) the time fixed for filing objections to confirmation of the Plan, and (iv) the time, date and place of the Confirmation Hearing, (3) a Ballot or Notice of Non-Voting Status, as applicable, and (4) the approved form of the Disclosure Statement (together with the Plan annexed thereto as Exhibit "A") to (i) the parties in interest listed on the Master Service List (as defined in this Court's Order Establishing Notice Procedures, dated December 21, 2001), - --------- (3) Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to such terms in the Plan and/or the Disclosure Statement Approval Order. Any capitalized term not defined in the Plan, the Disclosure Statement Approval Order, or this Confirmation Order, but is used in title 11 of the United States Code, as amended (the "Bankruptcy Code") or the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"), shall have the meaning ascribed to that term in the Bankruptcy Code or the Bankruptcy Rules. (4) This Court entered an order approving the Disclosure Statement on September 26, 2002 and a Corrected Order on October 2, 2002, to reflect a revised address to which administrative proofs of claim should be mailed. 2 (ii) attorneys for the Committee, (iii) the U.S. Trustee, (iv) all persons or entities that filed proofs of claim on or before the date of the Disclosure Statement Notice, except to the extent that a claim was paid pursuant to, or expunged by, prior order of this Court, (v) all persons or entities listed in the Debtors' Schedules as holding liquidated, noncontingent, and undisputed claims in an amount greater than zero, (vi) the transfer agent(s) and registered holders of the Debtors' Class 4 senior subordinated note claims, Class 7 CRESTS claims, and Class 8 Equity Interests, (vii) all other parties in interest that have filed a request for notice pursuant to Bankruptcy Rule 2002 in the Debtors' chapter 11 cases, (viii) the Securities and Exchange Commission, (ix) the Internal Revenue Service, (x) the Department of Justice, (xi) the Pension Benefit Guaranty Corporation, and (xii) any entity that has filed with the Court a notice of transfer of a claim under Bankruptcy Rule 3001(e) prior to date of the Disclosure Statement Notice, and (xiii) any other known holders of claims against the Debtors. The Debtors filed the certificates of publication of Gary Morris, Advertising Clerk of the Publisher of The Wall Street Journal sworn to on September 5, 2002; Cathy Zike, Principal Clerk of the Publisher of The New York Times, sworn to on September 18, 2002; and Cheryl Rothlein, Principal Clerk of USA Today, sworn to on August 29, 2002, attesting to the fact that notice of the Confirmation Hearing was published on August 26, 2002 in accordance with this Court's scheduling order dated August 21, 2002. The Debtors filed the Declaration of Debra L. Reyes Certifying the Acceptances and Rejections of the Plan, sworn to on November 4, 2002, (the "Reyes Affidavit") attesting and certifying the method and results of the ballot tabulation for the Classes of Claims entitled to vote to accept or reject the Plan (the "Voting Report"). 3 PLAN CONFIRMATION Six (6) objections or purported objections to confirmation of the Plan were timely filed and served (the "Objections"). Five (5) of the Objections have been withdrawn or resolved on the terms and conditions described on the record of the Confirmation Hearing (collectively, the "Resolved Objections"), and the remaining Limited Objection of PCG/Macon Investment Corp. and PCG Development Partners L.L.C. dated October 28, 2002 (the "PCG Objection") is overruled on the merits pursuant to this Confirmation Order. The Debtors filed (i) a memorandum of law in support of confirmation of the Plan dated November 1, 2002 (the "Confirmation Memorandum"), (ii) the Plan Supplement dated October 23, 2002 (as may be amended, the "Plan Supplement"); (iii) a response to the PCG Objection dated November 4, 2002 (the "Response"); (iv) the Declaration of David Hawthorne in Support of Confirmation of Plan dated November 1, 2002 (the "Hawthorne Affidavit"); and (v) the Declaration of Matthew Rosenberg of Chilmark Partners LP in Support of Confirmation of the Plan dated November 1, 2002 (the "Chilmark Affidavit", and together with the Hawthorne Affidavit and Reyes Affidavit, the "Confirmation Affidavits"). The provisions of the Plan are amended to reflect the various amendments to the Plan all as set forth in the various modifications filed with this Court and by the Plan Proponents on the record at the Confirmation Hearing. The Plan is a separate plan for each Debtor's estate. Accordingly, the provisions of the Plan, including without limitation the definitions and distributions to creditors and equity interest holders, shall apply to the respective assets of, claims against, and equity interests in, such Debtor's separate estate. Based upon the Bankruptcy Court's review of the Disclosure Statement, Plan, Plan Supplement, Voting Report, Confirmation Affidavits, Response, and Confirmation 4 Memorandum; and upon (a) all the evidence proffered or adduced at, memoranda and Objections filed in connection with, and arguments of counsel made at, the Confirmation Hearing, and (b) the entire record of these Chapter 11 Cases; and after due deliberation thereon and good cause appearing therefore, FINDINGS OF FACT AND CONCLUSIONS OF LAW IT IS HEREBY FOUND AND DETERMINED THAT:(5) (A) Exclusive Jurisdiction; Venue; Core Proceeding (28 U.S.C. ss.ss. 157(b)(2), 1334(a)). This Bankruptcy Court has jurisdiction over these cases pursuaNt to sections 157 and 1334 of title 28 of the United States Code. Venue is proper pursuant to sections 1408 and 1409 of title 28 of the United States Code. Confirmation of the Plan is a core proceeding pursuant to 28 U.S.C. ss. 157(b)(2)(L), and this Bankruptcy Court has exclusive jurisdiction to determine whetheR the Plan complies with the applicable provisions of the Bankruptcy Code and should be confirmed. (B) Judicial Notice. This Bankruptcy Court takes judicial notice of the docket of the Chapter 11 Cases maintained by the Clerk of the Bankruptcy Court and/or its duly-appointed agent, including, without limitation, all pleadings and other documents filed, all orders entered, and evidence and argument made, proffered, or adduced at the hearings held before the Bankruptcy Court during the pendency of the Chapter 11 Cases, including, but not limited to, the hearings to consider the adequacy of the Disclosure Statement. (C) Burden of Proof. The Debtors have the burden of proving the elements of sections 1129(a) and (b) of the Bankruptcy Code by a preponderance of evidence. - --------- (5) Pursuant to Bankruptcy Rule 7052, findings of fact shall be construed as conclusions of law and conclusions of law shall be construed as findings of fact when appropriate. 5 (D) Transmittal and Mailing of Materials; Notice. The Disclosure Statement, the Plan, the Ballots or Notice of Non-Voting Status, as the case may be, the Disclosure Statement Approval Order, and the Disclosure Statement Approval Notice, which were transmitted and served as set forth in the Reyes Affidavit, shall be deemed to have been transmitted and served in compliance with the Disclosure Statement Approval Order and the Bankruptcy Rules, and such transmittal and service were adequate and sufficient, and no other or further notice is or shall be required. (E) Voting. Votes to accept and reject the Plan have been solicited and tabulated fairly, in good faith, and in a manner consistent with the Bankruptcy Code, the Bankruptcy Rules, the Disclosure Statement Approval Order, and industry practice. (F) Classes deemed to have accepted the Plan. Classes 2, 9 (Lodgian Subclasses) and 10-C are unimpaired and are deemed to have accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code. (G) Classes deemed to have rejected the Plan. Classes 3 (Liquidating Subclasses), 9 (Liquidating Subclasses), and 11 will not receive any property under the Plan and, with respect to Class 8, will not receive any property from the Debtors under the Plan, and therefore are all deemed to have rejected the Plan pursuant to section 1126(g) of the Bankruptcy Code. (H) Plan Compliance with Bankruptcy Code (11 U.S.C. ss. 1129(a)(1)). The Plan complies with the applicable provisions of the Bankruptcy Code, thereby satisfying section 1129(a)(1) of the Bankruptcy Code. (1) Proper Classification (11 U.S.C. ss.ss. 1122, 1123(a)(1)). In addition to the Administrative Expense Claims (consisting of Claims under the headings Compensation and Reimbursement Claims, DIP Financing Facility Claims and Indenture 6 Trustee Claims) and Priority Tax Claims listed in Section 2 of the Plan, which need not be designated, the Plan designates 10 Classes of Claims and Equity Interests.(6) Each Secured Claim, General Unsecured Claim, Debtor Owned Old Subsidiary Equity Interest, and Third Party Old Subsidiary Equity Interest shall be deemed to be separately classified in a subclass of Classes 1, 3, 9 and 10, respectively, and shall have all rights associated with separate classification under the Bankruptcy Code. The Claims and Equity Interests placed in each Class are substantially similar to other Claims and Equity Interests, as the case may be, in each such Class. Valid business, factual, and legal reasons exist for separately classifying the various Classes of Claims and Equity Interests created under the Plan, and such Classes do not unfairly discriminate between holders of Claims and Equity Interests. The Plan satisfies sections 1122 and 1123(a)(1) of the Bankruptcy Code. (2) Specified Unimpaired Classes (11 U.S.C. ss. 1123(a)(2)). Section 4 of the Plan specifies that Classes 2, 9 (Lodgian Subclasses), and 10-C are unimpaired under the Plan, thereby satisfying section 1123(a)(2) of the Bankruptcy Code. (3) Specified Treatment of Impaired Classes (11 U.S.C. ss. 1123(a)(3)). Section 4 of the Plan designates Classes 1, 3, 4, 5, 7, 8, 9 (Liquidating Subclasses), 10-A, 10-B, 10-D and 11 as impaired and specifies the treatment of Claims and Equity Interests in those Classes, thereby satisfying section 1123(a)(3) of the Bankruptcy Code. (4) No Discrimination (11 U.S.C. ss. 1123(a)(4)). The Plan provides for the same treatment by the Debtors for each Claim or Equity Interest in each respective Class unless the holder of a particular Claim or Equity Interest has agreed to a less - --------- (6) The Plan excludes the designation of Classes 6 and 6A which are expressly reserved and do not provide for any treatment of Claims or Equity Interests under the Plan. 7 favorable treatment of such Claim or Equity Interest, thereby satisfying section 1123(a)(4) of the Bankruptcy Code. (5) Implementation of Plan (11 U.S.C. ss. 1123(a)(5)). The Plan provides adequate and proper means for the Plan's implementation, including, among other things, (i) the Exit Financing Agreements; (ii) the issuance of Plan Securities; (iii) the execution and delivery of Warrant Agreements; (iv) the waiver of subordination rights; (v) the execution and delivery of Registration Rights Agreement; (v) the listing of the Plan Securities; (vi) the adoption and implementation of the New Equity Incentive Plan; (vii) the cancellation of existing securities, instruments, and other documentation; (viii) the selection of directors and officers for the Reorganized Debtors, as disclosed on the Debtors' website; (ix) the amendment of the certificates of incorporation, bylaws and similar reorganizational documents; (x) the approval and implementation of the Class 4 Compromise; (xi) the issuance of Class 1 Amended Notes, the Subclass 1-H Note and the Subclass 1-O Note and the related financing documents; (xii) the liquidation and dissolution of the Liquidating Debtors; (xiii) the transfer of assets; and (ix) the establishment of new entities. (6) Non-Voting Equity Securities (11 U.S.C. ss. 1123(a)(6)). Section 6.10 of the Plan provides that the Amended Organization Documents shall prohibit the issuance of nonvoting equity securities. Thus, the requirements of section 1123(a)(6) of the Bankruptcy Code are satisfied. (7) Designation of Directors (11 U.S.C. ss. 1123(a)(7)). Section 6.9 of the Plan contains provisions with respect to the manner of selection of directorS of the Reorganized Debtors that are consistent with the interests of creditors, equity security holders, and public policy in accordance with section 1123(a)(7). 8 (8) Additional Plan Provisions (11 U.S.C. ss. 1123(b)). The Plan's provisions are appropriate and not inconsistent with the applicable provisions of the Bankruptcy Code. (9) Bankruptcy Rule 3016(a). The Plan is dated and identifies the entities submitting it as the Plan Proponents, thereby satisfying Bankruptcy Rule 3016(a). (I) Debtors' Compliance with Bankruptcy Code (11 U.S.C. ss. 1129(a)(2)). The Debtors have complied with the applicable provisions of the Bankruptcy Code, thereby satisfying section 1129(a)(2) of the Bankruptcy Code. Specifically: (i) The Debtors are proper debtors under section 109 of the Bankruptcy Code. (ii) The Debtors have complied with applicable provisions of the Bankruptcy Code, except as otherwise provided or permitted by orders of the Bankruptcy Court. (iii) The Debtors have complied with the applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, and the Disclosure Statement Approval Order in transmitting the Plan, the Disclosure Statement, the Ballots or Notice of Non-Voting Status, as the case may be, and related documents in soliciting and tabulating votes on the Plan. (J) Plan Proposed in Good Faith (11 U.S.C. ss. 1129(a)(3)). The Plan Proponents have proposed the Plan in good faith and not by any means forbidden by law, thereby satisfying section 1129(a)(3) of the Bankruptcy Code. The Plan Proponents' good faith is evident from the facts and records of these Chapter 11 Cases, the Disclosure Statement and the hearings thereon, and the record of the Confirmation Hearing and other proceedings held in these Chapter 11 Cases. The Plan was proposed with the legitimate and honest purpose of maximizing 9 the value of the Debtors' estates and to effectuate a successful reorganization of the Debtors, and with respect to the Liquidating Debtors, a successful wind-down. (K) Payments for Services or Costs and Expenses (11 U.S.C. ss. 1129(a)(4)). Any payment made or to be made by any of the Debtors for services or for costs and expenses in or in connection with the Chapter 11 Cases, or in connection with the Plan and incident to the Chapter 11 Cases, has been approved by, or is subject to the approval of, the Bankruptcy Court as reasonable, thereby satisfying section 1129(a)(4) of the Bankruptcy Code. (L) Directors, Officers, and Insiders (11 U.S.C. ss. 1129(a)(5)). The Plan proponents have complied with section 1129(a)(5) of the Bankruptcy Code. The identity and affiliations of the persons proposed to serve as initial directors or officers of the Reorganized Debtors and, to the extent necessary, the Liquidating Debtors after confirmation of the Plan have been fully disclosed in the Plan Supplement, and the appointment to, or continuance in, such offices of such persons is consistent with the interests of holders of Claims against and Equity Interests in the Debtors and with public policy. The identity of any insider that will be employed or retained by the Reorganized Debtors or the Liquidating Debtors and the nature of such insider's compensation have also been fully disclosed. (M) No Rate Changes (11 U.S.C. ss. 1129(a)(6)). After confirmation of the Plan, the Debtors' businesses will not involve rates established or approved by, or otherwise subject to, any governmental regulatory commission. Thus, section 1129(a)(6) of the Bankruptcy Code is not applicable in these Chapter 11 Cases. (N) Best Interests of Creditors (11 U.S.C. ss. 1129(a)(7)). The Plan satisfies section 1129(a)(7) of the Bankruptcy Code. The liquidation analyses provided in the Disclosure Statement, Plan Supplement, the Confirmation Affidavits, and other evidence proffered or adduced at or prior to the Confirmation Hearing (a) are persuasive and credible, (b) have not 10 been controverted by other evidence, and (c) establish that each holder of an impaired Claim or Equity Interest either has accepted the Plan or will receive or retain under the Plan, on account of such Claim or Equity Interest, property of a value, as of the Effective Date, that is not less than the amount that such holder would receive or retain if the Debtors were liquidated under chapter 7 of the Bankruptcy Code on such date. (O) Acceptance of Certain Classes (11 U.S.C. ss. 1129(a)(8)). Classes 2, 9 (Lodgian Subclasses) and 10-C of the Plan are Classes of unimpaired Claims that are conclusively presumed to have accepted the Plan under section 1126(f) of the Bankruptcy Code and the accepting Classes as set forth in the Reyes Affidavit have voted to accept the Plan in accordance with sections 1126(c) and (d) of the Bankruptcy Code (the "Accepting Classes") and therefore satisfy section 1129(a)(8) of the Bankruptcy Code. Although section 1129(a)(8) has not been satisfied with respect to (i) Classes 3 (Liquidating Subclasses), 9 (Liquidating Subclasses) and 11, which will not receive any property under the Plan and, therefore, are deemed to have rejected the Plan pursuant to section 1126(g) of the Bankruptcy Code, (ii) Class 8, which will not receive any property from the Debtors under the Plan, and, therefore, is deemed to have rejected the Plan pursuant to section 1126(g) of the Bankruptcy Code and (iii) the Class 3 rejections against the Debtors Servico, Inc., McKnight Motel, Inc. and Servico Hotels I, Inc., as set forth in the Reyes Affidavit, (all of the foregoing, the "Rejecting Classes"), the Plan is confirmable because the Plan satisfies section 1129(b) of the Bankruptcy Code with respect to the Rejecting Classes identified above. (P) Treatment of Administrative and Tax Claims (11 U.S.C. ss. 1129(a)(9)). The treatment of Administrative Expense Claims and Priority Non-Tax Claims pursuant to Sections 2.1 and 4.2 of the Plan satisfies the requirements of sections 1129(a)(9)(A) and (B) of the Bankruptcy Code, and the treatment of Priority Tax Claims pursuant to Section 2.3 of the 11 Plan satisfies the requirements of section 1129(a)(9)(C) of the Bankruptcy Code. Allowed Priority Tax Claims only constitute unsecured Claims against the applicable Debtor's estate and the holder of such Allowed Priority Tax Claim shall not have any lien securing such Claim or otherwise be permitted to assert any other encumbrance against property of the applicable Debtor relating to such Claim. Except to the extent that a holder of an Allowed Priority Tax Claim and the applicable Debtor agree to a different treatment, each holder of an Allowed Priority Tax Claim shall receive, in full satisfaction of such Claim, payment in Cash of the Allowed Amount of such Claim over a period not exceeding six (6) years after the date of assessment of such Claim, with interest at a rate equal to the Federal Judgment Rate as of the Confirmation Date, payable monthly, in periodic payments having a value, as of the Effective Date, equal to the amount of such Allowed Priority Tax Claim. The treatment of Allowed Priority Tax Claims will be memorialized in a tax note (the "Tax Note"), substantially in the form annexed hereto as Exhibit "B", which shall be given to each holder of an Allowed Priority Tax Claim. (Q) Treatment of Secured Tax Claims. In connection with any Allowed Secured Claim relating to a tax claim that is not an Allowed Priority Tax Claim and which is treated as a Secured Claim under Class 1-P of the Plan, except to the extent that a holder of such an Allowed Secured Claim and the applicable Debtor agree to a different treatment, each holder of such an Allowed Secured Claim shall receive a Tax Note pursuant to section 4.1 of the Plan. (R) Acceptance By Impaired Classes (11 U.S.C. ss. 1129(a)(10)). At least one Class of Claims against each of the Debtors that is impaired under the Plan has accepted the Plan, determined without including any acceptance of the Plan by any insider, thus satisfying the requirements of section 1129(a)(10) of the Bankruptcy Code. (S) Feasibility (11 U.S.C. ss. 1129(a)(11)). The Disclosure Statement, Plan, Plan Supplement, Voting Report, Confirmation Affidavits, Response, Confirmation 12 Memorandum, and all evidence proffered or adduced at the Confirmation Hearing (a) is persuasive and credible, (b) has not been controverted by other evidence, and (c) establishes that confirmation of the Plan is not likely to be followed by the liquidation (except with respect to the Liquidating Debtors), or the need for further financial reorganization, of the Reorganized Debtors, thus satisfying the requirements of section 1129(a)(11) of the Bankruptcy Code. (T) Payment of Fees (11 U.S.C. ss. 1129(a)(12)). All fees payable under section 1930 of title 28, United States Code, as determined by the Bankruptcy Court on the Confirmation Date, have been paid or will be paid pursuant to Section 13.7 of the Plan on the Effective Date, thus satisfying the requirements of section 1129(a)(12) of the Bankruptcy Code. (U) Continuation of Retiree Benefits (11 U.S.C. ss. 1129(a)(13)). Section 13.1 of the Plan provides that, on and after the Effective Date, the Reorganized Debtors will continue to pay all "retiree benefits" (as defined in section 1114(a) of the Bankruptcy Code), at the level established pursuant to section 1114 of the Bankruptcy Code at any time prior to confirmation of the Plan, for the duration of the period the Debtors have obligated themselves to provide such benefits. Thus, the requirements of section 1129(a)(13) of the Bankruptcy Code are satisfied. (V) Fair and Equitable; No Unfair Discrimination (11 U.S.C. ss. 1129(b)). Based upon the Confirmation Affidavits and the evidence proffered, adduced, or presented by the Debtors at the Confirmation Hearing, the Plan does not discriminate unfairly and is fair and equitable with respect to the Rejecting Classes as required by section 1129(b)(1) of the Bankruptcy Code. Thus, the Plan may be confirmed notwithstanding the Debtors' failure to satisfy section 1129(a)(8) of the Bankruptcy Code. Accordingly, upon confirmation and the occurrence of the Effective Date, the Plan shall be binding upon the members of the Rejecting Classes. 13 (W) Principal Purpose of the Plan (11 U.S.C. ss. 1129(d)). The principal purpose of the Plan is not the avoidance of taxes or the avoidance of the application of Section 5 of the Securities Act of 1933. (X) Modifications to the Plan. The modifications to the Plan as set forth in the plan modifications filed with this Court and on the record at the Confirmation Hearing constitute technical changes and/or changes with respect to particular Claims by agreement with holders of such Claims, and do not materially adversely affect or change the treatment of any Claims or Equity Interests. Accordingly, pursuant to Bankruptcy Rule 3019, these modifications do not require additional disclosure under section 1125 of the Bankruptcy Code or resolicitation of votes under section 1126 of the Bankruptcy Code, nor do they require that holders of Claims or Equity Interests be afforded an opportunity to change previously cast acceptances or rejections of the Plan. (Y) Good Faith Solicitation (11 U.S.C. ss. 1125(e)). Based on the record before the Bankruptcy Court in these Chapter 11 Cases, the Debtors and their directors, officers, employees, shareholders, members, agents, advisors, accountants, investment bankers, consultants, attorneys, and other representatives have acted in "good faith" within the meaning of section 1125(e) of the Bankruptcy Code in compliance with the applicable provisions of the Bankruptcy Code and Bankruptcy Rules in connection with all their respective activities relating to the solicitation of acceptances to the Plan and their participation in the activities described in section 1125 of the Bankruptcy Code, and are entitled to the protections afforded by section 1125(e) of the Bankruptcy Code and the exculpation provisions set forth in Section 11.7 of the Plan. (Z) Assumption and Rejection. Section 9 of the Plan governing the assumption and rejection of executory contracts and unexpired leases satisfies the requirements 14 of section 365(b) of the Bankruptcy Code. Pursuant to Section 9.2 of the Plan, except as may otherwise be agreed to by the parties, within thirty (30) days after the Confirmation Date, the Debtors file and serve a statement with the Bankruptcy Court listing the cure amounts of all executory contracts or unexpired leases to be assumed. The parties to such executory contracts or unexpired leases to be assumed by the applicable Debtor shall have fifteen (15) days from service to object to the cure amounts listed by the applicable Debtor. If there are any objections filed which are not resolved consensually by the applicable Debtor, then, upon request of the applicable Debtor, the Bankruptcy Court shall hold a hearing. Prior to and after the Effective Date, the applicable Debtor shall retain its right to reject any of its executory contracts or unexpired leases, including contracts or leases that are subject to a dispute concerning amounts necessary to cure any defaults. Notwithstanding the foregoing, at all times through the date that is five (5) Business Days after the Bankruptcy Court enters an order resolving and fixing the amount of a disputed cure amount, the Debtors shall have the right to reject such executory contract or unexpired lease. (AA) Class 4 Compromise. The Class 4 Compromise embodied in the Plan as a settlement of certain issues between the Debtors and the holders of the Senior Subordinated Notes Claims, including the amount of Allowed Senior Subordinated Notes Claims against each Senior Subordinated Notes Guarantor Debtor, the determination of the Debtors that are liable as Senior Subordinated Notes Guarantor Debtors, as well as the valuation of the Debtors on which recoveries on account of Allowed Claims and Allowed Equity Interests should be based, is hereby approved pursuant to Bankruptcy Rule 9019 as a fair, prudent, and reasonable compromise of the controversies resolved by such settlement and is binding upon all entities affected thereby. 15 (BB) Satisfaction of Confirmation Requirements. The Plan satisfies the requirements for confirmation set forth in section 1129 of the Bankruptcy Code. (CC) Retention of Jurisdiction. The Bankruptcy Court may properly retain jurisdiction over the matters set forth in Section 12 of the Plan and section 1142 of the Bankruptcy Code. DECREES NOW, THEREFORE, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED THAT: 1. Confirmation. The Plan, as modified, is approved and confirmed under section 1129 of the Bankruptcy Code. The terms of the Plan and the Plan Supplement are incorporated by reference into and are an integral part of the Plan and this Confirmation Order. 2. Amendments. The modifications of the Plan as reflected on the record at the Confirmation Hearing meet the requirements of sections 1127(a) and (c), such modifications do not adversely change the treatment of the Claim of any creditor or Equity Interest of any equity security holder within the meaning of Bankruptcy Rule 3019, and no further solicitation or voting is required. 3. Objections. All Objections that have not been withdrawn, waived, or settled, and all reservations of rights pertaining to confirmation of the Plan included therein, are overruled on the merits. 4. Plan Classification Controlling. The classifications of Claims and Equity Interests for purposes of the distributions to be made under the Plan shall be governed solely by the terms of the Plan. The classifications set forth on the Ballots tendered to or returned by the Debtors' creditors in connection with voting on the Plan (a) were set forth on the Ballots solely 16 for purposes of voting to accept or reject the Plan, (b) do not necessarily represent, and in no event shall be deemed to modify or otherwise affect, the actual classification of such Claims and Equity Interests under the Plan for distribution purposes, and (c) shall not be binding on the Debtors (the Lodgian and Liquidating Debtors) or the Reorganized Debtors. 5. Binding Effect. The Plan and its provisions shall be binding upon the Debtors (the Lodgian and Liquidating Debtors), the Reorganized Debtors, the Disbursing Agent, the Committee, any entity acquiring or receiving property or a distribution under the Plan, and any holder of a Claim against or Equity Interest in the Debtors, including all governmental entities (including without limitation all taxing authorities), whether or not the Claim or Equity Interest of such holder is impaired under the Plan, whether or not the Claim or Equity Interest is Allowed, and whether or not such holder or entity has accepted the Plan. 6. Vesting of Assets (11 U.S.C. ss. 1141(b) and (c)). Pursuant to Section 11.1 of the Plan, except as otherwise provided in the Plan, each Debtor will, as a Reorganized Debtor or Liquidating Debtor, as applicable, continue to exist after the Effective Date as a separate corporate entity, with all the powers of a corporation under applicable law and without prejudice to any right to alter or terminate such existence (whether by merger, dissolution, or otherwise) under applicable state law. Except as otherwise expressly provided in the Plan, upon the Effective Date all property of the Debtors' estates shall vest in the Reorganized Debtors, or the Liquidating Debtors, as applicable, free and clear of all Claims, liens, encumbrances, charges, and other interests, and all such Claims, liens, encumbrances, charges, and other interests shall be extinguished. From and after the Effective Date, each Reorganized Debtor may operate its business and may use, acquire, and dispose of property, and compromise or settle any Claims and Equity Interests without supervision or approval by the Bankruptcy Court and free of any restrictions of the Bankruptcy Code or Bankruptcy Rules, other than those restrictions expressly 17 imposed by the Plan or this Confirmation Order. From and after the Effective Date, each Liquidating Debtor shall continue in existence for the purpose of (i) winding up their affairs, (ii) liquidating, by conversion to Cash or other methods, assets of their estates, (iii) enforcing and prosecuting of claims, interests, rights and privileges of the Liquidating Debtors without supervision or approval by the Bankruptcy Court and free of any restrictions of the Bankruptcy Code or Bankruptcy Rules, other than those restrictions expressly imposed by the Plan or this Confirmation Order, (iv) administering this Plan, including, without limitation, objecting to Disputed Claims, and (v) filing appropriate tax returns. 7. Assumption or Rejection of Executory Contracts and Unexpired Leases (11 U.S.C. ss. 1123(b)(2)). Except as otherwise provided for herein, pursuant to Section 9.1 of the Plan, on the Effective Date, all executory contracts and unexpired leases to which each Debtor is a party shall be deemed rejected as of the Effective Date, except for an executory contract or unexpired lease that (i) has been assumed or rejected pursuant to a Final Order of the Bankruptcy Court, (ii) is specifically designated as a contract or lease to be assumed on the Schedule of Assumed Contracts set forth in the Plan Supplement, provided however, that the Debtors reserve the right to amend the Plan Supplement at any time on or before the Effective Date to amend the Schedule of Assumed Contracts to add or delete any executory contract or unexpired lease, thus providing for its assumption, assumption and assignment, or rejection; or (iii) is the subject of a separate motion to assume, assume and assign, or reject filed under section 365 of the Bankruptcy Code by the applicable Debtor on or before the Effective Date. 8. Bar Date for Rejection Damage Claims. Pursuant to Section 9.4 of the Plan, if the rejection of an executory contract or unexpired lease by any of the Debtors pursuant to Section 9.1 of the Plan results in damages to the other party or parties to such contract or lease, a Claim for such damages, if not heretofore evidenced by a filed proof of claim, shall be forever 18 barred and shall not be enforceable against the Debtors, or their respective properties or interests in property as agents, successors, or assigns, unless a proof of claim is filed with the Bankruptcy Court and served upon counsel for the Debtors on or before the date that is twenty (20) days after the Effective Date or such later rejection date that occurs as a result of a dispute concerning amounts necessary to cure any defaults. 9. General Authorizations. Each of the Debtors (the Lodgian and Liquidating Debtors) and the Reorganized Debtors are authorized to execute, deliver, file, or record such contracts, instruments, releases, and other agreements or documents and take such actions as may be necessary or appropriate to effectuate, implement, and further evidence the terms and conditions of the Plan, including without limitation any notes or securities issued pursuant to the Plan. The Debtors (the Lodgian and Liquidating Debtors) and the Reorganized Debtors and their respective directors, officers, members, agents, and attorneys, are authorized and empowered to issue, execute, deliver, file, or record any agreement, document, or security, including, without limitation, the documents contained in the Plan Supplement, as modified, amended, and supplemented, in substantially the form included therein, and to take any action necessary or appropriate to implement, effectuate, and consummate the Plan in accordance with its terms, or take any or all corporate actions authorized to be taken pursuant to the Plan, and any release, amendment, or restatement of any bylaws, certificates of incorporation, or other organization documents of the Debtors, whether or not specifically referred to in the Plan or the Plan Supplement, without further order of the Court, and any or all such documents shall be accepted by each of the respective state filing offices and recorded in accordance with applicable state law and shall become effective in accordance with their terms and the provisions of state law. 10. Authorization in connection with Exit Financing Agreements. Without limitation on the general authorizations provided for in this Order and the Plan, each of the 19 Lodgian Debtors and the Reorganized Debtors are authorized to take all actions necessary or desirable in furtherance of the consummation and implementation of the Exit Financing Agreements, including without limitation, as follows: (a) Impac Hotel Group, LLC. Impac Hotel Group, LLC is authorized to create Impac Hotel Group Mezzanine, LLC ("Impac Mezzanine") and to transfer to Impac Mezzanine 100% of the equity interest in Dedham Beverage Management, Inc. and Impac SPE #3, Inc. and all of Impac Hotel Group, LLC's 99% equity interest in the Debtor Dedham Lodging Associates I, L.P. in exchange for the equity interest in Impac Mezzanine, as set forth on Schedule A-1 hereto. (b) Servico Operations Corp. Servico Operations Corp., a non-debtor, is authorized to create Servico Operations Mezzanine, LLC ("Servico Mezzanine") and transfer to Servico Mezzanine 100% of the equity interests in the following Debtors: Island Motel Enterprises, Inc., Lodgian AMI, Inc., Penmoco, Inc., and Servico Lansing, Inc., and the equity interest in the non-debtor Servico Columbia II, Inc. in exchange for the equity interest in Servico Mezzanine, as set forth on Schedule A-2 hereto. (c) Lodgian Financing Corp. Lodgian Financing Corp. is authorized to create Lodgian Financing Mezzanine, LLC ("Lodgian Mezzanine", and together with Impac Mezzanine and Servico Mezzanine, the "Mezzanine Borrowers") and to transfer to Impac Mezzanine all of the equity interests as set forth on Schedule A-3 hereto. Further, Lodgian Mezzanine is authorized to create two entities: Lodgian Hartford Property Owner, LLC ("Lodgian Hartford") and Lodgian Memphis Property Owner, LLC ("Lodgian Memphis"). Lodgian Mezzanine is authorized to cause (i) Debtor AMI Operating Partners, L.P. to transfer its interest in the Holiday Inn East Hartford, together with its interest in all related contracts, licenses and personal property, to Lodgian Hartford, and (ii) Debtor Impac Hotels I, L.L.C. to transfer its interest in the 20 Memphis French Quarter Suites to Lodgian Memphis. Such property interest shall be deemed to have been transferred to Lodgian Mezzanine and contributed to Lodgian Mezzanine to Lodgian Hartford, and Lodgian Memphis. 11. Authorization to enter into certain Stipulations. In addition to the general authorization given to each of Debtors and the Reorganized Debtors through this Order and the Plan, each of the Debtors (the Lodgian and Liquidating Debtors) and Reorganized Debtors are authorized to execute and take such actions as may be necessary or appropriate to effectuate and implement the various stipulations relating to the treatment of holders of Allowed Secured Claims under Class 1 of the Plan, including as set forth in the Exit Financing Agreements. Further, nothing in the Plan or this Order shall modify or affect (i) the terms of any stipulations entered into by and between the applicable Debtor(s) and their franchisors relating to the assumption of the applicable franchise agreements by the applicable Debtor(s), including (A) that certain stipulation and order, dated as of October 30, 2002, among each of the affiliates and subsidiaries of Lodgian, Inc. listed therein, on the one hand, and Holiday Hospitality Franchising, Inc., an affiliate of Six Continents Hotels, Inc., on the other hand, as approved by this Court, (B) that certain stipulation and order, dated as of August 8, 2002, among Servico Pensacola 7330, Inc., Dothan Hospitality, 3071, Inc., Sioux City Hospitality, LP, Fort Wayne Hospitality Associates II, L.P, Servico Columbia, Inc., NH Motel Enterprises, Inc., and Impac Hotels I, L.L.C., on the one hand, and Hilton Hotels Corporation, Promus Hotels, Inc., Doubletree Hotel Systems, Inc., and Hilton Inns, Inc., on the other hand, as approved by this Court, and (C) that certain stipulation, dated as of October 30, 2002, among each of the affiliates and subsidiaries of Lodgian, Inc. listed therein, on the one hand, and Marriott International, Inc., on the other hand, as approved by this Court, and (ii) that certain Order Pursuant to Sections 362 and 363(b) of the Bankruptcy Code and Rule 9019(a) of the Federal Rules of 21 Bankruptcy Procedure Approving a Settlement Agreement Between Certain of the Debtors and The Capital Company of America LLC, entered on October 31, 2002 (the "CCA Settlement Agreement"), including the obligations of the Reorganized Debtors under the CCA Settlement Agreement as approved by this Court, all of which such stipulations and orders shall remain valid and binding upon the parties thereto. In the event of any conflict between this Order and any of the foregoing stipulations, the terms of such stipulations shall control. 12. Authorization of Liquidating Debtors. Subject to the Liquidating Debtors entering into acceptable agreements with the applicable secured lenders (the "Liquidating Debtor Stipulations"), the Liquidating Debtors are hereby authorized to take all actions necessary and in furtherance of the liquidation and orderly wind-down of their Estates, including without limitation, the transfer of all or substantially all of the Liquidating Debtors' assets constituting the secured creditors' collateral to the applicable secured creditors (or their designees) or such other sale or transfer of the Liquidating Debtors' assets in furtherance of such liquidation and orderly wind-down, as and to the extent set forth in Liquidating Debtor Stipulations. Notwithstanding anything in this Order to the contrary, the Effective Date of the Plan for each Liquidating Debtor shall be subject to the applicable Liquidating Debtor entering into a Liquidating Debtor Stipulation. In the event of any conflict between this Order and Liquidating Debtor Stipulations, the terms of such stipulations shall control. 13. Lennar Debtors. Subject to the Debtors McKnight Motel, Inc., East Washington Associates, L.P, Servico Hotels I, Inc., Servico Hotels II, Inc., Servico Hotels III, Inc., Servico Fort Wayne, Inc., New Orleans Airport Hotel Associates, Inc., Servico Hotels IV, Inc., Moon Airport Motel, Inc., Washington Motel Enterprises, Inc., and Hilton Head Motel Enterprise, Inc. (the "Lennar Debtors") entering into acceptable agreements with the applicable secured lenders (the "Lennar Debtor Stipulations"), the Lennar Debtors are hereby authorized to 22 take all actions necessary and in furtherance of the confirmation and consummation of the Plan as it relates to the Lennar Debtors. Notwithstanding anything in this Order to the contrary, the Effective Date of the Plan for each Lennar Debtor shall be subject to the applicable Lennar Debtor entering into a Lennar Debtor Stipulation. In the event of any conflict between this Order and Lennar Debtor Stipulations, the terms of such stipulations shall control. 14. Corporate Action. The Reorganized Debtors shall file Amended Organizational Documents, including, but not limited to, an Amended Certificate of Incorporation with the Office of the Secretary of State for the applicable State on the Effective Date. The Amended Certificate of Incorporation and the certificates of incorporation for each of the Reorganized Debtors that are corporations shall prohibit the issuance of nonvoting equity securities, subject to further amendment of such certificates of incorporation as permitted by applicable law. The Amended Bylaws shall be deemed adopted by the board of directors of the Reorganized Debtors as of the Effective Date. The Liquidating Debtors may (but shall not be required to) file with the Office of the Secretary of State for the applicable State a certificate of dissolution. 15. Issuance of New Securities. Pursuant to Section 6.2 of the Plan, based upon the record of the Chapter 11 Cases, including the instruments included in the Plan Supplement (and any amendments thereto), the issuance of the Plan Securities by Reorganized Lodgian is hereby authorized without further act or action under applicable law, regulation, order, or rule. 16. Securities Laws Exemption. The offering, issuance, and distribution by Reorganized Lodgian of the Plan Securities is exempt from the provisions of section 5 of the Securities Act of 1933, as amended, and any state or local law requiring registration for the offer, issuance, distribution, or sale of a security by reason of section 1145(a) of the Bankruptcy Code. The Plan Securities will be freely tradable by the recipients thereof subject only to the provisions 23 of section 1145(b)(1) of the Bankruptcy Code relating to the definition of an underwriter in Section 2(11) of the Securities Act of 1933, as amended, and compliance with any applicable rules and regulations of the Securities Exchange Commission. 17. DIP Financing Facility. Notwithstanding anything that may be contained herein to the contrary, on the Effective Date, the applicable Debtors shall pay or arrange for the payment of all allowed amounts outstanding under the DIP Financing Facility. Once such payments have been made, the DIP Financing Facility, except to the extent that any letters of credit remain outstanding thereunder as provided herein, shall be deemed terminated (subject in all respects to any carve-out approved by the Bankruptcy Court in the Final Order approving the DIP Financing Facility), and the DIP Lenders shall take all reasonable action to confirm the removal of any liens on the properties of the applicable Debtors securing the DIP Financing Facility. On the Effective Date, any outstanding letters of credit issued under the DIP Financing Facility shall be either replaced or cash collateralized under the Exit Financing Agreements. The DIP Financing Facility shall be continued through the Effective Date. 18. Exit Financing Agreements. (a) The Debtors, the Mezzanine Borrowers, Lodgian Hartford and Lodgian Memphis (together, the "Exit Financing Borrowers") are authorized to enter into new financing arrangements (the "Exit Financing Agreements") with the Exit Financing Agreements to be entered into on the Effective Date among the Exit Financing Lender, Reorganized Lodgian, and the Exit Financing Borrowers and, in the case of the principal agreements, substantially in the form set forth in the Plan Supplement (subject to such modifications that are consistent with the terms of the Plan as the Plan Proponents may approve). All Cash necessary for the Reorganized Debtors to make payments pursuant to the Plan will be obtained from the Reorganized Debtors' cash balances, operations and borrowings under the Exit Financing Agreements. 24 (b) On the Effective Date, all the liens and security interests to be created under the Exit Financing Agreements shall be deemed approved. In furtherance of the foregoing, the Reorganized Debtors and the other Persons granting such liens and security interests are authorized to make all filings and recordings, and to obtain all governmental approvals and consents necessary to establish and perfect such liens and security interests under the provisions of state, provincial, federal, or other law (whether domestic or foreign) that would be applicable in the absence of this Confirmation Order, and will thereafter cooperate to make all other filings and recordings that otherwise would be necessary under applicable law to give notice of such liens and security interests to third parties. 19. Plan Supplement. The documents contained in the Plan Supplement and any amendments, modifications, and supplements thereto (to the extent consistent with the terms of the Plan as the Plan Proponents may approve), and all documents and agreements introduced into evidence by the Debtors at the Confirmation Hearing (including all exhibits and attachments thereto and documents referred to therein), and the execution, delivery, and performance thereof by the Reorganized Debtors, are authorized and approved, including, but not limited to, (i) the Amended Organizational Documents, (ii) the New Preferred Stock Certificate of Designation, (iii) the Warrant Agreements, (iv) the Registration Rights Agreement, (v) the New Equity Incentive Plan, (vi) the Exit Financing Agreements, (vii) the Class 1 Amended Notes, (viii) the Subclass 1-H Note and (ix) the Subclass 1-O Note. Without need for further order or authorization of the Bankruptcy Court, the Debtors (the Lodgian and Liquidating Debtors) and Reorganized Debtors are authorized and empowered to make any and all modifications to any and all documents included as part of the Plan Supplement that do not materially modify the terms of such documents and are consistent with the Plan (subject to the approval of the Committee). The Debtors are authorized to implement the New Equity Incentive Plan without 25 the necessity of shareholder approval required under any applicable law, including, without limitation, Sections 162(m) and 422(b)(1) of the Internal Revenue Code. 20. Governmental Approvals Not Required. This Confirmation Order shall constitute all approvals and consents required, if any, by the laws, rules, or regulations of any state or any other governmental authority with respect to the implementation or consummation of the Plan and any documents, instruments, or agreements, and any amendments or modifications thereto, and any other acts referred to in or contemplated by the Plan, the Disclosure Statement, and any documents, instruments, or agreements, and any amendments or modifications thereto. 21. Exemption From Certain Taxes. Pursuant to section 1146(c) of the Bankruptcy Code: (a) the issuance, transfer, or exchange of notes or equity securities under the Plan; (b) the creation or recording of any mortgage, deed of trust, lien, pledge, or other security interest in connection with the Exit Financing Agreements or otherwise; (c) the making or assignment of any lease or sublease, or the making, delivery or recording of any deed or other instrument of transfer; and (d) the revesting, transfer or sale of any real or personal property (including any direct or indirect equity interest in the Exit Financing Borrowers) of the Debtors, their Estates or the Reorganized Debtors, under, in furtherance of, or in connection with, the Plan, including, without limitation, the Exit Financing Agreements, the Liquidating Debtor Stipulations, agreements of consolidation, restructuring, disposition, liquidation, or dissolution, as well as any mortgages, pledges, financing statements, deeds, bills of sale, stock powers, and transfers of property, or any assignments executed in connection with any of the transactions contemplated under the Plan or the Exit Financing Agreements, will not be subject to any stamp tax, recording tax, personal property transfer tax, real estate transfer tax, sales or use tax, or other similar tax. 26 22. Distributions. Pursuant to Section 7.3 of the Plan, on the Effective Date or as soon thereafter as is practicable, the Disbursing Agent shall distribute to the applicable agent and/or recordholder for the individual holders of the applicable Allowed Claims and Equity Interests (i) the Cash allocable to Classes 1 and 2, and Class 5; and (ii) the New Preferred Stock and New Common Stock allocable to the Class 3 Lodgian Subclasses and Classes 4, 7 and 8. Solely for the purpose of calculating the amount of shares of New Preferred Stock and New Common Stock to be initially distributed to holders of Allowed Claims in any Class 3 Lodgian Subclass, all Disputed Claims in such Subclass will be treated as though such Claims will be Allowed Claims in the amounts asserted, or as estimated by the Bankruptcy Court, as applicable; provided, however, that nothing herein shall be construed to deem a Disputed Claim an Allowed Claim absent an agreement between the applicable Debtor and the applicable claimant, or by further order of this Court. On the Final Distribution Date, each holder of an Allowed Claim in any Class 3 Lodgian Subclass shall receive, if applicable to such Subclass, a Catch-up Distribution of New Preferred Stock and New Common Stock. After the Effective Date but prior to the Final Distribution Date, the applicable Reorganized Lodgian Debtor, in its sole discretion, may direct the Disbursing Agent to distribute shares of New Preferred Stock and New Common Stock to a holder of a Disputed Claim in a Class 3 Lodgian Subclass, which becomes an Allowed Claim after the Effective Date such that the holder of such Claim receives the same amount of shares of New Preferred Stock and New Common Stock that such holder would have received had its Claim been an Allowed Claim in such amount on the Effective Date. 23. Waiver of Subordination. The distributions under the Plan take into account the relative priority of the Claims in each Class in connection with any contractual subordination provisions relating thereto or, in the case of the distributions to be made on account of Allowed Claims of holders of Claims in Class 7, represent a reallocation of Plan Securities from the 27 holders of Claims in Class 4. Accordingly, the distributions under the Plan to any holder of an Allowed Claim shall not be subject to levy, garnishment, attachment or other legal process by any holder of indebtedness senior by reason of claimed contractual subordination rights to the indebtedness of the holders of such Allowed Claim. On the Effective Date, all creditors shall be deemed to have waived any and all contractual subordination rights which they may have with respect to distributions under the Plan to any holder of an Allowed Claim, and the Confirmation Order shall permanently enjoin, effective as of the Effective Date, all Persons from enforcing or attempting to enforce any such rights with respect to the distributions under the Plan; provided, however, that nothing herein shall affect the classification or treatment of Subordinated Claims in Class 11 of the Plan. 24. Final Fee Applications. Pursuant to Section 2.2 of the Plan, all entities seeking an award by the Bankruptcy Court of compensation for services rendered or reimbursement of expenses incurred through and including the Confirmation Date under section 503(b)(2), 503(b)(3), 503(b)(4) or 503(b)(5) of the Bankruptcy Code (i) shall file their respective final applications for allowance of compensation for services rendered and reimbursement of expenses incurred by the date that is forty-five (45) days after the Effective Date, and (ii) shall be paid in full in such amounts as are allowed by the Bankruptcy Court (A) upon the later of (i) the Effective Date and (ii) the date upon which the order relating to any such Administrative Expense Claim is entered, or (B) upon such other terms as may be mutually agreed upon between the holder of such an Administrative Expense Claim and the Plan Proponents or, on and after the Effective Date, the Reorganized Debtors. Each Debtor is authorized to pay compensation for services rendered or reimbursement of expenses incurred after the Confirmation Date and until the Effective Date in the ordinary course of business and without the need for Bankruptcy Court approval. 28 25. Discharge of Claims and Termination of Equity Interests. Pursuant to Section 11.2 of the Plan, except as otherwise provided in the Plan or the Confirmation Order, the rights afforded in the Plan and the entitlement to receive payments and distributions to be made hereunder shall discharge all existing Claims, of any kind, nature or description whatsoever against each of the Debtors or any of their assets or properties. Except as provided in the Plan, on the Effective Date, all existing Claims against each of the Debtors and Equity Interests in the Debtors shall be, and shall be deemed to be, discharged or canceled and all holders of Claims and Equity Interests shall be precluded and enjoined from asserting against the Debtors and/or the Reorganized Debtors, or any of their assets or properties, any other or further Claim or Equity Interest based upon any act or omission, transaction or other activity of any kind or nature that occurred prior to the Effective Date, whether or not such holder has filed a proof of claim or equity interest. 26. Discharge of Debtors. Pursuant to Section 11.3 of the Plan, upon the Effective Date and in consideration of the distributions to be made under the Plan, except as otherwise expressly provided in the Plan, each holder (as well as any trustees and agents on behalf of each holder) of a Claim or Equity Interest of such holder shall be deemed to have forever waived, released and discharged each of the Debtors, of and from any and all Claims, Equity Interests, rights and liabilities that arose prior to the Effective Date. Upon the Effective Date, all such Persons shall be forever precluded and enjoined, pursuant to section 524 of the Bankruptcy Code, from prosecuting or asserting any such discharged Claim against or canceled Equity Interest in each of the Debtors. 27. Indenture Trustees' Fees and Expenses. Pursuant to Section 2.5 of the Plan, Deutsche Bank Trust Company of America, the Indenture Trustee for the Senior Subordinated Notes, and Wilmington Trust Company, the Indenture Trustee for the CRESTS shall be granted, 29 pursuant to section 503(b) of the Bankruptcy Code, an Administrative Claim for their reasonable fees and expenses in performing their duties as Indenture Trustees from the Commencement Date through the Effective Date to the extent that such fees and expenses are either (i) not in dispute by the Plan Proponents or (ii) in the event of any dispute, determined by a Final Order of the Bankruptcy Court. 28. Survival of Corporate Indemnitees. Pursuant to Section 9.5 of the Plan, any obligations of any of the Debtors pursuant to the applicable Debtor's corporate charters and bylaws or agreements entered into any time prior to the Effective Date, to indemnify any Releasee, with respect to all present and future actions, suits and proceedings against such Debtor or such Releasee, based upon any act or omission for or on behalf of such Debtor, shall not be discharged or impaired by confirmation of the Plan. Such obligations shall be deemed and treated as executory contracts to be assumed by the applicable Debtor pursuant to the Plan, and shall continue as obligations of the applicable Reorganized Debtor. 29. Releases, Exculpations, and Injunctions. The release, exculpation, and injunction provisions contained in the Plan are fair and equitable, are given for valuable consideration, and are in the best interests of the Debtors and their chapter 11 estates, and such provisions shall be effective and binding upon all persons and entities. 30. Termination of Injunctions and Automatic Stay. Pursuant to Section 11.5 of the Plan, unless otherwise provided in the Plan, all injunctions or stays arising under section 105 or 362 of the Bankruptcy Code, any order entered during the Chapter 11 Cases under section 105 or 362 of the Bankruptcy Code or otherwise, and in existence on the Confirmation Date, shall remain in full force and effect until the later of the Effective Date and the date indicated in such order. 30 31. Disallowance of Adequate Protection Claims. As of the Effective Date, all Adequate Protection Claims (as hereinafter defined) shall be deemed to be disallowed. As used herein, "Adequate Protection Claims" shall mean any and all claims for (a) adequate protection arising under ss.ss. 361, 362, 363 or 364 of the Bankruptcy Code, or (b) any diminution in the value of a creditor's interest in property of the Debtor's estates, from the Petition Date through and including the Effective Date, whether such claim arises by stipulation, agreement, statute, court order or otherwise. 32. Termination of Adequate Protection Liens. As of the Effective Date, all liens, charges or other encumbrances on property of the Debtors' estates securing the payment of any Adequate Protection Claim shall be deemed to be discharged and released, without the need for the filing of any releases or termination statements or similar documents or taking any further action whatsoever. 33. Cancellation of Existing Securities and Agreements. Except as otherwise expressly provided for in the Plan and pursuant to Section 6.8 of the Plan, except for purposes of evidencing a right to distributions under the Plan or otherwise provided hereunder, on the Effective Date, all the agreements and other documents evidencing (i) any Claims or rights of any holder of a Claim against the applicable Debtor, including all indentures and notes evidencing such Claims and (ii) any options or warrants to purchase Equity Interests, obligating the applicable Debtor to issue, transfer or sell Equity Interests or any other capital stock of the applicable Debtor, shall be canceled. 34. Chilmark Fees. The Lodgian Debtors are authorized to pay Chilmark Partners LP ("Chilmark") a restructuring fee in the amount of $4.3 million less fifty percent of Chilmark's total monthly fees earned in these Chapter 11 Cases in full satisfaction of the services it has provided to the Debtors in connection with these Chapter 11 Cases. The Court shall retain 31 jurisdiction to resolve any dispute between the Debtors, the Committee and Chilmark regarding the calculation of such restructuring fee. 35. Evercore Fees. The Lodgian Debtors are authorized to pay Evercore Partners LP ("Evercore") a restructuring fee in the amount of $1,000,000, less 50% of the aggregate amount of monthly fees received by Evercore, but in no event less than $300,000 in full satisfaction of the services it has rendered to the Committee in connection with these Chapter 11 Cases. The Court shall retain jurisdiction to resolve any dispute between the Debtors, the Committee and Evercore regarding the calculation of such restructuring fee. 36. Nonoccurrence of Effective Date. In the event that the Effective Date does not occur, then (i) the Plan, (ii) assumption or rejection of executory contracts or unexpired leases pursuant to the Plan, (iii) any document or agreement executed pursuant to the Plan, and (iv) any actions, releases, waivers, or injunctions authorized by this Confirmation Order or any order in aid of consummation of the Plan shall be deemed null and void. In such event, nothing contained in this Confirmation Order, any order in aid of consummation of the Plan, or the Plan, and no acts taken in preparation for consummation of the Plan, (a) shall be deemed to constitute a waiver or release of any Claims or Equity Interests by or against the Debtors or any other persons or entities, to prejudice in any manner the rights of the Debtors or any person or entity in any further proceedings involving the Debtors or otherwise, or to constitute an admission of any sort by the Debtors or any other persons or entities as to any issue, or (b) shall be construed as a finding of fact or conclusion of law in respect thereof. 37. Notice of Entry of Confirmation Order. On or before the tenth (10th) Business Day following the date of entry of this Confirmation Order, the Debtors shall electronically file with the Court and serve notice of entry of this Confirmation Order on the parties identified in the Master Service List as defined in this Court's Order Establishing Notice 32 Procedures, dated December 21, 2001 by causing notice of entry of the Confirmation Order (the "Notice of Confirmation"), to be delivered to such parties by first-class mail, postage prepaid. The notice described herein is adequate under the particular circumstances and no other or further notice is necessary. The Debtors also shall cause the Notice of Confirmation to be published as promptly as practicable after the entry of this Confirmation Order once in each of The New York Times (National Edition), The Wall Street Journal (National Edition), and USA Today. 38. Notice of Effective Date. Within five (5) Business Days following the occurrence of the Effective Date, the Reorganized Debtors shall file notice of the occurrence of the Effective Date and shall serve a copy of same on the parties identified in the Master Service List as defined in this Court's Order Establishing Notice Procedures, dated December 21, 2001. 39. Authorization to File Conformed Plan. The Debtors are authorized to file a conformed Plan, dated on the date hereof, which incorporates the amendments to the Plan within thirty (30) days of the entry at this Confirmation Order. 40. Binding Effect. Pursuant to sections 1123(a) and 1142(a) of the Bankruptcy Code and the provisions of this Confirmation Order, the Plan, the Plan Supplement, and the Plan Documents shall apply and be enforceable notwithstanding any otherwise applicable nonbankruptcy law. 41. Severability. Each term and provision of the Plan, as it may have been altered or interpreted by the Bankruptcy Court in accordance with Section 13.11 of the Plan, is valid and enforceable pursuant to its terms. 42. Conflicts Between Order and Plan. To the extent of any inconsistency between the provisions of the Plan and this Confirmation Order, the terms and conditions contained in this Confirmation Order shall govern. The provisions of this Confirmation Order 33 are integrated with each other and are nonseverable and mutually dependent unless expressly stated by further order of this Bankruptcy Court. Dated: November 5, 2002 New York, New York /S/ Burton R. Lifland ---------------------------------- UNITED STATES BANKRUPTCY JUDGE 34 EXHIBIT A AMENDED PLAN EXHIBIT B PROMISSORY NOTE $______________ __________, 2002 FOR VALUE RECEIVED, ___________________ ("Payor"), promises to pay to the order of _________________ or its assigns ("Payee"), in lawful money of the United States of America, ___________________ DOLLARS ($_______) (the "Loan") on _________ (the "Maturity Date") at such place as Payee may from time to time designate in writing. 1. Payment of Principal and Interest. Dated: Payor shall make monthly payments of the principal outstanding under this Promissory Note (this "Note") in an amount, for each such principal payment, equal to 1/180th of the original principal amount hereof. Interest on the unpaid principal outstanding on this Note shall accrue at a rate equal to the Federal Judgement Rate as in effect on the Confirmation Date and shall be payable in arrears. Payments of principal and interest hereunder shall be payable on the first day of each month following the date hereof and continuing on the first day of each succeeding month thereafter, to and including the first day of the month immediately preceding the Maturity Date. The entire balance of principal and interest then unpaid shall be due and payable on the Maturity Date. All computations of interest shall be on the basis of a 360-day year composed of twelve 30-day months, provided that interest for any partial month shall be payable for the actual number of days elapsed in the period during which it accrues. Payor may at any time prepay the principal balance of this Note in whole or in part. 2. Waiver of Notice. The makers, endorsers, guarantors and sureties of this Note, and each of them, hereby waive diligence, demand, presentment for payment, notice of non-payment, protest and notice of protest and specifically consent to and waive notice of any renewals or extensions of this Note, whether made to or in favor of the makers or any other person or persons. 3. Governing Law. This Note shall be governed and construed in accordance with the laws of the State of New York. IN WITNESS WHEREOF, Payor has executed this Promissory Note as of the date first written above. [NAME OF PAYOR] By: ---------------------------------------- Name: Title: Schedule A-1 Mezzanine Entity Impac Hotel Group Mezzanine, LLC, a Delaware limited liability company Transferred Interests 100% of Dedham Beverage Management, Inc. 99% of Dedham Lodging Associates I, L.P. 100% of Impac SPE #3, Inc. Schedule A-2 Mezzanine Entity Servico Operations Mezzanine, LLC, a Delaware limited liability company Transferred Interests 100% of Island Motel Enterprises, Inc. 100% of Lodgian AMI, Inc. 100% of Penmoco, Inc. 100% of Servico Lansing, Inc. 100% of Servico Columbia II, Inc. Schedule A-3 Mezzanine Entity Lodgian Financing Mezzanine, LLC, a Delaware limited liability company Transferred Interests 100% of AMIOP Acquisition Corporation 99% of AMI Operating Partners, L.P. 100% of Impac SPE #1, Inc. 99% of Impac Hotels I, L.L.C. 100% of Albany Hotels Inc. 100% of Apico Hills, Inc. 100% of Apico Inns of Green Tree, Inc. 100% of Brunswick Motel Enterprises, Inc. 100% of Dothan Hospitality 3053, Inc. 100% of Dothan Hospitality 3071, Inc. 100% of Gadsden Hospitality, Inc. 100% of Minneapolis Motel Enterprises, Inc. 100% of NH Motel Enterprises, Inc. 100% of Servico Cedar Rapids, Inc. 100% of Servico Columbia, Inc. 100% of Servico Grand Island, Inc. 100% of Servico Jamestown, Inc. 100% of Servico Maryland, Inc. 100% of Servico Metairie, Inc. 100% of Servico New York, Inc. 100% of Servico Niagra Falls, Inc. 100% of Servico Northwoods, Inc. 100% of Servico Pensacola 7200, Inc. 100% of Servico Pensacola 7330, Inc. 100% of Servico Pensacola, Inc. 100% of Servico Rolling Meadows, Inc. 100% of Servico Windsor, Inc. 100% of Servico Winter Haven, Inc. 100% of Lodgian Richmond SPE, Inc. 99% of Little Rock Lodging Associates, LP 100% of Servico Market Center, Inc. 100% of Servico Austin, Inc. 100% of Sheffield Motel Enterprises, Inc. 100% of Servico Houston, Inc. 100% of Palm Beach Motel Enterprises, Inc. 3 EX-10.9 32 g87458exv10w9.txt EX-10.9 CLASS A WARRANT AGREEMENT EXHIBIT 10.9 LODGIAN, INC. AND WACHOVIA BANK, N.A., AS WARRANT AGENT CLASS A WARRANT AGREEMENT DATED AS OF NOVEMBER 25, 2002 TABLE OF CONTENTS 1 DEFINITIONS............................................................................................... 1 2. EXECUTION AND DELIVERY OF WARRANT CERTIFICATES............................................................ 2 3. EXERCISE OF WARRANT....................................................................................... 4 3.1 Manner of Exercise................................................................................... 4 3.2. Procedure........................................................................................... 4 3.3. Payment of Taxes..................................................................................... 5 3.4. Fractional Shares ................................................................................... 5 4. TRANSFER, DIVISION AND COMBINATION ....................................................................... 5 4.1. Division and Combination ........................................................................... 5 4.2. Expenses ........................................................................................... 5 4.3. Maintenance of Books ............................................................................... 6 4.4. Transfer ........................................................................................... 6 5. ADJUSTMENTS .............................................................................................. 6 5.1. Stock Dividends, Subdivisions and Combinations ..................................................... 6 5.2. Certain Other Distributions ........................................................................ 6 5.3. Below Market Issuances of Common Stock ............................................................. 7 5.4. Below Market Issuances of Convertible Securities ................................................... 7 5.5. Superseding Adjustment ............................................................................. 8 5.6. Other Provisions Applicable to Adjustments under this Section ...................................... 8 5.7. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets ................... 9 5.8. Other Action Affecting Common Stock ................................................................10 5.9. Certain Limitations ................................................................................10 6. NOTICES OF ADJUSTMENT ....................................................................................10 7. NO IMPAIRMENT ............................................................................................10 8. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY ...........................................................10 9. STOCK AND WARRANT TRANSFER BOOKS .........................................................................11 10. SUPPLYING INFORMATION ....................................................................................11 11. LOSS OR MUTILATION .......................................................................................11 12. OFFICE OF COMPANY ........................................................................................11 13. APPRAISAL ................................................................................................11 14. LIMITATION OF LIABILITY ..................................................................................12 15. CONCERNING THE WARRANT AGENT .............................................................................12 15.1. Correctness of Statement ..........................................................................12 15.2. Breach of Covenants ...............................................................................12 15.3. Reliance on Counsel ...............................................................................12 15.4. Reliance on Documents .............................................................................12

i 15.5. Compensation and Indemnification ..................................................................12 15.6. Legal Proceedings .................................................................................12 15.7. Other Transactions in Securities of the Company ...................................................12 15.8. Liability of Warrant Agent ........................................................................13 15.9. Adjustments .......................................................................................13 16. MISCELLANEOUS ............................................................................................13 16.1. Nonwaiver .........................................................................................13 16.2. Notice Generally ..................................................................................13 16.3. Appointment of Warrant Agent ......................................................................13 16.4. Successors and Assigns ............................................................................13 16.5. Amendment .........................................................................................14 16.6. Severability ......................................................................................14 16.7. Headings ..........................................................................................14 16.8. Governing Law .....................................................................................14 SIGNATURES ....................................................................................................15 Exhibit A Form of Warrant Certificate .................................................................16 Exhibit B Subscription Form ...........................................................................19 Exhibit C Assignment Form .............................................................................21

ii WARRANT AGREEMENT WARRANT AGREEMENT, dated as of November 25, 2002 (the "Warrant Agreement"), between LODGIAN, INC., a Delaware corporation (the "Company"), and Wachovia Bank, N.A., as Warrant Agent (the "Warrant Agent"). WHEREAS, pursuant to the First Amended Joint Plan of Reorganization (the "Plan") of the Company and certain of its subsidiaries, as confirmed by the United States Bankruptcy Court for the Southern District of New York on November 5, 2002, the Company proposes to issue Class A Warrants (as defined herein), representing the right to purchase up to an aggregate of 1,510,638 shares of its Common Stock (as defined herein), subject to adjustment as hereinafter provided; and WHEREAS, the Company desires to appoint the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing so to act in connection with the issuance, transfer, exchange, replacement and exercise of the Class A Warrant Certificates (as defined herein) and other matters as provided herein; NOW THEREFORE, in consideration of the foregoing and for the purpose of defining the terms and conditions of the Class A Warrants and the respective rights and obligations thereunder of the Company and the holders from time to time of the Class A Warrants, the Company and the Warrant Agent hereby agree as follows: 1. DEFINITIONS As used in this Warrant Agreement, the following terms have the respective meanings set forth below: "Additional Shares of Common Stock" means all shares of Common Stock issued by the Company after the Closing Date, other than shares of Class A Warrant Stock. "Appraised Value" means, in respect of the Common Stock on any date herein specified, the fair saleable value of one share of Common Stock as of the last day of the most recent fiscal month ended at least 15 days prior to such specified date, based on (i) the equity value of the Company, as determined by an investment banking firm selected in accordance with the terms of Section 13, divided by (ii) the number of Fully Diluted Outstanding shares of Common Stock. "Business Day" means any day that is not a Saturday or Sunday or a day on which banks are required or permitted to be closed in the State of New York. "Class A Warrant" means each of the Company's warrants issued pursuant to this Warrant Agreement, each of which evidences the right to purchase one share of Common Stock, subject to adjustment as set forth in this Warrant Agreement, and all warrants issued upon transfer, division or combination of, or in substitution for, any thereof. "Class B Warrant" means each of the Company's warrants issued pursuant to that certain Warrant Agreement dated as of even date herewith, each of which evidences the right to purchase one share of Common Stock, subject to adjustment as set forth in such Warrant Agreement, and all warrants issued upon transfer, division or combination of, or in substitution for, any thereof. "Class A Warrant Certificate" means a certificate, substantially in the form of Exhibit A hereto, representing one or more Class A Warrants held by a Holder. All Class A Warrant Certificates shall be identical as to terms and conditions, except as to the number of Class A Warrants represented thereby. "Class A Warrant Price" means an amount equal to (i) the number of shares of Common Stock being purchased upon exercise of Class A Warrants pursuant to Section 3.1, multiplied by (ii) the Current Class A Warrant Price as of the date of such exercise. "Class A Warrant Stock" means the shares of Common Stock purchased by the Holders of the Class A 1 Warrants upon the exercise thereof. "Closing Date" means November 25, 2002. "Commission" means the Securities and Exchange Commission or any other federal agency then administering the Securities Act and other federal securities laws. "Common Stock" means the Common Stock, $0.01 par value, of the Company, and any capital stock into which such Common Stock may hereafter be changed, whether as a result of any change in the capital structure of the Company or otherwise, and shall also include (i) capital stock of the Company of any other class (regardless of how denominated) issued to the holders of shares of Common Stock upon any reclassification thereof which is not preferred as to dividends or assets over any other class of stock of the Company and which is not subject to redemption and (ii) shares of common stock of any successor or acquiring corporation (as defined in Section 5.7) received by or distributed to the holders of Common Stock of the Company in the circumstances contemplated by Section 5.7. "Convertible Securities" means evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for Additional Shares of Common Stock, either immediately or upon the occurrence of a specified date or a specified event. "Current Class A Warrant Price" means, at any date herein specified, the price at which one share of Common Stock may be purchased pursuant to this Warrant Agreement on such date. The Current Class A Warrant Price as of the date of this Warrant Agreement is $18.29, subject to adjustment in accordance with the terms hereof. "Current Market Price" means, in respect of any share of Common Stock on any date herein specified, (a) for so long as there shall then be a public market for the Common Stock, the average of the Daily Market Prices for the 20 consecutive Business Days immediately prior to such specified date, and (b) if there is then no public market for the Common Stock, the Appraised Value per share of Common Stock as at such specified date. "Daily Market Price" means, for each Business Day (i) if the Common Stock is then listed or admitted to trading on any stock exchange, the last sale price per share of Common Stock on such day on the principal stock exchange on which the Common Stock is then listed or admitted to trading, (ii) if the Common Stock is then listed or admitted to trading on any stock exchange but no sale takes place on such day on such exchange, the average of the last reported closing bid and asked prices per share of Common Stock on such day as officially quoted on such exchange, (iii) if the Common Stock is not then listed or admitted to trading on any stock exchange, the closing sale price per share of Common Stock on such day in the over-the-counter market, as furnished by the Nasdaq Stock Market or the National Quotation Bureau, Inc., provided, that if no sale takes place on such day in the over-the-counter market, the average closing bid and asked price per share of Common Stock on such day as furnished by the Nasdaq Stock Market or the National Quotation Bureau, Inc., (iv) if neither such corporation at the time is engaged in the business of reporting such prices, the closing sale price per share of Common Stock on such day in the over-the-counter market as furnished by any similar firm then engaged in such business, (v) if there is no such firm, the closing sale price per share of Common Stock on such day in the over-the-counter market as furnished by any member of the NASD selected by the Company or (vi) if there is then no public market for the Common Stock, the Appraised Value per share of Common Stock as at such specified date. "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, as the same shall be in effect from time to time. "Exercise Period" means the period during which the Class A Warrants are exercisable pursuant to Section 3.1. "Expiration Date" means the 5th anniversary of the Closing Date. "Fully Diluted Outstanding" means, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all shares of Common Stock Outstanding at such date and all shares of Common Stock issuable in respect of the Class A Warrants outstanding on such date, and other options or 2 warrants to purchase, or securities convertible into, shares of Common Stock outstanding on such date which would be deemed outstanding in accordance with GAAP for purposes of determining book value or net income per share. "GAAP" means generally accepted accounting principles in the United States of America as in effect on the applicable date of determination. "Holder" means, at any time, a Person in whose name a Class A Warrant or Class A Warrants is then registered on the books of the Company maintained by the Warrant Agent for such purpose. "NASD" means the National Association of Securities Dealers, Inc., or any successor corporation thereto. "Other Property" shall have the meaning set forth in Section 5.7. "Outstanding" means, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all issued shares of Common Stock, except shares then owned or held by or for the account of the Company or any subsidiary thereof, and shall include all shares issuable in respect of outstanding scrip or any certificates representing fractional interests in shares of Common Stock. "Permitted Issuances" means (i) the issuance of the Class A Warrants and Class B Warrants, (ii) the issuance of shares of Common Stock upon the exercise of the Class A Warrants and the Class B Warrants, (iii) the issuance of (x) shares of Common Stock and (y) warrants, options or other rights to acquire shares of Common Stock to the Company's management and other eligible participants under the Company's 2002 Stock Incentive Plan, in accordance with its terms as in effect on the effective date of the Plan, (iv) the issuance of shares of Common Stock upon exercise of the warrants, options and other rights referred to in clause (iii)(y), and (v) all other issuances of Common Stock and warrants by the Company expressly authorized by the Plan. "Person" means any individual, corporation, partnership, trust or other entity of any nature whatsoever. "Plan" has the meaning assigned to such term in the recitals in this Warrant Agreement. "Securities Act" means the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. 2. EXECUTION AND DELIVERY OF WARRANT CERTIFICATES Class A Warrant Certificates evidencing 1,510,638 Class A Warrants, each Class A Warrant to purchase initially one share of Common Stock, may be executed, on or after the date of this Warrant Agreement, by the Company and delivered to the Warrant Agent for countersignature, and the Warrant Agent shall thereupon countersign and deliver such Class A Warrant Certificates upon the order and at the written direction of the Company signed by its Chief Executive Officer or other duly authorized executive officer. The Warrant Agent is hereby authorized to countersign and deliver Class A Warrant Certificates as required by this Section 2 or by Section 3.2, 4 or 11 hereof. The Class A Warrant Certificates shall be executed on behalf of the Company by its Chairman of the Board, Chief Executive Officer, President, any Vice President or other duly authorized executive officer of the Company either manually or by facsimile signature printed thereon. The Class A Warrant Certificates shall be countersigned by manual signature of the Warrant Agent and shall not be valid for any purpose unless so countersigned. In case any officer or director of the Company whose signature shall have been placed upon any Class A Warrant Certificate shall cease to be such officer or director of the Company before countersignature by the Warrant Agent and the issuance and delivery thereof, such Class A Warrant Certificate may nevertheless be countersigned by the Warrant Agent and issued and delivered with the same force and effect as though such person had not ceased to be such officer or director of the Company. 3 3. EXERCISE OF WARRANT 3.1. Manner of Exercise. From and after the date hereof and until 5:00 P.M., New York time, on the Expiration Date, a Holder may exercise Class A Warrants, at any time and from time to time, on any Business Day, for all or any part of the number of shares of Class A Warrant Stock purchasable hereunder. 3.2. Procedure. (a) In order to exercise Class A Warrants, a Holder shall deliver to the Company at its principal office located at 3445 Peachtree Road - Suite 700, Atlanta, Georgia 30326, Attn: General Counsel, or, if so requested in writing by the Company, to the Warrant Agent, at the office or agency designated by the Company pursuant to Section 12, (i) a written notice of such Holder's election to exercise such Class A Warrants substantially in the form attached hereto as Exhibit B (the "Subscription Form"), duly executed by such Holder or its designated agent or attorney, which notice shall specify the number of shares of Common Stock to be purchased by such Holder, (ii) payment of the Class A Warrant Price made against delivery of the shares, at the option of such Holder, by certified or official bank check or wire transfer or, at the option of the Holder, as provided in subsection (b), and (iii) the Class A Warrant Certificate in respect of the Class A Warrants being exercised. (b) In lieu of payment of the Class A Warrant Price by certified or official bank check or wire transfer, as provided for in subsection (a)(ii), a Holder may elect to pay all or any portion of the Class A Warrant Price, as indicated by such Holder on the Subscription Form, (i) by agreeing to accept a reduction in the number of shares of Class A Warrant Stock that would have otherwise been issued to such Holder upon exercise of such Class A Warrants, which would result in the Holder receiving from the Company, pursuant to such exercise, a number of shares of Class A Warrant Stock computed using the following formula: X = Y (A-B) ------- A WHERE: X = the number of shares of Class A Warrant Stock to be issued to the Holder. Y = the number of shares of Class A Warrant Stock purchasable under the Class A Warrants being exercised by such Holder. A = the Daily Market Price of one share of the Common Stock on the trading day preceding such exercise date. B = the Current Class A Warrant Price (as adjusted to the date of such calculation). or (ii) by surrender to the Company of debt securities of the Company having a value equal to the Class A Warrant Price of the Class A Warrant Stock being purchased upon such exercise, which value shall be the principal amount thereof, plus accrued interest and premium (if any) or less any unamortized discount thereon, as reasonably determined by the Company. (c) Upon receipt thereof, the Company shall, as promptly as practicable, and in any event within ten (10) Business Days thereafter, (i) have executed by a duly authorized executive officer of the Company, either manually or by facsimile signature printed thereon, and (ii) cause the Warrant Agent to execute and deliver or cause to be delivered to such Holder a certificate or certificates representing the aggregate number of full shares of Class A Warrant Stock issuable upon such exercise, together with cash in lieu of any fraction of a share, as hereinafter provided. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall request in the notice and shall be registered in the name of such Holder or, such other name as shall be designated in the notice delivered to the Company by such Holder. Class A Warrants shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the exercising Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the notice, together with payment therefor (in whatever form, as provided in this Warrant Agreement) and the Class A Warrant Certificate, is received by the Company as described above and all taxes required to be paid by such Holder, if any, pursuant to Section 3.3 prior to the issuance of such shares, have been paid. If the Class A Warrants represented by a Class A Warrant Certificate 4 shall have been exercised in part, the Warrant Agent shall, at the time of delivery of the certificate or certificates representing Class A Warrant Stock, deliver to the exercising Holder a new Class A Warrant Certificate representing Class A Warrants to purchase a number of shares of Common Stock equal to the unpurchased balance of the shares of Common Stock issuable upon exercise of the Class A Warrants represented by the Class A Warrant Certificate surrendered, which new Class A Warrant Certificate shall in all other respects be identical to the Class A Warrant Certificate so surrendered, or, at the request of the exercising Holder, appropriate notation may be made on the Class A Warrant Certificate so surrendered and the same returned to such Holder. Until a Holder has complied with Section 3.3 with respect to the payment of certain taxes and charges specified in such section, the Company shall not be required to issue or deliver shares in the name of any Person who acquired Class A Warrants or any Class A Warrant Stock. 3.3. Payment of Taxes. All shares of Common Stock issuable upon the exercise of Class A Warrants pursuant to the terms hereof shall be validly issued, fully paid and nonassessable and without any preemptive rights. The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issuance or delivery thereof, unless such tax or charge is imposed by law upon a Holder, in which case such taxes or charges shall be paid by such Holder. The Company shall not be required, however, to pay any tax or other charge imposed in connection with any transfer involved in the issuance of any certificate for shares of Common Stock issuable upon exercise of Class A Warrants in any name other than that of a Holder, and in such case the Company shall not be required to issue or deliver any stock certificate until such tax or other charge has been paid or it has been established to the satisfaction of the Company that no such tax or other charge is due. If such tax or other charge is due, the Warrant Agent shall have no duty or obligation under this Section 3.3 or any other similar provision of this Warrant Agreement unless and until it is satisfied that all such taxes and/or governmental charges have been paid in full. 3.4. Fractional Shares. The Company shall not be required to issue a fractional share of Common Stock upon exercise of any Class A Warrants. As to any fraction of a share which a Holder of one or more Class A Warrants, the rights under which are exercised in the same transaction, would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such fraction in an amount equal to the same fraction of the Current Market Price per share of Common Stock on the date of exercise. 4. TRANSFER, DIVISION AND COMBINATION 4.1. Division and Combination. A Class A Warrant Certificate may be exchanged for a new Class A Warrant Certificate and Class A Warrants may be divided or combined with other Class A Warrants upon presentation of the Class A Warrant Certificate(s) therefor at the aforesaid office or agency of the Warrant Agent, together with a written notice specifying the names and denominations in which new Class A Warrant Certificates are to be issued, signed by the Holder of such Class A Warrant Certificate or Certificates or its agent or attorney. Subject to compliance with this Section 4.1, as to any transfer which may be involved in such division or combination, the Warrant Agent shall execute and deliver a new Class A Warrant Certificate(s) in exchange for the Class A Warrant Certificate(s) representing the Class A Warrants to be divided or combined in accordance with such notice. 4.2. Expenses. The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Class A Warrant Certificates under this Section 4. The Company shall not be required, however, to pay any tax or other charge imposed in connection with any transfer of any Class A Warrants, including, but not limited to, any transfer involved in the division or combination of any Class A Warrant Certificates under this Section 4, and in such case the Company shall not be required to issue or deliver any Class A Warrant Certificates until such tax or other charge has been paid or it has been established to the satisfaction of the Company that no such tax or other charge is due. If such tax or other charge is due, the Warrant Agent shall have no duty or obligation under this Section 4 or any other similar provision of this Warrant Agreement unless and until it is satisfied that all such taxes and/or governmental charges have been paid in full. 4.3. Maintenance of Books. The Company agrees to maintain, at its aforesaid office or agency, books for the registration and the registration of transfer of the Class A Warrants. 4.4. Transfer. Subject to Section 4.2, the Class A Warrants and all rights hereunder are transferable, in 5 whole or in part, without charge to the Holder hereof upon surrender of the Class A Warrant Certificate with a form of assignment, substantially in the form attached hereto as Exhibit C, at the office or agency of the Warrant Agent as provided for in Section 12. Upon any partial transfer, the Warrant Agent shall promptly issue and deliver to the Holder hereof a new Class A Warrant Certificate of like tenor, in the name of the Holder hereof, which shall be exercisable for such number of shares of Class A Warrant Stock which were not so transferred. 5. ADJUSTMENTS The number of shares of Common Stock for which each Class A Warrant is exercisable, and the price at which such shares may be purchased upon exercise of Class A Warrants, shall be subject to adjustment from time to time as set forth in this Section 5. The Company shall give each Holder notice of any event described below which requires an adjustment pursuant to this Section 5 at the time of such event. 5.1. Stock Dividends, Subdivisions and Combinations. If at any time after the Closing Date the Company shall: (a) pay a dividend, or make any other distribution of, Additional Shares of Common Stock to all holders of its Common Stock, (b) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, or (c) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, then (i) the number of shares of Common Stock for which each Class A Warrant is exercisable immediately after the occurrence of any such event shall be adjusted to equal the number of shares of Common Stock which a record holder of the same number of shares of Common Stock for which one Class A Warrant is exercisable immediately prior to the occurrence of such event would own or be entitled to receive after the happening of such event, and (ii) the Current Class A Warrant Price shall be adjusted to equal (A) the Current Class A Warrant Price multiplied by the number of shares of Common Stock for which one Class A Warrant is exercisable immediately prior to such adjustment divided by (B) the number of shares for which one Class A Warrant is exercisable immediately after such adjustment. 5.2. Certain Other Distributions. If at any time after the Closing Date the Company shall make: (a) any distribution of evidences of its indebtedness or any other assets of any nature whatsoever (other than cash or Convertible Securities covered by Section 5.4) to all holders of its Common Stock, or (b) any distribution of warrants or other rights to subscribe for or purchase any evidences of its indebtedness (other than warrants or rights covered by Section 5.3 hereof) to all holders of its Common Stock, then (i) the number of shares of Common Stock for which each Class A Warrant is exercisable shall be adjusted to equal the product obtained by multiplying the number of shares of Common Stock for which one Class A Warrant is exercisable immediately prior to such distribution by a fraction (A) the numerator of which shall be the Current Market Price per share of Common Stock at the time of such distribution and (B) the denominator of which shall be the Current Market Price per share of Common Stock minus the amount allocable to one share of Common Stock of the fair value (as determined in good faith by the Board of Directors of the Company) of any and all such evidences of indebtedness, shares of stock, other securities or property or warrants or other subscription or purchase rights so distributed, and (ii) the Current Class A Warrant Price shall be reduced to equal (A) the Current Class A Warrant Price immediately prior to such distribution multiplied by the number of shares of Common Stock for which one Class A Warrant is exercisable immediately prior to such distribution divided by (B) the number of shares for which one Class A Warrant is exercisable immediately after such distribution. A reclassification of the Common Stock (other than a change in par value, or from par value to no par value or from no par value to par value) into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by the Company to the holders of its Common Stock of such shares of such other class of stock within the meaning of this Section 5.2 and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock as a part of such reclassification, such change shall be deemed a subdivision or combination, as the case may be, of 6 the outstanding shares of Common Stock within the meaning of Section 5.1. 5.3. Below Market Issuances of Common Stock. If at any time after the Closing Date the Company shall (other than in a Permitted Issuance) issue Additional Shares of Common Stock (or options, warrants or other rights to subscribe for or purchase any Additional Shares of Common Stock or any Convertible Securities, whether or not the rights to exchange, subscribe or convert thereunder are immediately exercisable), at a price per share (or having an effective exercise, exchange or conversion price per share together with the purchase price thereof) of less than 90% of the Current Market Price in effect immediately prior to the time of such issue, then in each such case (i) the number of shares of Common Stock for which each Class A Warrant is exercisable shall be adjusted to equal the product obtained by multiplying the number of shares of Common Stock for which one Class A Warrant is exercisable immediately prior to such issuance by a fraction (A) the numerator of which shall be the number of shares of Common Stock Outstanding immediately prior to such issuance plus the total number of Additional Shares of Common Stock issued or offered for subscription or purchase, as the case may be, and (B) the denominator of which shall be the number of shares of Common Stock Outstanding immediately prior to such issuance plus the number of shares of Common Stock which the aggregate purchase, subscription and/or exercise price to be paid for all Additional Shares of Common Stock would purchase at the then Current Market Price; and (ii) the Current Class A Warrant Price in effect immediately prior to such issuance shall be reduced by multiplying such Current Class A Warrant Price by a fraction (X) the numerator of which shall be the number of shares for which one Class A Warrant is exercisable immediately prior to such issuance; and (Y) the denominator of which shall be the number of shares of Common Stock for which one Class A Warrant is exercisable immediately after such issuance. No further adjustments of the number of shares for which Class A Warrants are exercisable or of the Current Class A Warrant Price shall be made upon the actual issue of such Common Stock or such Convertible Securities upon exercise of any such options, warrants or other rights or upon the actual issuance of such Common Stock upon such conversion or exchange of such Convertible Securities. No adjustment of the number of shares of Common Stock for which Class A Warrants are exercisable or of the Current Class A Warrant Price shall be made under this Section 5.3 for the issuance of any shares of Common Stock upon the conversion or exchange of any Convertible Securities, the issuance of which Convertible Shares is covered by Section 5.4 or is expressly exempt from Section 5.4 by reason of the price per share (or effective price per share) for which Common Stock is issuable upon exchange or conversion thereof. No adjustment of the number of shares of Common Stock for which Class A Warrants are exercisable or of the Current Class A Warrant Price shall be made under this Section 5.3 for any issuance of shares of Common Stock covered by Section 5.1. 5.4. Below Market Issuances of Convertible Securities. If at any time after the Closing Date the Company shall (other than in a Permitted Issuance) make a distribution to all holders of its Common Stock of, or otherwise issue, any Convertible Securities (whether or not the rights to exchange or convert thereunder are immediately exercisable), for which Common Stock is issuable upon such exchange or conversion at a price per share (or effective price per share together with the purchase price thereof) of less than 90% of the Current Market Price in effect immediately prior to the time of such issuance, then (i) the number of shares of Common Stock for which each Class A Warrant is exercisable shall be adjusted to equal the product obtained by multiplying the number of shares of Common Stock for which one Class A Warrant is exercisable immediately prior to such issuance by a fraction (A) the numerator of which shall be the number of shares of Common Stock Outstanding immediately prior to such issuance plus the total number of Additional Shares of Common Stock into which such Convertible Securities would be convertible and (B) the denominator of which shall be the number of shares of Common Stock Outstanding immediately prior to such issuance plus the number of shares of Common Stock which the aggregate consideration to be paid upon the exchange or conversion thereof would purchase at the then Current Market Price, and (ii) the Current Class A Warrant Price in effect immediately prior to such issuance shall be reduced by multiplying such Current Class A Warrant Price by a fraction (X) the numerator of which shall be the number of shares for which one Class A Warrant is exercisable immediately prior to such issuance and (Y) the denominator of which shall be the number of shares of Common Stock for which one Class A Warrant is exercisable immediately after such issuance. No further adjustments of the number of shares of Common Stock for which Class A Warrants are exercisable or of the Current Class A Warrant Price shall be made upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities. No adjustment of the number of shares of Common Stock for which Class A Warrants are exercisable or of the Current Class A Warrant Price shall be made under this Section 5.4 upon the issuance of any Convertible Securities which are issued pursuant to the exercise of any warrants or other subscription or purchase rights therefor, the issuance of which warrants or other subscription or purchase rights is covered by Section 5.3 or is expressly exempt from Section 5.3 by reason of the price per share (or 7 effective price per share) for which Common Stock is issuable upon exchange or conversion of the Convertible Securities covered thereby. 5.5. Superseding Adjustment. If, at any time after any adjustment of the number of shares of Common Stock for which Class A Warrants are exercisable and the Current Class A Warrant Price shall have been made pursuant to Section 5.3 or Section 5.4 as the result of any issuance of warrants, rights or Convertible Securities, (a) such warrants or rights, or the right of conversion or exchange in such other Convertible Securities, shall expire, and all or a portion of such warrants or rights, or the right of conversion or exchange with respect to all or a portion of such other Convertible Securities, as the case may be, shall not have been exercised, or (b) the consideration per share for which shares of Common Stock are issuable pursuant to such warrants or rights, or the terms of such other Convertible Securities, shall be increased solely by virtue of provisions therein contained for an automatic increase in such consideration per share upon the occurrence of a specified date or event, then for each outstanding Class A Warrant such previous adjustment shall be rescinded and annulled and the Additional Shares of Common Stock which were deemed to have been issued by virtue of the computation made in connection with the adjustment so rescinded and annulled shall no longer be deemed to have been issued by virtue of such computation. Thereupon, a recomputation shall be made of the effect of such rights or options or other Convertible Securities on the basis of (i) treating the number of Additional Shares of Common Stock or other property, if any, theretofore actually issued or issuable pursuant to the previous exercise of any such warrants or rights or any such right of conversion or exchange, as having been issued on the date or dates of any such exercise and for the consideration actually received and receivable therefor, and (ii) treating any such warrants or rights or any such other Convertible Securities which then remain outstanding as having been granted or issued immediately after the time of such increase of the consideration per share for which shares of Common Stock or other property are issuable under such warrants or rights or other Convertible Securities; whereupon a new adjustment of the number of shares of Common Stock for which Class A Warrants are exercisable and the Current Class A Warrant Price shall be made, which new adjustment shall supersede the previous adjustment so rescinded and annulled. 5.6. Other Provisions Applicable to Adjustments under this Section. The following provisions shall be applicable to the making of adjustments of the number of shares of Common Stock for which Class A Warrants are exercisable and the Current Class A Warrant Price provided for in this Section 5: (a) Computation of Consideration. To the extent that any Additional Shares of Common Stock or any Convertible Securities or any warrants or other rights to subscribe for or purchase any Additional Shares of Common Stock or any Convertible Securities shall be issued for cash consideration, the consideration received by the Company therefor shall be the amount of the cash received by the Company therefor, or, if such Additional Shares of Common Stock or Convertible Securities are offered by the Company for subscription, the subscription price. To the extent that such issuance shall be for a consideration other than cash, then, except as herein otherwise expressly provided, the amount of such consideration shall be deemed to be the fair value of such consideration at the time of such issuance as determined in good faith by the Board of Directors of the Company. In case any Additional Shares of Common Stock or any Convertible Securities or any warrants or other rights to subscribe for or purchase such Additional Shares of Common Stock or Convertible Securities shall be issued in connection with any merger in which the Company issues any securities, the amount of consideration therefor shall be deemed to be the fair value, as determined in good faith by the Board of Directors of the Company, of such portion of the assets and business of the nonsurviving corporation as such Board in good faith shall determine to be attributable to such Additional Shares of Common Stock, Convertible Securities, warrants or other rights, as the case may be. The consideration for any Additional Shares of Common Stock issuable pursuant to any warrants or other rights to subscribe for or purchase the same shall be the consideration received by the Company for issuing such warrants or other rights plus the additional consideration payable to the Company upon exercise of such warrants or other rights. The consideration for any Additional Shares of Common Stock issuable pursuant to the terms of any Convertible Securities shall be the consideration received by the Company for issuing warrants or other rights to subscribe for or 8 purchase such Convertible Securities, plus the consideration paid or payable to the Company in respect of the subscription for or purchase of such Convertible Securities, plus the additional consideration, if any, payable to the Company upon the exercise of the right of conversion or exchange in such Convertible Securities. In case of the issuance at any time of any Additional Shares of Common Stock or Convertible Securities in payment or satisfaction of any dividends upon any class of stock other than Common Stock, the Company shall be deemed to have received for such Additional Shares of Common Stock or Convertible Securities a consideration equal to the amount of such dividend so paid or satisfied. (b) When Adjustments to Be Made. The adjustments required by this Section 5 shall be made whenever and as often as any specified event requiring an adjustment shall occur, except that any adjustment of the number of shares of Common Stock for which Class A Warrants are exercisable that would otherwise be required may be postponed (except in the case of a subdivision or combination of shares of the Common Stock, as provided in Section 5.1) up to, but not beyond the date of exercise if such adjustment either by itself or with other adjustments not previously made adds or subtracts less than 1% of the shares of Common Stock for which Class A Warrants are exercisable immediately prior to the making of such adjustment. Any adjustment representing a change of less than such minimum amount (except as aforesaid) which is postponed shall be carried forward and made as soon as such adjustment, together with other adjustments required by this Section 5 and not previously made, would result in a minimum adjustment or on the date of exercise. For the purpose of any adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence. (c) Fractional Interests. In computing adjustments under this Section 5, fractional interests in Common Stock shall be taken into account to the nearest 1/100th of a share. 5.7. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In case the Company shall, after the Closing Date, reorganize its capital or reclassify its capital stock (other than in a capital reorganization or reclassification resulting solely in the issuance of Additional Shares of Common Stock or Convertible Securities or options, warrants or other rights to subscribe for or purchase Additional Shares of Common Stock or Convertible Securities, the issuance of which is covered by Section 5.1, 5.3 or 5.4 or is expressly exempt from Section 5.3 or 5.4 by reason of the price per share (or effective price per share) for which Common Stock is issuable upon exercise, exchange or conversion thereof), consolidate or merge with or into another Person (where the Company is not the surviving corporation or where as a result of such consolidation or merger there is a change in or distribution with respect to the Common Stock of the Company), or sell, transfer or otherwise dispose of all or substantially all its property, assets or business to another Person and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor, acquiring Person or surviving corporation (or of the Company if the Company is the surviving corporation), or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor, acquiring Person or surviving corporation ("Other Property"), are to be received by or distributed to the holders of Common Stock of the Company, then, subject to the terms and conditions of this Warrant Agreement, each Class A Warrant shall thereafter entitle the Holder thereof to receive, upon exercise thereof, the number of shares of common stock of the successor, acquiring Person or surviving corporation (or of the Company, if the Company is the surviving corporation), and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which one Class A Warrant is exercisable immediately prior to such event. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant Agreement to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined by resolution of the Board of Directors of the Company) in order to provide for adjustments of shares of the Common Stock for which Class A Warrants are exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 5. For purposes of this Section 5.7, "common stock of the successor, acquiring Person or surviving corporation" shall include stock of such Person of any class which is not preferred as to dividends or assets over any other class of stock of such Person and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 5.7 shall similarly 9 apply to any successive reorganizations, reclassifications, mergers, consolidations or disposition of assets. 5.8. Other Action Affecting Common Stock. In case at any time or from time to time the Company shall take any action in respect of its Common Stock, other than any action described in this Section 5, then the number of shares of Common Stock or other stock for which Class A Warrants are exercisable and/or the Class A Warrant Price thereof shall be adjusted in such manner as may be equitable in the circumstances consistent with the fundamental intent of such provisions making an appropriate adjustment in the Current Class A Warrant Price and the number of Class A Warrant Stock obtainable upon exercise of the Class A Warrants so as to protect the rights of the Holder of the Class A Warrants. 5.9. Certain Limitations. Notwithstanding anything herein to the contrary, the Company agrees not to enter into any transaction which, by reason of any adjustment hereunder, would cause the Current Class A Warrant Price to be less than the par value per share of Common Stock. 6. NOTICES OF ADJUSTMENT Whenever the number of shares of Common Stock for which Class A Warrants are exercisable, or whenever the Current Class A Warrant Price shall be adjusted pursuant to Section 5, the Company shall forthwith prepare a certificate to be executed by the chief financial officer of the Company setting forth, in reasonable detail, the event requiring the adjustment and the facts, computations, and method by which such adjustment was calculated (including a description of the basis on which the Board of Directors of the Company determined the fair value of any evidences of indebtedness, shares of stock, other securities or property or warrants or other subscription or purchase rights referred to in Section 5), specifying the number of shares of Common Stock for which Class A Warrants are exercisable and (if such adjustment was made pursuant to Section 5.7) describing the number and kind of any shares of other common stock or Other Property for which Class A Warrants are exercisable, and any change in the Current Class A Warrant Price (or, if such adjustment was made pursuant to Section 5.7, the purchase price or prices at which a share of such other common stock or Other Property may be purchased upon exercise of Class A Warrants), after giving effect to such adjustment. The Company shall promptly cause a signed copy of such certificate to be delivered to the Warrant Agent and to each Holder in accordance with Section 16.2. The Company shall keep at its office or agency designated pursuant to Section 12 copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by any Holder or any prospective purchaser of Class A Warrants designated by a Holder thereof. 7. NO IMPAIRMENT The Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant Agreement, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holders against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any shares of Common Stock receivable upon the exercise of a Class A Warrant above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of a Class A Warrant, and (c) use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant Agreement. 8. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY From and after the Closing Date, the Company shall at all times reserve and keep available for issue upon the exercise of Class A Warrants such number of authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of all outstanding Class A Warrants. All shares of Common Stock which shall be so issuable, when issued upon exercise of any Class A Warrant and payment therefor in accordance with the terms of this Warrant Agreement, shall be duly and validly issued and fully paid and nonassessable, not subject to 10 preemptive rights, and free from all taxes, liens, charges, security interests, encumbrances and other restrictions created by or through the Company. Before taking any action which would cause an adjustment reducing the Current Class A Warrant Price below the then par value, if any, of the shares of Common Stock issuable upon exercise of the Class A Warrants, the Company shall take any corporate action which may be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of such Common Stock at such adjusted Current Class A Warrant Price. Before taking any action which would result in an adjustment in the number of shares of Common Stock for which Class A Warrants are exercisable or in the Current Class A Warrant Price, the Company shall use its best efforts to obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof. If any shares of Common Stock required to be reserved for issuance upon exercise of Class A Warrants require registration or qualification with any governmental authority or other governmental approval or filing under any federal or state law before such shares may be so issued, the Company will in good faith (subject to all applicable laws including, without limitation, those rules and regulations promulgated under the Securities Act) and as expeditiously as possible and at its expense endeavor to cause such shares to be duly registered. 9. STOCK AND WARRANT TRANSFER BOOKS The Company will not at any time, except upon dissolution, liquidation or winding up of the Company, close its stock transfer books or Class A Warrant transfer books so as to result in preventing or delaying the exercise or transfer of any Class A Warrant. 10. SUPPLYING INFORMATION The Company shall cooperate with each Holder of a Class A Warrant and each holder of Class A Warrant Stock in supplying such information as may be reasonably necessary for such holder to complete and file any information reporting forms presently or hereafter required by the Commission as a condition to the availability of an exemption from the Securities Act for the sale of any Class A Warrant or Class A Warrant Stock. 11. LOSS OR MUTILATION Upon receipt by the Company from any Holder of evidence satisfactory to the Company of the ownership of and the loss, theft, destruction or mutilation of a Class A Warrant Certificate and indemnity satisfactory to the Company, and in case of mutilation upon surrender and cancellation thereof, the Company will execute and deliver to such Holder in exchange for or in lieu thereof a new Class A Warrant Certificate of like tenor and for the same aggregate number of Class A Warrants. 12. OFFICE OF COMPANY As long as any of the Class A Warrants remain outstanding, the Warrant Agent, on behalf of the Company, shall maintain an office or agency (which shall be the principal executive offices of the Warrant Agent) where the Class A Warrants may be presented for exercise, registration of transfer, division or combination as provided in this Warrant Agreement. 13. APPRAISAL The determination of the Appraised Value per share of Common Stock shall be made by an investment banking firm of nationally recognized standing selected by the Company. The Company shall retain, at its sole cost, such investment banking firm as may be necessary for the determination of Appraised Value required by the terms of this Warrant Agreement. 11 14. LIMITATION OF LIABILITY No provision hereof, in the absence of affirmative action by a Holder to purchase shares of Common Stock, and no enumeration herein of the rights or privileges of a Holder hereof, shall give rise to any liability of such Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 15. CONCERNING THE WARRANT AGENT The Warrant Agent undertakes the duties and obligations imposed by this Warrant Agreement upon the following terms and conditions, by all of which the Company and the Holders, by their acceptance of the Class A Warrants, shall be bound: 15.1. Correctness of Statement. The statements contained herein and in the Class A Warrant Certificates shall be taken as statements of the Company, and the Warrant Agent assumes no responsibility for the correctness of any of the same except such as describe the Warrant Agent or action to be taken by it. The Warrant Agent assumes no responsibility with respect to the distribution of the Class A Warrant Certificates except as herein otherwise provided. 15.2. Breach of Covenants. The Warrant Agent shall not be responsible for any failure of the Company to comply with any of the covenants contained in this Warrant Agreement or in the Class A Warrant Certificates to be complied with by the Company. 15.3. Reliance on Counsel. The Warrant Agent may consult at any time with counsel satisfactory to it (who may be counsel for the Company) and the Warrant Agent shall incur no liability or responsibility to the Company or to any Holder in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the opinion or the advice of such counsel. 15.4. Reliance on Documents. The Warrant Agent shall incur no liability or responsibility to the Company or to any Holder for any action taken, suffered or omitted in reliance on any Class A Warrant Certificate, certificate of shares, notice, resolution, waiver, consent, order certificate, or other paper, document or instrument believed by it to be genuine and to have signed, sent or presented by the proper party or parties. 15.5. Compensation and Indemnification. The Company agrees to pay to the Warrant Agent reasonable compensation for all services rendered by the Warrant Agent in the execution of this Warrant Agreement, to reimburse the Warrant Agent for all expenses, taxes and governmental charges and other charges of any kind and nature incurred by the Warrant Agent in the execution of this Warrant Agreement to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments, costs and counsel fees, for anything done or omitted by the Warrant Agent in the execution of its duties and powers under this Warrant Agreement, except for such liabilities that arise as a result of the Warrant Agent's negligence, willful misconduct or bad faith. 15.6. Legal Proceedings. The Warrant Agent shall be under no obligation to institute any action, suit or legal proceeding or to take any other action likely to involve expense unless the Company or one or more Holders shall furnish the Warrant Agent with reasonable security and indemnity for any costs and expenses which may be incurred, but this provision shall not affect the power of the Warrant Agent to take such action as it may consider proper, whether with or without any such security indemnity. All rights of action under this Warrant Agreement or under any of the Class A Warrant Certificates may be enforced by the Warrant Agent without possession of any of the Class A Warrant Certificates or the production thereof at any trial or other proceeding relative thereto, and any such action, suit or proceeding instituted by the Warrant Agent shall be brought in its name as Warrant Agent, and any recovery of judgment shall be for the ratable benefit of the Holders, as their respective rights or interests may appear. 15.7. Other Transactions in Securities of the Company. Except as prohibited by law, the Warrant Agent, and any stockholder, director, officer or employee of it, may buy, sell or deal in any of the Class A Warrants or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not 12 Warrant Agent under this Warrant Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity. 15.8. Liability of Warrant Agent. The Warrant Agent shall act hereunder solely as agent for the Company, and its duties shall be determined solely by the provisions hereof. The Warrant Agent shall not be liable for anything which it may do or refrain from doing in connection with this Warrant Agreement except for its own negligence, willful misconduct or bad faith. 15.9. Adjustments. The Warrant Agent shall not at any time be under any duty or responsibility to any Holder to make or cause to be made any adjustment of the Current Class A Warrant Price or number of shares of Class A Warrant Stock deliverable as provided in this Warrant Agreement, or to determine whether any facts exist which may require any of such adjustments, or with respect to the nature or extent of any such adjustments, when made, or with respect to the method employed in making the same. The Warrant Agent shall not be accountable with respect to the validity or value or the kind or amount of any shares of Class A Warrant Stock or of any securities or property which may at any time be issued or delivered upon the exercise of any Class A Warrant or with respect to whether any such shares of Class A Warrant Stock or other securities will be, when issued, validly issued, fully paid and nonassessable, and makes no representation with respect thereto. 16. MISCELLANEOUS 16.1. Nonwaiver. No course of dealing or any delay or failure to exercise any right hereunder on the part of any Holder shall operate as a waiver of such right or otherwise prejudice Holder's rights, powers or remedies. 16.2. Notice Generally. Any notice, demand, request, consent, approval, declaration, delivery or other communication hereunder to be made pursuant to the provisions of this Warrant Agreement shall be sufficiently given or made if in writing and either (i) delivered in person with receipt acknowledged, (ii) sent by registered or certified mail, return receipt requested, postage prepaid, or (iii) by telecopy and confirmed by telecopy answer back, addressed as follows: (a) If to any Holder or holder of Class A Warrant Stock, at its last known address appearing on the books of the Company maintained by the Warrant Agent for such purpose; (b) If to the Warrant Agent, to Wachovia Bank, N.A., as Warrant Agent, Corporate Trust Group, Corporate Actions Department, 1525 West W.T. Harris Blvd., Bldg. 3C3, Charlotte, NC 28262-1153 (overnight courier) 28288-1153 (first class mail); or (c) If to the Company, at 3445 Peachtree Road, N.E. - Suite 700, Atlanta, Georgia 30326, Attn: General Counsel; or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration, delivery or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged, telecopied and confirmed by telecopy answerback, or three (3) Business Days after the same shall have been deposited in the United States mail. Failure or delay in delivering copies of any notice, demand, request, approval, declaration, delivery or other communication to the person designated above to receive a copy shall in no way adversely affect the effectiveness of such notice, demand, request, approval, declaration, delivery or other communication. 16.3. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company in accordance with the instructions set forth herein, and the Warrant Agent hereby accepts such appointment. 16.4. Successors and Assigns. This Warrant Agreement and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company, the Warrant Agent and the successors and assigns of each Holder. The provisions of this Warrant Agreement are intended to be for the benefit of all Holders from time to time of a Class A Warrant or Class A Warrants and holders of Class A Warrant Stock, and shall be enforceable by 13 any such Holder or holder of Class A Warrant Stock. 16.5. Amendment. The Company and the Warrant Agent may from time to time supplement or amend this Warrant Agreement without the approval of any Holders in order to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision herein, or to make any other provisions or change in regard to matters or questions arising hereunder which the Company and the Warrant Agent may deem necessary or desirable and which shall not adversely affect the interests of any Holder. 16.6. Severability. Wherever possible, each provision of this Warrant Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Warrant Agreement. 16.7. Headings. The headings used in this Warrant Agreement are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant Agreement. 16.8. Governing Law. This Warrant Agreement shall be governed by the laws of the State of Delaware, without regard to the provisions thereof relating to conflict of laws. 14 IN WITNESS WHEREOF, the Company and the Warrant Agent have caused this Warrant Agreement to be duly executed as of the date first written above. LODGIAN, INC. By: /s/ Daniel E. Ellis ---------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary WACHOVIA BANK, N.A. By: /s/ Ted Wiener ---------------------------------- Name: Ted Wiener Title: Assistant Vice President 15 EXHIBIT A FORM OF CLASS A WARRANT CERTIFICATE CLASS A WARRANT LODGIAN, INC. No. ______________ [______] Class A Warrants Incorporated Under the Laws of the State of Delaware THIS CERTIFIES THAT, for value received, ______________________, the registered holder hereof or registered assigns (the "Holder"), is the owner of the number of Class A Warrants set forth above, each of which represents the right to purchase from LODGIAN, INC., a Delaware corporation (the "Company"), at any time commencing with the opening of business on November __, 2002, and until the close of business on November __, 2007 (the "Expiration Date"), at the purchase price of $18.29 (subject to adjustment as described below) (the "Current Class A Warrant Price"), one fully paid and nonassessable share of Common Stock, par value $0.01 per share (the "Common Stock"), of the Company. The number of shares of Common Stock purchasable upon exercise of each Class A Warrant and the Current Class A Warrant Price per whole share shall be subject to adjustment from time to time as set forth in the Warrant Agreement referred to below. The Class A Warrants represented hereby may be exercised in whole or in part by presentation of this Class A Warrant Certificate with the Subscription Form included herein duly executed, which signature shall, in certain circumstances (as indicated on the Subscription Form), be guaranteed by a bank or trust company having an office or correspondent in the United States or a broker or dealer which is a member of a registered securities exchange or the National Association of Securities Dealers, Inc., and simultaneous payment of the exercise price thereof (in the form indicated on the Subscription Form) to the Company at 3445 Peachtree Road - Suite 700, Atlanta, Georgia 30326, Attn: General Counsel, or as otherwise provided in the Warrant Agreement (defined below). The Class A Warrants represented hereby are of a duly authorized issue of Class A Warrants evidencing the right to purchase up to an aggregate of 1,510,638 shares of Common Stock and are issued under and in accordance with a Warrant Agreement (the "Warrant Agreement"), dated as of November __, 2002, between the Company and Wachovia Bank, N.A. (the "Warrant Agent") and are subject to the terms and provisions contained in the Warrant Agreement, to all of which the Holder of this Class A Warrant Certificate by acceptance hereof consents. A copy of the Warrant Agreement is available for inspection at the principal office of the Company. Upon any partial exercise of the Class A Warrants represented hereby, there shall be countersigned and issued to the Holder hereof a new Warrant Certificate in respect of the shares of Common Stock as to which the Class A Warrants represented hereby shall not have been exercised. The Class A Warrants represented hereby may be exchanged at the office of the Warrant Agent by surrender of this Class A Warrant Certificate properly endorsed either separately or in combination with one or more other Class A Warrant Certificates for one or more new Class A Warrant Certificates representing Class A Warrants entitling the Holder thereof to purchase the same aggregate number of shares of Common Stock as were purchased on exercise of the Class A Warrant or Class A Warrants exchanged. No fractional shares will be issued upon the exercise of these Class A Warrants. Subject to compliance with applicable securities laws, the Class A Warrants represented hereby are transferable at the office of the Warrant Agent, in the manner and subject to the limitations set forth in the Warrant Agreement. The Holder hereof may be treated by the Company, the Warrant Agent and all other persons dealing with this Warrant Certificate as the absolute owner hereof for any purpose and as the person entitled to exercise the rights represented hereby, or to the transfer hereof on the books of the Company, any notice to the contrary notwithstanding, and until such transfer on such books, the Company may treat the Holder hereof as the owner for all purposes. 16 The Class A Warrants represented hereby do not entitle any Holder hereof to any of the rights of a shareholder of the Company. The Class A Warrants represented hereby shall not be valid or obligatory for any purpose until this Warrant Certificate shall have been countersigned by the Warrant Agent. 17 Witness the facsimile seal of the Company and the facsimile signatures of its duly authorized officers. Dated: [_______________] Countersigned and Registered: WACHOVIA BANK, N.A. as Warrant Agent By: --------------------------- Authorized Signature LODGIAN, INC. By: ------------------------------------- President or Vice President Attest: ---------------------------------- Secretary or Assistant Secretary 18 EXHIBIT B SUBSCRIPTION FORM [To be executed only upon exercise of a Warrant or Warrants] The undersigned (the "Registered Holder") hereby irrevocably exercises the right to purchase _________ shares of Common Stock of LODGIAN, INC., an entity organized and existing under the laws of the State of Delaware (the "Company"), evidenced by the attached Warrant Certificate, and herewith makes payment of the exercise price against delivery of the shares with respect to such shares in full in the form of (check the appropriate box) (i) certified or official bank check or wire transfer in the amount of $________; (ii) by surrendering ______ shares of Class A Warrant Stock, which represent the amount of Class A Warrant Stock, as provided in the Warrant Agreement, to be cancelled in connection with such exercise; or (iii) by the surrender to the Company of the attached original debt securities of the Company in the principal amount (plus accrued interest and premium (if any) or less any unamortized discount thereon) of $_________, all in accordance with the conditions and provisions of the Warrant Agreement, and requests that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable upon such exercise) be issued in the name of and delivered to [_____________] whose address is [________________________________] and, if such shares of Common Stock shall not include all of the shares of Common Stock issuable as provided in the Class A Warrant Certificate, that a new Class A Warrant Certificate of like tenor and date for the balance of the shares of Common Stock issuable thereunder be delivered to the undersigned. --------------------------------------- (Name of Registered Owner) --------------------------------------- (Signature of Registered Owner) --------------------------------------- (Street Address) - --------------------------- --------------------------------------- (Signature Guarantee) (City)(State)(Zip Code) NOTICE: The signature on this subscription form must correspond with the name as written upon the face of the Class A Warrant Certificate in every particular, without alteration or enlargement or any change whatsoever. 19 Witness the facsimile seal of the Company and the facsimile signatures of its duly authorized officers. Dated: [_______________] Countersigned and Registered: WACHOVIA BANK, N.A. as Warrant Agent By: ---------------------------- Authorized Signature [Name] [Title] LODGIAN, INC. By: ---------------------------------------- President and Chief Executive Office Attest: ------------------------------------- Secretary 20 EXHIBIT C ASSIGNMENT FORM FOR VALUE RECEIVED the undersigned registered owner of the Class A Warrant(s) represented by Class A Warrant Certificate No. [_______] hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the Warrant Agreement, with respect to the number of Class A Warrants set forth below: Name and Address of Assignee No. of Class A Warrants - ---------------------------- ------------------------ and does hereby irrevocably constitute and appoint [_____________________] attorney-in-fact to register such transfer on the books of LODGIAN, INC. maintained for the purpose, with full power of substitution in the premises. Date: ----------------------- Print Name: ---------------------------- Signature: ----------------------------- Witness: ------------------------------ - ---------------------------- (Signature Guarantee) NOTICE: The signature on this subscription form must correspond with the name as written upon the face of the Warrant in every particular, without alteration or enlargement or any change whatsoever. 21 EX-10.10 33 g87458exv10w10.txt EX-10.10 CLASS B WARRANT AGREEMENT EXHIBIT 10.10 - ------------------------------------------------------------------------------- LODGIAN, INC. AND WACHOVIA BANK, N.A., AS WARRANT AGENT CLASS B WARRANT AGREEMENT DATED AS OF NOVEMBER 25, 2002 - ------------------------------------------------------------------------------- TABLE OF CONTENTS 1 DEFINITIONS............................................................................................... 1 2. EXECUTION AND DELIVERY OF WARRANT CERTIFICATES............................................................ 3 3. EXERCISE OF WARRANT....................................................................................... 4 3.1 Manner of Exercise................................................................................... 4 3.2. Procedure............................................................................................ 4 3.3. Payment of Taxes..................................................................................... 5 3.4. Fractional Shares ................................................................................... 5 4. TRANSFER, DIVISION AND COMBINATION ....................................................................... 5 4.1. Division and Combination ........................................................................... 5 4.2. Expenses ........................................................................................... 5 4.3. Maintenance of Books ............................................................................... 6 4.4. Transfer ........................................................................................... 6 5. ADJUSTMENTS .............................................................................................. 6 5.1. Stock Dividends, Subdivisions and Combinations ..................................................... 6 5.2. Certain Other Distributions ........................................................................ 6 5.3. Below Market Issuances of Common Stock ............................................................. 7 5.4. Below Market Issuances of Convertible Securities ................................................... 7 5.5. Superseding Adjustment ............................................................................. 8 5.6. Other Provisions Applicable to Adjustments under this Section ...................................... 8 5.7. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets ................... 9 5.8. Other Action Affecting Common Stock ................................................................10 5.9. Certain Limitations ................................................................................10 6. NOTICES OF ADJUSTMENT ....................................................................................10 7. NO IMPAIRMENT ............................................................................................10 8. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY ...........................................................10 9. STOCK AND WARRANT TRANSFER BOOKS .........................................................................11 10. SUPPLYING INFORMATION ....................................................................................11 11. LOSS OR MUTILATION .......................................................................................11 12. OFFICE OF COMPANY ........................................................................................11 13. APPRAISAL ................................................................................................11 14. LIMITATION OF LIABILITY ..................................................................................12 15. CONCERNING THE WARRANT AGENT .............................................................................12 15.1. Correctness of Statement ..........................................................................12 15.2. Breach of Covenants ...............................................................................12 15.3. Reliance on Counsel ...............................................................................12 15.4. Reliance on Documents .............................................................................12

i 15.5. Compensation and Indemnification ..................................................................12 15.6. Legal Proceedings .................................................................................12 15.7. Other Transactions in Securities of the Company ...................................................12 15.8. Liability of Warrant Agent ........................................................................13 15.9. Adjustments .......................................................................................13 16. MISCELLANEOUS ............................................................................................13 16.1. Nonwaiver .........................................................................................13 16.2. Notice Generally ..................................................................................13 16.3. Appointment of Warrant Agent ......................................................................13 16.4. Successors and Assigns ............................................................................13 16.5. Amendment .........................................................................................14 16.6. Severability ......................................................................................14 16.7. Headings ..........................................................................................14 16.8. Governing Law .....................................................................................14 SIGNATURES ....................................................................................................15 Exhibit A Form of Warrant Certificate .................................................................16 Exhibit B Subscription Form ...........................................................................19 Exhibit C Assignment Form .............................................................................21

ii WARRANT AGREEMENT WARRANT AGREEMENT, dated as of November 25, 2002 (the "Warrant Agreement"), between LODGIAN, INC., a Delaware corporation (the "Company"), and Wachovia Bank, N.A., as Warrant Agent (the "Warrant Agent"). WHEREAS, pursuant to the First Amended Joint Plan of Reorganization (the "Plan") of the Company and certain of its subsidiaries, as confirmed by the United States Bankruptcy Court for the Southern District of New York on November 5, 2002, the Company proposes to issue Class B Warrants (as defined herein), representing the right to purchase up to an aggregate of 1,029,366 shares of its Common Stock (as defined herein), subject to adjustment as hereinafter provided; and WHEREAS, the Company desires to appoint the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing so to act in connection with the issuance, transfer, exchange, replacement and exercise of the Class B Warrant Certificates (as defined herein) and other matters as provided herein; NOW THEREFORE, in consideration of the foregoing and for the purpose of defining the terms and conditions of the Class B Warrants and the respective rights and obligations thereunder of the Company and the holders from time to time of the Class B Warrants, the Company and the Warrant Agent hereby agree as follows: 1. DEFINITIONS As used in this Warrant Agreement, the following terms have the respective meanings set forth below: "Additional Shares of Common Stock" means all shares of Common Stock issued by the Company after the Closing Date, other than shares of Class B Warrant Stock. "Appraised Value" means, in respect of the Common Stock on any date herein specified, the fair saleable value of one share of Common Stock as of the last day of the most recent fiscal month ended at least 15 days prior to such specified date, based on (i) the equity value of the Company, as determined by an investment banking firm selected in accordance with the terms of Section 13, divided by (ii) the number of Fully Diluted Outstanding shares of Common Stock. "Business Day" means any day that is not a Saturday or Sunday or a day on which banks are required or permitted to be closed in the State of New York. "Class A Warrant" means each of the Company's warrants issued pursuant to that certain Warrant Agreement dated as of even date herewith, each of which evidences the right to purchase one share of Common Stock, subject to adjustment as set forth in such Warrant Agreement, and all warrants issued upon transfer, division or combination of, or in substitution for, any thereof. "Class B Warrant" means each of the Company's warrants issued pursuant to this Warrant Agreement, each of which evidences the right to purchase one share of Common Stock, subject to adjustment as set forth in this Warrant Agreement, and all warrants issued upon transfer, division or combination of, or in substitution for, any thereof. "Class B Warrant Certificate" means a certificate, substantially in the form of Exhibit A hereto, representing one or more Class B Warrants held by a Holder. All Class B Warrant Certificates shall be identical as to terms and conditions, except as to the number of Class B Warrants represented thereby. "Class B Warrant Price" means an amount equal to (i) the number of shares of Common Stock being purchased upon exercise of Class B Warrants pursuant to Section 3.1, multiplied by (ii) the Current Class B Warrant Price as of the date of such exercise. "Class B Warrant Stock" means the shares of Common Stock purchased by the Holders of the Class B 1 Warrants upon the exercise thereof. "Closing Date" means November 25, 2002. "Commission" means the Securities and Exchange Commission or any other federal agency then administering the Securities Act and other federal securities laws. "Common Stock" means the Common Stock, $0.01 par value, of the Company, and any capital stock into which such Common Stock may hereafter be changed, whether as a result of any change in the capital structure of the Company or otherwise, and shall also include (i) capital stock of the Company of any other class (regardless of how denominated) issued to the holders of shares of Common Stock upon any reclassification thereof which is not preferred as to dividends or assets over any other class of stock of the Company and which is not subject to redemption and (ii) shares of common stock of any successor or acquiring corporation (as defined in Section 5.7) received by or distributed to the holders of Common Stock of the Company in the circumstances contemplated by Section 5.7. "Convertible Securities" means evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for Additional Shares of Common Stock, either immediately or upon the occurrence of a specified date or a specified event. "Current Class B Warrant Price" means, at any date herein specified, the price at which one share of Common Stock may be purchased pursuant to this Warrant Agreement on such date. The Current Class B Warrant Price as of the date of this Warrant Agreement is $25.44, subject to adjustment in accordance with the terms hereof. "Current Market Price" means, in respect of any share of Common Stock on any date herein specified, (a) for so long as there shall then be a public market for the Common Stock, the average of the Daily Market Prices for the 20 consecutive Business Days immediately prior to such specified date, and (b) if there is then no public market for the Common Stock, the Appraised Value per share of Common Stock as at such specified date. "Daily Market Price" means, for each Business Day (i) if the Common Stock is then listed or admitted to trading on any stock exchange, the last sale price per share of Common Stock on such day on the principal stock exchange on which the Common Stock is then listed or admitted to trading, (ii) if the Common Stock is then listed or admitted to trading on any stock exchange but no sale takes place on such day on such exchange, the average of the last reported closing bid and asked prices per share of Common Stock on such day as officially quoted on such exchange, (iii) if the Common Stock is not then listed or admitted to trading on any stock exchange, the closing sale price per share of Common Stock on such day in the over-the-counter market, as furnished by the Nasdaq Stock Market or the National Quotation Bureau, Inc., provided, that if no sale takes place on such day in the over-the-counter market, the average closing bid and asked price per share of Common Stock on such day as furnished by the Nasdaq Stock Market or the National Quotation Bureau, Inc., (iv) if neither such corporation at the time is engaged in the business of reporting such prices, the closing sale price per share of Common Stock on such day in the over-the-counter market as furnished by any similar firm then engaged in such business, (v) if there is no such firm, the closing sale price per share of Common Stock on such day in the over-the-counter market as furnished by any member of the NASD selected by the Company or (vi) if there is then no public market for the Common Stock, the Appraised Value per share of Common Stock as at such specified date. "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, as the same shall be in effect from time to time. "Exercise Period" means the period during which the Class B Warrants are exercisable pursuant to Section 3.1. "Expiration Date" means the 7th anniversary of the Closing Date. "Fully Diluted Outstanding" means, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all shares of Common Stock Outstanding at such date and all shares of Common Stock issuable in respect of the Class B Warrants outstanding on such date, and other options or 2 warrants to purchase, or securities convertible into, shares of Common Stock outstanding on such date which would be deemed outstanding in accordance with GAAP for purposes of determining book value or net income per share. "GAAP" means generally accepted accounting principles in the United States of America as in effect on the applicable date of determination. "Holder" means, at any time, a Person in whose name a Class B Warrant or Class B Warrants is then registered on the books of the Company maintained by the Warrant Agent for such purpose. "NASD" means the National Association of Securities Dealers, Inc., or any successor corporation thereto. "Other Property" shall have the meaning set forth in Section 5.7. "Outstanding" means, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all issued shares of Common Stock, except shares then owned or held by or for the account of the Company or any subsidiary thereof, and shall include all shares issuable in respect of outstanding scrip or any certificates representing fractional interests in shares of Common Stock. "Permitted Issuances" means (i) the issuance of the Class B Warrants and Class A Warrants, (ii) the issuance of shares of Common Stock upon the exercise of the Class B Warrants and the Class A Warrants, (iii) the issuance of (x) shares of Common Stock and (y) warrants, options or other rights to acquire shares of Common Stock to the Company's management and other eligible participants under the Company's 2002 Stock Incentive Plan, in accordance with its terms as in effect on the effective date of the Plan, (iv) the issuance of shares of Common Stock upon exercise of the warrants, options and other rights referred to in clause (iii)(y), and (v) all other issuances of Common Stock and warrants by the Company expressly authorized by the Plan. "Person" means any individual, corporation, partnership, trust, or other entity of any nature whatsoever. "Plan" has the meaning assigned to such term in the recitals in this Warrant Agreement. "Securities Act" means the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. 2. EXECUTION AND DELIVERY OF WARRANT CERTIFICATES Class B Warrant Certificates evidencing 1,029,366 Class B Warrants, each Class B Warrant to purchase initially one share of Common Stock, may be executed, on or after the date of this Warrant Agreement, by the Company and delivered to the Warrant Agent for countersignature, and the Warrant Agent shall thereupon countersign and deliver such Class B Warrant Certificates upon the order and at the written direction of the Company signed by its Chief Executive Officer or other duly authorized executive officer. The Warrant Agent is hereby authorized to countersign and deliver Class B Warrant Certificates as required by this Section 2 or by Section 3.2, 4 or 11 hereof. The Class B Warrant Certificates shall be executed on behalf of the Company by its Chairman of the Board, Chief Executive Officer, President, any Vice President or other duly authorized executive officer of the Company either manually or by facsimile signature printed thereon. The Class B Warrant Certificates shall be countersigned by manual signature of the Warrant Agent and shall not be valid for any purpose unless so countersigned. In case any officer or director of the Company whose signature shall have been placed upon any Class B Warrant Certificate shall cease to be such officer or director of the Company before countersignature by the Warrant Agent and the issuance and delivery thereof, such Class B Warrant Certificate may nevertheless be countersigned by the Warrant Agent and issued and delivered with the same force and effect as though such person had not ceased to be such officer or director of the Company. 3 3. EXERCISE OF WARRANT 3.1. Manner of Exercise. From and after the date hereof and until 5:00 P.M., New York time, on the Expiration Date, a Holder may exercise Class B Warrants, at any time and from time to time, on any Business Day, for all or any part of the number of shares of Class B Warrant Stock purchasable hereunder. 3.2. Procedure. (a) In order to exercise Class B Warrants, a Holder shall deliver to the Company at its principal office located at 3445 Peachtree Road - Suite 700, Atlanta, Georgia 30326, Attn: General Counsel, or, if so requested in writing by the Company, to the Warrant Agent, at the office or agency designated by the Company pursuant to Section 12, (i) a written notice of such Holder's election to exercise such Class B Warrants substantially in the form attached hereto as Exhibit B (the "Subscription Form"), duly executed by such Holder or its designated agent or attorney, which notice shall specify the number of shares of Common Stock to be purchased by such Holder, (ii) payment of the Class B Warrant Price made against delivery of the shares, at the option of such Holder, by certified or official bank check or wire transfer or, at the option of the Holder, as provided in subsection (b), and (iii) the Class B Warrant Certificate in respect of the Class B Warrants being exercised. (b) In lieu of payment of the Class B Warrant Price by certified or official bank check or wire transfer, as provided for in subsection (a)(ii), a Holder may elect to pay all or any portion of the Class B Warrant Price, as indicated by such Holder on the Subscription Form, (i) by agreeing to accept a reduction in the number of shares of Class B Warrant Stock that would have otherwise been issued to such Holder upon exercise of such Class B Warrants, which would result in the Holder receiving from the Company, pursuant to such exercise, a number of shares of Class B Warrant Stock computed using the following formula: X = Y (A-B) ------- A Where: X = the number of shares of Class B Warrant Stock to be issued to the Holder. Y = the number of shares of Class B Warrant Stock purchasable under the Class B Warrants being exercised by such Holder. A = the Daily Market Price of one share of the Common Stock on the trading day preceding such exercise date. B = the Current Class B Warrant Price (as adjusted to the date of such calculation). or (ii) by surrender to the Company of debt securities of the Company having a value equal to the Class B Warrant Price of the Class B Warrant Stock being purchased upon such exercise, which value shall be the principal amount thereof, plus accrued interest and premium (if any) or less any unamortized discount thereon, as reasonably determined by the Company. (c) Upon receipt thereof, the Company shall, as promptly as practicable, and in any event within ten (10) Business Days thereafter, (i) have executed by a duly authorized executive officer of the Company, either manually or by facsimile signature printed thereon, and (ii) cause the Warrant Agent to execute and deliver or cause to be delivered to such Holder a certificate or certificates representing the aggregate number of full shares of Class B Warrant Stock issuable upon such exercise, together with cash in lieu of any fraction of a share, as hereinafter provided. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall request in the notice and shall be registered in the name of such Holder or, such other name as shall be designated in the notice delivered to the Company by such Holder. Class B Warrants shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the exercising Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the notice, together with payment therefor (in whatever form, as provided in this Warrant Agreement) and the Class B Warrant Certificate, is received by the Company as described above and all taxes required to be paid by such Holder, if any, pursuant to Section 3.3 prior to the issuance of such shares, have been paid. If the Class B Warrants represented by a Class B Warrant Certificate 4 shall have been exercised in part, the Warrant Agent shall, at the time of delivery of the certificate or certificates representing Class B Warrant Stock, deliver to the exercising Holder a new Class B Warrant Certificate representing Class B Warrants to purchase a number of shares of Common Stock equal to the unpurchased balance of the shares of Common Stock issuable upon exercise of the Class B Warrants represented by the Class B Warrant Certificate surrendered, which new Class B Warrant Certificate shall in all other respects be identical to the Class B Warrant Certificate so surrendered, or, at the request of the exercising Holder, appropriate notation may be made on the Class B Warrant Certificate so surrendered and the same returned to such Holder. Until a Holder has complied with Section 3.3 with respect to the payment of certain taxes and charges specified in such section, the Company shall not be required to issue or deliver shares in the name of any Person who acquired Class B Warrants or any Class B Warrant Stock. 3.3. Payment of Taxes. All shares of Common Stock issuable upon the exercise of Class B Warrants pursuant to the terms hereof shall be validly issued, fully paid and nonassessable and without any preemptive rights. The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issuance or delivery thereof, unless such tax or charge is imposed by law upon a Holder, in which case such taxes or charges shall be paid by such Holder. The Company shall not be required, however, to pay any tax or other charge imposed in connection with any transfer involved in the issuance of any certificate for shares of Common Stock issuable upon exercise of Class B Warrants in any name other than that of a Holder, and in such case the Company shall not be required to issue or deliver any stock certificate until such tax or other charge has been paid or it has been established to the satisfaction of the Company that no such tax or other charge is due. If such tax or other charge is due, the Warrant Agent shall have no duty or obligation under this Section 3.3 or any other similar provision of this Warrant Agreement unless and until it is satisfied that all such taxes and/or governmental charges have been paid in full. 3.4. Fractional Shares. The Company shall not be required to issue a fractional share of Common Stock upon exercise of any Class B Warrants. As to any fraction of a share which a Holder of one or more Class B Warrants, the rights under which are exercised in the same transaction, would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such fraction in an amount equal to the same fraction of the Current Market Price per share of Common Stock on the date of exercise. 4. TRANSFER, DIVISION AND COMBINATION 4.1. Division and Combination. A Class B Warrant Certificate may be exchanged for a new Class B Warrant Certificate and Class B Warrants may be divided or combined with other Class B Warrants upon presentation of the Class B Warrant Certificate(s) therefor at the aforesaid office or agency of the Warrant Agent, together with a written notice specifying the names and denominations in which new Class B Warrant Certificates are to be issued, signed by the Holder of such Class B Warrant Certificate or Certificates or its agent or attorney. Subject to compliance with this Section 4.1, as to any transfer which may be involved in such division or combination, the Warrant Agent shall execute and deliver a new Class B Warrant Certificate(s) in exchange for the Class B Warrant Certificate(s) representing the Class B Warrants to be divided or combined in accordance with such notice. 4.2. Expenses. The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Class B Warrant Certificates under this Section 4. The Company shall not be required, however, to pay any tax or other charge imposed in connection with any transfer of any Class B Warrants, including, but not limited to, any transfer involved in the division or combination of any Class B Warrant Certificates under this Section 4, and in such case the Company shall not be required to issue or deliver any Class B Warrant Certificates until such tax or other charge has been paid or it has been established to the satisfaction of the Company that no such tax or other charge is due. If such tax or other charge is due, the Warrant Agent shall have no duty or obligation under this Section 4 or any other similar provision of this Warrant Agreement unless and until it is satisfied that all such taxes and/or governmental charges have been paid in full. 4.3. Maintenance of Books. The Company agrees to maintain, at its aforesaid office or agency, books for the registration and the registration of transfer of the Class B Warrants. 5 4.4. Transfer. Subject to Section 4.2, the Class B Warrants and all rights hereunder are transferable, in whole or in part, without charge to the Holder hereof upon surrender of the Class B Warrant Certificate with a form of assignment, substantially in the form attached hereto as Exhibit C, at the office or agency of the Warrant Agent as provided for in Section 12. Upon any partial transfer, the Warrant Agent shall promptly issue and deliver to the Holder hereof a new Class B Warrant Certificate of like tenor, in the name of the Holder hereof, which shall be exercisable for such number of shares of Class B Warrant Stock which were not so transferred. 5. ADJUSTMENTS The number of shares of Common Stock for which each Class B Warrant is exercisable, and the price at which such shares may be purchased upon exercise of Class B Warrants, shall be subject to adjustment from time to time as set forth in this Section 5. The Company shall give each Holder notice of any event described below which requires an adjustment pursuant to this Section 5 at the time of such event. 5.1. Stock Dividends, Subdivisions and Combinations. If at any time after the Closing Date the Company shall: (a) pay a dividend, or make any other distribution of, Additional Shares of Common Stock to all holders of its Common Stock, (b) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, or (c) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, then (i) the number of shares of Common Stock for which each Class B Warrant is exercisable immediately after the occurrence of any such event shall be adjusted to equal the number of shares of Common Stock which a record holder of the same number of shares of Common Stock for which one Class B Warrant is exercisable immediately prior to the occurrence of such event would own or be entitled to receive after the happening of such event, and (ii) the Current Class B Warrant Price shall be adjusted to equal (A) the Current Class B Warrant Price multiplied by the number of shares of Common Stock for which one Class B Warrant is exercisable immediately prior to such adjustment divided by (B) the number of shares for which one Class B Warrant is exercisable immediately after such adjustment. 5.2. Certain Other Distributions. If at any time after the Closing Date the Company shall make: (a) any distribution of evidences of its indebtedness or any other assets of any nature whatsoever (other than cash or Convertible Securities covered by Section 5.4) to all holders of its Common Stock, or (b) any distribution of warrants or other rights to subscribe for or purchase any evidences of its indebtedness (other than warrants or rights covered by Section 5.3 hereof) to all holders of its Common Stock, then (i) the number of shares of Common Stock for which each Class B Warrant is exercisable shall be adjusted to equal the product obtained by multiplying the number of shares of Common Stock for which one Class B Warrant is exercisable immediately prior to such distribution by a fraction (A) the numerator of which shall be the Current Market Price per share of Common Stock at the time of such distribution and (B) the denominator of which shall be the Current Market Price per share of Common Stock minus the amount allocable to one share of Common Stock of the fair value (as determined in good faith by the Board of Directors of the Company) of any and all such evidences of indebtedness, shares of stock, other securities or property or warrants or other subscription or purchase rights so distributed, and (ii) the Current Class B Warrant Price shall be reduced to equal (A) the Current Class B Warrant Price immediately prior to such distribution multiplied by the number of shares of Common Stock for which one Class B Warrant is exercisable immediately prior to such distribution divided by (B) the number of shares for which one Class B Warrant is exercisable immediately after such distribution. A reclassification of the Common Stock (other than a change in par value, or from par value to no par value or from no par value to par value) into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by the Company to the holders of its Common Stock of such shares of such other class of stock within the meaning of this Section 5.2 and, if the outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock as a part of such reclassification, such change shall be deemed a subdivision or combination, as the case may be, of 6 the outstanding shares of Common Stock within the meaning of Section 5.1. 5.3. Below Market Issuances of Common Stock. If at any time after the Closing Date the Company shall (other than in a Permitted Issuance) issue Additional Shares of Common Stock (or options, warrants or other rights to subscribe for or purchase any Additional Shares of Common Stock or any Convertible Securities, whether or not the rights to exchange, subscribe or convert thereunder are immediately exercisable), at a price per share (or having an effective exercise, exchange or conversion price per share together with the purchase price thereof) of less than 90% of the Current Market Price in effect immediately prior to the time of such issue, then in each such case (i) the number of shares of Common Stock for which each Class B Warrant is exercisable shall be adjusted to equal the product obtained by multiplying the number of shares of Common Stock for which one Class B Warrant is exercisable immediately prior to such issuance by a fraction (A) the numerator of which shall be the number of shares of Common Stock Outstanding immediately prior to such issuance plus the total number of Additional Shares of Common Stock issued or offered for subscription or purchase, as the case may be, and (B) the denominator of which shall be the number of shares of Common Stock Outstanding immediately prior to such issuance plus the number of shares of Common Stock which the aggregate purchase, subscription and/or exercise price to be paid for all Additional Shares of Common Stock would purchase at the then Current Market Price; and (ii) the Current Class B Warrant Price in effect immediately prior to such issuance shall be reduced by multiplying such Current Class B Warrant Price by a fraction (X) the numerator of which shall be the number of shares for which one Class B Warrant is exercisable immediately prior to such issuance; and (Y) the denominator of which shall be the number of shares of Common Stock for which one Class B Warrant is exercisable immediately after such issuance. No further adjustments of the number of shares for which Class B Warrants are exercisable or of the Current Class B Warrant Price shall be made upon the actual issue of such Common Stock or such Convertible Securities upon exercise of any such options, warrants or other rights or upon the actual issuance of such Common Stock upon such conversion or exchange of such Convertible Securities. No adjustment of the number of shares of Common Stock for which Class B Warrants are exercisable or of the Current Class B Warrant Price shall be made under this Section 5.3 for the issuance of any shares of Common Stock upon the conversion or exchange of any Convertible Securities, the issuance of which Convertible Shares is covered by Section 5.4 or is expressly exempt from Section 5.4 by reason of the price per share (or effective price per share) for which Common Stock is issuable upon exchange or conversion thereof. No adjustment of the number of shares of Common Stock for which Class B Warrants are exercisable or of the Current Class B Warrant Price shall be made under this Section 5.3 for any issuance of shares of Common Stock covered by Section 5.1. 5.4. Below Market Issuances of Convertible Securities. If at any time after the Closing Date the Company shall (other than in a Permitted Issuance) make a distribution to all holders of its Common Stock of, or otherwise issue, any Convertible Securities (whether or not the rights to exchange or convert thereunder are immediately exercisable), for which Common Stock is issuable upon such exchange or conversion at a price per share (or effective price per share together with the purchase price thereof) of less than 90% of the Current Market Price in effect immediately prior to the time of such issuance, then (i) the number of shares of Common Stock for which each Class B Warrant is exercisable shall be adjusted to equal the product obtained by multiplying the number of shares of Common Stock for which one Class B Warrant is exercisable immediately prior to such issuance by a fraction (A) the numerator of which shall be the number of shares of Common Stock Outstanding immediately prior to such issuance plus the total number of Additional Shares of Common Stock into which such Convertible Securities would be convertible and (B) the denominator of which shall be the number of shares of Common Stock Outstanding immediately prior to such issuance plus the number of shares of Common Stock which the aggregate consideration to be paid upon the exchange or conversion thereof would purchase at the then Current Market Price, and (ii) the Current Class B Warrant Price in effect immediately prior to such issuance shall be reduced by multiplying such Current Class B Warrant Price by a fraction (X) the numerator of which shall be the number of shares for which one Class B Warrant is exercisable immediately prior to such issuance and (Y) the denominator of which shall be the number of shares of Common Stock for which one Class B Warrant is exercisable immediately after such issuance. No further adjustments of the number of shares of Common Stock for which Class B Warrants are exercisable or of the Current Class B Warrant Price shall be made upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities. No adjustment of the number of shares of Common Stock for which Class B Warrants are exercisable or of the Current Class B Warrant Price shall be made under this Section 5.4 upon the issuance of any Convertible Securities which are issued pursuant to the exercise of any warrants or other subscription or purchase rights therefor, the issuance of which warrants or other subscription or purchase rights is covered by Section 5.3 or is expressly exempt from Section 5.3 by reason of the price per share (or 7 effective price per share) for which Common Stock is issuable upon exchange or conversion of the Convertible Securities covered thereby. 5.5. Superseding Adjustment. If, at any time after any adjustment of the number of shares of Common Stock for which Class B Warrants are exercisable and the Current Class B Warrant Price shall have been made pursuant to Section 5.3 or Section 5.4 as the result of any issuance of warrants, rights or Convertible Securities, (a) such warrants or rights, or the right of conversion or exchange in such other Convertible Securities, shall expire, and all or a portion of such warrants or rights, or the right of conversion or exchange with respect to all or a portion of such other Convertible Securities, as the case may be, shall not have been exercised, or (b) the consideration per share for which shares of Common Stock are issuable pursuant to such warrants or rights, or the terms of such other Convertible Securities, shall be increased solely by virtue of provisions therein contained for an automatic increase in such consideration per share upon the occurrence of a specified date or event, then for each outstanding Class B Warrant such previous adjustment shall be rescinded and annulled and the Additional Shares of Common Stock which were deemed to have been issued by virtue of the computation made in connection with the adjustment so rescinded and annulled shall no longer be deemed to have been issued by virtue of such computation. Thereupon, a recomputation shall be made of the effect of such rights or options or other Convertible Securities on the basis of (i) treating the number of Additional Shares of Common Stock or other property, if any, theretofore actually issued or issuable pursuant to the previous exercise of any such warrants or rights or any such right of conversion or exchange, as having been issued on the date or dates of any such exercise and for the consideration actually received and receivable therefor, and (ii) treating any such warrants or rights or any such other Convertible Securities which then remain outstanding as having been granted or issued immediately after the time of such increase of the consideration per share for which shares of Common Stock or other property are issuable under such warrants or rights or other Convertible Securities; whereupon a new adjustment of the number of shares of Common Stock for which Class B Warrants are exercisable and the Current Class B Warrant Price shall be made, which new adjustment shall supersede the previous adjustment so rescinded and annulled. 5.6. Other Provisions Applicable to Adjustments under this Section. The following provisions shall be applicable to the making of adjustments of the number of shares of Common Stock for which Class B Warrants are exercisable and the Current Class B Warrant Price provided for in this Section 5: (a) Computation of Consideration. To the extent that any Additional Shares of Common Stock or any Convertible Securities or any warrants or other rights to subscribe for or purchase any Additional Shares of Common Stock or any Convertible Securities shall be issued for cash consideration, the consideration received by the Company therefor shall be the amount of the cash received by the Company therefor, or, if such Additional Shares of Common Stock or Convertible Securities are offered by the Company for subscription, the subscription price. To the extent that such issuance shall be for a consideration other than cash, then, except as herein otherwise expressly provided, the amount of such consideration shall be deemed to be the fair value of such consideration at the time of such issuance as determined in good faith by the Board of Directors of the Company. In case any Additional Shares of Common Stock or any Convertible Securities or any warrants or other rights to subscribe for or purchase such Additional Shares of Common Stock or Convertible Securities shall be issued in connection with any merger in which the Company issues any securities, the amount of consideration therefor shall be deemed to be the fair value, as determined in good faith by the Board of Directors of the Company, of such portion of the assets and business of the nonsurviving corporation as such Board in good faith shall determine to be attributable to such Additional Shares of Common Stock, Convertible Securities, warrants or other rights, as the case may be. The consideration for any Additional Shares of Common Stock issuable pursuant to any warrants or other rights to subscribe for or purchase the same shall be the consideration received by the Company for issuing such warrants or other rights plus the additional consideration payable to the Company upon exercise of such warrants or other rights. The consideration for any Additional Shares of Common Stock issuable pursuant to the terms of any Convertible Securities shall be the consideration received by the Company for issuing warrants or other rights to subscribe for or 8 purchase such Convertible Securities, plus the consideration paid or payable to the Company in respect of the subscription for or purchase of such Convertible Securities, plus the additional consideration, if any, payable to the Company upon the exercise of the right of conversion or exchange in such Convertible Securities. In case of the issuance at any time of any Additional Shares of Common Stock or Convertible Securities in payment or satisfaction of any dividends upon any class of stock other than Common Stock, the Company shall be deemed to have received for such Additional Shares of Common Stock or Convertible Securities a consideration equal to the amount of such dividend so paid or satisfied. (b) When Adjustments to Be Made. The adjustments required by this Section 5 shall be made whenever and as often as any specified event requiring an adjustment shall occur, except that any adjustment of the number of shares of Common Stock for which Class B Warrants are exercisable that would otherwise be required may be postponed (except in the case of a subdivision or combination of shares of the Common Stock, as provided in Section 5.1) up to, but not beyond the date of exercise if such adjustment either by itself or with other adjustments not previously made adds or subtracts less than 1% of the shares of Common Stock for which Class B Warrants are exercisable immediately prior to the making of such adjustment. Any adjustment representing a change of less than such minimum amount (except as aforesaid) which is postponed shall be carried forward and made as soon as such adjustment, together with other adjustments required by this Section 5 and not previously made, would result in a minimum adjustment or on the date of exercise. For the purpose of any adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence. (c) Fractional Interests. In computing adjustments under this Section 5, fractional interests in Common Stock shall be taken into account to the nearest 1/100th of a share. 5.7. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In case the Company shall, after the Closing Date, reorganize its capital or reclassify its capital stock (other than in a capital reorganization or reclassification resulting solely in the issuance of Additional Shares of Common Stock or Convertible Securities or options, warrants or other rights to subscribe for or purchase Additional Shares of Common Stock or Convertible Securities, the issuance of which is covered by Section 5.1, 5.3 or 5.4 or is expressly exempt from Section 5.3 or 5.4 by reason of the price per share (or effective price per share) for which Common Stock is issuable upon exercise, exchange or conversion thereof), consolidate or merge with or into another Person (where the Company is not the surviving corporation or where as a result of such consolidation or merger there is a change in or distribution with respect to the Common Stock of the Company), or sell, transfer or otherwise dispose of all or substantially all its property, assets or business to another Person and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor, acquiring Person or surviving corporation (or of the Company if the Company is the surviving corporation), or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor, acquiring Person or surviving corporation ("Other Property"), are to be received by or distributed to the holders of Common Stock of the Company, then, subject to the terms and conditions of this Warrant Agreement, each Class B Warrant shall thereafter entitle the Holder thereof to receive, upon exercise thereof, the number of shares of common stock of the successor, acquiring Person or surviving corporation (or of the Company, if the Company is the surviving corporation), and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which one Class B Warrant is exercisable immediately prior to such event. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant Agreement to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined by resolution of the Board of Directors of the Company) in order to provide for adjustments of shares of the Common Stock for which Class B Warrants are exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 5. For purposes of this Section 5.7, "common stock of the successor, acquiring Person or surviving corporation" shall include stock of such Person of any class which is not preferred as to dividends or assets over any other class of stock of such Person and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 5.7 shall similarly 9 apply to any successive reorganizations, reclassifications, mergers, consolidations or disposition of assets. 5.8. Other Action Affecting Common Stock. In case at any time or from time to time the Company shall take any action in respect of its Common Stock, other than any action described in this Section 5, then the number of shares of Common Stock or other stock for which Class B Warrants are exercisable and/or the Class B Warrant Price thereof shall be adjusted in such manner as may be equitable in the circumstances consistent with the fundamental intent of such provisions making an appropriate adjustment in the Current Class B Warrant Price and the number of Class B Warrant Stock obtainable upon exercise of the Class B Warrants so as to protect the rights of the Holder of the Class B Warrants. 5.9. Certain Limitations. Notwithstanding anything herein to the contrary, the Company agrees not to enter into any transaction which, by reason of any adjustment hereunder, would cause the Current Class B Warrant Price to be less than the par value per share of Common Stock. 6. NOTICES OF ADJUSTMENT Whenever the number of shares of Common Stock for which Class B Warrants are exercisable, or whenever the Current Class B Warrant Price shall be adjusted pursuant to Section 5, the Company shall forthwith prepare a certificate to be executed by the chief financial officer of the Company setting forth, in reasonable detail, the event requiring the adjustment and the facts, computations, and method by which such adjustment was calculated (including a description of the basis on which the Board of Directors of the Company determined the fair value of any evidences of indebtedness, shares of stock, other securities or property or warrants or other subscription or purchase rights referred to in Section 5), specifying the number of shares of Common Stock for which Class B Warrants are exercisable and (if such adjustment was made pursuant to Section 5.7) describing the number and kind of any shares of other common stock or Other Property for which Class B Warrants are exercisable, and any change in the Current Class B Warrant Price (or, if such adjustment was made pursuant to Section 5.7, the purchase price or prices at which a share of such other common stock or Other Property may be purchased upon exercise of Class B Warrants), after giving effect to such adjustment. The Company shall promptly cause a signed copy of such certificate to be delivered to the Warrant Agent and to each Holder in accordance with Section 16.2. The Company shall keep at its office or agency designated pursuant to Section 12 copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by any Holder or any prospective purchaser of Class B Warrants designated by a Holder thereof. 7. NO IMPAIRMENT The Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant Agreement, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holders against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any shares of Common Stock receivable upon the exercise of a Class B Warrant above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of a Class B Warrant, and (c) use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant Agreement. 8. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY From and after the Closing Date, the Company shall at all times reserve and keep available for issue upon the exercise of Class B Warrants such number of authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of all outstanding Class B Warrants. All shares of Common Stock which shall be so issuable, when issued upon exercise of any Class B Warrant and payment therefor in accordance with the terms of this Warrant Agreement, shall be duly and validly issued and fully paid and nonassessable, not subject to 10 preemptive rights, and free from all taxes, liens, charges, security interests, encumbrances and other restrictions created by or through the Company. Before taking any action which would cause an adjustment reducing the Current Class B Warrant Price below the then par value, if any, of the shares of Common Stock issuable upon exercise of the Class B Warrants, the Company shall take any corporate action which may be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of such Common Stock at such adjusted Current Class B Warrant Price. Before taking any action which would result in an adjustment in the number of shares of Common Stock for which Class B Warrants are exercisable or in the Current Class B Warrant Price, the Company shall use its best efforts to obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof. If any shares of Common Stock required to be reserved for issuance upon exercise of Class B Warrants require registration or qualification with any governmental authority or other governmental approval or filing under any federal or state law before such shares may be so issued, the Company will in good faith (subject to all applicable laws including, without limitation, those rules and regulations promulgated under the Securities Act) and as expeditiously as possible and at its expense endeavor to cause such shares to be duly registered. 9. STOCK AND WARRANT TRANSFER BOOKS The Company will not at any time, except upon dissolution, liquidation or winding up of the Company, close its stock transfer books or Class B Warrant transfer books so as to result in preventing or delaying the exercise or transfer of any Class B Warrant. 10. SUPPLYING INFORMATION The Company shall cooperate with each Holder of a Class B Warrant and each holder of Class B Warrant Stock in supplying such information as may be reasonably necessary for such holder to complete and file any information reporting forms presently or hereafter required by the Commission as a condition to the availability of an exemption from the Securities Act for the sale of any Class B Warrant or Class B Warrant Stock. 11. LOSS OR MUTILATION Upon receipt by the Company from any Holder of evidence satisfactory to the Company of the ownership of and the loss, theft, destruction or mutilation of a Class B Warrant Certificate and indemnity satisfactory to the Company, and in case of mutilation upon surrender and cancellation thereof, the Company will execute and deliver to such Holder in exchange for or in lieu thereof a new Class B Warrant Certificate of like tenor and for the same aggregate number of Class B Warrants. 12. OFFICE OF COMPANY As long as any of the Class B Warrants remain outstanding, the Warrant Agent, on behalf of the Company, shall maintain an office or agency (which shall be the principal executive offices of the Warrant Agent) where the Class B Warrants may be presented for exercise, registration of transfer, division or combination as provided in this Warrant Agreement. 13. APPRAISAL The determination of the Appraised Value per share of Common Stock shall be made by an investment banking firm of nationally recognized standing selected by the Company. The Company shall retain, at its sole cost, such investment banking firm as may be necessary for the determination of Appraised Value required by the terms of this Warrant Agreement. 11 14. LIMITATION OF LIABILITY No provision hereof, in the absence of affirmative action by a Holder to purchase shares of Common Stock, and no enumeration herein of the rights or privileges of a Holder hereof, shall give rise to any liability of such Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 15. CONCERNING THE WARRANT AGENT The Warrant Agent undertakes the duties and obligations imposed by this Warrant Agreement upon the following terms and conditions, by all of which the Company and the Holders, by their acceptance of the Class B Warrants, shall be bound: 15.1. Correctness of Statement. The statements contained herein and in the Class B Warrant Certificates shall be taken as statements of the Company, and the Warrant Agent assumes no responsibility for the correctness of any of the same except such as describe the Warrant Agent or action to be taken by it. The Warrant Agent assumes no responsibility with respect to the distribution of the Class B Warrant Certificates except as herein otherwise provided. 15.2. Breach of Covenants. The Warrant Agent shall not be responsible for any failure of the Company to comply with any of the covenants contained in this Warrant Agreement or in the Class B Warrant Certificates to be complied with by the Company. 15.3. Reliance on Counsel. The Warrant Agent may consult at any time with counsel satisfactory to it (who may be counsel for the Company) and the Warrant Agent shall incur no liability or responsibility to the Company or to any Holder in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the opinion or the advice of such counsel. 15.4. Reliance on Documents. The Warrant Agent shall incur no liability or responsibility to the Company or to any Holder for any action taken, suffered or omitted in reliance on any Class B Warrant Certificate, certificate of shares, notice, resolution, waiver, consent, order certificate, or other paper, document or instrument believed by it to be genuine and to have signed, sent or presented by the proper party or parties. 15.5. Compensation and Indemnification. The Company agrees to pay to the Warrant Agent reasonable compensation for all services rendered by the Warrant Agent in the execution of this Warrant Agreement, to reimburse the Warrant Agent for all expenses, taxes and governmental charges and other charges of any kind and nature incurred by the Warrant Agent in the execution of this Warrant Agreement to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments, costs and counsel fees, for anything done or omitted by the Warrant Agent in the execution of its duties and powers under this Warrant Agreement, except for such liabilities that arise as a result of the Warrant Agent's negligence, willful misconduct or bad faith. 15.6. Legal Proceedings. The Warrant Agent shall be under no obligation to institute any action, suit or legal proceeding or to take any other action likely to involve expense unless the Company or one or more Holders shall furnish the Warrant Agent with reasonable security and indemnity for any costs and expenses which may be incurred, but this provision shall not affect the power of the Warrant Agent to take such action as it may consider proper, whether with or without any such security indemnity. All rights of action under this Warrant Agreement or under any of the Class B Warrant Certificates may be enforced by the Warrant Agent without possession of any of the Class B Warrant Certificates or the production thereof at any trial or other proceeding relative thereto, and any such action, suit or proceeding instituted by the Warrant Agent shall be brought in its name as Warrant Agent, and any recovery of judgment shall be for the ratable benefit of the Holders, as their respective rights or interests may appear. 15.7. Other Transactions in Securities of the Company. Except as prohibited by law, the Warrant Agent, and any stockholder, director, officer or employee of it, may buy, sell or deal in any of the Class B Warrants or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Warrant Agent under this Warrant Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity. 12 15.8. Liability of Warrant Agent. The Warrant Agent shall act hereunder solely as agent for the Company, and its duties shall be determined solely by the provisions hereof. The Warrant Agent shall not be liable for anything which it may do or refrain from doing in connection with this Warrant Agreement except for its own negligence, willful misconduct or bad faith. 15.9. Adjustments. The Warrant Agent shall not at any time be under any duty or responsibility to any Holder to make or cause to be made any adjustment of the Current Class B Warrant Price or number of shares of Class B Warrant Stock deliverable as provided in this Warrant Agreement, or to determine whether any facts exist which may require any of such adjustments, or with respect to the nature or extent of any such adjustments, when made, or with respect to the method employed in making the same. The Warrant Agent shall not be accountable with respect to the validity or value or the kind or amount of any shares of Class B Warrant Stock or of any securities or property which may at any time be issued or delivered upon the exercise of any Class B Warrant or with respect to whether any such shares of Class B Warrant Stock or other securities will be, when issued, validly issued, fully paid and nonassessable, and makes no representation with respect thereto. 16. MISCELLANEOUS 16.1. Nonwaiver. No course of dealing or any delay or failure to exercise any right hereunder on the part of any Holder shall operate as a waiver of such right or otherwise prejudice Holder's rights, powers or remedies. 16.2. Notice Generally. Any notice, demand, request, consent, approval, declaration, delivery or other communication hereunder to be made pursuant to the provisions of this Warrant Agreement shall be sufficiently given or made if in writing and either (i) delivered in person with receipt acknowledged, (ii) sent by registered or certified mail, return receipt requested, postage prepaid, or (iii) by telecopy and confirmed by telecopy answer back, addressed as follows: (a) If to any Holder or holder of Class B Warrant Stock, at its last known address appearing on the books of the Company maintained by the Warrant Agent for such purpose; (b) If to the Warrant Agent, to Wachovia Bank, N.A., as Warrant Agent, Corporate Trust Group, Corporate Actions Department, 1525 West W.T. Harris Blvd., Bldg. 3C3, Charlotte, NC 28262-1153 (overnight courier) 28288-1153 (first class mail); or (c) If to the Company, at 3445 Peachtree Road, N.E. - Suite 700, Atlanta, Georgia 30326, Attn: General Counsel; or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration, delivery or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged, telecopied and confirmed by telecopy answerback, or three (3) Business Days after the same shall have been deposited in the United States mail. Failure or delay in delivering copies of any notice, demand, request, approval, declaration, delivery or other communication to the person designated above to receive a copy shall in no way adversely affect the effectiveness of such notice, demand, request, approval, declaration, delivery or other communication. 16.3. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company in accordance with the instructions set forth herein, and the Warrant Agent hereby accepts such appointment. 16.4. Successors and Assigns. This Warrant Agreement and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company, the Warrant Agent and the successors and assigns of each Holder. The provisions of this Warrant Agreement are intended to be for the benefit of all Holders from time to time of a Class B Warrant or Class B Warrants and holders of Class B Warrant Stock, and shall be enforceable by any such Holder or holder of Class B Warrant Stock. 13 16.5. Amendment. The Company and the Warrant Agent may from time to time supplement or amend this Warrant Agreement without the approval of any Holders in order to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision herein, or to make any other provisions or change in regard to matters or questions arising hereunder which the Company and the Warrant Agent may deem necessary or desirable and which shall not adversely affect the interests of any Holder. 16.6. Severability. Wherever possible, each provision of this Warrant Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Warrant Agreement. 16.7. Headings. The headings used in this Warrant Agreement are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant Agreement. 16.8. Governing Law. This Warrant Agreement shall be governed by the laws of the State of Delaware, without regard to the provisions thereof relating to conflict of laws. 14 IN WITNESS WHEREOF, the Company and the Warrant Agent have caused this Warrant Agreement to be duly executed as of the date first written above. LODGIAN, INC. By: /s/ Daniel E. Ellis --------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary WACHOVIA BANK, N.A. By: /s/ Ted Wiener --------------------------------------- Name: Ted Wiener Title: Assistant Vice President 15 EXHIBIT A FORM OF CLASS B WARRANT CERTIFICATE CLASS B WARRANT LODGIAN, INC. No. [______] Class B Warrants Incorporated Under the Laws of the State of Delaware THIS CERTIFIES THAT, for value received, ______________________, the registered holder hereof or registered assigns (the "Holder"), is the owner of the number of Class B Warrants set forth above, each of which represents the right to purchase from LODGIAN, INC., a Delaware corporation (the "Company"), at any time commencing with the opening of business on November __, 2002, and until the close of business on November __, 2009 (the "Expiration Date"), at the purchase price of $25.44 (subject to adjustment as described below) (the "Current Class B Warrant Price"), one fully paid and nonassessable share of Common Stock, par value $0.01 per share (the "Common Stock"), of the Company. The number of shares of Common Stock purchasable upon exercise of each Class B Warrant and the Current Class B Warrant Price per whole share shall be subject to adjustment from time to time as set forth in the Warrant Agreement referred to below. The Class B Warrants represented hereby may be exercised in whole or in part by presentation of this Class B Warrant Certificate with the Subscription Form included herein duly executed, which signature shall, in certain circumstances (as indicated on the Subscription Form), be guaranteed by a bank or trust company having an office or correspondent in the United States or a broker or dealer which is a member of a registered securities exchange or the National Association of Securities Dealers, Inc., and simultaneous payment of the exercise price thereof (in the form indicated on the Subscription Form) to the Company at 3445 Peachtree Road - Suite 700, Atlanta, Georgia 30326, Attn: General Counsel, or as otherwise provided in the Warrant Agreement (defined below). The Class B Warrants represented hereby are of a duly authorized issue of Class B Warrants evidencing the right to purchase up to an aggregate of 1,029,366 shares of Common Stock and are issued under and in accordance with a Warrant Agreement (the "Warrant Agreement"), dated as of November __, 2002, between the Company and Wachovia Bank, N.A. (the "Warrant Agent") and are subject to the terms and provisions contained in the Warrant Agreement, to all of which the Holder of this Class B Warrant Certificate by acceptance hereof consents. A copy of the Warrant Agreement is available for inspection at the principal office of the Company. Upon any partial exercise of the Class B Warrants represented hereby, there shall be countersigned and issued to the Holder hereof a new Warrant Certificate in respect of the shares of Common Stock as to which the Class B Warrants represented hereby shall not have been exercised. The Class B Warrants represented hereby may be exchanged at the office of the Warrant Agent by surrender of this Class B Warrant Certificate properly endorsed either separately or in combination with one or more other Class B Warrant Certificates for one or more new Class B Warrant Certificates representing Class B Warrants entitling the Holder thereof to purchase the same aggregate number of shares of Common Stock as were purchased on exercise of the Class B Warrant or Class B Warrants exchanged. No fractional shares will be issued upon the exercise of these Class B Warrants. Subject to compliance with applicable securities laws, the Class B Warrants represented hereby are transferable at the office of the Warrant Agent, in the manner and subject to the limitations set forth in the Warrant Agreement. The Holder hereof may be treated by the Company, the Warrant Agent and all other persons dealing with this Warrant Certificate as the absolute owner hereof for any purpose and as the person entitled to exercise the rights represented hereby, or to the transfer hereof on the books of the Company, any notice to the contrary notwithstanding, and until such transfer on such books, the Company may treat the Holder hereof as the owner for all purposes. 16 The Class B Warrants represented hereby do not entitle any Holder hereof to any of the rights of a shareholder of the Company. The Class B Warrants represented hereby shall not be valid or obligatory for any purpose until this Warrant Certificate shall have been countersigned by the Warrant Agent. 17 Witness the facsimile seal of the Company and the facsimile signatures of its duly authorized officers. Dated: [_______________] Countersigned and Registered: WACHOVIA BANK, N.A. as Warrant Agent By: ------------------------------ Authorized Signature LODGIAN, INC. By: ----------------------------------- President or Vice President Attest: -------------------------------- Secretary or Assistant Secretary 18 EXHIBIT B SUBSCRIPTION FORM [To be executed only upon exercise of a Warrant or Warrants] The undersigned ___________ (the "Registered Holder") hereby irrevocably exercises the right to purchase _______ shares of Common Stock of LODGIAN, INC., an entity organized and existing under the laws of the State of Delaware (the "Company"), evidenced by the attached Warrant Certificate, and herewith makes payment of the exercise price against delivery of the shares with respect to such shares in full in the form of (check the appropriate box) (i) certified or official bank check or wire transfer in the amount of $________; (ii) by surrendering ______ shares of Class B Warrant Stock, which represent the amount of Class B Warrant Stock, as provided in the Warrant Agreement, to be cancelled in connection with such exercise; or (iii) by the surrender to the Company of the attached original debt securities of the Company in the principal amount (plus accrued interest and premium (if any) or less any unamortized discount thereon) of $______, all in accordance with the conditions and provisions of the Warrant Agreement, and requests that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable upon such exercise) be issued in the name of and delivered to [_____________] whose address is [______________________________] and, if such shares of Common Stock shall not include all of the shares of Common Stock issuable as provided in the Class B Warrant Certificate, that a new Class B Warrant Certificate of like tenor and date for the balance of the shares of Common Stock issuable thereunder be delivered to the undersigned. --------------------------------------- (Name of Registered Owner) --------------------------------------- (Signature of Registered Owner) --------------------------------------- (Street Address) - -------------------------------- --------------------------------------- (Signature Guarantee) (City)(State)(Zip Code) NOTICE: The signature on this subscription form must correspond with the name as written upon the face of the Class B Warrant Certificate in every particular, without alteration or enlargement or any change whatsoever. 19 Witness the facsimile seal of the Company and the facsimile signatures of its duly authorized officers. Dated: [_______________] Countersigned and Registered: WACHOVIA BANK, N.A. as Warrant Agent By: -------------------------------- Authorized Signature [Name] [Title] LODGIAN, INC. By: ------------------------------------ President and Chief Executive Office Attest: -------------------------------- Secretary 20 EXHIBIT C ASSIGNMENT FORM FOR VALUE RECEIVED the undersigned registered owner of the Class B Warrant(s) represented by Class B Warrant Certificate No. [_______] hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under the Warrant Agreement, with respect to the number of Class B Warrants set forth below: NAME AND ADDRESS OF ASSIGNEE NO. OF CLASS B WARRANTS and does hereby irrevocably constitute and appoint [_____________________] attorney-in-fact to register such transfer on the books of LODGIAN, INC. maintained for the purpose, with full power of substitution in the premises. Date: ------------------------ Print Name: ---------------------------- Signature: ----------------------------- Witness: ------------------------------- - -------------------------------- (Signature Guarantee) NOTICE: The signature on this subscription form must correspond with the name as written upon the face of the Warrant in every particular, without alteration or enlargement or any change whatsoever. 21 EX-10.11 34 g87458exv10w11.txt EX-10.11 REGISTRATION RIGHTS AGREEMENT EXHIBIT 10.11 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT, dated as of November 25, 2002 (this "Agreement"), by and among LODGIAN, INC., a Delaware corporation (the "Company"), and the other signatories hereto (the "Shareholders"). WHEREAS, pursuant to the First Amended Joint Plan of Reorganization (the "Plan") of the Company and certain of its subsidiaries, as confirmed by the United States Bankruptcy Court for the Southern District of New York on November 5, 2002, the Shareholders shall receive shares of the Company's Common Stock, par value $0.01 per share (the "Original Issue Common Stock"), shares of the Company's Series A Preferred Stock, par value $0.01 per share (the "Original Issue Preferred Stock"), Class A Warrants and/or Class B Warrants (the "Original Issue Warrants") in connection with the Plan. WHEREAS, in connection with the foregoing, the Company has agreed, subject to the terms, conditions and limitations set forth in this Agreement, to provide the Shareholders and their respective successors, assigns and transferees as permitted herein with certain registration rights in respect of the Original Issue Common Stock, the Original Issue Preferred Stock, the Original Issue Warrants and the Warrant Shares (as hereinafter defined). NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1. Definitions. Capitalized words and phrases used and not otherwise defined in this Agreement shall have the following meanings: Class A Warrants: means the Class A Warrants of the Company issued pursuant to the Plan, each of which is exercisable for one share of Common Stock and, in the case of a reclassification, recapitalization or other similar change in such warrants or in the case of a consolidation or merger of the Company with or into another Person, such consideration to which a holder of a warrant would have been entitled upon the occurrence of such event. Class B Warrants: means the Class B Warrants of the Company issued pursuant to the Plan, each of which is exercisable for one share of Common Stock and, in the case of a reclassification, recapitalization or other similar change in such warrants or in the case of a consolidation or merger of the Company with or into another Person, such consideration to which a holder of a warrant would have been entitled upon the occurrence of such event. Commission: means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. Common Stock: means the common stock, par value $0.01 per share, of the Company and all shares hereafter authorized of any class of common stock of the Company, and, in the case of a reclassification, recapitalization or other similar change in such Common Stock or in the case of a consolidation or merger of the Company with or into another Person, such consideration to which a holder of a share of Common Stock would have been entitled upon the occurrence of such event. Company: includes, in addition to the Company, any successor or assignee corporation or corporations into which or with which Lodgian, Inc. may be merged or consolidated; any corporation for whose shares the Common Stock, Preferred Stock, Class A Warrants and Class B Warrants may be exchanged; and any assignee of or successor to all or substantially all of the assets of the Company. Effective Date: shall have the meaning set forth in the recitals. Exchange Act: means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. Holder: means each of those Persons listed on Schedule A hereto, and each Person who is a Permitted Transferee of any Shareholder. Original Issue Common Stock: shall have the meaning set forth in the recitals. Original Issue Preferred Stock: shall have the meaning set forth in the recitals. Original Issue Warrants: shall have the meaning set forth in the recitals. Permitted Transferee: means: (i) In the case of a Shareholder which is a corporation, partnership, limited liability company or other entity, (a) any corporation, partnership, limited liability company or other Person controlled by, controlling, or under common control with any Shareholder to whom any Shareholder has Transferred shares of Common Stock, Preferred Stock, Class A Warrants, Class B Warrants or Warrant Shares or (b) any corporation, partnership, limited liability company or other Person to whom any Shareholder has Transferred, in the aggregate, 15% or more of such Shareholder's shares of Common Stock, Preferred Stock, Class A Warrants, Class B Warrants or Warrant Shares; (ii) In the case of any Shareholder which is an individual, any spouse (including a former spouse under a legally terminated marriage), or descendant (whether natural, step or adopted) of any such individual Shareholder or any trust formed exclusively for the benefit of any such individual Shareholder; and (iii) In the case of any Shareholder, any other Shareholder. Notwithstanding any Person's status as a Permitted Transferee, any Transfer of Registrable Securities shall be subject to the provisions of Section 10.1. Person: means any individual, corporation, partnership, trust or other entity of any nature whatsoever. Piggyback Registration: shall have the meaning set forth in Section 3.1. Plan: shall have the meaning set forth in the recitals. Preferred Stock: means the Series A preferred stock, par value $0.01 per share, of the Company, and, in the case of a reclassification, recapitalization or other similar change in such preferred stock or in the case of a consolidation or merger of the Company with or into another Person, such consideration to which a holder of a share of preferred stock would have been entitled upon the occurrence of such event. Registrable Securities: means, with respect to any Holder, (a) all shares of Original Issue Common Stock, Original Issue Preferred Stock, Original Issue Warrants and Warrant Shares (collectively, with the Original Issue Common Stock, Original Issue Preferred Stock and Original Issue Warrants, the "Original Issue Securities") beneficially owned by such Holder; and (b) all other securities issued or distributed by the Company with respect to, or in exchange for, the Original Issue Securities pursuant to a stock dividend or distribution, stock split, merger, consolidation, reorganization, recapitalization, reclassification, conversion right or otherwise. Shares of Original Issue Securities held by any Holder shall cease to be Registrable Securities when (i) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act pursuant to Section 2.1 of this Agreement and such securities shall have been disposed of pursuant to such registration statement, (ii) such securities shall have been sold or otherwise distributed pursuant to Rule 144 (or any successor provision) under the Securities Act, (iii) they may be freely transferred by such Holder pursuant to Rule 144 under the Securities Act without compliance with paragraph (e) thereto, (iv) all such securities then held by such Holder can be transferred within a single 90-day period pursuant to Rule 144 under the Securities Act within the limits specified in paragraph (e)(1)(i) thereof, provided that, in the case of clauses (iii) and (iv), the Company shall have complied with paragraph -2- (c) thereof, or (v) such securities shall have ceased to be outstanding. Registration Statement: shall have the meaning set forth in Section 2.1. Securities Act: means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. Shareholders: shall have the meaning set forth in the recitals. Shelf Registration: shall have the meaning set forth in Section 2.1. Transfer: means any transfer, sale, gift, assignment, distribution, conveyance, pledge, hypothecation, encumbrance or other voluntary or involuntary transfer of title or beneficial interest, whether or not for value, including, without limitation, any disposition by operation of law or any grant of a derivative or economic interest therein. Warrant Shares: means the shares of Common Stock issuable upon exercise of the Class A Warrants or the Class B Warrants. ARTICLE II SHELF REGISTRATION 2.1. Shelf Registration. The Company shall use its reasonable best efforts to cause to be filed with the Commission, on or before six months after the Effective Date, a shelf registration statement (the "Registration Statement") on an appropriate form under the Securities Act, relating to the offer and sale of the Registrable Securities by the Holders thereof from time to time in accordance with the methods of distribution set forth in the Registration Statement and Rule 415 under the Securities Act (the "Shelf Registration"). The Company shall use its reasonable best efforts to have such Shelf Registration declared effective by the Commission as promptly as practicable thereafter and in no event later than eighteen months after the Effective Date. The Company shall use its reasonable best efforts to keep the Registration Statement continuously effective, supplemented and amended in order to permit the prospectus included therein to be lawfully delivered by the Holders of the relevant Registrable Securities for the period beginning on the date on which such Registration Statement is declared effective and ending on the first date that there are no Registrable Securities (the "Shelf Registration Period"). (As used herein, except as otherwise provided or unless the context otherwise requires, the term "prospectus" refers to the prospectus included in the Registration Statement at the time such Registration Statement is declared effective, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such prospectus.) The Company's obligations under this Section 2.1 are subject to the provisions of Section 4.1. 2.2. Notice of Offering. Notwithstanding anything in Section 2.1 to the contrary, in the event that the Registration Statement is prepared on a Form S-1, any Holder intending to distribute a prospectus in connection with the sale of Registrable Securities, shall, prior to such distribution, provide the Company with 5 business days prior written notice of such intention, in order to provide the Company with sufficient time to amend, supplement, and/or otherwise update the Registration Statement to permit the prospectus included therein to be lawfully delivered. ARTICLE III PIGGYBACK REGISTRATION 3.1. Notice of Registration. In the event that the Company proposes to register any of its Common Stock, either for its own account or for the account of any Person other than the Holders, but not including a registration (i) relating to employee stock option or purchase plans or (ii) relating to a transaction pursuant to Rule 145 under the Securities Act (a "Piggyback Registration"), the Company will: (X) promptly give written notice thereof to the Holders; and -3- (Y) use its best efforts to include in such Piggyback Registration and in any underwriting involved therein up to all of the Registrable Securities which the Holders request in writing to be so included within 20 days after receipt of such written notice from the Company. Any Holder of Registrable Securities shall have the right to withdraw its request for inclusion of its Registrable Securities in any registration statement pursuant to this Section 3 by giving written notice to the Company, within a reasonable time, of its request to withdraw. The Company's obligations under this Section 3.1 are subject to the provisions of Section 4.1. 3.2. Underwriting. If the registration of which the Company gives notice is for a registered underwritten public offering, the Company shall so advise the Holders as a part of the written notice given pursuant to Section 3.1, and the right of the Holders to include Registrable Securities in such registration shall be conditioned upon the Holders' participation in such underwriting and the entry of the participating Holders (together with the Company and other holders distributing their securities through such underwriting) into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company. 3.3. Priority. If the underwriter of the registered public offering referred to in Section 3.2 shall advise the Company in writing that marketing factors require a limitation of the amount of securities to be underwritten, securities shall be included in such offering in the following priority: first, the Common Stock proposed to be registered by the Company; and second, Registrable Securities requested to be included in such registration by requesting Holders pursuant to Section 3.1, pro rata on the basis of the number of Registrable Securities requested to be included by such Holders. Any securities excluded pursuant to the provisions of this Section 3.3 shall be withdrawn from and shall not be included in such Piggyback Registration. ARTICLE IV PERMITTED DELAYS IN REGISTRATION; HOLDBACK AGREEMENTS 4.1. Suspension of Company Obligations. Notwithstanding anything to the contrary set forth in this Agreement, the Company's obligation under Article II of this Agreement to file the Registration Statement and to use its best efforts to cause Registrable Securities to be registered as provided therein shall be suspended in the event either (i) the Company is engaged in an underwritten primary offering and the Company is advised in writing by the underwriters that the sale of Registrable Securities would have a material adverse effect on such primary offering, or (ii) in the good faith opinion of counsel to the Company's Board of Directors, effecting the registration of Registrable Securities would adversely affect a material financing, acquisition, disposition of assets or stock, merger or other comparable transaction or would require the Company to make public disclosure of information the public disclosure of which would have a material adverse effect upon the Company (any of the events set forth in clauses (i) and (ii) being hereinafter referred to as a "Suspension Event"), but such suspension shall occur on not more than one occasion in a 365-day period and shall continue only for so long as such event or its effect is continuing, but in no event will any such suspension exceed 100 days. The Company shall promptly notify the Holders in writing of the existence of any Suspension Event, and with such notice shall provide the Holders with a copy of such underwriters' determination (in the case of clause (i) above), or such opinion of counsel to the Board of Directors (in the case of clause (ii) above). 4.2. Restrictions on Public Sale by Holders. Each Holder agrees, if requested in writing by: (i) the managing underwriter or underwriters in an underwritten primary offering of equity securities of the Company made pursuant to the Securities Act; or (ii) the principal placement agent or agents in any offering of equity securities to be effected by the Company pursuant to an exemption from registration under the Securities Act; not to effect any public sale or distribution of any Registrable Securities, including a sale pursuant to Rule 144 (or any successor provision) under the Securities Act (except to the extent included in any such offering or distribution pursuant to Sections 2.1 or 3.1), during the period starting with the date 15 days prior to and ending on the date 90 days after the closing date of any such offering, sale or distribution; provided that, with respect to a given offering of securities, (x) each other Holder is similarly restricted and (y) each director and executive officer (including any -4- "key" employees) of the Company agrees in writing to identical restrictions. 4.3. Release from Restrictions. The Company may, in its sole and absolute discretion, elect to waive the applicability in any particular instance of the provisions of Section 4.2. ARTICLE V REGISTRATION PROCEDURES 5.1. Registration Procedures. In connection with each registration to be effected by the Company pursuant to this Agreement in which any Holder is participating, the Company shall keep the Holder advised in writing as to the initiation of each registration and as to the completion thereof. In connection with each such offering, the Company shall as expeditiously as possible, at its sole expense: (a) prepare and file with the Commission a registration statement with respect to such Holder's Registrable Securities and use its reasonable best efforts to cause such registration statement to become effective, and thereafter use its best efforts to keep such registration statement, in the case of the Shelf Registration, continuously effective for the Shelf Registration Period, and in the case of the Piggyback Registration, until the distribution described in the registration statement relating thereto has been completed; (b) in connection with the preparation and filing of a registration statement, give the Holders, the underwriters, if any, and their respective counsel, the opportunity to participate (including the inclusion of any reasonable comments proposed by the Holders) in the preparation of such registration statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto (provided that the Company shall not file any such registration statement including Registrable Securities or amendment thereto or any related prospectus or any supplement thereto to which such Holders or the managing underwriter or underwriters, if any, shall reasonably object in writing), and give each of them such access to its books and records and such opportunities to discuss the business of the Company with its officers, its counsel and the independent public accountants who have certified its financial statements as shall be necessary, in the opinion of the Holder's and such underwriters' respective counsel, to conduct a reasonable due diligence investigation within the meaning of the Securities Act; (c) furnish to the Holders and to the underwriters of the Registrable Securities such number of copies of the registration statement, preliminary prospectus, final prospectus and other documents incident thereto as such underwriters and Holders from time to time may reasonably request; (d) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement; (e) register or qualify the Registrable Securities under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by any of the Holders for the distribution of the Registrable Securities covered by the registration statement to be sold by such Holders; and to take any other action which may be reasonably necessary to enable such Holders to consummate the disposition in such jurisdictions in the United States of such Registrable Securities owned by such Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, or to subject itself to taxation in any such jurisdiction; (f) enter into an underwriting agreement in customary form and substance reasonably satisfactory to the Company, the Holders and the managing underwriter or underwriters of the public offering of Registrable Securities, if the offering is to be underwritten, in whole or in part, provided that the Holders shall be a party to such underwriting agreement and the Holders may, at their option, require that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of the Holders. The Holders shall not be required to make any representations or warranties to or agreement with the Company or the underwriters other than representations, warranties or agreements regarding the Holders and their -5- intended method of distribution and any other representation or warranty required by law; (g) promptly notify the Holders at any time when a prospectus relating thereto covered by such registration statement is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and at the request of any such Holder prepare and furnish to such Holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, provided that each Holder agrees that upon receipt of any notice from the Company of the happening of any event of the kind described in this Section 5.1(g), such Holder shall forthwith discontinue its disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such Holder's receipt of the copies of the supplemented or amended prospectus contemplated by this Section 5.1(g) and, if so directed by the Company, such Holder shall use its reasonable best efforts to deliver to the Company all copies, other than permanent file copies then in such Holder's possession, of the prospectus relating to such Registrable Securities current at the time of receipt of such notice; (h) use its reasonable best efforts promptly to obtain the withdrawal of any stop order suspending the effectiveness of a registration statement, or any order suspending or preventing the use of any related prospectus or suspending the qualification of any securities included in such registration statement for sale in any jurisdiction; (i) furnish, at the request of a Holder on the date that any Registrable Securities are to be delivered to the underwriters for sale in connection with a registration pursuant to this Agreement, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to such Holder and (ii) a letter dated such date, from the independent certified public accountants of the Company who have certified the Company's financial statements included in such registration statement, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to such Holder; (j) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission to effect the prompt registration of the securities covered by the registration statement, and make generally available to the Holders, as soon as reasonably practicable, an earnings statement covering a period of at least twelve months beginning after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act; and (k) list all Registrable Securities covered by such registration statement on the American Stock Exchange or such other national securities exchange or inter-dealer quotation system as may be mutually agreed upon by the parties and such securities exchange. ARTICLE VI INDEMNIFICATION 6.1. Indemnification by the Company. In the event of any registration of any Registrable Securities pursuant to this Agreement under the Securities Act, the Company will, and hereby does, indemnify and hold harmless each participating Holder, each of its trustees, beneficiaries, directors, officers, employees, agents, advisors and controlling persons, if any, each other Person who participates as an underwriter in the offering or sale of such securities and each other Person who controls any such underwriter within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such participating Holder or any such Person, underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise -6- out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement under which such Registrable Securities were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and the Company will reimburse each participating Holder and each such Person, underwriter and controlling person for any reasonable legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such participating Holder or any other Person who participates as an underwriter in the offering or sale of such securities, in either case, specifically stating that it is for use in the preparation thereof; and provided, further, that the Company shall not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the Securities Act in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus or supplement to the Persons asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus or supplement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of any participating Holder or any such underwriter or controlling person and shall survive the transfer of such securities by the Holder. 6.2. Indemnification by Participating Holders. Each of the participating Holders whose Registrable Securities are included or to be included in any registration statement, as a condition to including Registrable Securities in such registration statement, agrees to indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 6.1) the Company, each director of the Company, each officer of the Company and each other Person, if any, who controls the Company within the meaning of the Securities Act, and each other Person who participates as an underwriter in the offering or sale of such securities and each other Person who controls any such underwriter within the meaning of the Securities Act with respect to any untrue statement or alleged untrue statement of a material fact in or omission or alleged omission to state a material fact from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company pertaining to such participating Holder by such participating Holder specifically stating that it is for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement. The obligation to provide indemnification pursuant to this Section 6.2 shall be several, and not joint and several, among the participating Holders. The indemnity provided by each Holder under this Section 6.2 shall be limited to an amount equal to the net proceeds received by such Holder from the sale of Registrable Securities pursuant to such registration statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any such director, officer, or any such underwriter or controlling person and shall survive the transfer of such securities by any participating Holder. 6.3. Notices of Claims. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in Section 6.1 or 6.2, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided, however, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under Section 6.1 or 6.2, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to the indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the -7- defense thereof other than reasonable costs of investigation, provided that the indemnified party may participate in such defense at the indemnified party's expense and provided, further, that all indemnified parties shall have the right to employ one counsel to represent them if, in the reasonable judgment of such indemnified parties, it is advisable for them to be represented by separate counsel by reason of having legal defenses which are different from or in addition to those available to the indemnifying party, and in that event the reasonable fees and expenses of such one counsel shall be paid by the indemnifying party. If the indemnifying party is not entitled to, or elects not to, assume the defense of a claim, it will not be obligated to pay the fees and expenses of more than one counsel for the indemnified parties with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel for the indemnified parties. No indemnifying party shall consent to entry of any judgment or enter into any settlement without the consent of the indemnified party which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. No indemnifying party shall be subject to any liability for any settlement made without its consent, which consent shall not be unreasonably withheld. 6.4. Other Indemnification. Indemnification similar to that specified in the preceding Sections of this Article VI (with appropriate modifications) shall be given by the Company and any participating Holder with respect to any required registration or other qualification of securities under any federal or state law or regulation of any governmental authority other than the Securities Act. 6.5. Indemnification Payments. The indemnification required by this Article VI shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. 6.6. Contribution. If, for any reason, the foregoing indemnity is unavailable, or is insufficient to hold harmless an indemnified party, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of the expense, loss, claim, damage or liability (a) in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party on the other (determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission relates to information supplied by the indemnifying party or the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission), or (b) if the allocation provided by clause (a) above is not permitted by applicable law or provides a lesser sum to the indemnified party than the amount otherwise payable hereunder, in the proportion as is appropriate to reflect not only the relative fault of the indemnifying party and the indemnified party, but also the relative benefits received by the indemnifying party on the one hand and the indemnified party on the other, as well as any other relevant equitable considerations. No indemnified party guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any indemnifying party who was not guilty of such fraudulent misrepresentation. The contribution provided by each participating Holder under this Section 6.6 shall be limited to an amount equal to the net proceeds received by such participating Holder from the sale of Registrable Securities pursuant to such registration statement. ARTICLE VII REGISTRATION EXPENSES 7.1. Registration Expenses. All expenses incident to the Company's performance of or compliance with this Agreement will be borne by the Company, including, without limitation: (i) all registration, filing and National Association of Securities Dealers fees and expenses; (ii) all fees and expenses associated with compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing of certificates for the Common Stock, Preferred Stock, Class A Warrants, Class B Warrants, Warrant Shares and the prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company and the Holders, except to the extent otherwise provided in this Section 7.1; (v) all application and filing fees in connection with listing the Registrable Securities on a securities exchange pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Company (including the expenses associated with preparing any special audit and comfort letters required by or incident to such -8- performance or compliance). The Company will reimburse the Holders of Registrable Securities registered pursuant to the Registration Statement, or any Piggyback Registration, for the reasonable fees and disbursements of not more than one counsel, which shall be chosen by Holders of a majority of Registrable Securities being registered pursuant to such registration. Notwithstanding the provisions of this Section 7.1, each Holder shall bear the expense of any broker's commission, agency fee or underwriter's discount or commission. ARTICLE VIII INFORMATION BY HOLDERS 8.1. Information Regarding Holders. Each Holder shall furnish to the Company and any applicable underwriter such information regarding such Holder and the distribution proposed by such Holder as the Company or such underwriter may request in writing and as shall be required in connection the registration referred to in this Agreement. ARTICLE IX RULE 144 SALES 9.1. Reporting. With a view to making available to the Holders the benefits of certain rules and regulations of the Commission which may permit the sale of Registrable Securities (and shares of Original Issue Common Stock, Original Issue Preferred Stock, Original Issue Warrants and Warrant Shares held by a Holder which are eligible for sale or distribution under Rule 144 (or any successor provision) promulgated under the Securities Act) to the public without registration or through short form registration forms the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in Rule 144, at all times after 90 days after the Effective Date; (b) file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (c) furnish to each Holder, so long as such Holder owns any Registrable Securities (or any shares of Original Issue Common Stock, Original Issue Preferred Stock, Original Issue Warrants or Warrant Shares held by a Holder which are eligible for sale or distribution under Rule 144 (or any successor provision) promulgated under the Securities Act), forthwith upon request a written statement by the Company that it has complied with the reporting requirements of Rule 144 (at any time after 90 days after the Effective Date), the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed by the Company as such Holder may reasonably request in availing itself of any rule or regulation of the Commission permitting such Holder to sell any such securities without registration. ARTICLE X TRANSFER OF RIGHTS 10.1. Transfer or Assignment. The rights granted hereunder by the Company may be assigned or otherwise conveyed to the respective Permitted Transferees of the Shareholders. It shall be a condition to any Transfer that (a) such Transfer is effected in accordance with applicable federal and state securities laws, (b) such transferee or assignee becomes a party to this Agreement or agrees in writing to be subject to the terms hereof to the same extent as if it were the Holder hereunder, and (c) the Company is given written notice by the Holder of said Transfer, stating the name and address of said transferee and identifying the securities with respect to which such registration rights are being assigned. -9- ARTICLE XI TERMINATION 11.1. Termination. This Agreement and the rights provided hereunder shall terminate and be of no further force and effect with respect to each Holder on such date as such Holder shall no longer hold any Registrable Securities. ARTICLE XII MISCELLANEOUS 12.1. Remedies for Breach. It is expressly understood that the equitable remedies of specific performance and injunction shall be available for the enforcement of the covenants and agreements herein, and that the availability of these equitable remedies shall not be deemed to limit any other right or remedy to which any party to this Agreement would otherwise be entitled. 12.2. Successors and Assigns. Subject to the provisions of Section 10.1, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors, assigns and transferees of the parties. If any successor, assignee or transferee of any Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such Person shall be conclusively deemed to have agreed to be bound by all of the terms and provisions hereof. 12.3. Notices. All notices and other communications provided for hereunder shall be in writing and sent by registered or certified mail, return receipt requested, postage prepaid or delivered in person or by courier, telecopier or electronic mail, and shall be deemed to have been duly given when received, by the party to whom such notice is to be given at its address set forth below, or at such other address for the party as shall be specified by notice given pursuant hereto: (a) if to the Company, to: LODGIAN, INC. 3445 Peachtree Road - Suite 700 Atlanta, Georgia 30326 Attention: General Counsel with a copy to: Cadwalader, Wickersham & Taft 100 Maiden Lane New York, NY 10038 Attention: Michael C. Ryan (b) If to a Holder, to such Holder at the address set forth for such Holder in the stock records of the Company. 12.4. Governing Law. This Agreement and any controversy or claim arising out of or relating to this Agreement shall be governed by the laws of the State of Delaware, without giving effect to the principles of conflicts of laws. 12.5. Consent to Jurisdiction and Service of Process. Each of the Company and each Holder hereby irrevocably appoints the Corporation Trust Company, at its office at 1209 Orange Street, Wilmington, DE 19801, its lawful agent and attorney to accept and acknowledge service of any and all process against it in any action, suit or proceeding arising in connection with this Agreement and upon whom such process may be served, with the same effect as if such party were a resident of the State of Delaware and had been lawfully served with such process in -10- such jurisdiction, and waives all claims of error by reason of such service, provided that in the case of any service upon such agent and attorney, the party effecting such service shall also deliver a copy thereof to each other party at the address and in the manner specified in Section 12.3. Each of the Company and each Holder will enter into such agreements with such agent as may be necessary to constitute and continue the appointment of such agent hereunder. In the event that such agent and attorney resigns or otherwise becomes incapable of acting as such, each party will appoint a successor agent and attorney in Wilmington, Delaware, reasonably satisfactory to the Company, with like powers. Each party hereby irrevocably submits to the non-exclusive jurisdiction of the United States District Court for the District of Delaware or any court of the State of Delaware located in the City of Wilmington in any such action, suit or proceeding, and agrees that any such action, suit or proceeding shall be brought only in such court (and waives any objection based on forum non conveniens or any other objection to venue therein); provided, however, that such consent to jurisdiction is solely for the purpose referred to in this Section 12.5 and shall not be deemed to be a general submission to the jurisdiction of said courts or in the State of Delaware other than for such purpose. Nothing herein shall affect the right of any party to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against any other party in any other jurisdiction. 12.6. Entire Agreement; Amendments and Waivers. This Agreement constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions whether oral or written, of the parties. No supplement, modification or waiver of this Agreement shall be binding unless executed in writing by all parties. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 12.7. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Copies of executed counterparts transmitted by telecopy or other electronic transmission service shall be considered original executed counterparts for purposes of this Section 12.7. 12.8. Severability. In the event that any one or more of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement. 12.9. Attorneys' Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and disbursements in addition to any other relief to which such party may be entitled. 12.10. Headings. The headings of the Articles and Sections herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. 12.11. Gender and Other References. Unless the context clearly indicates otherwise, the use of any gender pronoun in this Agreement shall be deemed to include all other genders, and singular references shall include the plural and vice versa. [SIGNATURE PAGE FOLLOWS] -11- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. LODGIAN, INC. By: /s/ Daniel E. Ellis -------------------------------------- Name: Daniel E. Ellis Title: Vice President and Secretary OCM REAL ESTATE OPPORTUNITIES FUND II, L.P. BY: OAKTREE CAPITAL MANAGEMENT, LLC, ITS GENERAL PARTNER By: /s/ Mark Porosoff -------------------------------------- Name: Mark Porosoff Title: Senior Vice President, Legal By: /s/ Bruce Nuzie -------------------------------------- Name: Bruce Nuzie Title: Senior Vice President BRE/HY FUNDING, L.L.C. By: -------------------------------------- Name: Title: THIRD AVENUE TRUST, ON BEHALF OF THIRD AVENUE VALUE FUND By: /s/ David Barse -------------------------------------- Name: David Barse Title: President THIRD AVENUE TRUST, ON BEHALF OF THIRD AVENUE REAL ESTATE VALUE FUND By: /s/ David Barse -------------------------------------- Name: David Barse Title: President THIRD AVENUE MANAGEMENT LLC, as Investment Advisor for, and on behalf of, Aegon/Transamerica Series Fund, Inc. By: /s/ David Barse -------------------------------------- Name: David Barse Title: President -12- GENERAL MOTORS TRUST COMPANY By: /s/ Tony Kow -------------------------------------- Name: Tony Kow Title: Managing Director -13- SCHEDULE A
NAME NUMBER OF SHARES OF NUMBER OF SHARES OF NUMBER OF SHARES OF OF ORIGINAL ISSUE ORIGINAL ISSUE ORIGINAL ISSUE SHAREHOLDER COMMON STOCK PREFERRED STOCK WARRANTS ----------- ------------------- ------------------- ------------------- OCM Real Estate 1,578,611 1,332,364.9 N/A Opportunities Fund II, L.P. General Motors Trust 86,141.4 72,704.3 N/A Company BRE/HY Funding, L.L.C. 833,626.7 703,590 N/A Third Avenue Value 439,629.6 N/A Class A - 637,571.8 Fund Class B - 127,159.3 Third Avenue Real Estate 31,000 N/A Class A - 44,957.7 Value Fund Class B - 8,966.5 Ageon/Transamerica 22,320 N/A Class A - 32,369.5 Series Fund, Inc. Class B - 6,455.9
-14- EX-10.12 35 g87458exv10w12.txt EX-10.12 EMPLOYMENT AGREEMENT EXHIBIT 10.12 EMPLOYMENT AGREEMENT I, W. Thomas Parrington, and Lodgian, Inc. (Company) agree to the terms and conditions of employment set forth in this Employment Agreement (Agreement). 1. TERM OF EMPLOYMENT. My employment under this Agreement shall commence on July 1, 2003 and shall end on July 15, 2006 (Expiration Date), or such earlier date on which my employment is terminated under Section 5 of this Agreement ( "Employment Term"). Unless one party notifies the other in writing that it intends to permit this Agreement to expire at least 60 days prior to the Expiration Date, the Expiration Date shall automatically be extended for one year. In the event that the Agreement is extended, I shall continue to be eligible to receive the performance based incentive awards in Section 4(d) and 4(e). The Company and I shall enter into a side letter with respect to such awards, which shall specify the Target EBITDA and how awards shall vest (or in the case of the options, become exercisable), which shall be in a manner consistent with the vesting schedules, as applicable, in Section 4(d) or 4(e). 2. NATURE OF DUTIES. I shall be the Company's President and Chief Executive Officer reporting solely to the Board of Directors (Board). Except as noted herein, I shall work exclusively for the Company and shall have all of the customary powers and duties associated with these positions. I shall devote my full business time and effort to the performance of my duties for the Company, which I shall perform faithfully and to the best of my ability. I shall be subject to the Company's policies, procedures, and approval practices, as generally in effect from time-to-time and applied to Senior Executives. Notwithstanding the foregoing, I shall be able to serve on up to two Boards for for-profit entities. With Board approval, which shall not be unreasonably withheld, I shall be permitted to exceed this limit of two. Nothing herein shall be construed as limiting my ability to serve on the Board for non-profit entities or otherwise engage in activities for charities. However, I shall not serve on such Boards to the extent that doing so would interfere with my duties to the Company. 3. PLACE OF PERFORMANCE. My primary office location shall be at 3445 Peachtree Road, Suite 700, Atlanta, Georgia, except for required travel on the Company's business. 4. COMPENSATION AND RELATED MATTERS. (a) BASE SALARY. The Company shall pay me base salary at an annual rate of $650,000, or such higher rate as it elects to pay me. My base salary shall be paid in conformity with the Company's salary payment practices generally applicable to other similarly situated Company senior executives, but no less often than once monthly. (b) SIGNING BONUS - STOCK. (i) The Company shall pay me a signing bonus in the form of: (1) 200,000 restricted shares of the Company's common stock (Common Stock) which were issued on July 15, 2003 and (2) a non-qualified option (Option) to purchase 100,000 shares of Common Stock at a strike price of $3.00 per share, which was granted on July 15, 2003. (ii) The Option and restricted stock in Section 4(b) shall be subject to the terms of the incentive plan and incentive agreement under which they were issued. (iii) If I remain employed by the Company through the vesting date in question, subject to Section 5(a), one-third of the Option and one-third of the restricted stock award in Section 4(b) shall vest (i.e., with respect to the Option, become exercisable) on each of July 15, 2004, 2005, and 2006. However, subject to Section 5(a), vesting shall be postponed during any Health-Related Leave of Absence until I return to work, unless such postponement is prohibited by law. (c) Signing Bonus - Cash Payment. The Company shall pay me a signing bonus of $100,000 payable in two payments of $50,000 each on April 1, 2004 and April 1, 2005. (d) ANNUAL PERFORMANCE BONUS. (i) Subject to Section 5(a), I shall be eligible to receive an annual performance bonus in the amount shown in the applicable row on the following table for each calendar year 2003-2006 as indicated if I remain employed through December 31 of the year in question. If I take a Health-Related Leave of Absence, my annual performance bonus shall be prorated by multiplying the applicable bonus by a percentage equal to a fraction, the numerator of which is the total number of days that I was employed during the applicable calendar year, minus the total number of days that I was absent, the denominator of which is 365, but the prorated bonus shall be payable only if I am employed through December 31 of the year in question or, if my employment terminated before then, if the bonus is to be paid pursuant to Section 5(a). Prior to payment of the bonus, the Company's Board shall review and approve the bonus, which is subject to Board approval. The Board shall review actual operating EBITDA performance, and determine the percentage of Target EBITDA (as defined in the chart below) that the Company achieved for the applicable calendar year. The Board shall not unreasonably withhold approval upon determination of the actual operating EBITDA performance (as defined herein) and the corresponding bonus due for that level of performance. If the Board has not approved or disapproved the bonus by April 15, its approval shall not be required and the bonus for the calendar year in question shall be paid if otherwise due. 2
IF THE COMPANY'S EBITDA FOR THE CALENDAR YEAR THE COMPANY SHALL PAY ME IN QUESTION IS AN ANNUAL PERFORMANCE BONUS OF - -------------------------------- -------------------------------------- 125% or more of the Company's For 2003: $325,000 target EBITDA for the calendar year in question as set forth in Section 4(d)(iii) (Target EBITDA) For 2004, 2005 & 2006: $650,000 (Maximum Bonus) 124.99% - 115% of Target EBITDA For 2003: $276,250 For 2004, 2005 & 2006: 85% of Maximum Bonus ($552,500) 114.99% - 107.5% of Target EBITDA For 2003: $211,250 For 2004, 2005 & 2006: 65% of Maximum Bonus ($422,500) 107.49% - 100% of Target EBITDA For 2003: $167,500 For 2004, 2005 & 2006: 50% of Maximum Bonus ($325,000) 99.99% - 90% of the Target EBITDA For 2003, $100,000 For 2004, $200,000 For 2005, 20% of Maximum Bonus ($130,000) For 2006, 20% of Maximum Bonus ($130,000) Less than 90% of the Target EBITDA For 2003, $100,000 For 2004, $200,000 For 2005, $0 For 2006, $0
(ii) For calendar year 2003, my partial year of employment is reflected by the bonus amount in the chart, but the minimum bonus for year 2003 shall be no less than $100,000, regardless of the Company's EBITDA. For 3 calendar year 2006, my bonus shall be prorated to reflect, if still applicable, a partial year of employment. My prorated bonus in 2006, as applicable, shall be calculated by multiplying the bonus by a percentage equal to the total number of days in 2006 that I am employed pursuant this Agreement, divided by total number of days in 2006. (iii) Subject to section (iv) below, the Company's "Target EBITDA" as used herein for calendar years 2003, 2004, 2005, and 2006 are, respectively, $65 million, $76.5 million, $84.1 million, and $92.6 million. (iv) EBITDA means the Company's earnings before interest, taxes, depreciation, and amortization of the Company's current portfolio of assets, but shall exclude restructuring charges, asset sales, and other nonrecurring income and expense items. EBITDA shall be calculated in a manner consistent with the Company's presentation of financial statements to the Board for the period commencing January 1, 2003 and ending June 30, 2003. If changes to the portfolio are made, the Company will adjust its EBITDA targets as follows: (1) If a property is sold, the Target EBITDA for the Year in which the sale occurs shall be reduced by the sold property's EBITDA for the trailing 12 full months through the date of the sale, and actual results for the Year will exclude the sold property's EBITDA. For each subsequent Year, Target EBITDA shall be reduced by the sum of the reduction for the Year of sale plus 10 percent of that reduction for each Year since the Year of sale. (2) If a property is acquired, the Target EBITDA for the Year in which the purchase occurs shall be increased by the acquired property's EBITDA for the trailing 12 full months through the date of purchase, and actual results for the Year of purchase shall include the acquired property's EBITDA as if it had been acquired on the first day of the year. For each subsequent Year, Target EBITDA shall be increased by the sum of the increase for the Year of purchase plus 10 percent of that increase for each Year since the Year of purchase. (3) For purposes of clauses (1) and (2), "Year" shall mean the annual performance bonus calendar year in question or, with respect to Section 4(e), the long-term compensation fiscal year in question. (v) My bonus shall be paid within 30 days after the Company has finalized its financial statement for the period in question, but in no event later than April 15 (Bonus Payment Date). The Company shall pay each bonus 75% in cash and 25% in restricted shares of Common Stock. The restricted stock grant shall vest on the first anniversary of the Bonus Payment Date if I remain employed through such date, except as provided in Sections 4(c)(vi) and 5(a). My restricted stock awards shall be subject to the terms of the incentive plan and agreement under which they are issued. The restricted stock in Section 4(d) is intended to qualify as "qualified performance based compensation" for purposes of Section 162(m) of the Code. 4 (vi) Notwithstanding Section 4(d)(v) but subject to Section 5(a), vesting shall be postponed during any Health-Related Leave of Absence until I return to work, unless prohibited by law. (e) LONG-TERM COMPENSATION. (i) Subject to the approval of the Board, the Company shall grant me Options to purchase: (i) 50,000 shares of Common Stock (2004 Options), (ii) 50,000 shares of Common Stock (2005 Options), and (iii) 50,000 shares of Common Stock (2006 Options). The strike price of these Option shall be equal to the fair market value per share (Strike Price). (ii) Subject to Section 4(e)(iii) and 5(a), the Options in Section 4(e) shall vest as follows: (1) One-third of the 2004 Options shall become exercisable on each of June 30, 2005, 2006, and 2007 if the Company's EBITDA for the year ending June 30, 2004 is $70.8 million and I remain employed through the vesting date in question. (2) One-third of the 2005 Options shall become exercisable on each of June 30, 2006, 2007, and 2008 if the Company's EBITDA for the year ending June 30, 2005 is $80.3 million and I remain employed through the vesting date in question. (3) One-third of the 2006 Options shall become exercisable on each of June 30, 2007, 2008, and 2009 if the Company's EBITDA for the year ending June 30, 2006 is $88.4 million and I remain employed through the vesting date in question. (4) If the EBITDA targets in Section 4(e) are not met, the Options shall become exercisable on the seventh anniversary of the grant date if I remain employed through this date. (iii) Notwithstanding Section 4(e)(ii), if the EBITDA target is met for the option year in question, I remain employed through the applicable Vesting Commencement Date, and the Strike Price of any Option granted in this section is greater than the Target Price, the Company shall grant me a number of restricted shares of Common Stock determined by the Conversion Formula in Section 4(e)(iv), rounded up to the nearest whole share, and an equal number of shares covered by the Option shall lapse. The Target Price of the 2004, 2005, and 2006 Options, respectively, are $3, $4, and $5 per share. The restricted stock granted in this section shall vest according to the same three-year schedule as the options for the year in question. For example, restricted stock granted in connection with the 2004 Options shall vest according to analogous vesting provisions. 5 (iv) "Conversion Formula" shall mean a fraction, the numerator of which is the excess, if any, of the Strike Price over the Target Price of the Option in question, multiplied by 50,000, and the denominator of which is the fair market value of the Common Stock on the June 30, 2004 with respect to the 2004 Options, June 30, 2005 with respect to the 2005 Options, and June 30, 2006 with respect to the 2006 Options (Vesting Commencement Date). Therefore, for example, if the Strike Price of the 2004 Options is $5 per share and the applicable fair market value is $5 per share, then the I will receive (5-3)*50,000=100,000/5=20,000 shares of restricted stock and 30,000 Options for 2004. (v) The Options in Section 4(e) are intended to qualify as "qualified performance based compensation" for purposes of Section 162(m) of the Code. The Options and restricted stock in Section 4(e) will be subject to the terms of the incentive plan under which they are issued and the award agreement between me and the Company. Notwithstanding Section 4(e)(ii) but subject to Section 5(a), vesting shall be postponed during any Health-Related Leave of Absence until I return to work, unless such postponement is prohibited by law. (f) STANDARD BENEFITS. During my employment, I shall be entitled to participate in all employee benefit plans and programs, including paid vacations, to the same extent generally available to other similarly situated Company senior executives, in accordance with the terms of those plans and programs. The Company agrees that I and my spouse shall be immediately eligible to participate in the Company's medical/health/prescription coverage plan without any waiting period or any pre-existing condition(s), limitations, or exclusions whatsoever. To the extent that I or my spouse is/are not fully covered by the medical/health/prescription plan for any reason, then the Company shall pay or otherwise provide full coverage such that I and my spouse do not incur any expense beyond the standard plan deductible and co-payment, if any. Notwithstanding anything to the contrary herein, I shall not be eligible to participate in the Company's 401(k) plan. The Company shall have the right to terminate or change any such plan or program at any time in accordance with plan terms. (g) INTEGRATION WITH DISABILITY BENEFITS. While I am absent due to a health-related disability, the Company compensation otherwise payable to me for that period shall be reduced by payments for that period from Company-provided short or long term disability coverage and Workers' Compensation wage replacement benefits. (h) INDEMNIFICATION. The Company shall extend to me the same indemnification arrangements as are generally provided to other similarly situated Company senior executives, which shall survive termination of my employment. (i) EXPENSES. I shall be entitled to receive prompt reimbursement for all reasonable and customary travel and business expenses I incur in connection with my employment, but I must incur and account for those expenses in 6 accordance with the policies and procedures established by the Company and as applied to Senior Executives. (j) SARBANES-OXLEY ACT LOAN PROHIBITION. Notwithstanding this Agreement or any other Company policy or program, the Company shall not make a loan to me that would violate the Sarbanes-Oxley Act, and this Agreement does not contemplate any such loans. (k) OTHER BENEFITS. I shall be entitled to the following non-recurring benefits: (1) reimbursement of my relocation expenses, to be paid within 30 days of presentment by me, (2) reimbursement of temporary housing costs incurred by me to reside in Atlanta through October 7, 2003 and (3) reimbursement of reasonable fees and expenses for legal and tax advice arising in connection with the negotiation and documentation of this Agreement. 5. TERMINATION. (a) RIGHTS AND DUTIES. If my employment is terminated, I shall be entitled to the amounts and/or benefits shown on the applicable row of the following table, subject to the balance of this Section 5. The Company and I shall have no further obligations to each other, except the Company's ongoing indemnification obligation under Section 4, my confidentiality, etc. obligations under Section 6, and our mutual arbitration obligations under Section 8, or as set forth in any written agreement I subsequently enter into with the Company.
DISCHARGE Payment of (1) any unpaid base salary, reimbursement FOR CAUSE of expenses incurred, and unused vacation days OR accrued prior to the date of termination, (2) other RESIGNATION unpaid REASON vested amounts or benefits under WITHOUT GOOD Company compensation, incentive, and benefit plans, (3) COBRA benefits. DISABILITY Payment of (1) any unpaid base salary, reimbursement of expenses incurred, and unused vacation days accrued prior to the date of termination, (2) other unpaid vested amounts or benefits under Company compensation, incentive, and benefit plans, (3) COBRA benefits, (4) a prorated bonus, calculated by multiplying the applicable bonus by a percentage equal to the total number of days that I was employed for the bonus year in question, divided by 365, (5) accelerated vesting and right to exercise all options in Section 4(b), (6) accelerated vesting and right to exercise all Options and restricted stock in Section 4(e) if the EBITDA target is met for the option year in question and I remain employed through the
7 applicable Vesting Commencement Date (all other awards granted under Section 4(e) shall terminate), (7) any unpaid portion of the cash signing bonus in Section 4(c), and (8) a lump sum payment equal to the difference, if any, between my monthly base salary and my monthly Company-provided short term disability benefits and Workers' Compensation wage replacement benefits for up to 6 months or the date that my Company-provided long-term disability benefits commence if I am eligible to receive such benefits, whichever is shorter. I shall be eligible to receive the benefits in clauses (4) through (8) only if I am terminated by the Company due to Disability, but not if I resign. DISCHARGE Payment of (1) any unpaid base salary, reimbursement WITHOUT of expenses incurred, and unused vacation days CAUSE OR accrued prior to the date of termination, (2) other RESIGNATION unpaid vested amounts or benefits under Company FOR GOOD compensation, incentive, and benefit plans, (3) COBRA REASON benefits. In exchange for my execution of a release in accordance with this section, I shall also receive (4) my base salary in section 4(a), any unpaid portion of the cash signing bonus in Section 4(c), and medical benefits all shall continue through the Expiration Date or two years, whichever is shorter, (5) the vesting of the stock options awarded in Section 4(b) and the vesting of restricted stock awarded in Section 4(d) shall accelerate and become immediately exercisable, (6) I shall continue to be eligible to receive the annual performance bonus in section 4(d) through the Expiration Date or two years, whichever is shorter, and (7) accelerated vesting and right to exercise all Options and restricted stock in Section 4(e) if the EBITDA target is met for the option year in question and I remain employed through the applicable Vesting Commencement Date (all other awards granted under Section 4(e) shall terminate). The annual performance bonus (if any) shall be determined and paid as set forth in Section 4(d) as if my employment had continued through the Expiration Date, or for two years, whichever is shorter. DEATH Payment of (1) any unpaid base salary, reimbursement of expenses incurred, and unused vacation days accrued prior to the date of termination, (2) other unpaid vested amounts or benefits under Company compensation, incentive, and benefit plans, (3) COBRA benefits, (4) accelerated vesting and right of designee to exercise all options in Section 4(b) and all granted but unvested restricted stock, (5) prorated annual performance bonus, calculated by multiplying

8 the applicable bonus by a percentage equal to the total number of days that I was employed for the year in question, divided by 365, (6) accelerated vesting and right to exercise all Options and restricted stock in Section 4(e) if the EBITDA target is met for the option year in question and I remain employed through the applicable Vesting Commencement Date (all other awards granted under Section 4(e) shall terminate), and (4) any unpaid portion of the cash signing bonus in Section 4(c). TERMINATION OF PAYMENT Payment of (1) any unpaid base salary, reimbursement EMPLOYMENT of expenses incurred, and unused vacation days AT accrued prior to the date of termination, (2) other EXPIRATION unpaid vested amounts or benefits under Company OF compensation, incentive, and benefit plans, (3) COBRA AGREEMENT benefits.

(b) DISCHARGE FOR CAUSE. The Company may terminate my employment at any time if it believes in good faith that it has Cause to terminate me. However, my termination shall not be deemed for Cause unless the Company sends me a written notice detailing the reasons it believes it had Cause to terminate me on or before the date it did so. "Cause" shall mean: (i) my willful refusal to follow the Board's lawful directions or my material failure to perform my duties (other than by reason of physical or mental illness, injury, or condition), in either case, only after I have been given written notice by the Board detailing the directives I have refused to follow or the duties I have failed to perform and at least 30 days to cure; (ii) my material and willful failure to comply with Company policies as applied to senior executives, only after I have been given written notice by the Board detailing the policies with which I have failed to comply and at least 30 days to cure; (iii) my having actively sought a position with another business, applied for such a position, and am likely to accept such a position without the Company's written consent at any time more than 90 days before the Expiration Date. (iv) my engaging in any of the following conduct: (1) an act of fraud or dishonesty that materially harms the Company or its affiliates. 9 (2) a felony or any violation of any federal or state securities law or my being enjoined from violating any federal or state securities law or being determined to have violated any such law. (3) willful or reckless misconduct or gross negligence in connection with any property or activity of the Company and its subsidiaries and affiliates, and successors (Group). (4) repeated and intemperate use of alcohol or illegal drugs after written notice from the Board. (5) material breach of any of my obligations under this Agreement (other than by reason of physical or mental illness, injury, or condition), but only after I have been given written notice by the Board of the breach and at least 30 days to cure. (6) becoming barred or prohibited by the SEC from holding my position with the Company. In the event I have tendered my resignation, the Company may not then or thereafter terminate me for Cause. (c) TERMINATION FOR DISABILITY. Except as prohibited by applicable law, the Company may terminate this Agreement on account of Disability, or may transfer me to inactive employment status, which shall have the same effect under this Agreement as a termination for Disability. "Disability" means a physical or mental illness, injury, or condition that prevents me from performing substantially all of my duties under this Agreement for at least 90 consecutive calendar days or for at least 120 calendar days, whether or not consecutive, in any 365 calendar day period. (d) DISCHARGE WITHOUT CAUSE. The Board may terminate my employment at any time without cause by providing me with 30 days advance written notice for any reason. If I am terminated by the Company other than for Cause under Section 5(b) or for Disability under Section 5(c), I will only receive the special benefits provided under the applicable provisions of Section 5(a) if I sign a mutual release form, subject to negotiation as provided below, within 30 days after I receive the release from the Company and before asserting any claims covered by the release against the Company other than claims pertaining to (i) my right to severance benefits, (ii) the Company's continuing indemnification obligations to me under Section 4, and (iii) claims for defamation, slander and/or libel. The Company shall furnish the release to me at my termination. Subject to the exceptions in clauses (i) through (iii) of the second preceding sentence, the parties shall in good faith negotiate the final form of such release, but it shall include any provision customary in formal settlement agreements and general releases, including such things as the Company's release of all claims against me other than my continuing obligations under Section 5(i) and the claims that the Company has 10 asserted no later than 30 days after my termination of employment, my release of the Company and all conceivably related persons or entities (affiliates) from all known and unknown claims, my covenant never in the future to pursue any released claim, my promise never seek employment with the Company or any affiliate in the future, but not including any provision that expands my obligations to the Company under Section 5(i). The Company and I acknowledge that the severance benefits for which the release is required are intended to effect my peaceful transition from the Company. If I choose not to sign the release, I shall have the right to pursue any claims I may have, but I shall not be eligible to receive the severance benefits that I would have otherwise received had I signed this release. (e) RESIGNATION FOR GOOD REASON. I may resign my employment for Good Reason, which shall mean the occurrence of any of the following without my express written consent: (i) Relocation of my primary office location more than 50 miles from the current location, as set forth in section 3; (ii) Any change in my reporting relationship as set forth in section 2; (iii) Any diminution in title, or material diminution in overall compensation or duties; (iv) Material failure by the Company to keep any promise or make any payment provided herein; (v) Change in Control as defined in Section 7 below; (vi) Any transfer to any subsidiary or affiliate or other change that removes me from the position of Chief Executive and President of the parent company; (vii) Failure by the Company to continue, or continue my participation in, any compensation or benefit plan in which I participate or am entitled to participate that materially affects my total compensation, unless an equivalent substitute is adopted or made available on a basis not less favorable to me and my spouse; However, an event that is or would constitute Good Reason shall cease to be Good Reason if: (i) I do not provide the Company with written notice of my intent to terminate my employment due to an event that would constitute Good Reason within the earlier of 30 days after the occurrence of such event or 30 days after I am officially notified or it is officially announced that the Company will take any actions that would constitute Good Reason to resign, (ii) the Company reverses the action or cures the default that constitutes Good Reason within 30 days after receiving such written notice, 11 (iii) I do not terminate employment within 60 days after the event occurs, (iv) I am a primary instigator of the Good Reason event other than a Change in Control and the circumstances make it inappropriate for me to receive benefits under this Agreement (e.g., I initiate a relocation of the Company's headquarters); or (v) if the company in good faith temporarily suspends me for no more than 30 days (with full pay) to investigate any suspected wrongdoing that, if substantiated, would give the Company reason to terminate me for Cause. (f) RESIGNATION OTHER THAN FOR GOOD REASON. I may terminate my employment hereunder at any time without good reason upon providing the Company with 30 days written notice of my intention to do so, but the Company shall be entitled to accept my resignation as of any earlier date and my termination, in such event, I shall only be eligible to receive the benefits in Section 5(a) under the subsection "Resignation Without Good Reason." Notwithstanding anything to the contrary in this Agreement or any other document, restricted stock, options and all other incentive compensation shall cease vesting when I give such notice. (g) DEATH. If I die while employed under this Agreement, the payments required by Section 5(a) in the event of my death shall be made. (h) AMOUNTS OWED TO THE COMPANY. Any amounts payable to me under this section shall first be applied to repay any liquidated amounts I owe the Company (i.e., personal expenses on my credit card). (i) NO FURTHER OBLIGATIONS. The Company and I shall have no further obligations to each other, except the Company's ongoing indemnification obligation under Section 4, my confidentiality, etc. obligations under Section 6, and our mutual arbitration obligations under Section 8, or as set forth in any written agreement I subsequently enter into with the Company. 6. CONFIDENTIALITY. I acknowledge that I currently possess or will acquire secret, confidential, or proprietary information or trade secrets concerning the operations, future plans, customers or business methods of the Group (Confidential Information). (a) PROMISE NOT TO DISCLOSE. I promise never to use or disclose any Confidential Information before it has become generally known within the relevant industry through no fault of my own. I agree that this promise shall never expire. (b) PROMISE NOT TO SOLICIT. I further agree that, while this Agreement is in effect and for 6 months after termination, I will not solicit or attempt to solicit (or assist others to solicit) for employment any person who is, or within the preceding 6 months was, an officer, manager, or employee of the Group. 12 (c) PROMISE NOT TO ENGAGE IN CERTAIN EMPLOYMENT. I agree that, while this Agreement is in effect and for 6 months after termination, I will not accept any employment or engage in any activity, without the written consent of the Chairman of the Board if the loyal and complete fulfillment of my duties would inevitably require me to reveal or utilize Confidential Information, as reasonably determined by the Chairman of the Board. (d) RETURN OF INFORMATION. When my employment with the Company ends, I will promptly deliver to the Company, or, at its written instruction, destroy, all documents, data, drawings, manuals, letters, notes, reports, electronic mail, recordings, and copies thereof, of or pertaining to it or any other Group member in my possession or control. In addition, during my employment with the Company or the Group and thereafter, I agree to meet with Company personnel and, based on knowledge or insights I gained during my employment with the Company and the Group, answer any question they may have related to the Company or the Group. The Company shall pay me for attending such meetings at a rate not less than the hourly equivalent of my base salary, plus reimbursement of reasonable expenses in accordance with the Company's reimbursement policy for senior executives. (e) PROMISE TO DISCUSS PROPOSED ACTIONS IN ADVANCE. I promise that, before I disclose or use Confidential Information and before I commence employment, solicitations, or any other activity that could possibly violate the promises I have just made, I will discuss my proposed actions with the Chairman of the Board, who will advise me in writing whether my proposed actions would violate these promises. (f) INTELLECTUAL PROPERTY. Intellectual property (including such things as all inventions, plans, developments, software, data, configurations, materials (whether written or machine-readable), designs, drawings, illustrations, and photographs, that may be protectable, in whole or in part, under any patent, copyright, trademark, trade secret, or other intellectual property law), developed, created, conceived, made, or reduced to practice during my Company employment (except intellectual property that has no relation to the Group or any Group customer that I developed, purely on my own time and at my own expense), shall be the sole and exclusive property of the Company, and I hereby assign all my rights, title, and interest in any such intellectual property to the Company. 7. CHANGE IN CONTROL. (i) EVENTS TRIGGERING CHANGE IN CONTROL. Change in Control shall mean the first of the following to occur after the date of this Agreement, excluding any event that is Management Action, and, if I have not yet become entitled to severance benefits under Section 7, excluding any event that is subsequently rescinded, revoked, abandoned, or enjoined: 13 (1) Acquisition of Controlling Interest. Any Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 51 percent or more of the combined voting power of the Company's then outstanding securities, except that a voting agreement or other voting activity shall not make the Person a Beneficial Owner unless the voting activity in question is intended to accomplish a Change in Control under Sections 7(d)(i)(2), (3), or (4). In applying the preceding sentence, securities acquired directly from the Company or its affiliates by or for the Person shall not be taken into account. (2) Change in Board Control. During a consecutive 2-year period commencing after the date of this Agreement, individuals who constituted the Board at the beginning of the period cease for any reason to constitute a majority of the Board. A new director shall be considered an "approved replacement" director if his or her election (or nomination for election) was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or were themselves approved replacement directors. (3) Merger Approved. The shareholders of the Company approve a merger or consolidation of the Company with any other corporation unless: (a) the voting securities of the Company outstanding immediately before the merger or consolidation would continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 51 percent of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation. (4) Sale of Assets. The shareholders of the Company approve an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets in a transaction or series of transactions to an entity that is not owned, directly or indirectly, by the Company's Common Stock shareholders in substantially the same proportions as the owners of the Company's Common Stock before such transaction or series of transactions. Notwithstanding the foregoing, a Change in Control shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of Common Stock immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions. (b) CERTAIN DEFINITIONS. (i) "Beneficial Owner" has the meaning set forth in Rule 13d-3 under the Securities Exchange Act of 1934, as amended." 14 (ii) Management Action" means any event, circumstance, or transaction that results from the action of the Management Group. (iii) "Management Group" means any entity or group that includes, is affiliated with, or is wholly or partly controlled by one or more executive officers of the Company. (iv) "Person" has the meaning given in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended, and as modified and used in Section 13(d) of that Act, and shall include a "group," as defined in Rule 13d-5 promulgated thereunder. However, a Person shall not include: (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, (iv) Oaktree Capital Management, LLC, (v) the Blackstone Group, or (vi) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. 8. NOTICE. (a) TO THE COMPANY. I will send all communications required by this Agreement to the Company in writing by hand delivery or overnight, both requiring signature acknowledging receipt, addressed as follows: If Mailed or Faxed Lodgian Inc. Attention: Daniel Ellis, Senior Vice President and General Counsel 3445 Peachtree Road NE, Suite 700 Atlanta, Georgia 30326 With a copy to Lodgian Inc. Attention: Chairman of the Board 3445 Peachtree Road NE, Suite 700 Atlanta, Georgia 30326 (b) TO ME. All communications required by this Agreement from the Company to me relating to this Agreement must be sent to me in writing by hand delivery or overnight, both requiring my signature acknowledging receipt at 3286 Northside Parkway, Apartment 801, Atlanta, Georgia, 30327; with a copy to Nancy E. Rafuse at Ashe & Rafuse, LLP, 1355 Peachtree Street, Suite 500, Atlanta, Georgia 30309, also by hand delivery or overnight, requiring signature acknowledging receipt by her or her representative. 15 (c) TIME NOTICE DEEMED GIVEN. Written notice as required by this Agreement shall be deemed to have been given to either party when signed by such party or its representative acknowledging receipt. 9. ARBITRATION OF DISPUTES. All disputes between the Company and me are to be resolved by final and binding arbitration in accordance with the separate Arbitration Agreement attached as Schedule 1 to this Agreement. This section shall remain in effect after the termination of this Agreement. 10. GOLDEN PARACHUTE LIMITATION. I agree that my payments and benefits under this Agreement and all other contracts, arrangements, or programs shall not, in the aggregate, exceed the maximum amount that may be paid to me without triggering golden parachute penalties under Section 280G and related provisions of the Internal Revenue Code, as determined in good faith by the Company's independent auditors. If any benefits must be cut back to avoid triggering such penalties, my benefits shall be cut back in the priority order designated by the Company but in no event may the payment in Section 4(a) be reduced. Any payment cut back must still be paid, but may be paid over the shortest period of time or in a method so as not to trigger golden parachute penalties. The Company and I agree to cooperate with each other in connection with any administrative or judicial proceedings concerning the existence or amount of golden parachute penalties with respect to payments or benefits I receive. 11. AMENDMENT. No provisions of this Agreement may be modified, waived, or discharged except by a written document signed by the Chairman of the Board and me. Thus, for example, promotions, commendations, and/or bonuses shall not, by themselves, modify, amend, or extend this Agreement. A waiver of any conditions or provisions of this Agreement in a given instance shall not be deemed a waiver of such conditions or provisions at any other time. 12. INTERPRETATION; EXCLUSIVE FORUM. The validity, interpretation, construction, and performance of this Agreement shall be governed by the laws of the state of Georgia (excluding any that mandate the use of another jurisdiction's laws). Any litigation, arbitration, or similar proceeding with respect to such matters only may be brought within that state, and all parties to this Agreement consent to that state's jurisdiction and agree that venue anywhere in that state would be proper. 13. SUCCESSORS. This Agreement shall be binding upon, and shall inure to the benefit of, me and my estate, but I may not assign or pledge this Agreement or any rights arising under it, except to the extent permitted under the terms of the benefit plans in which I participate. Without my consent, the Company may not assign this Agreement to a successor that agrees in writing to be bound by this Agreement, after which any reference to the "Company" in this Agreement shall be deemed to be a reference to the successor. Thereafter, the Company shall have no further primary, secondary or other responsibilities or liabilities under this Agreement of any kind. 16 14. TAXES. The Company shall withhold taxes from payments it makes pursuant to this Agreement as it determines to be required by applicable law. 15. VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 16. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute the same instrument. 17. ENTIRE AGREEMENT. All oral or written agreements or representations, express or implied, with respect to the subject matter of this Agreement are set forth in this Agreement. However, this Agreement does not override other written agreements I have executed relating to specific aspects of my employment, such as conflicts of interest. 18. FORMER EMPLOYERS. I am not subject to any employment, confidentiality, or other agreement or restriction that would prevent me from fully satisfying my duties under this Agreement or that would be violated if I did so. Without the Company's prior written approval, I promise I will not disclose proprietary information belonging to a former employer or other entity without its written permission. I will indemnify and hold the Company harmless from any liabilities, including defense costs, it may incur because I am alleged to have broken the promises in this section 18 or improperly revealed or used proprietary information of a former employer without its permission, or if a former employer challenges my entering into this Agreement or rendering services pursuant to it. 17 I ACKNOWLEDGE THAT ALL UNDERSTANDINGS AND AGREEMENTS BETWEEN THE COMPANY AND ME RELATING TO THE SUBJECTS COVERED IN THIS AGREEMENT ARE CONTAINED IN IT AND THAT I HAVE ENTERED INTO THIS AGREEMENT VOLUNTARILY AND NOT IN RELIANCE ON ANY PROMISES OR REPRESENTATIONS BY THE COMPANY OTHER THAN THOSE CONTAINED IN THIS AGREEMENT ITSELF. I FURTHER ACKNOWLEDGE THAT I HAVE CAREFULLY READ THIS AGREEMENT, THAT I UNDERSTAND ALL OF IT, AND THAT I HAVE BEEN GIVEN THE OPPORTUNITY TO DISCUSS THIS AGREEMENT WITH MY PRIVATE LEGAL COUNSEL AND HAVE AVAILED MYSELF OF THAT OPPORTUNITY TO THE EXTENT I WISHED TO DO SO. I UNDERSTAND THAT BY SIGNING THIS AGREEMENT I AM GIVING UP MY RIGHT TO A JURY TRIAL. Date: December 18, 2003 Lodgian, Inc. By: /s/ Daniel E. Ellis ------------------------------- Name: Daniel E. Ellis -------------------------- Title: Senior Vice President and -------------------------- General Counsel -------------------------- Date: December 18, 2003 /s/ W. Thomas Parrington ----------------------------------- W. Thomas Parrington 18 EX-10.13.1 36 g87458exv10w13w1.txt EX-10.13.1 DISCLOSURE STATEMENT FOR JOINT PLAN EXHIBIT 10.13.1 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 - --------------------------------- DISCLOSURE STATEMENT FOR JOINT PLAN OF REORGANIZATION OF IMPAC HOTELS II, L.L.C. AND IMPAC HOTELS III, L.L.C. TOGETHER WITH THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE This is not a solicitation of acceptances or rejections of the Impac Debtors' Joint Plan of Reorganization under chapter 11 of the Bankruptcy Code, which is annexed as Exhibit B to the Impac Disclosure Statement (the "Impac Plan"). Acceptances or rejections with respect to the Impac Plan may not be solicited until a disclosure statement has been approved by the United States Bankruptcy Court for the Southern District of New York. The Impac Disclosure Statement is being submitted for approval, but has not yet been approved, by the Bankruptcy Court. Any such approval by the Bankruptcy Court of the Impac Disclosure Statement as containing "adequate information" will not constitute endorsement of the Impac Plan. Information contained in the Impac Disclosure Statement is subject to completion or amendment. CADWALADER, WICKERSHAM CURTIS, MALLET-PREVOST, COLT & TAFT LLP & MOSLE LLP Attorneys for the Debtors and Co-Attorneys for the Debtors and Debtors-In-Possession Debtors-In-Possession 100 Maiden Lane 101 Park Avenue New York, New York 10038 New York, New York 10178 (212) 504-6000 (212) 696-6000 DEBEVOISE & PLIMPTON Attorneys for the Official Committee of Unsecured Creditors 919 Third Avenue New York, New York 10022 (212) 909-6000 Dated: As of March 3, 2003 THE DEADLINE BY WHICH EACH HOLDER OF AN IMPAIRED CLAIM MUST CAST A PROPERLY COMPLETED AND DELIVERED BALLOT FOR ITS VOTE TO ACCEPT OR REJECT THE IMPAC PLAN TO BE COUNTED IS APRIL 17, 2003, AT 5:00 P.M. (PACIFIC TIME), UNLESS EXTENDED. IMPORTANT NOTICE The Impac Disclosure Statement and its related documents are the only documents authorized by the Bankruptcy Court to be used in connection with the solicitation of votes to accept the Impac Plan. No representations have been authorized by the Bankruptcy Court concerning the Impac Debtors, their business operations or the value of their assets, except as explicitly set forth herein. Please refer to the Glossary and the Impac Plan for definitions of the capitalized terms used but not defined in the Impac Disclosure Statement. The Impac Debtors reserve the right to file an amended Impac Plan and Impac Disclosure Statement from time to time. The Impac Debtors urge you to read the Impac Disclosure Statement carefully for a discussion of voting instructions, recovery information, Classification of Claims and Equity Interests, the history of the Impac Debtors and the Impac Debtors' Chapter 11 cases, the Impac Debtors' businesses, properties and results of operations, historical and projected financial results and a summary and analysis of the Impac Plan. The Impac Debtors also have attached the Lodgian Disclosure Statement (as defined in section V.A.2), annexed hereto as Exhibit A, for further information regarding the history and businesses of the Lodgian Group. The Impac Disclosure Statement contains only a summary of the Impac Plan. The Impac Disclosure Statement is not intended to replace the careful and detailed review and analysis of the Impac Plan, only to aid and supplement such review. The Impac Disclosure Statement is qualified in its entirety by reference to the Impac Plan, the Plan Supplement and the exhibits attached thereto and the agreements and documents described therein. If there is a conflict between the Impac Plan and the Impac Disclosure Statement, the provisions of the Impac Plan will govern. You are encouraged to review the full text of the Impac Plan and Plan Supplement and to read carefully the entire Impac Disclosure Statement, including all exhibits, before deciding how to vote with respect to the Impac Plan. Except as otherwise indicated, the statements in the Impac Disclosure Statement are made as of the date indicated on the cover and the delivery of the Impac Disclosure Statement will not imply that the information contained in the Impac Disclosure Statement is correct at any time after that date. Estimates of Claims in the Impac Disclosure Statement may vary from the final amounts of Claims allowed by the Bankruptcy Court. You should not construe the Impac Disclosure Statement as providing any legal, business, financial or tax advice. You should, therefore, consult with your own legal, business, financial or tax advisors as to any such matters in connection with the Impac Plan, the solicitation of votes on the Impac Plan and the transactions contemplated by the Impac Plan. As to any contested matters, adversary proceedings or other actions or threatened actions, the Impac Disclosure Statement is not, and is in no event to be construed as, an admission or stipulation. Instead, the Impac Disclosure Statement is, and is for all purposes to be construed as, solely and exclusively a statement made in settlement negotiations. The settlements and compromises described in the Impac Plan and the Impac Disclosure Statement remain subject to ongoing negotiations with the respective parties. FORWARD-LOOKING INFORMATION The Impac Disclosure Statement includes forward-looking statements based largely on the Impac Debtors' current expectations and projections about future events and financial trends affecting the financial condition of the Impac Debtors' or the Reorganized Impac Debtors' businesses. These include management's expectations with respect to the Impac Debtors' Chapter 11 cases, statements that describe anticipated revenues, capital expenditures and other financial items, statements that describe the Reorganized Impac Debtors' business plans and objectives, and statements that describe the expected impact of competition, government regulation, litigation and other factors on the Reorganized Impac Debtors' 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. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in section VIII, "Risk Factors," of the Impac Disclosure Statement. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in the Impac Disclosure Statement may not occur and actual results could differ materially from those anticipated in the forward-looking statements. None of the Impac Debtors, the Reorganized Impac Debtors nor any other person undertakes any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. TABLE OF CONTENTS
PAGE # I. INTRODUCTION............................................................. 4 II. TREATMENT OF CREDITORS AND SHAREHOLDERS UNDER THE IMPAC PLAN............ 7 A. New Capital Structure of the Reorganized Impac Debtors.......... 7 B. Summary of Classification and Treatment......................... 8 C. Description of the Classes...................................... 10 1. CCA Secured Claim (Class 1-A)................................. 10 2. Miscellaneous Secured Claims (Class 1-B)...................... 10 3. Priority Non-Tax Claims (Class 2)............................. 11 4. General Unsecured Claims (Class 3)............................ 11 5. Convenience Claims (Class 5).................................. 12 6. Equity Interests (Class 9).................................... 12 7. Subordinated Claims (Class 11)................................ 12 D. Administrative Expenses of the Impac Debtors.................... 13 E. Reservation of "Cram Down" Rights............................... 14 III. VOTING PROCEDURES AND REQUIREMENTS..................................... 14 A. Vote Required for Acceptance by a Class......................... 14 B. Voting.......................................................... 15 IV. FINANCIAL INFORMATION AND PROJECTIONS................................... 15 A. Operating Performance........................................... 16 B. Three-Year Projections of the Reorganized Impac Debtors......... 16 V. BUSINESS DESCRIPTION AND SALIENT EVENTS DURING REORGANIZATION............ 17 A. Historical Background........................................... 17 1. Background to the Chapter 11 Filings.......................... 17 2. Confirmation of the Lodgian Plan.............................. 18 3. Significant Events Concerning the Impac Debtors............... 18 VI. GOVERNANCE OF THE REORGANIZED IMPAC DEBTORS............................. 22 A. Boards of Directors of the Reorganized Impac Debtors............ 22 B. Senior Management of the Reorganized Impac Debtors.............. 22 VII. OTHER ASPECTS OF THE IMPAC PLAN........................................ 22 A. Distributions Under the Impac Plan.............................. 22 1. Disbursing Agent.............................................. 22 2. Timing and Conditions of Distributions........................ 23 3. Procedures for Treating Disputed Claims Under the Impac Plan.. 23 B. Treatment of Executory Contracts and Unexpired Leases........... 25 1. Contracts and Leases Not Expressly Assumed Are Rejected....... 25 2. Cure of Defaults.............................................. 25 3. Rejection Claims.............................................. 25 4. Franchise Agreements.......................................... 25
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PAGE # C. Effect of Confirmation.......................................... 26 1. Discharge of Claims........................................... 26 2. Indemnification............................................... 26 D. Miscellaneous Provisions........................................ 26 VIII. RISK FACTORS.......................................................... 26 A. Certain Bankruptcy Considerations............................... 27 1. General Risks Relating to Confirmation and Consummation....... 27 2. Matters Affecting Recoveries.................................. 27 3. of Franchise Agreements....................................... 27 4. No Assurance of Feasibility................................... 28 B. Financing Risks................................................. 29 1. Post-Reorganization Obligations............................... 29 2. Limited Access to Working Capital............................. 29 C. Risks Associated with the Businesses............................ 29 IX. CONFIRMATION OF THE IMPAC PLAN.......................................... 30 A. Confirmation Hearing............................................ 31 B. General Requirements of Section 1129............................ 31 C. Best Interests Tests............................................ 32 D. Liquidation Analysis............................................ 33 E. Feasibility..................................................... 34 F. Section 1129(b)................................................. 34 1. No Unfair Discrimination...................................... 34 2. Fair and Equitable Test....................................... 34 X. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE IMPAC PLAN................ 35 A. Consequences to Holders of General Unsecured Claims............. 36 B. Distributions in Discharge of Accrued Interest.................. 36 C. Market Discount................................................. 37 D. Information Reporting and Withholding........................... 37 XI. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE IMPAC PLAN......... 37 A. Liquidation Under Chapter 11.................................... 37 B. Alternative Plan(s)............................................. 38 XII. CONCLUSION............................................................. 38
-ii- EXHIBITS Exhibit A Lodgian Disclosure Statement Exhibit B Impac Debtors' Joint Plan of Reorganization Exhibit C Projections -iii- GLOSSARY The terms in the following table are used in the Impac Disclosure Statement and, in most cases, the Impac Plan. The definitions given below of terms used in the Impac Plan are summaries. Please refer to the Impac Plan for the complete definitions of those terms and other defined terms used throughout the Impac Disclosure Statement. Unless otherwise specified, all section references in the Impac Disclosure Statement refer to sections of the Impac Disclosure Statement. Administrative Expense Claim Any expense relating to the administration of an Impac Debtor's Chapter 11 Case, including actual and necessary costs and expenses of preserving the respective Impac Debtor's estate and operating the Impac Debtor's businesses, any indebtedness or obligations incurred or assumed during the applicable Chapter 11 Case, allowances for compensation and reimbursement of expenses to the extent allowed by the Bankruptcy Court, and certain statutory fees chargeable against the Impac Debtors' estates. Allowed Claim or Equity Interest A Claim against, or Equity Interest in, an Impac Debtor which the Impac Debtor agrees, or in the event of a dispute, which the Bankruptcy Court determines pursuant to a Final Order, to be a valid obligation of the Impac Debtor in the amount so agreed or determined. Allowed Tax Claim Any Allowed Claim of a governmental unit of the kind entitled to priority in payment as specified in sections 502(i) and 507(a)(8) of the Bankruptcy Code. Bankruptcy Code Title 11 of the United States Code, as amended. Bankruptcy Court The United States Bankruptcy Court for the Southern District of New York. Bar Date June 3, 2002, which is the date fixed by the Bankruptcy Court as the last date upon which proofs of Claim and Equity Interests can be filed against the Impac Debtors' estates. Cash Legal tender of the United States of America. CCA The Capital Company of America LLC. CCA Secured Claim The Claim by CCA, as agreed to by the Impac Debtors and CCA under the Settlement Agreement. Claim Either (i) any right to payment from any of the Impac Debtors, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, known or unknown, or (ii) any right to an equitable remedy for breach of performance if such breach gives rise to a right of payment from any of the Impac Debtors, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured, known or unknown. Commencement Date The date the Impac Debtors' Chapter 11 cases were commenced was December 20, 2001. Committee The Official Committee of General Unsecured Creditors appointed in the jointly administered Chapter 11 cases of Lodgian and its debtor-subsidiaries, including the Impac Debtors. Disputed Claim A Claim that is not an Allowed Claim. Effective Date A business day selected by the Plan Proponents on or after the date of confirmation of the Impac Plan, on which all conditions to the effectiveness of the Impac Plan have been satisfied or waived and there is no stay of the order confirming the Impac Plan. The Plan Proponents may select different Effective Dates for each of the Impac Debtors. Equity Interest The rights of a holder of an Impac Debtor's capital stock, membership or partnership interests, or similar ownership interests, including any right to acquire such an interest. Exit Financing Borrowers The newly formed special purpose entities to be named as the borrowers under the Exit Financing Facility. Exit Financing Facility The financing agreements to be entered into on the Effective Date among a lender (as discussed in section V.A.3(b)), and the Exit Financing Borrowers. Final Order An order or judgment of the Bankruptcy Court entered by the Clerk of the Bankruptcy Court on the docket in the Chapter 11 Cases, which has not been reversed, vacated or stayed and as to which (i) the time to appeal, petition for certiorari or move for a new trial, reargument or rehearing has expired and as to which no appeal, petition for certiorari or other proceedings for a new trial, reargument or rehearing shall then be pending, or (ii) if an appeal, writ of certiorari, new trial, reargument or rehearing thereof has been sought, such order or judgment of the Bankruptcy Court shall have been affirmed by the highest court to which such order was appealed, or certiorari shall have been denied, or a new trial, reargument or rehearing shall have been denied or resulted in no modification of such order, and the time to take any further appeal, petition for certiorari or move for a new trial, reargument or rehearing shall have expired; provided, however, that the possibility that a motion under Rule 60 of the Federal Rules of Civil Procedure, or any analogous rule under the Bankruptcy Rules, may be filed relating to such order shall not cause such order to not be a Final Order. -2- General Unsecured Claim Any Claim against the applicable Impac Debtor that (i) is not an Administrative Expense Claim, a Priority Tax Claim, a Secured Claim, a Priority Non-Tax Claim, or a Subordinated Claim, or (ii) is otherwise determined by the Bankruptcy Court to be a General Unsecured Claim. Impac Debtors IMPAC Hotels II, L.L.C. and IMPAC Hotels III, L.L.C., as debtors and debtors-in-possession in Chapter 11 cases 01-16367 and 01-16375, respectively. Impac Disclosure Statement This document together with the annexed exhibits. Impac Hotel Properties As applicable, the respective interests of the Impac Debtors in the hotel properties (including leasehold interests) described in section V.A.3. Impac Plan The Impac Debtors' Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, annexed as Exhibit B to the Impac Disclosure Statement. Inter-Company Claims Any General Unsecured Claim held by the Impac Debtors or a member of the Lodgian Group (as is defined in section V.A.3 of the Impac Disclosure Statement) against the other, as well as any General Unsecured Claim held by one of the Impac Debtors against the other Impac Debtor. Lodgian Lodgian, Inc. Plan Proponents The Impac Debtors and the Committee. Plan Supplement A supplemental appendix to the Impac Plan that will contain: (i) the draft form of the Plan Documents to be entered into as of the Effective Date and (ii) the Schedule of Assumed Contracts as of the date of the Plan Supplement, to be filed seven (7) days before the date of the Confirmation Hearing. Projections The projections in the Impac Disclosure Statement, included in Exhibit C. Reinstated Equity Security The Equity Interests in the Impac Debtors as reinstated pursuant to the Impac Plan. Reorganized Impac Debtors The Impac Debtors as reorganized as of the Effective Date in accordance with the Impac Plan. Settlement Agreement The agreement approved by the Bankruptcy Court on October 31, 2002, which, inter alia, permits the Impac Debtors to fully discharge the CCA Secured Claim. Settlement Amount The amount for which the CCA Secured Claim can be fully discharged, in accordance with the Settlement Agreement. Subclass A subclass of a Class of Claims established pursuant to Section 3 of the Impac Plan. -3- I. INTRODUCTION The Plan Proponents are soliciting votes to accept or reject the Impac Plan. The overall purpose of the Impac Plan is to provide for the restructuring of the Impac Debtors' liabilities in a manner designed to maximize recoveries to all stakeholders and avoid liquidation or turnover of the Impac Hotel Properties. The Impac Plan provides for the continued operation of the Reorganized Impac Debtors. A copy of the Impac Plan is attached as Exhibit B to the Impac Disclosure Statement. Please refer to the Glossary, as well as the Impac Plan for definitions of terms used but not defined in the Impac Disclosure Statement. Although the Impac Plan is proposed as a joint plan of reorganization of the Impac Debtors, the Impac Plan is a separate plan for each Impac Debtor. As such, the Impac Plan does not provide for substantive consolidation of the assets or liabilities of the Impac Debtors. The purpose of the Impac Disclosure Statement is to provide sufficient information to enable the creditors of each Impac Debtor that are entitled to vote to make an informed decision on whether to accept or reject the Impac Plan. The Impac Disclosure Statement describes: O the new capital structures of the Reorganized Impac Debtors and how the holders of Allowed Claims and Equity Interests are treated (section II); O how to vote on the Impac Plan and who is entitled to vote (section III); O certain financial information about the Impac Debtors, including three-year consolidated cash flow projections of the Reorganized Impac Debtors (section IV); O the businesses of the Impac Debtors, the events that led to the commencement of their Chapter 11 cases and significant events that have occurred in the Chapter 11 cases (section V); O how the Reorganized Impac Debtors will be governed when the Impac Plan becomes effective (section VI); O how distributions under the Impac Plan will be made and the manner in which Disputed Claims will be resolved (section VII.A); O certain factors that creditors should consider before voting (section VIII); O the procedure and requirements for confirming the Impac Plan (section IX); O certain federal income tax consequences of confirmation of the Impac Plan (section X); and O alternatives to the Impac Plan (section XI). -4- Additional financial information, such as historical profit and loss statements, can be found in the Projections located in Exhibit C of the Impac Disclosure Statement. Financial information about Lodgian can be found in the periodic reports of Lodgian, filed with the Securities and Exchange Commission, including: Lodgian's annual report on Form 10-K for the fiscal year ended December 31, 2001, and quarterly reports on Form 10-Q for the fiscal quarters ended March 31, 2002, June 30, 2002, and September 30, 2002. The December 31, 2002 Form 10-K will be filed on or before March 31, 2003. Copies of these filings may be obtained on the Internet at www.sec.gov or www.freeedgar.com. The Plan Supplement will contain material documents to be entered into in connection with the implementation of the Impac Plan, including, among others, organizational documents of the Reorganized Impac Debtors. The Impac Disclosure Statement, the attached exhibits, the Impac Plan and the Plan Supplement are the only materials that you should use in determining whether to vote to accept or reject the Impac Plan. The summaries of the Impac Plan and other documents related to the restructuring of the Impac Debtors are qualified in their entirety by the Impac Plan, its exhibits, and the documents and exhibits contained in the Plan Supplement. -------------------------------------------------------------------- ENTITLEMENT TO VOTE ON THE IMPAC PLAN O Classes 1-B, 3 and 5 are impaired under the Impac Plan and are entitled to vote under the Impac Plan. O Classes 1-A, 2, and 9 are unimpaired under the Impac Plan, are deemed to have accepted the Impac Plan and will not be entitled to vote on the Impac Plan. O Class 11 will not receive any distribution under the Impac Plan, is deemed to have rejected the Impac Plan and will not be entitled to vote on the Impac Plan. See section II.B for a description of the Classes of Claims and Equity Interests and their treatment under the Impac Plan. (1) -------------------------------------------------------------------- The Bankruptcy Code provides that only Claims actually voted will be counted for purposes of determining whether the requisite acceptances of the Impac Plan are received. Failure to timely deliver a properly completed ballot with respect to any Claim entitled to vote will constitute an abstention and that Claim will not be counted for the purpose of approving the Impac Plan. - ---------- (1) The Impac Plan is based upon the confirmed Joint Plan of Reorganization of Lodgian, Inc., et al., and provisions that do not apply to the Impac Debtors were intentionally omitted. Consequently, the numbering of the classes in the Impac Plan is not consecutive. -5- -------------------------------------------------------------------- VOTING DEADLINE AND RECORD DATE THE LAST DAY TO VOTE TO ACCEPT OR REJECT THE IMPAC PLAN IS APRIL 17, 2003. ALL VOTES MUST BE RECEIVED BY THE VOTING AGENT BY 5:00 P.M. (PACIFIC TIME) ON THAT DAY. THE RECORD DATE FOR DETERMINING WHICH CREDITORS MAY VOTE ON THE IMPAC PLAN IS MARCH 20, 2003. -------------------------------------------------------------------- The Impac Plan is based on extensive negotiations with holders of the various Claims against the Impac Debtors. Importantly, the Impac Plan (and the Exit Financing Facility providing the means for its implementation) enables the Impac Debtors to reorganize their businesses and avoid liquidation, pursuant to the Impac Debtors' rights as previously negotiated in the Settlement Agreement. The Plan Proponents believe that approval of the Impac Plan provides the best opportunity for each Impac Debtor to avoid an immediate liquidation and emerge from Chapter 11, returning its business to profitability. The Committee fully supports, and is a co-proponent of, the Impac Plan. The Committee, which is the single committee of unsecured creditors appointed in the jointly administered chapter 11 cases of Lodgian and its debtor-subsidiaries, including the Impac Debtors, does not include creditors of the Impac Debtors. The majority of the Committee presently holds equity interests of Lodgian, which they received as pre-petition creditors of Lodgian and its debtor-subsidiaries (other than the Impac Debtors) pursuant to the previously confirmed plan of reorganization of those entities. However, as discussed elsewhere in this Impac Disclosure Statement, the Committee and its professionals participated fully in the negotiation of the Settlement Agreement which was heavily negotiated prior to confirmation of the Confirmed Debtors' plan of reorganization and the conversion of the Committee members' allowed claims to equity interests of reorganized Lodgian under that chapter 11 plan. -------------------------------------------------------------------- VOTING RECOMMENDATIONS The Plan Proponents believe that confirmation of the Impac Plan is the best opportunity for creditors and Equity Interest holders of the respective Impac Debtors to avoid an immediate liquidation and maximize their recoveries and for the on-going business operations of the Impac Debtors. Each of the Impac Debtors encourages its creditors entitled to vote to accept the Impac Plan. -------------------------------------------------------------------- -6- Please contact the Voting Agent with any questions relating to voting on the Impac Plan. Additional copies of the Impac Disclosure Statement and, when filed, copies of the Plan Supplement are available upon request made to the Voting Agent, at the following address: ---------------------------------------------------------------------------- IF BY OVERNIGHT OR HAND DELIVERY: IF BY STANDARD MAILING: POORMAN-DOUGLAS CORPORATION POORMAN-DOUGLAS CORPORATION 10300 S.W. ALLEN BOULEVARD P.O. BOX 4230 BEAVERTON, OREGON 97005 PORTLAND, OREGON 97208-4230 ATTN: LODGIAN/IMPAC ATTN: LODGIAN/IMPAC BALLOTING CENTER BALLOTING CENTER ---------------------------------------------------------------------------- II. TREATMENT OF CREDITORS AND SHAREHOLDERS UNDER THE IMPAC PLAN The Impac Plan governs the treatment of Claims against and Equity Interests in the Impac Debtors. This section summarizes the new capital structures of the Reorganized Impac Debtors, describes the Claims and Equity Interests in each Class established under the Impac Plan and summarizes the treatment of each Class. A. NEW CAPITAL STRUCTURE OF THE REORGANIZED IMPAC DEBTORS The Impac Plan provides for the continued operation of the Reorganized Impac Debtors, which through their newly formed subsidiaries (the Exit Financing Borrowers), will continue in operation if the Impac Plan is confirmed. In order to maximize the value of the business of the Reorganized Impac Debtors, by virtue of the reorganization, the Reinstated Equity Securities of the Reorganized Impac Debtors will be left unimpaired and will continue to be one hundred percent (100%) directly or indirectly owned by Lodgian, in exchange for substantial contributions of new value. The new value contributions will consist of certain InterCompany Claims at approximately $32.7 million, which will be contributed as equity under the Impac Plan and will not receive a creditor distribution. Further material contributions consist of Cash to fund the Class 3 Cash Pool (discussed in section II.C.4) as well as financial accommodations in connection with the Exit Financing Facility, such as extending a guarantee under the Exit Financing Facility and the payment of Extension Fees (as defined in the Settlement Agreement). In particular, the Exit Financing Facility is expressly conditioned upon Lodgian's agreement to guaranty certain obligations of the Exit Financing Borrowers, including, under certain circumstances, repayment of the entire loan. Absent the Lodgian guarantee, there would be no Exit Financing Facility and, in turn, no reorganization of the Impac Debtors. The Impac Debtors have explored multiple options for reorganization, including sale of the Impac Hotel Properties or alternative exit financing options, and believe that the current structure provides the best recovery on all Claims given the facts and circumstances of the Impac Debtors' bankruptcy cases. As set forth below in section V.A.3, the Settlement -7- Agreement provides that the Impac Debtors may fully discharge the CCA pre-petition Claims by payment of the Settlement Amount on or before the Outside Closing Date. Given that if the Settlement Amount is not timely paid, the Impac Hotel Properties will be transferred to CCA pursuant to foreclosure and/or deed in lieu of foreclosure documents executed and presently held in escrow (to the detriment of all other claimholders of the Impac Debtors), the Settlement Agreement effectively limits the types of structures the Impac Debtors can employ in their reorganization. The only viable option for the Impac Debtors, outside of the currently proposed Impac Plan, is liquidation. If liquidation occurs, in accordance with the Settlement Agreement, it is highly probable that CCA will obtain the Impac Hotel Properties, either through deed in lieu documents or through foreclosure, leaving no unencumbered assets for distribution to other claimants. Therefore, a reorganization with payment of the Settlement Amount in satisfaction of the CCA Secured Claim provides a greater recovery to all other Claims of the Impac Debtors. B. SUMMARY OF CLASSIFICATION AND TREATMENT -------------------------------------------------------------------- IMPORTANT NOTE ON ESTIMATES The estimates of recovery amounts and percentages in the following tables and elsewhere in the Impac Disclosure Statement may differ from actual distributions if the Impac Debtors' estimates of Allowed Claims prove to be inaccurate. The Impac Debtors' estimates of Allowed Claims reflect the Impac Debtors' reasonable judgment based on current information as of the date of the Impac Disclosure Statement and the Impac Debtors make no representation as to the accuracy of these amounts. -------------------------------------------------------------------- The Impac Plan constitutes a separate Chapter 11 plan of reorganization for each Impac Debtor. Except for Administrative Expense Claims and Priority Tax Claims, all Claims against, and Equity Interests in a particular Impac Debtor are placed in the following Classes for each of the Impac Debtors. In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Expense Claims and Priority Tax Claims have not been classified and thus are excluded from the following Classes. The following table designates the Classes of Claims against and Equity Interests in each Impac Debtor (as and to the extent that such Class of Claims or Equity Interests is applicable to such Impac Debtor) and specifies which of those Classes are (i) impaired or unimpaired by the Impac Plan and (ii) entitled to vote to accept or reject the Impac Plan in accordance with section 1126 of the Bankruptcy Code or deemed to reject the Impac Plan. -8- Treatment of Claims and Equity Interests
- ------------------------------------------------------------------------------------------------------------------- CLASS DESCRIPTION TREATMENT ENTITLED ESTIMATED TO VOTE RECOVERY - ------------------------------------------------------------------------------------------------------------------- 1-A CCA Secured Claim Satisfaction of Settlement Amount No (deemed 100% to accept) - ------------------------------------------------------------------------------------------------------------------- 1-B Miscellaneous Secured Claims Either (i) Cash equal to 100% of the Yes 100% Allowed Claim; (ii) net proceeds of sale of collateral up to the amount of the Allowed Claim; (iii) the collateral securing the Allowed Claim; (iv) a note with periodic cash payments having a present value equal to the amount of the Allowed Claim and secured by the existing collateral; (v) such treatment that leaves unaltered the legal, equitable and contractual rights of the holder; or (vi) such other distribution as is necessary to satisfy the requirements of the Bankruptcy Code - ------------------------------------------------------------------------------------------------------------------- 2 Priority Non-Tax Claims Paid in full No (deemed 100% to accept) - ------------------------------------------------------------------------------------------------------------------- 3 General Unsecured Claims Pro rata share of Class 3 Cash Pool Yes 15% - ------------------------------------------------------------------------------------------------------------------- 4 Reserved N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- 5 Convenience Claims Paid in full Yes 100% - ------------------------------------------------------------------------------------------------------------------- 6 Reserved N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- 7 Reserved N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- 8 Reserved N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- 9 Equity Interest Reinstated Equity Security No (deemed 100% to accept) - ------------------------------------------------------------------------------------------------------------------- 10 Reserved N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------- 11 Subordinated Claims No distribution No (deemed None to reject) - -------------------------------------------------------------------------------------------------------------------
For convenience of identification, the Impac Plan classifies the Allowed Claims in Class 1 as a single Class. This Class is actually a group of two Subclasses, the CCA Secured Claim Subclass and the Miscellaneous Secured Claims Subclass. The treatment of the Claims in the CCA Secured Claim Subclass is the contractual treatment as provided for in the Settlement Agreement and, as such, Subclass 1-A is unimpaired. The treatment of the Miscellaneous Secured Claims Subclass depends upon the Collateral securing such Allowed Claims. Each Subclass is treated under the Impac Plan as a separate class for voting and distribution purposes. -9- For convenience of identification, the Impac Plan classifies the Allowed Claims in Class 3 as a single Class. This Class is actually a group of two Subclasses, one for the Allowed Class 3 Claims against each Impac Debtor. Although each Subclass is treated under the Impac Plan as a separate class for voting purposes, the holders of claims in each Subclass will receive, as a distribution under the Impac Plan, its pro rata share from the aggregate amount of Cash in the Class 3 Cash Pool as provided in the Impac Plan. C. DESCRIPTION OF THE CLASSES Unless otherwise indicated, the characteristics and amount of the Claims or Equity Interests in the following Classes are based on the books and records of each of the applicable Impac Debtors.(2) Each Subclass is treated as a separate Class for purposes of the Impac Plan and the Bankruptcy Code. However, the following discussion may refer to a group of Subclasses as a single Class for ease of reference. -------------------------------------------------------------------- INTEREST WILL NOT ACCRUE AFTER COMMENCEMENT DATE Unless otherwise specified in the Impac Plan or by order of the Bankruptcy Court, no interest will accrue or be paid on an Allowed Claim, for any purpose, on or after the Commencement Date. -------------------------------------------------------------------- 1. CCA Secured Claim (Class 1-A) Description. The allowed claim held by CCA against the Impac Debtors pursuant to the Settlement Agreement. Treatment. The Class 1-A Claim is held by CCA and will be satisfied in full by payment of the Settlement Amount. Class 1-A Claim is unimpaired. 2. Miscellaneous Secured Claims (Class 1-B) Description. The Claims in Class 1-B consist of any Claims to the extent (i) secured by Collateral, the amount of which is equal to or less than the value of such Collateral (A) as set forth in the Impac Plan, (B) as agreed to by the holder of such Claim and the applicable Impac Debtor(s), or (C) as determined by a Final Order in accordance with section 506(a) of the Bankruptcy Code, or (ii) secured by the amount of any rights of setoff of the holder thereof under section 553 of the Bankruptcy Code Treatment. Class 1-B Claims are impaired, and any holders of Allowed Claims in Class 1-B are entitled to vote to accept or reject the Impac Plan. Class 1-B will receive (i) Cash equal to 100% of the Allowed Claim; (ii) net proceeds of sale of collateral up to the amount of the Allowed Claim; (iii) the collateral securing the Allowed Claim; (iv) a note with periodic cash payments having a present value equal to the amount of the Allowed Claim and secured by the - ---------- (2) Again, the Impac Plan is based upon the confirmed Joint Plan of Reorganization of Lodgian, Inc., et al. Provisions that do not apply to the Impac Debtors were intentionally omitted and, consequently, the numbering of the classes is intentionally not consecutive. -10- existing collateral; (v) such treatment that leaves unaltered the legal, equitable and contractual rights of the holder; or (vi) such other distribution as is necessary to satisfy the requirements of the Bankruptcy Code. In the event that Class 1-B rejects the Impac Plan, the applicable Impac Debtor(s) reserves the right to request, pursuant to section 13.10 of the Impac Plan, confirmation of its plan through a "cram down" of such Class under section 1129(b) of the Bankruptcy Code and modification of the plan to the extent, if any, confirmation under section 1129(b) requires modification. 3. Priority Non-Tax Claims (Class 2) Description. The Claims in Class 2 are the types of Claims identified in section 507(a) of the Bankruptcy Code that are entitled to priority in payment (other than Administrative Expense Claims and Priority Tax Claims). For each of the Impac Debtors, these Claims relate primarily to pre-petition wages and employee benefit plan contributions that had not yet been paid as of the Commencement Date. Each of the Impac Debtors believes that all of these Claims have already been paid pursuant to an order entered by the Bankruptcy Court on the Commencement Date. Treatment. Allowed Claims in Class 2 are unimpaired. To the extent that they have not already been paid, they will be paid in full on or as soon as is reasonably practicable after the Effective Date, except to the extent that the holders of such Claims agree to a different treatment. 4. General Unsecured Claims (Class 3) Description. Class 3 consists of the Claims of suppliers and other vendors, personal injury and other litigation claimants to the extent not covered by insurance, parties to executory contracts or unexpired leases with the respective Impac Debtors that are being rejected, any applicable Inter-Company Claims and other General Unsecured Claims. Class 3 includes Tort Claims that are covered in whole or in part by insurance maintained by the Impac Debtors. However, such Claims will share in the treatment of this Class only to the extent of the allowed amount of such Claims that is less than or equal to the Debtor's self-insured retention or deductible amount under the applicable insurance policy and not satisfied from proceeds of insurance payable to the holder of the Claim. For purposes of the initial distribution, and as part of the distribution mechanism under the Impac Plan for holders of Claims in Class 3, the applicable Impac Debtor will be required to estimate the total amount of Allowed Claims in Class 3. The aggregate amount of General Unsecured Claims (excluding Inter-Company Claims) filed or scheduled against the Impac Debtors on or before the Bar Date (adjusted to take into account Claims that have been otherwise satisfied as of the date hereof) was approximately $4.4 million.(3) However, the respective Impac Debtors estimate that, after deducting duplicate Claims, Claims not supported by the respective Impac Debtors' books and records, Claims that are (or will be) covered by insurance and Claims that are subject to other objections, the aggregate amount of Allowed Claims in Class 3 Subclasses will be approximately $2.0 million. - ---------- (3) This amount excludes any potential deficiency claims that holders of Allowed Secured Claims in Class 1-B may have. -11- For convenience of identification, the Impac Plan classifies the Allowed Claims in Class 3 as a single Class. Class 3 actually consists of two separate Subclasses, one for the allowed Class 3 Claims against each of the respective Impac Debtors. Each Subclass is treated under the Impac Plan as a separate class for purposes of voting. Treatment of Class 3 Claims against Impac Debtors. Class 3 Claims are impaired. In order to provide a recovery to holders of Class 3 Allowed Claims, Lodgian is contributing $ 302,484 in Cash to the Class 3 Cash Pool. The holders of Allowed Claims in each Class 3 Subclass will receive a pro rata share of the Cash in the Class 3 Cash Pool. Based upon present estimates of aggregate Claims, all holders of Allowed Class 3 Claims will receive approximately fifteen percent (15%) of their Allowed Claim. However, the actual percentage of the payout will be based upon the ultimate amount of all Allowed Claims, as the percentage recovery is based on a pro rata distribution of the fixed amount in the Class 3 Cash Pool. 5. Convenience Claims (Class 5) Description. Class 5 consists of (a) Allowed General Unsecured Claims of a holder in an amount equal to $200 or less, (b) Allowed General Unsecured Claims of a holder that has irrevocably elected on its ballot to reduce its Claims to the amount of $200, or (c) a disputed General Unsecured Claim that becomes an Allowed General Unsecured Claim of $200 or less with the consent of, and in the amount agreed to by, the applicable Impac Debtor or pursuant to a Final Order. Treatment. Class 5 is impaired. Class 5 Claims will receive Cash in an amount equal to the Allowed amount of their Claim on or as soon as reasonably practicable after the Effective Date. 6. Equity Interests (Class 9) Description. Class 9 consists of holders of Equity Interests. Treatment. Class 9 is unimpaired. Except as may otherwise be determined by the applicable Impac Debtor, including, without limitation, the transfer of Equity Interests to affiliates of the Impac Debtors, the legal, equitable and contractual rights of holders of Allowed Equity Interests in Class 9 shall remain unaltered. All holders of Equity Interests, and all instruments representing it, will be reinstated on the Effective Date. In consideration of the retention of the Reinstated Equity Securities, Lodgian is providing substantial new value consisting of Cash and other financial accommodations, as set forth in section II.A. 7. Subordinated Claims (Class 11) Description. Class 11 consists of any Claim against any of the Impac Debtors for any fine, penalty, forfeiture or attorneys' fees (but only to the extent such attorneys' fees are punitive in nature), or for multiple, exemplary or punitive damages, to the extent that such fine, penalty, forfeiture, attorneys' fees or damages are not compensation for actual pecuniary loss suffered by the holder of such Claim and not statutorily prescribed, and all claims against either -12- of the Debtors of the type described in Section 510(b) of the Bankruptcy Code relating to equity interests (including all Equity Interests). In general, punitive or exemplary damage Claims are intended to punish or make an example of a wrongdoer. However, in the context of an insolvent entity, such as each of the Impac Debtors, the enforcement of punitive Claims would have the effect of punishing unsecured creditors by diluting the ultimate recovery to all unsecured creditors. Moreover, punitive and exemplary damage Claims differ significantly from other General Unsecured Claims which are based upon pecuniary losses. For these reasons, such Claims have been classified separately from other unsecured Claims. The Debtors do not believe that there will be any Allowed Claims in this Class. Treatment. Class 11 is impaired. To the extent that there are any Allowed Claims in Class 11, they are subordinated to the Claims in other Classes. No property will be distributed to or retained by the holders of Allowed Claims in this Class on account of these Claims. Class 11 is therefore deemed to reject the Impac Plan and the Impac Debtors will not solicit their vote. D. ADMINISTRATIVE EXPENSES OF THE IMPAC DEBTORS In order to confirm the Impac Plan, Administrative Expense Claims and Allowed Tax Claims entitled to priority under the Bankruptcy Code must be paid in full or in a manner otherwise agreeable to the holders of those Claims. Administrative expenses are the actual and necessary costs and expenses of the Impac Debtors' Chapter 11 cases of each of the respective Impac Debtors. Those expenses include, but are not limited to, cure payments in connection with the assumption of certain contracts, post-petition salaries and other benefits for employees, post-petition rent for facilities and offices, amounts owed to vendors providing goods and services during the Impac Debtors' Chapter 11 cases, tax obligations incurred after the commencement of the Impac Debtors' Chapter 11 cases, and certain statutory fees and expenses. Other administrative expenses include the actual, reasonable and necessary professional fees and expenses of the professionals retained by each of the Impac Debtors and the Committee. Consistent with the requirements of the Bankruptcy Code, the Impac Plan generally provides for Allowed Administrative Expense Claims to be paid in full on the later of the Effective Date and the first business day after the date that is 30 days after the date such Administrative Expense Claim becomes Allowed, except for Administrative Expense Claims relating to ordinary course of business transactions or for money borrowed, both of which will be paid in accordance with the past practice of the applicable Impac Debtor and the terms of the agreements governing such obligations. Administrative Expense Claims relating to compensation of the professionals retained by the applicable Impac Debtors or the Committee or for the reimbursement of expenses of certain members of the Committee will, unless otherwise agreed by the claimant, be paid on the later of the Effective Date and the date on which an order allowing such Administrative Expense Claim is entered. Unless otherwise specified in the Impac Plan or by order of the Bankruptcy Court, no interest will accrue or be paid in connection with an Allowed Administrative Expense Claim for any purpose, on or after the Commencement Date. Allowed Tax Claims entitled to priority under the Bankruptcy Code will be paid over a period not exceeding six years from the date of assessment of the tax, with interest at a -13- fixed annual rate so that the periodic payments have a value, as of the Effective Date, equal to the Allowed amount of the Claim. E. RESERVATION OF "CRAM DOWN" RIGHTS The Bankruptcy Code permits the Bankruptcy Court to confirm a Chapter 11 plan over the dissent of any class of claims as long as the standards in section 1129(b) are met. This power to confirm a plan over dissenting classes - - often referred to as "cram down" - is an important part of the reorganization process. It assures that no single group (or multiple groups) of claims can block a restructuring that otherwise meets the requirements of the Bankruptcy Code and is in the interests of the other constituents in the case. Each of the Impac Debtors reserves the right to seek confirmation of the Impac Plan, notwithstanding the rejection of the Impac Plan by any Class entitled to vote. In the event that a Class votes to reject the Impac Plan, the applicable Impac Debtor may request the Bankruptcy Court to rule that the Impac Plan meets the requirements specified in section 1129(b) of the Bankruptcy Code with respect to such Class. The applicable Impac Debtor will also seek such a ruling with respect to each Class that is deemed to reject the Impac Plan. III. VOTING PROCEDURES AND REQUIREMENTS Detailed voting instructions are provided with the ballot accompanying the Impac Disclosure Statement. The following Classes are the only Classes entitled to vote to accept or reject the Impac Plan.
CLASS DESCRIPTION ----- ----------- ~~1-B Miscellaneous Secured Claims 3 General Unsecured Claims 5 Convenience Claims~~
If your Claim is not in one of these Classes, you are not entitled to vote. If your Claim is in one of these Classes, you should read your ballot and follow the listed instructions carefully. Please only use the ballot that accompanies the Impac Disclosure Statement. ---------------------------------------------- BALLOT INFORMATION NUMBER: (888) 697-3594 ---------------------------------------------- A. VOTE REQUIRED FOR ACCEPTANCE BY A CLASS The Impac Debtors have filed a motion seeking entry of the Voting Procedures Order to set certain procedures in connection with voting on the Impac Plan. If the Voting Procedures Order is approved, it will set forth the procedures to be employed in tabulating acceptances and rejections of the Impac Plan. -14- -------------------------------------------------------------------- CLASS VOTE REQUIRED TO ACCEPT THE IMPAC PLAN Acceptance of the Impac Plan by a Class of Claims will be determined by calculating the number and the amount of Claims voting to accept, based only on the Claims in the Class actually voting. Acceptance by a Class of Claims requires an affirmative vote of a majority of the total Claims voting and two-thirds in amount of the total Claims in the Class voting. Any impaired Class that fails to achieve the specified majority vote will be deemed to have rejected the Impac Plan. -------------------------------------------------------------------- B. VOTING In order for your vote to be counted, your vote must be received by the Voting Agent at the following address before the voting deadline of 5:00 p.m., Pacific Time, on April 17, 2003: -------------------------------------------------------------------- IF BY OVERNIGHT OR HAND DELIVERY: IF BY STANDARD MAILING: POORMAN-DOUGLAS CORPORATION POORMAN-DOUGLAS CORPORATION 10300 S.W. ALLEN BOULEVARD P.O. BOX 4330 BEAVERTON, OREGON 97005 PORTLAND, OREGON 97208-4330 ATTN: LODGIAN/IMPAC ATTN: LODGIAN/IMPAC BALLOTING CENTER BALLOTING CENTER -------------------------------------------------------------------- If the instructions on your ballot require you to return the ballot to your bank, broker or other nominee, or to their agent, you must deliver your ballot to them in sufficient time for them to process it and return it to the Voting Agent before the voting deadline. If a ballot is damaged or lost, you may contact the Voting Agent at (888) 697-3594. Any ballot that is executed and returned but which does not indicate an acceptance or rejection of the Impac Plan will not be counted. IV. FINANCIAL INFORMATION AND PROJECTIONS This section provides summary information concerning the recent financial performance and three-year financial projections for the Impac Debtors. The projections are based on information available as of the date of the Impac Disclosure Statement. The significant assumptions underlying the projections and the basis of their preparation are discussed below. -15- A. OPERATING PERFORMANCE For a recent description of the operating performance of Impac Debtors on a consolidated basis, see the historical profit and loss statements, which can be found in the Projections in Exhibit C of the Impac Disclosure Statement. Financial information regarding the Impac Debtors on a consolidated basis with Lodgian and its subsidiaries can be found in the periodic reports of Lodgian (as discussed in section I). B. THREE-YEAR PROJECTIONS OF THE REORGANIZED IMPAC DEBTORS -------------------------------------------------------------------- IMPORTANT NOTE ON FINANCIAL PROJECTIONS The projections included in the Impac Disclosure Statement (the "Projections") are based on a number of important assumptions, which are subject to significant business, economic and competitive risks and uncertainties that are not within the Impac Debtors' control and could cause actual results to differ materially and adversely from the Projections. These factors include the impact of the Chapter 11 cases on the Impac Debtors' businesses and operations; the Debtors' ability to maintain their existing franchise affiliations, to confirm the Impac Plan in a timely manner, to access adequate financing and to generate cash flow from operations to meet their obligations; the effect of general economic conditions; and other factors. See section VIII, "Risk Factors." The Projections are not, and should not be regarded as, a representation that the Projections can or will be achieved. -------------------------------------------------------------------- As a condition to confirmation of a plan of reorganization, the Bankruptcy Code requires, among other things, that the Bankruptcy Court determine that confirmation is not likely to be followed by the liquidation or the need for further financial reorganization of the debtor. In connection with the development of the Impac Plan and for the purpose of determining whether the Impac Plan satisfies this feasibility standard, the Impac Debtors developed the Projections, including a pro forma balance sheet as of December 31, 2002 and certain income statement projections for the fiscal years 2003 through 2005 (the "Projection Period") for the Reorganized Impac Debtors. Projections for the Reorganized Impac Debtors, on a consolidated basis, including the principal assumptions on which they are based, are attached as Exhibit C hereto. Based on the Projections, the Impac Debtors believe that the Reorganized Impac Debtors will be able to make all payments required pursuant to the Impac Plan and, therefore, that confirmation of the Impac Plan is not likely to be followed by liquidation or the need for further reorganization. The Projections should be read in conjunction with the assumptions and notes set forth in Exhibit C. -16- V. BUSINESS DESCRIPTION AND SALIENT EVENTS DURING REORGANIZATION A. HISTORICAL BACKGROUND The following is a discussion of the background to the Chapter 11 filings, as well as pertinent events that have occurred during the Chapter 11 cases in connection with the overall restructuring of each of the Impac Debtors' financial obligations. 1. Background to the Chapter 11 Filings The Impac Debtors' business is cyclical, with the winter months tending to be the low points in terms of occupancy and cash flow, with the period of December 15th to January 15th being the lowest time period for the Impac Debtors, operationally. Demand is also dependent upon many factors, including general and local economic conditions and changes in levels of tourism and business-related travel. The Impac Debtors' hotels depend upon both commercial and tourist travelers for revenues and, generally, the Impac Debtors' hotels operate in areas that contain numerous other competitive lodging facilities. Notably, the Impac Debtors compete with other facilities on various bases, including room prices, quality, service, location and amenities customarily offered to the traveling public. The Impac Debtors' businesses have been negatively impacted by the general economic slowdown and, in particular, the dramatic decline in both business and leisure travel. On a comparative basis, occupancy of the Debtors' hotels declined from 57.3% to 57.1% over the twelve (12) months ending December 31, 2001 and December 31, 2002, respectively. The Average Daily Rate ("ADR") declined from $75.23 to $71.00 over the same period. The events of September 11, 2001 have exacerbated the pressure on the Impac Debtors' revenues because of a standstill in travel demand. Although travel and occupancy usage has increased since September 11, 2001, the Impac Debtors expect the negative impact on travel to continue for the foreseeable future. Business continues to be weak due to a soft economy, fears of terrorism, and uncertainty of a conflict in the Middle East. 2. Confirmation of the Lodgian Plan On the Commencement Date, Lodgian and its debtor-subsidiaries, including the Impac Debtors, commenced these voluntary cases under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. On December 21, 2001, the Bankruptcy Court entered an Order Granting Joint Administration of the Impac Debtors' cases under the lead bankruptcy case, In re Lodgian, Inc., et al. (Case No.: 01-16345). Also on December 21, 2001, the Bankruptcy Court entered an interim order authorizing Lodgian and its debtor-subsidiaries, to borrow up to a maximum aggregate principal amount of $10 million, in accordance with the terms of the Revolving Credit and Guarantee Agreement Among Lodgian, Inc., as Borrower, the Subsidiaries of the Borrower, as Guarantors, and the Lender Parties, and Morgan Stanley Senior Funding, Inc., as Administrative Agent and Collateral Agent (the "DIP Credit Agreement"). Upon final hearing, the Bankruptcy Court -17- entered a final order authorizing Lodgian to borrow up to a maximum principal amount of $25 million, again in accordance with the terms of the DIP Credit Agreement. However, it should be noted that the Impac Debtors received no proceeds in connection with the DIP Credit Agreement. On January 8, 2002, pursuant to section 1102 of the Bankruptcy Code, the United States Trustee appointed the Committee. No trustee or examiner has been appointed in the Impac Debtors' Chapter 11 cases. On April 19, 2002, the Court entered an order extending the periods under section 1121(b) and 1121(c) of the Bankruptcy Code to file a Chapter 11 plan or plans of reorganization (the "Exclusive Filing Period") and solicit acceptances thereto (the "Exclusive Solicitation Period" and collectively, the "Exclusive Periods") for a period of six (6) months through and including July 18, 2002 and September 16, 2002, respectively. By order dated July 11, 2002, the Bankruptcy Court further extended the Exclusive Filing Period and the Exclusive Solicitation Period through and including October 21, 2002 and December 18, 2002, respectively (the "Lodgian Exclusivity Order"). On September 23, 2002, Lodgian and its debtor-subsidiaries, including the Impac Debtors, filed the Joint Plan of Reorganization of Lodgian, Inc., et al., together with the Official Committee of Unsecured Creditors under Chapter 11 of the Bankruptcy Code (the "Initial Lodgian Plan"), which contained provisions addressing the treatment of the Impac Debtors' estates and the Impac Debtors' creditors. At the September 24, 2002 hearing for the approval of the disclosure statement (the "Lodgian Disclosure Statement") relating to the Initial Lodgian Plan and upon the objection of CCA to the Lodgian Disclosure Statement, the Bankruptcy Court adjourned the hearing relating to the Lodgian Disclosure Statement to September 26, 2002. On September 25, 2002, Lodgian and its debtor-affiliates filed a modified plan (the "Lodgian Plan") which excluded the treatment of the Impac Debtors' estates from the Lodgian Plan. On September 26, 2002, the Bankruptcy Court approved the Lodgian Disclosure Statement. A copy of the Lodgian Disclosure Statement is annexed hereto as Exhibit A. Upon the confirmation hearing of November 5, 2002, the Court entered an order on November 5, 2002 confirming the Lodgian Plan which excluded the Impac Debtors. 3. Significant Events Concerning the Impac Debtors As set forth in greater detail in the Lodgian Disclosure Statement, Lodgian (together with its direct and indirect subsidiaries, the "Lodgian Group"), the parent company of the Impac Debtors, is one of the largest owners and operators of both full and limited-service hotels in the United States with 97 hotels containing approximately eighteen thousand rooms under Lodgian's ownership or management, located in thirty states, and with one hotel in Windsor, Canada. The Impac Debtors own eighteen (18) hotels located in eleven (11) states, seventeen (17) of which are operated under franchise agreements with Six Continents Hotels, Inc. ("Six Continents") and with Marriott International, Inc. ("Marriott"). There is one (1) hotel that is operated independently. Impac Hotels II, L.L.C.'s properties consist of the following thirteen (13) hotels: Marriott Hotel Denver, Colorado; Mayfair House, Florida; Holiday Inn North Miami, Florida; -18- Holiday Inn Florence, Kentucky; Holiday Inn Hamburg, New York; Holiday Inn Syracuse, New York; Holiday Inn Cincinnati Downtown, Ohio; Holiday Inn Ft. Mitchell, Kentucky; Courtyard by Marriott Tulsa, Oklahoma; Holiday Inn Memphis, Tennessee; Holiday Inn Fairmont, West Virginia; Holiday Inn Morgantown, West Virginia; and Holiday Inn Bridgeport, West Virginia. Impac Hotels III, L.L.C.'s properties consist of the following five (5) hotels: Fairfield Inn Augusta, Georgia; Courtyard by Marriott Lafayette, Louisiana; Fairfield Inn Merrimack, New Hampshire; Fairfield Inn Jackson, Tennessee; and Fairfield Inn Colchester, Vermont. (a) CCA's Claims Against the Impac Debtors Prior to the Commencement Date Prior to the Commencement Date, the Impac Debtors entered into separate loan agreements (the "Loan Agreements") with Nomura Asset Capital Corporation ("NACC"). Thereafter, NACC assigned its right under the Loan Agreements to CCA, an affiliate of NACC. Subsequent to such assignment, the Impac Debtors and CCA entered into a loan agreement which consolidated and restated the Loan Agreements (the "CCA Consolidated Loan Agreement"). On the Commencement Date, Lodgian and its debtors-subsidiaries, including the Impac Debtors, filed a motion (the "Cash Collateral Motion") to, inter alia, use cash collateral in which CCA claimed an interest (the "CCA Cash Collateral"). CCA filed an objection, but consented to the Impac Debtors' use of CCA's Cash Collateral based upon an agreement reached with CCA on January 9, 2002. The agreement provided for the limited use by the Impac Debtors of CCA Cash Collateral and that it would expire on or after the final hearing for approval of the Cash Collateral Motion on February 14, 2002. Thereafter, CCA agreed to extend the use of the CCA Cash Collateral until May 31, 2002 by entering into a stipulation and order and further agreed to the extended use of the CCA Cash Collateral from the period commencing June 1, 2002 through June 30, 2002 by entering into a second stipulation and order. On or about June 5, 2002, CCA filed proofs of claim against, among other parties, (i) Impac Hotels II, L.L.C., asserting a secured claim in the amount of $108,907,700, and (ii) Impac Hotels III, L.L.C., asserting a secured claim in the amount of $108,907,700. In anticipation of CCA's expected denial of the Impac Debtors' consensual use of cash collateral, on June 7, 2002, the Impac Debtors filed a Motion Pursuant to sections 105, 361, 363, 503, and 507 of the Bankruptcy Code and Rule 4001 of the Federal Rules of Bankruptcy Procedure for Entry of Order Approving the Use of Cash Collateral of The Capital Company of America LLC, which requested an order authorizing the Debtors to use the CCA Cash Collateral and provided assurance of adequate protection therewith (the "Second Cash Collateral Motion"). On June 24, 2002, CCA filed an objection to the Second Cash Collateral Motion. On June 27, 2002, without the need for litigation, Lodgian and its affiliated debtor-subsidiaries, including the Impac Debtors, and CCA entered into a third stipulation and order authorizing the use of CCA Cash Collateral from the period commencing July 1, 2002 through July 31, 2002. Thereafter, the parties entered into additional stipulations and orders allowing the Impac Debtors' continued use of the CCA Cash Collateral pursuant to a very restricted cash use agreement. -19- During this period, on May 30, 2002, CCA filed a motion for an Order (i) Pursuant to Section 1121(d) of the Bankruptcy Code Terminating the Exclusive Period Within Which Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C. May File and Solicit Acceptances to a Plan of Reorganization, and (ii) Authorizing The Capital Company of America LLC to File and Solicit Acceptances to a Plan of Reorganization (the "CCA Motion to Terminate Exclusivity"). On June 26, 2002, Lodgian and its affiliated debtor-subsidiaries, including the Impac Debtors, filed a second motion to extend the exclusive period within which the Debtors may file and solicit acceptances to a plan (or plans) of reorganization (the "Debtors' Second Exclusivity Motion"). On July 8, 2002, CCA filed an objection to the Debtors' Second Exclusivity Motion. Nevertheless, on July 11, 2002, upon the adjourned hearing on the CCA Motion to Terminate Exclusivity and upon the hearing of the Debtors' Second Exclusivity Motion, the Bankruptcy Court entered the Lodgian exclusivity order extending the Exclusive Filing Period and the Exclusive Solicitation Period. In addition, the Bankruptcy Court determined, sua sponte, and pursuant to section 2.2(B) of the Amended General Order Adopting Procedures Governing Mediation of Matters in Bankruptcy Cases and Adversary Proceedings, dated January 19, 1997, that Harvey R. Miller, Esq. be appointed as mediator (the "Mediator") to, inter alia, facilitate a resolution of various disputes between, inter alia, the Impac Debtors and CCA. As a result of extensive and intensive mediation sessions among representatives of Lodgian, the Impac Debtors, CCA, the Mediator, and other interested parties, an agreement in principle was reached resolving disputes between the Impac Debtors and CCA. By order dated October 31, 2002, the Bankruptcy Court approved the Settlement Agreement which, inter alia, provides that the Impac Debtors may fully discharge the CCA pre-petition Claims by payment of the Settlement Amount on or before the Outside Closing Date (as defined in the Settlement Agreement). The Outside Closing Date was initially February 28, 2003 but was extended to March 31, 2003 and may be further extended to May 31, 2003 upon satisfaction of the conditions provided in the Settlement Agreement. By order dated December 5, 2002, the Bankruptcy Court granted the Impac Debtors a further extension of the Exclusive Filing Period and the Exclusive Solicitation Period through and including February 28, 2003 and April 29, 2003, respectively. In addition, by order dated February 19, 2003, the Bankruptcy Court granted a further extension of the Exclusive Filing Period and the Exclusive Solicitation Period through and including June 2, 2003 and August 1, 2003, respectively. On February 20, 2003, the Impac Debtors notified CCA that it would be exercising its option to extend the Outside Closing Date to March 31, 2003. (b) The Impac Debtors' Efforts to Raise Capital to Exit Chapter 11 On January 3, 2003, Lodgian, at its own expense, engaged Hodges Ward Elliott, Inc. ("HWE") as its exclusive representative to seek to raise debt and equity capital on behalf of the Impac Debtors for the purpose of raising financing to pay the Settlement Amount in connection with the Impac Debtors continuing to own the 18-hotel portfolio (the "Portfolio"). HWE sought to effectuate a transaction of either (i) financing, mezzanine financing or equity investment, or other arrangement or transaction relating to a direct or indirect financing or equity interest, including partial interests of the Impac Debtors; or (ii) financing or other transaction, -20- directly or indirectly, with respect to a portion of the ownership interests of the entities which own the Impac Debtors. As part of its engagement, HWE prepared an analysis of the Portfolio, resulting in a marketing package that was used to secure the interest of multiple debt and equity investors, potential purchasers of the Impac Hotel Properties, and similar parties (the "HWE Financing Memorandum"). Without revealing the confidential information from the Settlement Agreement, HWE gave presentations on the Portfolio as well as distributed the HWE Financing Memorandum to numerous debt and equity investors. HWE simultaneously began negotiating confidentiality agreements with investors that expressed interest in the Portfolio, in preparation for releasing to such investors certain confidential information from the Settlement Agreement, such as the Settlement Amount. HWE based the confidentiality agreement on Exhibit P to the Settlement Agreement and, through counsel for Lodgian, negotiated any modifications to Exhibit P with counsel to CCA. Only when HWE had secured a signed confidentiality agreement from an interested investor, that was in form and substance acceptable to CCA, did HWE release confidential information from the Settlement Agreement to the interested investor. The HWE Financing Memorandum contained, among other things, an overview of the Portfolio, a summary of the borrower's investment strategy and detailed property summaries and financial data specific to each of the hotels in the Portfolio. The solicitation period for potential investors in the Portfolio lasted approximately one month. Though several investors expressed general interest in the Portfolio, Lehman Brothers Holdings Inc. ("Lehman Bros.") offered the most complete and timely package. Lehman Bros. proposed financing for the entire Portfolio, which was particularly attractive to the Impac Debtors given that they would not have to seek financing for a mezzanine portion. The terms of the Lehman Bros. proposal involve a two (2) year loan with an optional one (1) year extension, with interest rate spreads and fees that are market rate for similar transactions. Lehman Bros. also agreed to work to meet the Impac Debtors' goal to consummate the transaction before the end of May 2003. Final negotiation of the Exit Financing Facility is still pending, and as such, the Exit Financing Facility may ultimately be provided by Lehman Bros., any of its affiliates or subsidiaries, or such other third party as may be later be disclosed. Of importance, the proceeds of the Exit Financing Facility will be used, in part, to discharge in full the CCA Secured Claim under the Settlement Agreement, thereby allowing the Impac Debtors to avoid an immediate liquidation and surrender of collateral to CCA under the terms of the Settlement Agreement. The Exit Financing Facility is expressly conditioned upon Lodgian's agreement to guaranty certain obligations of the borrowers, including, under certain circumstances, repayment of the entire loan. Absent the Lodgian guarantee, there would be no Exit Financing Facility and, in turn, no reorganization of the Impac Debtors. Upon the Effective Date, all property of each Impac Debtor's estate shall vest in each of the applicable newly created subsidiaries of the Reorganized Impac Debtors pursuant to the Impac Plan. Each Reorganized Impac Debtor is authorized to execute the necessary documentation to effectuate the vesting of the property in the newly created subsidiaries as of the Effective Date. The Impac Plan provides that each Impac Debtor will assume and assign to the newly formed, wholly owned subsidiaries of each Reorganized Impac Debtor, as part of the Exit -21- Financing Agreement, each and every executory contract and unexpired lease to which the applicable Impac Debtor is a party. Each of the newly created subsidiaries will be required to have one independent director. VI. GOVERNANCE OF THE REORGANIZED IMPAC DEBTORS A. BOARDS OF DIRECTORS OF THE REORGANIZED IMPAC DEBTORS Prior to the confirmation of the Impac Plan, in accordance with section 1129(a)(5) of the Bankruptcy Code, the Impac Debtors shall disclose (i) the identity and affiliations of any individual proposed to serve, after the Effective Date, as a director or officer of the Reorganized Debtors, and (ii) the identity of any "insider" (as such term is defined in section 101(31) of the Bankruptcy Code) who shall be employed and retained by the Reorganized Debtors and the nature of any compensation for such insider. The Board of Directors and officers of the Debtors immediately before the Effective Date shall continue to serve immediately after the Effective Date in their respective capacities as directors and officers of the Reorganized Debtors. B. SENIOR MANAGEMENT OF THE REORGANIZED IMPAC DEBTORS The existing senior officers of the Impac Debtors will serve in their current capacities after the Effective Date. VII. OTHER ASPECTS OF THE IMPAC PLAN A. DISTRIBUTIONS UNDER THE IMPAC PLAN One of the key concepts under the Bankruptcy Code is that only Claims against, and Equity Interests in, a debtor that are "allowed" may receive distributions under a Chapter 11 plan. This term is used throughout the Impac Plan and the descriptions below. In general, an "allowed" Claim or "allowed" Equity Interest simply means that the debtor agrees, or in the event of a dispute, that the Bankruptcy Court determines, that the claim or equity interest, and the amount thereof, is in fact a valid obligation of the debtor. 1. Disbursing Agent Lodgian will contribute, among other valuable consideration, Cash to be distributed under the Impac Plan to each Impac Debtor as a capital contribution to allow such Impac Debtor to discharge the Claims against it. All distributions under the Impac Plan shall be made by the applicable Reorganized Impac Debtor as Disbursing Agent (or such other entity designated by the Reorganized Impac Debtor as a Disbursing Agent on or after the Effective Date). -22- 2. Timing and Conditions of Distributions (a) Date of Distribution Except as otherwise provided for in the Impac Plan, distributions on account of Allowed Claims will be made on or as soon as practicable after the later of the Effective Date or the date an order allowing a Disputed Claim becomes a Final Order. Disputed Claims will be treated as set forth below. (b) De Minimis Distributions The applicable Reorganized Impac Debtor as Disbursing Agent or such other entity designated by such Reorganized Impac Debtor as a Disbursing Agent on or after the Effective Date will not be required to distribute Cash to the holder of an Allowed Claim in an impaired Class if the amount of Cash to be distributed on any distribution date under the Impac Plan (including the Effective Date and the Final Distribution Date) on account of such Claim is less than $50. Any holder of an Allowed Claim on account of which the amount of Cash to be distributed is less than $50 will have its Claim for such distribution discharged and will be forever barred from asserting any such Claim against the Reorganized Impac Debtors or their respective property. Any Cash not distributed pursuant to this section VII.A.2.(b) will become the property of the Reorganized Impac Debtors, free of any restrictions thereon, and any such Cash held by a third-party Disbursing Agent will be returned to the Reorganized Impac Debtors. 3. Procedures for Treating Disputed Claims Under the Impac Plan (a) Disputed Claims Disputed Claims include those Claims (i) listed by each Impac Debtor in such respective Impac Debtor's schedules of assets and liabilities, as may be amended from time to time, as not liquidated in amount or contingent or disputed, (ii) to which an objection or request for estimation has been filed and not withdrawn or determined, (iii) for which a proof of claim has been filed and with respect to which no corresponding Claim is listed in the schedules or the corresponding Claim is listed as other than contingent, disputed, or unliquidated but for which the nature or amount of the Claim as filed differs from that listed in the schedules, or (iv) asserting Tort Claims. (b) Objections to Claims Each of the Impac Debtors shall be entitled to object to all Claims. Any objections to Claims shall be served and filed on or before one hundred twenty (120) days after the Effective Date or such later date as may be fixed by the Bankruptcy Court provided, however, that such one hundred and twenty (120) day period may be automatically extended by the applicable Impac Debtor, without any further application to, or approval by, the Bankruptcy Court, for an additional thirty (30) days with the consent of the Committee (not to be unreasonably withheld). Notwithstanding the foregoing, the Committee shall also have the right to make and file objections to Claims filed against any Impac Debtor, which objections shall be made in consultation with such Impac Debtor(s) and shall be made within the above time frames. From and after the Confirmation Date, subject to the Effective Date, all objections shall be -23- litigated to a Final Order except to the extent that the applicable Impac Debtor (with the consent of the Committee not to be unreasonably withheld) or the Committee (with the consent of the applicable Impac Debtor not to be unreasonably withheld), as applicable, elects to withdraw any such objection or the applicable Impac Debtor (with the consent of the Committee not to be unreasonably withheld) or the Committee (with the consent of the applicable Impac Debtor not to be unreasonably withheld), as applicable, and the holder of the Disputed Claim elects to compromise, settle or otherwise resolve any such objection, in which event they may settle, compromise or otherwise resolve any such Disputed Claim without approval of the Bankruptcy Court. At its option, upon the consent of the Committee, the applicable Impac Debtors may make a single, lump sum payment of the settlement amount to the claimant. To the extent that an objection is filed by the Committee, at its option, the Committee, upon the consent of the applicable Impac Debtor, may make a single, lump sum payment of the settlement amount to the claimant. (c) No Distributions Pending Allowance If any portion of a Claim is a Disputed Claim, no payment or distribution shall be made on account of the Claim until the disputed portion of the Claim becomes an Allowed Claim or is otherwise resolved. Pending the allowance or disallowance of the Disputed Claims, the applicable Impac Debtor shall withhold from the distributions made pursuant to the Impac Plan to the holders of Allowed Claims the distributions allocable to the Disputed Claims as if the Disputed Claims had been Allowed Claims. (d) Distributions After Allowance If, on or after the Effective Date, any Disputed Claim becomes, in whole or in part, an Allowed Claim, the applicable Reorganized Impac Debtor shall distribute to the holder thereof the distributions, if any, to which such holder is then entitled under the Impac Plan. Any Cash distributions shall be made as soon as practicable after the date that the order or judgment of the Bankruptcy Court allowing such Disputed Claim (or portion thereof) becomes a Final Order, but in no event more than thirty (30) days thereafter. Any pro rata share of the Class 3 Cash Pool distributable to the holder of a Disputed Claim which becomes an Allowed Claim (in whole or in part) as a result of the entry of such order or judgment of the Bankruptcy Court (and which is a Final Order) allowing such Disputed Claim (or portion thereof) shall be made in accordance with the next scheduled distribution date to the holders of Allowed Claims. (e) No Recourse With Respect to Disputed Claims Notwithstanding that the Allowed amount of any particular Disputed Claim is reconsidered under the applicable provisions of the Bankruptcy Code and Bankruptcy Rules, no Claim holder will have recourse against the Disbursing Agent, the Impac Debtors, the Committee, the Reorganized Impac Debtors, or any of their professional consultants, officers, directors or members or their successors or assigns, or any of their property. However, nothing in the Impac Plan will modify any right of a holder of a Claim under section 502(j) of the Bankruptcy Code. -24- B. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES 1. Contracts and Leases Not Expressly Assumed Are Rejected On the Effective Date, all executory contracts and unexpired leases to which each Impac Debtor is a party shall be deemed rejected as of the Effective Date, except for an executory contract or unexpired lease that (i) has been assumed or rejected pursuant to a Final Order of the Bankruptcy Court, (ii) is specifically designated as a contract or lease to be assumed on the Schedule of Assumed Contracts set forth in the Plan Supplement, provided however, that the Impac Debtors reserve the right to amend the Plan Supplement at any time on or before the Effective Date to amend the Schedule of Assumed Contracts to add or delete any executory contract or unexpired lease, thus providing for its assumption, assumption and assignment, or rejection, or (iii) is the subject of a separate motion to assume, assume and assign, or reject filed under section 365 of the Bankruptcy Code by the applicable Impac Debtor on or before the Effective Date. 2. Cure of Defaults Generally, if there has been a default (other than a default specified in section 365(b)(2) of the Bankruptcy Code) under an executory contract or unexpired lease, the debtor can assume the contract or lease only if the debtor cures the default. Accordingly, a condition to the assumption of an executory contract or unexpired lease is that any default under an executory contract or unexpired lease that is to be assumed pursuant to the Impac Plan will be cured in a manner consistent with the Bankruptcy Code and as set forth in the Impac Plan. 3. Rejection Claims If an entity with a claim for damages arising from the rejection of an executory contract or unexpired lease under the Impac Plan has not filed a proof of claim for such damages within twenty (20) days after the Effective Date, that Claim shall be barred and shall not be enforceable against any of the Impac Debtors or the Reorganized Impac Debtors. 4. Franchise Agreements At the present time, the Impac Debtors intend to continue operating each of their respective Impac Hotel Properties under the Impac Plan and, with one exception, intend to assume and assign to the applicable Exit Financing Borrowers any franchise agreements relating to those Impac Hotel Properties. However, with respect to the franchise agreement in connection with the Holiday Inn Cincinnati Downtown, Ohio hotel property (the "Cincinnati Hotel Property"), the applicable Impac Debtor has advised Six Continents that it intends to reject this franchise agreement. Upon rejection, the Cincinnati Hotel Property shall be operated as an independent hotel. The applicable Impac Debtors hope to reach consensual resolution with each applicable franchisor on the terms of the assumption of its franchise agreement. In the event that the applicable Impac Debtor and franchisor are unable to reach an agreement over such terms, including the cure of any defaults as and to the extent required by section 365 of the Bankruptcy Code, then the applicable Impac Debtor shall request that the Bankruptcy Court resolve such disputes. -25- C. EFFECT OF CONFIRMATION 1. Discharge of Claims Except as otherwise provided in the Impac Plan, confirmation of the Impac Plan will discharge all existing debts and Claims of any kind, nature or description whatsoever, against or in each of the Impac Debtors or any of their assets or properties, to the full extent permitted by section 1141 of the Bankruptcy Code. All holders of existing Claims against the Impac Debtors will be enjoined from asserting against the Reorganized Impac Debtors, or any of their assets or properties, any other or further Claim based upon any act or omission, transaction, or other activity that occurred prior to the Effective Date, whether or not such holder has filed a proof of claim. In addition, upon the Effective Date, each holder of a Claim against the Impac Debtors shall be forever precluded and enjoined from prosecuting or asserting any discharged Claim against the Impac Debtors or the Reorganized Impac Debtors. 2. Indemnification The Impac Plan provides for the assumption and continuation of normal corporate indemnification provisions related to the protection of officers and directors. D. MISCELLANEOUS PROVISIONS The Impac Plan contains provisions relating to corporate actions, the Disbursing Agent, delivery of distributions, manner of payment, vesting of assets, binding effect, term of injunctions or stays, injunction against interference with the Impac Plan, payment of statutory fees, recognition of guaranty rights, substantial consummation, compliance with tax requirements, severability, revocation and amendment of the Impac Plan, governing law, and timing. For more information regarding these items, see the Impac Plan attached hereto as Exhibit B. VIII. RISK FACTORS Holders of Claims against the Impac Debtors should read and consider carefully the following risk factors and the other information in the Impac Disclosure Statement, the Impac Plan, the Plan Supplement and the other documents delivered or incorporated by reference in the Impac Disclosure Statement and the Impac Plan, before voting to accept or reject the Impac Plan. These risk factors should not, however, be regarded as constituting the only risks involved in connection with the Impac Plan and its implementation. Additional risks and other information about Lodgian and the Impac Debtors can be found in Lodgian's annual report on Form 10-K for the fiscal year ended December 31, 2001, and quarterly reports on Form 10-Q for the fiscal quarters ended March 31, 2002, June 30, 2002 and September 30, 2002, and its other filings from time to time with the Securities and Exchange Commission, which are incorporated into the Impac Disclosure Statement by reference. -26- A. CERTAIN BANKRUPTCY CONSIDERATIONS 1. General Risks Relating to Confirmation and Consummation Although each of the Impac Debtors believes that the Impac Plan will satisfy all requirements necessary for confirmation by the Bankruptcy Court, there can be no assurance that the Bankruptcy Court will reach the same conclusion. Moreover, there can be no assurance that modifications of the Impac Plan will not be required for confirmation or that such modifications would not necessitate the resolicitation of votes. In addition, although each of the Impac Debtors believes that the Effective Date will occur soon after the Confirmation Date, there can be no assurance as to such timing. The Bankruptcy Court may confirm the Impac Plan if at least one impaired Class votes to accept the Impac Plan (with such acceptance being determined without including the vote of any "insider" in such Class). Thus, for the Impac Plan to be confirmed, one of the impaired Classes must vote to accept the Impac Plan. As to each impaired Class that has not accepted the Impac Plan, the Impac Plan may be confirmed if the Bankruptcy Court determines that the Impac Plan "does not discriminate unfairly" and is "fair and equitable" with respect to these Classes. Each of the Impac Debtors believes that the Impac Plan satisfies these requirements. 2. Matters Affecting Recoveries The estimates of recovery amounts and percentages in the Impac Disclosure Statement are based on a number of assumptions, including the Impac Debtors' estimates of Allowed Claims in each Class. Actual recoveries may differ from such estimates if the Impac Debtors' estimates of Allowed Claims prove to be inaccurate. The Impac Debtors' estimates of Allowed Claims reflect the Impac Debtors' reasonable judgment based on current information as of the date of the Impac Disclosure Statement and the Impac Debtors make no representation as to the accuracy of these amounts. 3. Loss of Franchise Agreements If any of the Impac Debtors were required to terminate or reject any of their franchise agreements on a non-consensual basis, and if such franchisor were to assert a claim against such Impac Debtor, then any Allowed Claim relating to such termination or rejection could reduce recoveries to the holders of Allowed General Unsecured Claims against such Impac Debtors. The Plan Proponents do not believe that such risks are any greater than that attendant to the resolution of Disputed Claims generally. By order dated, November 4, 2002, the Bankruptcy Court approved the stipulation entered into between Lodgian and certain of its debtor-subsidiaries, including the Impac Debtors, and Marriott resolving the status of certain franchise agreements (the "Marriott Stipulation"). Pursuant to the Marriott Stipulation, with respect to certain of the Impac Hotel Properties, the Impac Debtors agreed to, inter alia, (i) rectify the status of default under Marriott's Quality Assurance Programs by June 30, 2003; and (ii) comply with certain requirements relating to capital improvements of certain of the Impac Hotel Properties. There exists a risk that the Impac -27- Debtors will not have rectified any default within the time period proscribed by the Marriott Stipulation. 4. No Assurance of Feasibility The Impac Debtors cannot give assurance that the Reorganized Impac Debtors will be able to achieve the revenue or cash flow levels reflected in the Projections, which the Impac Debtors have relied on to project their future business prospects. If either or both of the Reorganized Impac Debtors do not achieve the revenue or cash flow levels reflected in the Projections, such Impac Debtor may lack sufficient liquidity to continue operating as planned after the Effective Date. Failure to meet specified financial results would be likely to result in an event of default under the Exit Financing Facility. The Projections represent management's view as of the date of the Impac Disclosure Statement, based on current known facts as to the projected operations of the Reorganized Impac Debtors and the assumptions stated in section IV. However, while management believes that the assumptions underlying the Projections are reasonable, the Projections do not attempt to demonstrate the viability of the business in a "worst case" environment. Additionally, approximately 475 proofs of claim were filed as of the Bar Date against the Impac Debtors. As of the date of the Impac Disclosure Statement, the Impac Debtors have completed a preliminary review of these Claims, including reconciliation to their own books and records. However, due to the number and amount of Claims in dispute, as well as the risk of error inherent in reconciling such a large number of proofs of claim with the books and records of the Impac Debtors, it is possible that the actual amount of Allowed Claims may differ materially from the Impac Debtors' estimates. The Impac Debtors continue to seek to resolve Disputed Claims and further refine their claims analysis. Because distributions under the Impac Plan and the Projections are linked to the amount and value of the Allowed Claims, any change in the Impac Debtors' estimates of Allowed Claims resulting from further analysis of the proofs of claim filed as of the Bar Date could impact the Projections. Claim estimates for purposes of effectuating the reserve for Disputed Claims will ultimately be established, after notice and hearing, by the Bankruptcy Court. Moreover, the Projections may not adequately account for continuing or unforeseen effects on the Reorganized Impac Debtors' operations that may result from the terrorist attacks that occurred on September 11, 2001, including the current crisis with the Republic of Iraq, or from extended weakening in the U.S. economy. The long-term effects of these events on the overall global and U.S. economies, the Impac Debtors' areas of business and the Impac Debtors' operations cannot be predicted. Further, the Projections do not take into account any changes in interest rates during the Projection Period. Though each of the Impac Debtors believes that the assumptions underlying the Projections are reasonable, the impact, if any, that the Chapter 11 cases may have on the operations of the Reorganized Impac Debtors cannot be accurately predicted or quantified. If confirmation and consummation of the Impac Plan do not occur expeditiously, the Chapter 11 cases could further adversely affect the Impac Debtors' relationships with their customers, employees and suppliers. However, even expedited Chapter 11 cases could have a detrimental -28- impact on future sales and patronage due to the possibility that the Chapter 11 cases may have created a negative image of the Impac Debtors in the eyes of their customers and suppliers. B. FINANCING RISKS 1. Post-Reorganization Obligations The Reorganized Impac Debtors may not be able to meet their post-reorganization debt obligations, operating expenses, working capital and other capital expenditures. The Impac Debtors are currently highly leveraged. The Reorganized Impac Debtors will be substantially less leveraged. However, the Impac Debtors cannot provide assurance that the operating cash flow of the Reorganized Impac Debtors will be adequate to pay the principal and interest payments under their post-reorganization indebtedness when due, as well as to fund all capital expenditures contemplated in the cash flow Projections. 2. Limited Access to Working Capital The Reorganized Impac Debtors' businesses are expected to require certain amounts of working capital. While the Projections assume that sufficient funds to meet their working capital needs for the foreseeable future will be available from the Cash generated by the businesses of the Reorganized Impac Debtors and from the proceeds of the Exit Financing Facility, the ability of the Reorganized Impac Debtors to gain access to additional capital, if needed, cannot be assured, particularly in view of competitive factors, industry conditions and the terms of the Exit Financing Facility. The Impac Debtors expect that the Exit Financing Facility will contain restrictive financial and operating covenants and prohibitions, including provisions that will limit the ability of the Reorganized Impac Debtors to make capital expenditures. Restrictions on capital investment are expected to be more restrictive if the Reorganized Impac Debtors' cash flow is lower than projected. As noted above, failure to make necessary capital expenditures could have an adverse effect on the ability of the Reorganized Impac Debtors to remain competitive. C. RISKS ASSOCIATED WITH THE BUSINESSES The following categories of risks associated with the businesses of the Impac Debtors are set forth in the Lodgian Registration Statement on Form S-4 filed with the Securities and Exchange Commission on August 13, 1999 (as amended on September 7, 1999): Risk Associated With The Lodging Industry - Economic Conditions, Oversupply, Travel Patterns and Other Conditions Beyond the Debtors' Control and Risk Related to Development of New Projects, Acquisitions and Renovations. Please refer to such filing for further discussion on this topic. -29- IX. CONFIRMATION OF THE IMPAC PLAN A. CONFIRMATION HEARING -------------------------------------------------------------------- CONFIRMATION HEARING The Court will hold the confirmation hearing at the following time and place: DATE AND TIME: commencing at 10:00 a.m. (Eastern time), on April 24, 2003. PLACE: The United States Bankruptcy Court, Southern District of New York, Alexander Hamilton Custom House, One Bowling Green, New York, New York 10004. JUDGE: The Honorable Burton R. Lifland. The confirmation hearing may be adjourned from time to time by the respective Impac Debtors or the Bankruptcy Court without further notice except for an announcement of the adjourned date made at the confirmation hearing or any subsequent adjourned confirmation hearing. -------------------------------------------------------------------- Section 1128(b) of the Bankruptcy Code provides that any party in interest may object to confirmation of a plan. Any objection to confirmation of the Impac Plan must be in writing, state the name and address of the objecting party and the nature of the Claim of such party, provide a concise statement of the basis for such objection or proposed modification, including, if applicable: (i) the specific page number of the Impac Plan to which the objection refers; (ii) the specific language proposed to be deleted, if a deletion is sought; (iii) a draft of the precise language that the objecting party proposes be added or substituted; and (iv) the reasons and statutory or other authority therefor and be filed, together with proof of service, with the Bankruptcy Court (with a copy to the chambers of the Honorable Judge Burton R. Lifland), and must further be served upon the following parties: (1) Cadwalader, Wickersham & Taft LLP, 100 Maiden Lane, New York, New York 10038, Attn: Adam C. Rogoff, Esq., counsel to the Debtors and Debtors-in-Possession; (2) Curtis, Mallet-Prevost, Colt & Mosle LLP, 101 Park Avenue, New York, New York 10178, Attn: Steven J. Reisman, Esq., co-counsel to the Debtors and Debtors-in-Possession; (3) Debevoise & Plimpton, 919 Third Avenue, New York, New York 10022, Attn: George E.B. Maguire, Esq., counsel for the Committee; and (4) Lodgian, Inc., 3445 Peachtree Road, Suite 700, Atlanta, Georgia 30326, Attn: Daniel Ellis, Esq., in each case SO AS TO BE ACTUALLY RECEIVED NO LATER THAN 4 P.M. (EASTERN TIME) ON APRIL 17, 2003. Objections to confirmation of the Impac Plan are governed by Rule 9014 of the Federal Rules of Bankruptcy Procedure. UNLESS AN OBJECTION TO CONFIRMATION IS TIMELY SERVED AND FILED, IT MAY NOT BE CONSIDERED BY THE BANKRUPTCY COURT. -30- B. GENERAL REQUIREMENTS OF SECTION 1129 At the confirmation hearing, the Bankruptcy Court will determine whether the following confirmation requirements specified in section 1129 of the Bankruptcy Code have been satisfied: 1. The Impac Plan complies with the applicable provisions of the Bankruptcy Code. 2. Each of the Impac Debtors has complied with the applicable provisions of the Bankruptcy Code. 3. The Impac Plan has been proposed in good faith and not by any means proscribed by law. 4. Any payment made or promised by each of the Impac Debtors or by a person issuing securities or acquiring property under the Impac Plan for services or for costs and expenses in, or in connection with, the Chapter 11 cases, or in connection with the Impac Plan and incident to the Chapter 11 cases, has been disclosed to the Bankruptcy Court, and any such payment made before the confirmation of the Impac Plan is reasonable or if such payment is to be fixed after confirmation of the Impac Plan, such payment is subject to the approval of the Bankruptcy Court as reasonable. 5. Each of the Impac Debtors has disclosed the identity and affiliations of any individual proposed to serve, after confirmation of the Impac Plan, as a director, officer or voting trustee of the respective Impac Debtors, affiliates of each of the Impac Debtors participating in the Impac Plan with each of the Impac Debtors, or a successor to each of the Impac Debtors under the Impac Plan, and the appointment to, or continuance in, such office of such individual is consistent with the interests of creditors and equity holders and with public policy, and each of the Impac Debtors has disclosed the identity of any insider that will be employed or retained by each of the Impac Debtors, and the nature of any compensation for such insider. 6. With respect to each Class of Claims, each holder of an impaired Claim either has accepted the Impac Plan or will receive or retain under the Impac Plan, on account of such holder's Claim, property of a value, as of the Effective Date, that is not less than the amount such holder would receive or retain if the applicable Impac Debtor was liquidated on the Effective Date under Chapter 7 of the Bankruptcy Code. See discussion of "Best Interests Test" below. 7. Except to the extent that the Impac Plan meets the requirements of section 1129(b) of the Bankruptcy Code (discussed below), each Class of Claims has either accepted the Impac Plan or is not impaired under the Impac Plan. 8. Except to the extent that the holder of a particular Claim has agreed to a different treatment of such Claim, the Impac Plan provides that Administrative Expense Claims and Priority Non-Tax Claims will be paid in full on the Effective Date and -31- that Priority Tax Claims will receive on account of such Claims deferred cash payments, over a period not exceeding six (6) years after the date of assessment of such Claims, of a value, as of the Effective Date, equal to the Allowed amount of such Claims. 9. At least one Class of impaired Claims has accepted the Impac Plan, determined without including any acceptance of the Impac Plan by any insider holding a Claim in such Class. 10. Confirmation of the Impac Plan is not likely to be followed by the liquidation or the need for further financial reorganization of any of the Impac Debtors or any successor to the Impac Debtors under the Impac Plan, unless such liquidation or reorganization is proposed in the Impac Plan. See discussion of "Feasibility" below. C. BEST INTERESTS TESTS As described above, the Bankruptcy Code requires that each holder of an impaired Claim either (i) accept the Impac Plan or (ii) receive or retain under the Impac Plan property of a value, as of the Effective Date, that is not less than the value such holder would receive if the applicable Impac Debtor was liquidated under Chapter 7 of the Bankruptcy Code. The first step in determining whether this test has been satisfied is to determine the dollar amount that would be generated from the liquidation of the applicable Impac Debtor's assets and properties in the context of a Chapter 7 liquidation case. The gross amount of Cash that would be available for satisfaction of Claims would be the sum consisting of the proceeds resulting from the disposition of the unencumbered assets and properties of the applicable Impac Debtor, augmented by the unencumbered Cash held by the applicable Impac Debtor at the time of the commencement of the liquidation case. The next step is to reduce that gross amount by the costs and expenses of liquidation and by such additional administrative and priority Claims that might result from the termination of the applicable Impac Debtor's business and the use of Chapter 7 for the purposes of liquidation. Any remaining net Cash would be allocated to creditors and shareholders in strict priority, in accordance with section 726 of the Bankruptcy Code. Finally, the present value of such allocations (taking into account the time necessary to accomplish the liquidation) are compared to the value of the property that is proposed to be distributed under the Impac Plan on the Effective Date. The applicable Impac Debtor's costs of liquidation under Chapter 7 would include the fees payable to a trustee in bankruptcy, as well as those fees that might be payable to attorneys and other professionals that such a trustee might engage. Other liquidation costs include the expenses incurred during the Chapter 11 cases that are Allowed Claims in the Chapter 7 case, such as compensation for attorneys, financial advisors, appraisers, accountants and other professionals for the applicable Impac Debtor and the Committee, and costs and expenses of members of the Committee, as well as other compensation Claims. In addition, Claims would arise by reason of the breach or rejection of obligations incurred and leases and -32- executory contracts assumed or entered into by the applicable Impac Debtor during the pendency of the Chapter 11 cases. Generally, the foregoing types of Claims, costs, expenses, fees and such other Claims that may arise in a liquidation case would be paid in full from the liquidation proceeds before the balance of those proceeds would be made available to pay pre-petition secured, priority and unsecured Claims. EACH OF THE IMPAC DEBTORS BELIEVES THAT IN A CHAPTER 7 CASE, CLASS 3 (GENERAL UNSECURED CLAIMS), CLASS 5 (CONVENIENCE CLAIMS) AND CLASS 9 (EQUITY INTERESTS) WOULD RECEIVE NO DISTRIBUTION OF PROPERTY, PARTICULARLY GIVEN THAT THE SETTLEMENT AGREEMENT WOULD OBLIGATE THE IMPAC DEBTORS TO TRANSFER EACH OF THE IMPAC HOTEL PROPERTIES TO CCA, IN ACCORDANCE WITH THE SETTLEMENT AGREEMENT. After consideration of the effects that a Chapter 7 liquidation would have on the ultimate proceeds available for distribution to creditors in the Chapter 11 cases, including (i) the increased costs and expenses of a liquidation under Chapter 7, arising from fees payable to a trustee in bankruptcy and professional advisors to such trustee, (ii) additional costs associated with the transfer of the Impac Hotel Properties, pursuant to the Settlement Agreement, and (iii) the substantial increases in Claims that would be satisfied on a priority basis, each of the Impac Debtors has determined that confirmation of the Impac Plan will provide each holder of an Allowed Claim with a recovery that is not less than such holder would receive pursuant to liquidation of each of the Impac Debtors under Chapter 7. Each of the Impac Debtors also believes that the value of any distributions to each Class of Allowed Claims in a Chapter 7 case, including all secured Claims, would be less than the value of distributions under the Impac Plan because such distributions in a Chapter 7 case would not occur for a substantial period of time. In this regard, it is possible that distribution of the proceeds of the liquidation could be delayed for one year or more after the completion of such liquidation in order to resolve Claims and prepare for distributions. In the event that litigation was necessary to resolve Claims asserted in a Chapter 7 case, the delay could be prolonged and administrative expenses increased. D. LIQUIDATION ANALYSIS Typically a liquidation analysis reflects the projected outcome of a hypothetical, orderly liquidation under chapter 7 of the Bankruptcy Code. However, as set forth in section XI.A, if no Chapter 11 plan can be confirmed for any of the Impac Debtors by the Outside Closing Date, the Impac Debtors' applicable Chapter 11 cases would be administered pursuant to the Settlement Agreement. Pursuant to the Settlement Agreement, each of the Impac Debtors believes that implementation of the Settlement Agreement would result in no distributions being made to the respective holders of Claims and Equity Interests because of (i) the likelihood that other assets of each of the Impac Debtors would have to be sold or otherwise disposed of in accordance with the Settlement Agreement, (ii) additional administrative expenses attendant to fees and expenses of attorneys and other professionals, and (iii) additional expenses and Claims, some of which would be entitled to priority, which would be generated during the implementation of the Settlement Agreement and from other executory contracts in connection with a cessation of each of the Impac Debtors' operations. As no funds would remain, the estates of the Impac Debtors would, at this point, be administratively insolvent. -33- E. FEASIBILITY As a condition to confirmation of the Impac Plan, the Bankruptcy Code requires, among other things, that the Bankruptcy Court determine that confirmation is not likely to be followed by the liquidation or the need for further financial reorganization of the Impac Debtors. In connection with the development of the Impac Plan and for the purpose of determining whether the Impac Plan satisfies this feasibility standard, the Impac Debtors developed the Projections, which include certain income statement, cash flows and balance sheet projections for the Projection Period consisting of the fiscal years 2003 through 2005 for the Reorganized Impac Debtors on a consolidated basis. The Projections, together with a discussion of the assumptions underlying the Projections, are included in section IV above, and Exhibit C, "Projections." Based on the Projections, the Impac Debtors believe that the Reorganized Impac Debtors will be able to make all payments required pursuant to the Impac Plan and, therefore, that confirmation of the Impac Plan is not likely to be followed by liquidation or the need for further reorganization. F. SECTION 1129(b) The Bankruptcy Court may confirm the Impac Plan over the rejection or deemed rejection of the Impac Plan by a Class of Claims if the Impac Plan "does not discriminate unfairly" and is "fair and equitable" with respect to such Class. 1. No Unfair Discrimination This test applies to Classes of Claims that are of equal priority and are receiving different treatment under the Impac Plan. The test does not require that the treatment be the same or equivalent, but that such treatment be "fair." 2. Fair and Equitable Test This test applies to Classes of different priority and status (e.g., secured versus unsecured) and includes the general requirement that no Class of Claims receive more than 100% of the amount of the Allowed Claims in such Class. As to the dissenting Class, the test sets different standards, depending on the type of Claims in such Class: O Secured Creditors. Each holder of an impaired Secured Claim either (i) retains its liens on the property to the extent of the amount of its Allowed Secured Claim and receives deferred cash payments having a value, as of the effective date, of at least the amount of such Allowed Claim, (ii) has the right to credit bid the amount of its Claim if its property is sold and retains its liens on the proceeds of the sale or (iii) receives the "indubitable equivalent" of its Allowed Secured Claim. O Unsecured Creditors. Either (i) each holder of an impaired unsecured Claim receives or retains under the plan property of a value equal to the amount of its Allowed Claim, or (ii) the holders of Claims and Equity Interests that are junior to the Claims of the dissenting Class will not receive any property under the plan. -34- These requirements are in addition to other requirements established by case law interpreting the statutory requirement. Each of the Impac Debtors believes that the Impac Plan will satisfy the "fair and equitable" requirement, because no junior Class to those not paid in full will receive or retain any property, in the absence of new value issued, on account of the Claims or Equity Interests in such Class. In addition, in consideration of the retention of the Reinstated Equity Securities, Lodgian is providing substantial new value consisting of Cash and other financial accommodations, as set forth in section II.A. X. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE IMPAC PLAN The following discussion summarizes certain federal income tax consequences of the implementation of the Impac Plan to certain holders of General Unsecured Claims. The following summary does not address the federal income tax consequences to (i) holders whose Claims are entitled to reinstatement or payment in full in cash, or are otherwise unimpaired under the Impac Plan, and (ii) holders of Claims which are extinguished without a distribution in exchange therefor. In addition, because no Equity Interests will be distributed to holders of Claims, the following summary does not address the federal income tax consequences of the implementation of the Impac Plan to the Impac Debtors. The following summary is based on the Internal Revenue Code of 1986, as amended (the "Tax Code"), Treasury Regulations promulgated thereunder, judicial decisions, and published administrative rules and pronouncements of the Internal Revenue Service ("IRS") as in effect on the date hereof. Changes in such rules or new interpretations thereof may have retroactive effect and could significantly affect the federal income tax consequences described below. Certain federal income tax consequences of the Impac Plan are complex and are subject to significant uncertainties. None of the Impac Debtors have requested or will request a ruling from the IRS or an opinion of counsel with respect to any of the tax aspects of the Impac Plan. Thus, no assurance can be given as to the interpretation that the IRS will adopt. In addition, this summary does not address foreign, state or local tax consequences of the Impac Plan, nor does it purport to address all federal income tax consequences of the Impac Plan that may be relevant to specific taxpayers in light of their particular circumstances or to special classes of taxpayers (such as foreign taxpayers, broker-dealers, mutual funds, insurance companies, financial institutions, small business investment companies, regulated investment companies, tax-exempt organizations, investors in pass-through entities, dealers in securities, U.S. expatriates or persons who have acquired the Claims as part of a straddle, hedge, conversion transaction or other integrated investment). Furthermore, the following discussion does not necessarily apply to holders who have claims in more than one class relating to the same underlying obligation (such as where the underlying obligation is classified as partially secured and partially unsecured). Such holders -35- should consult their tax advisors regarding the effect of such dual status obligations on the federal income tax consequences of the Impac Plan to them. ACCORDINGLY, THE FOLLOWING SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING AND ADVICE BASED UPON THE INDIVIDUAL CIRCUMSTANCES PERTAINING TO A HOLDER OF A CLAIM. ALL HOLDERS OF CLAIMS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS FOR THE FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES TO THEM OF THE IMPLEMENTATION OF THE IMPAC PLAN. A. CONSEQUENCES TO HOLDERS OF GENERAL UNSECURED CLAIMS In general, holders of General Unsecured Claims would recognize gain or loss in an amount equal to the difference between (i) the amount of cash (less any portion of such cash required to be treated as imputed interest as a result of any such cash being distributed after the Effective Date) received by the holder in satisfaction of its claim (other than any claim for accrued but unpaid interest) and (ii) the holder's adjusted tax basis in its claim (other than any claim for accrued but unpaid interest). For a discussion of the tax consequences of any claims for accrued interest, see section X.B, below. Due to the possibility that a holder of a General Unsecured Claim may receive a distribution of cash subsequent to the Effective Date in respect of any subsequently allowed disputed claims, the imputed interest provisions of the Tax Code may apply to treat a portion of the distribution to such holders as imputed interest. With respect to certain holders, such imputed interest may accrue over time using the constant interest method, in which case such holders may be required to include such imputed interest in income prior to the actual distribution. In addition, because distributions of cash to such holders may be made after the Effective Date, recognition of any loss, and a portion of any gain, realized by a holder in satisfaction of its claim may be deferred until all such subsequent distributions are made. Such holders are urged to consult their tax advisors regarding the possible application of (or ability to elect out of) the "installment method" of reporting any gain that may be recognized by such holder with respect to its claim. Where gain or loss is recognized by a holder, the character of such gain or loss as long-term or short-term capital gain or loss or as ordinary income or loss will be determined by a number of factors, including the tax status of the holder, whether the claim constitutes a capital asset in the hands of the holder and how long it has been held, whether the claim was acquired with market discount, and whether and to what extent the holder had previously claimed a bad debt deduction. B. DISTRIBUTIONS IN DISCHARGE OF ACCRUED INTEREST Pursuant to the Impac Plan, all distributions in respect of an allowed claim will be allocated first to the principal amount of the claim, with any excess allocated to the remaining portion of the claim. However, there is no assurance that such allocation would be respected by the IRS for federal income tax purposes. In general, to the extent that any amount received by a holder of a debt is treated as received in satisfaction of accrued interest during its holding period, -36- such amount will be taxable to the holder as interest income (if and to the extent not previously included in the holder's gross income). Conversely, a holder would generally recognize a deductible loss to the extent any accrued interest claimed was previously included in its gross income and is not paid in full. Each holder of a claim is urged to consult its tax advisor regarding the allocation of consideration and the deductibility of unpaid interest for tax purposes. C. MARKET DISCOUNT A holder that purchased its claim from a prior holder with market discount will be subject to the market discount rules of the Tax Code. Under those rules, assuming that the holder has made no election to amortize the market discount into income on a current basis with respect to any market discount instrument, any gain recognized on the exchange of its claim (subject to a de minimis rule) generally would be characterized as ordinary income to the extent of the accrued market discount on such claim as of the date of the exchange. D. INFORMATION REPORTING AND WITHHOLDING All distributions to holders of allowed claims under the Impac Plan are subject to any applicable withholding (including employment tax withholding). Under federal income tax law, interest, dividends, and other reportable payments may, under certain circumstances, be subject to "backup withholding" (currently at a rate of 30% and not to exceed 31%). Backup withholding generally applies if the holder (i) fails to furnish its social security number or other taxpayer identification number ("TIN"), (ii) furnishes an incorrect TIN, (iii) fails properly to report interest or dividends, or (iv) under certain circumstances, fails to provide a certified statement, signed under penalty of perjury, that the TIN provided is its correct number, that it is not subject to backup withholding, and that it is a U.S. person. Backup withholding is not an additional tax but merely an advance payment of tax, which may be refunded to the extent it results in an overpayment of tax. Certain persons are exempt from backup withholding, including, in certain circumstances, corporations and financial institutions. THE FOREGOING SUMMARY HAS BEEN PROVIDED FOR INFORMATIONAL PURPOSES ONLY. ALL HOLDERS OF CLAIMS ARE URGED TO CONSULT THEIR TAX ADVISORS CONCERNING THE FEDERAL, STATE, LOCAL, AND OTHER TAX CONSEQUENCES APPLICABLE UNDER THE IMPAC PLAN. XI. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE IMPAC PLAN A. LIQUIDATION UNDER CHAPTER 11 If no Chapter 11 plan can be confirmed for any of the Impac Debtors by the Outside Closing Date, the Impac Debtors' applicable Chapter 11 cases would be administered pursuant to the Settlement Agreement and liquidated under Chapter 11 of the Bankruptcy Code with either a structured dismissal or alternative arrangement acceptable to CCA and the Bankruptcy Court. A discussion of the effect that a Chapter 11 liquidation would have on the recoveries of holders of Claims is set forth in sections IX.C and IX.D, above. Pursuant to the -37- Settlement Agreement, each of the Impac Debtors believes that implementation of the Settlement Agreement would result in no distributions being made to the respective holders of Claims and Equity Interests because of (i) the likelihood that other assets of each of the Impac Debtors would have to be sold or otherwise disposed of in accordance with the Settlement Agreement, (ii) additional administrative expenses attendant to fees and expenses of attorneys and other professionals, and (iii) additional expenses and Claims, some of which would be entitled to priority, which would be generated during the implementation of the Settlement Agreement and from other executory contracts in connection with a cessation of each of the Impac Debtors' operations. AS NO FUNDS WOULD REMAIN, THE ESTATES OF THE IMPAC DEBTORS WOULD, AT THIS POINT, BE ADMINISTRATIVELY INSOLVENT. EACH OF THE IMPAC DEBTORS BELIEVES THAT THERE WOULD BE NO DISTRIBUTION TO HOLDERS OF CLAIMS IN CLASS 3 (GENERAL UNSECURED CLAIMS), CLASS 5 (CONVENIENCE CLAIMS) AND CLASS 9 (EQUITY INTERESTS) IF THE IMPAC PLAN IS NOT CONFIRMED AND THE IMPAC HOTEL PROPERTIES ARE DISPOSED OF BY CCA UNDER THE SETTLEMENT AGREEMENT. B. ALTERNATIVE PLAN(S) If the Impac Plan is not confirmed, the possibility that each of the Impac Debtors or any other party in interest (if the applicable Impac Debtor's exclusive period in which to file a plan has expired) could attempt to formulate a different plan would be highly unlikely given that the Impac Hotel Properties would more than likely be sold, or returned to CCA, in accordance with the Settlement Agreement. On the other hand, the Impac Plan allows the Reorganized Impac Debtors to take advantage of their unique position in the lodging industry, including strong relationships with vendors, extended credit terms, and other benefits associated with combined management efforts provided by the Lodgian Group. The employees and vendors of the Impac Debtors, as well as the management team, have expended substantial and valuable resources into the formulation of the Impac Plan, which would be lost if the Impac Debtors are required by CCA to dispose of the Impac Hotel Properties under the Settlement Agreement. This adverse result can be avoided if the current Impac Plan is confirmed. XII. CONCLUSION Each of the Impac Debtors believes that the Impac Plan is in the best interests of all of its creditors and equity holders and urges the holders of impaired Claims in Classes 1, 3, 5 and 9 to vote to accept the Impac Plan and to evidence such acceptance by returning their Ballots so that they will be received by the Voting Agent NOT LATER THAN 5:00 P.M. (PACIFIC TIME) ON APRIL 17, 2003. -38- Dated: As of March 3, 2003 Respectfully submitted, IMPAC HOTELS II, L.L.C. By: /s/ Daniel E. Ellis ---------------------------------------- Name: Daniel E. Ellis Title: Authorized Officer IMPAC HOTELS III, L.L.C. By: /s/ Daniel E. Ellis ---------------------------------------- Name: Daniel E. Ellis Title: Authorized Officer OFFICIAL COMMITTEE OF UNSECURED CREDITORS By: Debevoise & Plimpton, its counsel By: /s/ George E.B. Maguire ----------------------------------- Name: George E.B. Maguire Title: Attorneys for the Committee -39- EX-10.13.2 37 g87458exv10w13w2.txt EX-10.13.2 JOINT PLAN OF REORGANIZATION EXHIBIT 10.13.2 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK - --------------------------------------x In re : Chapter 11 LODGIAN, INC., et al., : Case No. 01-16345 (BRL) Debtors. : Jointly Administered - --------------------------------------x JOINT PLAN OF REORGANIZATION OF IMPAC HOTELS II, L.L.C. AND IMPAC HOTELS III, L.L.C., TOGETHER WITH THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE CADWALADER, WICKERSHAM CURTIS, MALLET-PREVOST, COLT & TAFT LLP & MOSLE LLP Attorneys for the Debtors and Co-Attorneys for the Debtors and Debtors-In-Possession Debtors-In-Possession 100 Maiden Lane 101 Park Avenue New York, New York 10038 New York, New York 10178 (212) 504-6000 (212) 696-6000 - and - DEBEVOISE & PLIMPTON Attorneys for the Official Committee of Unsecured Creditors 919 Third Avenue New York, New York 10022 (212) 909-6000 Dated: As of March 3, 2003 TABLE OF CONTENTS
Page ---- SECTION 1. DEFINITIONS AND INTERPRETATION ....................... 1 A. Definitions ........................................ 1 1.1 Administrative Expense Claim ....................... 1 1.2 Allowed ............................................ 2 1.3 Amended Organizational Documents ................... 2 1.4 Bankruptcy Code .................................... 2 1.5 Bankruptcy Court ................................... 2 1.6 Bankruptcy Rules ................................... 2 1.7 Business Day ....................................... 2 1.8 Cash ............................................... 3 1.9 Catch-up Distribution .............................. 3 1.10 CCA ................................................ 3 1.11 CCA Agreements ..................................... 3 1.12 CCA Secured Claim .................................. 3 1.13 CCA Settlement Agreement ........................... 3 1.14 Chapter 11 Cases ................................... 3 1.15 Claim .............................................. 3 1.16 Class .............................................. 3 1.17 Class 3 Cash Pool .................................. 3 1.18 Class 3 Subclass ................................... 4 1.19 Collateral ......................................... 4 1.20 Commencement Date .................................. 4 1.21 Committee .......................................... 4 1.22 Confirmation Date .................................. 4 1.23 Confirmation Hearing ............................... 4 1.24 Confirmation Order ................................. 4 1.25 Confirmed Debtors .................................. 4 1.26 Convenience Claim .................................. 4 1.27 Debtors ............................................ 4 1.28 Disbursing Agent ................................... 5 1.29 Disputed Claim ..................................... 5 1.30 Disputed Claims Reserve ............................ 5 1.31 Distribution Record Date ........................... 5 1.32 Effective Date ..................................... 5 1.33 Equity Interest .................................... 6 1.34 Equity Security .................................... 6
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Page ---- 1.35 Estate ........................................................ 6 1.36 Exit Financing ................................................ 6 1.37 Exit Financing Agreements ..................................... 6 1.38 Exit Financing Borrowers ...................................... 6 1.39 Exit Financing Lender ......................................... 6 1.40 Final Distribution Date ....................................... 6 1.41 Final Order ................................................... 6 1.42 General Unsecured Claim ....................................... 7 1.43 Inter-Company Claim ........................................... 7 1.44 Mortgage Financing Agreements ................................. 7 1.45 Person ........................................................ 7 1.46 Plan .......................................................... 7 1.47 Plan Documents ................................................ 7 1.48 Plan Proponents ............................................... 7 1.49 Plan Supplement ............................................... 7 1.50 Priority Non-Tax Claim ........................................ 7 1.51 Priority Tax Claim ............................................ 8 1.52 Pro Rata Share ................................................ 8 1.53 Releasees ..................................................... 8 1.54 Reorganized Debtor ............................................ 8 1.55 Schedule of Assumed Contracts ................................. 8 1.56 Schedules ..................................................... 8 1.57 Secured Claim ................................................. 8 1.58 Settlement Amount ............................................. 8 1.59 Subclass ...................................................... 8 1.60 Subclass Debtor ............................................... 9 1.61 Subordinated Claim ............................................ 9 1.62 Tort Claim .................................................... 9 B. Interpretation; Application of Definitions and Rules of Construction ....................................... 9 SECTION 2. ADMINISTRATIVE EXPENSE CLAIMS AND PRIORITY TAX CLAIMS ......... 9 2.1 Administrative Expense Claims ................................. 9 2.2 Compensation and Reimbursement Claims. ........................ 10 2.3 Priority Tax Claims ........................................... 10 SECTION 3. CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS .................... 10 3.1 Classes ....................................................... 11 3.2 Subclasses for Class 1 ........................................ 11
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Page ---- 3.3 Subclasses for Class 3 ........................................ 11 SECTION 4. TREATMENT OF CLAIMS AND EQUITY INTERESTS ........................ 12 4.1 Secured Claims (Class 1). ..................................... 12 4.2 Priority Non-Tax Claims (Class 2). ............................ 13 4.3 General Unsecured Claims (Class 3). ........................... 13 4.4 Intentionally Omitted ......................................... 13 4.5 Convenience Claims (Class 5). ................................. 13 4.6 Intentionally Omitted ......................................... 14 4.7 Intentionally Omitted ......................................... 14 4.8 Equity Interests (Class 9) .................................... 14 4.9 Intentionally Omitted ......................................... 14 4.10 Subordinated Claims (Class 11) ................................ 14 SECTION 5. ACCEPTANCE OR REJECTION OF PLAN ................................. 14 5.1 Voting of Claims .............................................. 14 5.2 Acceptance by a Class ......................................... 14 5.3 Presumed Acceptance of Plan ................................... 14 5.4 Presumed Rejection of Plan. ................................... 15 SECTION 6. MEANS FOR IMPLEMENTATION ........................................ 15 6.1 Exit Financing ................................................ 15 6.2 Intentionally Omitted ......................................... 15 6.3 Intentionally Omitted ......................................... 15 6.4 Waiver of Subordination. ...................................... 15 6.5 Intentionally Omitted ......................................... 16 6.6 Intentionally Omitted ......................................... 16 6.7 Intentionally Omitted ......................................... 16 6.8 Intentionally Omitted ......................................... 16 6.9 Executive Officers ............................................ 16 6.10 Amended Organizational Documents. ............................. 16 6.11 Intentionally Omitted ......................................... 16 6.12 Authorization of Notes ........................................ 16 6.13 Intentionally Omitted ......................................... 17 SECTION 7. DISTRIBUTIONS ................................................... 17 7.1 Distribution Record Date. ..................................... 17 7.2 Date of Distributions ......................................... 17 7.3 Distributions to Classes ...................................... 17 7.4 Disbursing Agent. ............................................. 18
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Page ---- 7.5 Rights and Powers of Disbursing Agent ......................... 18 7.6 Intentionally Omitted ......................................... 18 7.7 Delivery of Distribut ions. ................................... 18 7.8 Manner of Payment Under Plan .................................. 19 7.9 Retention of Equity Interests ................................. 19 7.10 De Minimis Distributions. ..................................... 19 7.11 Setoffs. ...................................................... 19 7.12 Allocation of Plan Distribution Between Principal and Interest .................................................. 20 7.13 Withholding and Reporting Requirements. ....................... 20 7.14 Time Bar to Cash Payments ..................................... 20 7.15 Transactions on Business Days ................................. 20 7.16 Closing of Chapter 11 Cases ................................... 21 SECTION 8. PROCEDURES FOR RESOLVING AND TREATING DISPUTED CLAIMS ........... 21 8.1 Payments and Distributions with Respect to Disputed Claims .... 21 8.2 Preservation of Insurance ..................................... 22 8.3 Resolution of Disputed Claims. ................................ 22 8.4 Distributions After Allowance ................................. 23 8.5 Reserve Accounts for Class 3 Disputed Claims. ................. 23 8.6 Investment of Disputed Claims Reserves. ....................... 23 8.7 Release of Funds from Disputed Claims Reserves. ............... 24 8.8 Estimation of Claims .......................................... 24 8.9 No Recourse ................................................... 24 8.10 Mediation of Disputed Claims. ................................. 25 SECTION 9. EXECUTORY CONTRACTS AND UNEXPIRED LEASES ........................ 26 9.1 General Treatment ............................................. 26 9.2 Cure of Defaults .............................................. 26 9.3 Assumptions and Assignments of Executory Contracts and Unexpired Leases .............................................. 27 9.4 Approval of Rejection of Executory Contracts and Unexpired Leases ........................................................ 27 9.5 Bar Date for Filing Proofs of Claim Relating to Executory Contracts and Unexpired Leases Rejected Pursuant to Plan ...... 27 9.6 Survival of Debtors' Corporate Indemnities .................... 27 SECTION 10. CONDITIONS PRECEDENT TO EFFECTIVE DATE ......................... 28 10.1 Conditions to Effective Date .................................. 28 10.2 Waiver of Conditions .......................................... 28
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Page ---- SECTION 11. EFFECT OF CONFIRMATION ................................ 28 11.1 Vesting of Assets. .................................... 28 11.2 Discharge of Claims ................................... 29 11.3 Discharge of Debtors. ................................. 29 11.4 Binding Effect ........................................ 29 11.5 Term of Injunctions or Stays .......................... 29 11.6 Injunction Against Interference with Plan. ............ 30 11.7 Exculpation. .......................................... 30 11.8 Rights of Action. ..................................... 30 11.9 Release by Debtors .................................... 30 11.10 Release of Releasees by Other Releasees. .............. 31 11.11 Claims of the United States Government ................ 31 SECTION 12. RETENTION OF JURISDICTION ............................. 31 SECTION 13. MISCELLANEOUS PROVISIONS .............................. 33 13.1 Retiree Benefits ...................................... 33 13.2 Deletion of Classes and Subclasses. ................... 33 13.3 Addition of Classes and Subclasses .................... 34 13.4 Committee ............................................. 34 13.5 Exemption from Transfer Taxes. ........................ 34 13.6 Substantial Consummation. ............................. 34 13.7 Payment of Statutory Fees. ............................ 34 13.8 Amendments. ........................................... 35 13.9 Revocation or Withdrawal of Plan ...................... 35 13.10 Cramdown. ............................................. 35 13.11 Severability. ......................................... 35 13.12 Request for Expedited Determination of Taxes .......... 36 13.13 Courts of Competent Jurisdiction. ..................... 36 13.14 Governing Law. ........................................ 36 13.15 Time. ................................................. 36 13.16 Headings .............................................. 36 13.17 Exhibits. ............................................. 37 13.18 Notices. .............................................. 37 EXHIBITS Exhibit A: List of Debtors
v UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK - ---------------------------------------------- x In re : Chapter 11 LODGIAN, INC., et al., : Case No. 01-16345 (BRL) Debtors. : Jointly Administered - ---------------------------------------------- x JOINT PLAN OF REORGANIZATION OF IMPAC HOTELS II, L.L.C. AND IMPAC HOTELS III, L.L.C., TOGETHER WITH THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C. (the "Debtors" or "Impac Debtors"), debtors and debtors-in-possession in the above-captioned chapter 11 cases, together with the official committee of unsecured creditors appointed in these chapter 11 cases, propose the following joint chapter 11 plan of reorganization pursuant to section 1121(a) of title 11 of the United States Code. WHILE THIS IS A JOINT PLAN FOR EACH OF THE DEBTORS, IT DOES NOT PROVIDE THAT THESE CHAPTER 11 CASES WILL BE SUBSTANTIVELY CONSOLIDATED. ACCORDINGLY, TO THE EXTENT APPLICABLE TO A DEBTOR, ALL OF THE PROVISIONS OF THIS PLAN, INCLUDING WITHOUT LIMITATION THE DEFINITIONS AND DISTRIBUTIONS TO CREDITORS AND EQUITY INTEREST HOLDERS, SHALL APPLY TO THE RESPECTIVE ASSETS OF, CLAIMS AGAINST, AND EQUITY INTERESTS IN, SUCH DEBTOR'S SEPARATE ESTATE. SECTION 1. DEFINITIONS AND INTERPRETATION A. DEFINITIONS. The following terms used herein shall have the respective meanings defined below (such meanings to be equally applicable to both the singular and plural): 1.1 ADMINISTRATIVE EXPENSE CLAIM means any right to payment constituting a cost or expense of administration of the Chapter 11 Cases allowed under sections 503(b) and 507(a)(1) of the Bankruptcy Code, including, without limitation, any actual and necessary costs and expenses of preserving the applicable Debtor's Estate, any actual and necessary costs and expenses of operating the applicable Debtor's businesses, any indebtedness or obligations incurred or assumed by the applicable Debtor, as a debtor-in-possession, during the Chapter 11 Cases (including, without limitation, for the acquisition or lease of property or an interest in property or the rendition of services), any allowances of compensation and reimbursement of expenses to the extent allowed by a Final Order under section 330 or 503 of the Bankruptcy Code, and any fees or charges assessed against the Estate of the applicable Debtor under section 1930 of chapter 123 of title 28 of the United States Code. 1.2 ALLOWED means, with reference to any Claim, (i) any Claim against a Debtor which has been listed by such Debtor in the Schedules, as such Schedules may be amended by the applicable Debtor from time to time in accordance with Bankruptcy Rule 1009, as liquidated in amount and not disputed or contingent and for which no contrary proof of claim or equity interest has been filed, (ii) any timely filed Claim as to which no objection to allowance has been interposed in accordance with Section 8.3 hereof or such other applicable period of limitation fixed by the Bankruptcy Code, the Bankruptcy Rules or the Bankruptcy Court, or as to which any objection has been determined by a Final Order to the extent that such objection is determined in favor of the respective holder, or (iii) any Claim expressly allowed by a Final Order or hereunder. 1.3 AMENDED ORGANIZATIONAL DOCUMENTS means the corporate, partnership or limited liability company organizational documents, as applicable, of each Debtor as amended and adopted on the Effective Date as necessary to comply with the requirements of the Bankruptcy Code and effect the terms of this Plan (including the implementation of the Exit Financing), substantially in the form set forth in the Plan Supplement for Reorganized Debtors. 1.4 BANKRUPTCY CODE means title 11 of the United States Code, as amended from time to time, as applicable to the Chapter 11 Cases. 1.5 BANKRUPTCY COURT means the United States District Court for the Southern District of New York having jurisdiction over the Chapter 11 Cases and, to the extent of the reference of the Chapter 11 Cases pursuant to 28 U.S.C. Section 157(a), the United States Bankruptcy Court for the Southern District of New York. 1.6 BANKRUPTCY RULES means the Federal Rules of Bankruptcy Procedure as promulgated by the United States Supreme Court under section 2075 of title 28 of the United States Code, as amended from time to time, as applicable to the Chapter 11 Cases, and any Local Rules of the Bankruptcy Court. 1.7 BUSINESS DAY means any day other than a Saturday, a Sunday, or any other day on which banking institutions in New York, New York are required or authorized to close by law or executive order. -2- 1.8 CASH means legal tender of the United States of America. 1.9 CATCH-UP DISTRIBUTION means with respect to each holder of an Allowed Claim in Class 3, the difference between (i) the Pro Rata Share of the Class 3 Cash Pool that such holder would have received if the resolution of all Disputed Claims in Class 3 had been known on the Effective Date, and (ii) the Pro Rata Share of the Class 3 Cash Pool previously received by such holder. 1.10 CCA means The Capital Company of America LLC. 1.11 CCA AGREEMENTS means the Mortgage Financing Agreements dated as of August 31, 2000 between CCA and the following debtors: Impac Hotels II, L.L.C., Impac Hotels III, L.L.C., Impac Hotel Group, L.L.C. and Lodgian, Inc., as such agreements have been modified by the CCA Settlement Agreement. 1.12 CCA SECURED CLAIM means the Claim by CCA, as agreed to by the Impac Debtors and CCA under the CCA Settlement Agreement. 1.13 CCA SETTLEMENT AGREEMENT means the settlement agreement dated as of October 21, 2002, as approved by the Bankruptcy Court on October 31, 2002, which, inter alia, permits the Impac Debtors to fully discharge the CCA Secured Claim. 1.14 CHAPTER 11 CASES means individually, the voluntary case commenced by each Debtor under its respective case number as listed on Exhibit A, and collectively, the voluntary cases under chapter 11 of the Bankruptcy Code commenced by each Debtor on the Commencement Date in the United States Bankruptcy Court for Southern District of New York, styled In re Lodgian, Inc., et al., Case No. 01-16345 (BRL), which are currently pending before the Bankruptcy Court. 1.15 CLAIM means (i) any right to payment from any of the Debtors, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, known or unknown, or (ii) any right to an equitable remedy for breach of performance if such breach gives rise to a right of payment from any of the Debtors, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured, known or unknown. 1.16 CLASS means a class of Claims or Equity Interests established pursuant to Section 3. 1.17 CLASS 3 CASH POOL means the $302,484 in Cash which shall be reserved as the aggregate Cash pool to be used for a pro rata distribution to the holders of Allowed Claims in both Subclasses of Class 3. -3- 1.18 CLASS 3 SUBCLASS means the Subclass for each Debtor. 1.19 COLLATERAL means any property or interest in property of the Estate of any Debtor subject to a lien, charge or other encumbrance to secure the payment or performance of a Claim, which lien, charge or other encumbrance is not subject to avoidance under the Bankruptcy Code. 1.20 COMMENCEMENT DATE means December 20, 2001 with respect to the Debtors and the Confirmed Debtors; provided, however, that "Commencement Date" means (i) December 21, 2001 with respect to Worcester Hospitality, L.P., Lodgian Hotels, Inc., Brecksville Hospitality, L.P. and Sioux City Hospitality, L.P., and (ii) April 17, 2002 with respect to New Orleans Airport Motel Associates, L.P. 1.21 COMMITTEE means the official committee of general unsecured creditors appointed by the Office of the United States Trustee in the Chapter 11 Cases pursuant to section 1102 of the Bankruptcy Code, as the membership of such Committee may be altered from time to time. 1.22 CONFIRMATION DATE means the date on which the Clerk of the Bankruptcy Court enters the Confirmation Order. 1.23 CONFIRMATION HEARING means the hearing to be held by the Bankruptcy Court regarding confirmation of this Plan, as such hearing may be adjourned or continued from time to time. 1.24 CONFIRMATION ORDER means the order of the Bankruptcy Court confirming this Plan pursuant to section 1129 of the Bankruptcy Code. 1.25 CONFIRMED DEBTORS means the all of the debtors in these jointly administered above-captioned chapter 11 cases except the Impac Debtors. 1.26 CONVENIENCE CLAIM means (i) an Allowed General Unsecured Claim against either of the Debtors in an amount equal to $200 or less, (ii) the Allowed General Unsecured Claim against either of the Debtors of a holder that has irrevocably elected on its ballot to reduce such Claim against such Debtor(s) to the amount of $200, or (iii) a Disputed Claim against either of the Debtors that becomes an Allowed General Unsecured Claim of $200 or less with the consent of, and in the amount agreed to by, the applicable Debtor or pursuant to a Final Order. 1.27 DEBTORS means IMPAC Hotels II, L.L.C. and IMPAC Hotels III, L.L.C., including in their capacity as debtors and debtors in possession pursuant to sections 1101, 1107(a) and 1108 of the Bankruptcy Code in chapter 11 cases 01-16367 and 01-16375, respectively. -4- 1.28 DISBURSING AGENT means any entity (including any applicable Debtor if it acts in such capacity) in its capacity as a disbursing agent under Section 7.4 hereof. 1.29 DISPUTED CLAIM means any Claim which has not been Allowed pursuant to this Plan or a Final Order, and (a) if no proof of claim has been filed by the applicable deadline: (i) a Claim that has been or hereafter is listed on the Schedules as disputed, contingent or unliquidated; or (ii) a Claim that has been or hereafter is listed on the Schedules as other than disputed, contingent or unliquidated, but as to which the applicable Debtor(s) or the Reorganized Debtors or any other party in interest has interposed an objection or request for estimation which has not been withdrawn or determined by a Final Order; or (b) if a proof of claim or request for payment of an Administrative Expense Claim has been filed by the applicable deadline: (i) a Claim for which no corresponding Claim has been or hereafter is listed on the Schedules; (ii) a Claim for which a corresponding Claim has been or hereafter is listed on the Schedules as other than disputed, contingent or unliquidated, but for which the nature or amount of the Claim as asserted in the proof of claim varies from the nature and amount of such Claim as listed on the Schedules; (iii) a Claim for which a corresponding Claim has been or hereafter is listed on the Schedules as disputed, contingent or unliquidated and which has not been resolved by written agreement of the parties or a Final Order; (iv) a Claim for which a timely objection or request for estimation is interposed by the applicable Debtor(s) or the Reorganized Debtors or any other party in interest, which has not been withdrawn or determined by a Final Order; or (v) any Tort Claim. 1.30 DISPUTED CLAIMS RESERVE means, in the event there exists any Disputed Claim in Class 3 on or after the Effective Date, Cash to be set aside by the Debtors in an interest-bearing account, in amounts sufficient to pay all such Disputed Claims in Class 3 in accordance with the provisions of this Plan, if such Disputed Claims become Allowed Claims, and to be maintained under this Plan, as set forth more fully in section 8.5 of this Plan. The amount of Cash to be set aside by the Debtors on the Effective Date shall not exceed the amount of the Class 3 Cash Pool. 1.31 DISTRIBUTION RECORD DATE means the date fixed as the "Distribution Record Date" by order of the Bankruptcy Court approving, inter alia, procedures to solicit acceptances or rejections of this Plan. 1.32 EFFECTIVE DATE means a Business Day on or after the Confirmation Date specified by the Plan Proponents on which (i) no stay of the Confirmation Order is in effect and (ii) the conditions to the effectiveness of this Plan specified in Section 10.1 hereof have been satisfied or waived. -5- 1.33 EQUITY INTEREST means the rights of a holder of an Equity Security. 1.34 EQUITY SECURITY means, with respect to any Debtor, its authorized capital stock, membership interests, partnership interests or similar ownership interests, whether or not transferable, including any option, warrant or right, contractual or otherwise, to acquire any such interest. 1.35 ESTATE means, as to each Debtor, the estate created pursuant to section 541 of the Bankruptcy Code upon the commencement of such Debtor's Chapter 11 Case. 1.36 EXIT FINANCING means the loan provided to the Exit Financing Borrowers by the Exit Financing Lender pursuant to the Exit Financing Agreements. 1.37 EXIT FINANCING AGREEMENTS means the Mortgage Financing Agreements to be entered into on the Effective Date among, inter alia, the Exit Financing Lender and the Exit Financing Borrowers. 1.38 EXIT FINANCING BORROWERS means the eighteen single purpose entities, single member Delaware limited liability companies being formed in connection with the Exit Financing, each of which will own one of the Impac hotel properties and be wholly-owned by the applicable Impac Debtor. 1.39 EXIT FINANCING LENDER means the Person(s) named as the lender(s) under the Exit Financing Agreements. 1.40 FINAL DISTRIBUTION DATE means, in the event that there exist on the Effective Date any Disputed Claims, a date selected by the Plan Proponents, in their sole discretion, on which all such Disputed Claims have been resolved by Final Order. 1.41 FINAL ORDER means an order or judgment of the Bankruptcy Court entered by the Clerk of the Bankruptcy Court on the docket in the Chapter 11 Cases, which has not been reversed, vacated or stayed and as to which (i) the time to appeal, petition for certiorari or move for a new trial, reargument or rehearing has expired and as to which no appeal, petition for certiorari or other proceedings for a new trial, reargument or rehearing shall then be pending, or (ii) if an appeal, writ of certiorari, new trial, reargument or rehearing thereof has been sought, such order or judgment of the Bankruptcy Court shall have been affirmed by the highest court to which such order was appealed, or certiorari shall have been denied, or a new trial, reargument or rehearing shall have been denied or resulted in no modification of such order, and the time to take any further appeal, petition for certiorari or move for a new trial, reargument or rehearing shall have expired; provided, however, that the possibility that a motion under Rule 60 of the Federal Rules of Civil Procedure, or any analogous rule under the Bankruptcy Rules, may be filed relating to such order shall not cause such order to not be a Final Order. -6- 1.42 GENERAL UNSECURED CLAIM means any Claim against the applicable Debtor that (i) is not an Administrative Expense Claim, a Priority Tax Claim, a Secured Claim, a Priority Non-Tax Claim, or a Subordinated Claim, or (ii) is otherwise determined by the Bankruptcy Court to be a General Unsecured Claim. 1.43 INTER-COMPANY CLAIM means any General Unsecured Claim held by a Debtor against another Debtor and/or a Confirmed Debtor against a Debtor. 1.44 MORTGAGE FINANCING AGREEMENTS means, with respect to any financing arrangements secured by the interest of the Debtors or each of their subsidiaries in any hotel property (including any leasehold interest), the applicable loan agreements and all related agreements, instruments and other documents, including all promissory notes, mortgages (including leasehold mortgages), security agreements and assignments of leases and rents, as the same may be amended or modified from time to time. 1.45 PERSON means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority, governmental unit or other entity of whatever nature. 1.46 PLAN means this joint chapter 11 plan of reorganization of the Debtors, to the extent applicable to any Debtor, including the Plan Supplement and the exhibits hereto and thereto, as the same may be amended or modified from time to time in accordance with the provisions of the Bankruptcy Code and the terms hereof. 1.47 PLAN DOCUMENTS means the documents to be executed, delivered, assumed or performed in conjunction with the consummation of this Plan on the Effective Date, including (i) the Amended Organizational Documents and (ii) the Exit Financing Agreements. Each of the Plan Documents to be entered into or adopted as of the Effective Date will be filed in draft form in the Plan Supplement. 1.48 PLAN PROPONENTS means each Debtor and the Committee. 1.49 PLAN SUPPLEMENT means a supplemental appendix to this Plan that will contain (i) the draft form of the Plan Documents to be entered into as of the Effective Date and (ii) the Schedule of Assumed Contracts as of the date of the Plan Supplement, to be filed seven (7) days before the date of the Confirmation Hearing. 1.50 PRIORITY NON-TAX CLAIM means any Claim other than an Administrative Expense Claim or a Priority Tax Claim, entitled to priority in payment as specified in section 507(a)(3), (4), (5), (6), (7) or (9) of the Bankruptcy Code. -7- 1.51 PRIORITY TAX CLAIM means any Claim of a governmental unit of the kind entitled to priority in payment as specified in sections 502(i) and 507(a)(8) of the Bankruptcy Code. 1.52 PRO RATA SHARE means, with respect to an Allowed Claim in Class 3, a proportional share of the Class 3 Cash Pool equal to (x) the amount of such Allowed Claim divided by (y) the aggregate amount of Allowed Claims in Class 3. For purposes of determining a Pro Rata Share, the Claims (both Disputed Claims and Allowed Claims) in each Subclass of Class 3 shall be aggregated. 1.53 RELEASEES means, collectively, (i) any director, officer, agent or employee of each Debtor who was employed or otherwise serving in such capacity on the Confirmation Date, (ii) the Committee, and (iii) any member of the Committee, any member, director, officer, agent or employee of a member of the Committee, or each Debtor's or the Committee's attorneys or advisors, in each case who were acting, employed or otherwise serving in such capacity on the Confirmation Date. 1.54 REORGANIZED DEBTOR means each Debtor on or after the Effective Date. 1.55 SCHEDULE OF ASSUMED CONTRACTS means the schedule listing the executory contracts and unexpired leases to be assumed by each Debtor, to be filed in the Plan Supplement. 1.56 SCHEDULES means the schedules of assets and liabilities and the statement of financial affairs filed by each Debtor under section 521 of the Bankruptcy Code, Bankruptcy Rule 1007 and the Official Bankruptcy Forms of the Bankruptcy Rules, as such schedules and statements have been or may be supplemented or amended through the Confirmation Date. 1.57 SECURED CLAIM means a Claim to the extent (i) secured by Collateral, the amount of which is equal to or less than the value of such Collateral (A) as set forth in this Plan, (B) as agreed to by the holder of such Claim and the applicable Debtor(s), or (C) as determined by a Final Order in accordance with section 506(a) of the Bankruptcy Code, or (ii) secured by the amount of any rights of setoff of the holder thereof under section 553 of the Bankruptcy Code. 1.58 SETTLEMENT AMOUNT means the amount for which the CCA Secured Claim can be fully discharged, in accordance with the CCA Settlement Agreement. 1.59 SUBCLASS means a subclass of a Class of Claims or Equity Interests established pursuant to Section 3. -8- 1.60 SUBCLASS DEBTOR means, with respect to any Subclass of Claims or Equity Interests, the Debtor against or in which such Claims or Equity Interests are Allowed. 1.61 SUBORDINATED CLAIM means any Claim against a Debtor, whether secured or unsecured, for any fine, penalty, forfeiture, attorneys' fees (to the extent that such attorneys' fees are punitive in nature), or for multiple, exemplary or punitive damages, to the extent that such fine, penalty, forfeiture, attorneys' fees or damages are not compensation for actual pecuniary loss suffered by the holder of such Claim and not statutorily prescribed, and all claims against either of the Debtors of the type described in Section 510(b) of the Bankruptcy Code relating to equity interests (including all Equity Interests). 1.62 TORT CLAIM means any Claim related to personal injury, property damage, products liability, wrongful death, employment litigation or other similar Claims against either of the Debtors arising out of events that occurred, in whole or in part, prior to the Commencement Date, which have not previously been compromised and settled or otherwise resolved. B. INTERPRETATION; APPLICATION OF DEFINITIONS AND RULES OF CONSTRUCTION. Unless otherwise specified, all section or exhibit references in this Plan are to the respective section in, or exhibit to, this Plan, as the same may be amended, waived or modified from time to time. The words "herein," "hereof," "hereto," "hereunder," and other words of similar import refer to this Plan as a whole and not to any particular section, subsection or clause contained therein. A term used herein that is not defined herein shall have the meaning assigned to that term in the Bankruptcy Code. The rules of construction contained in section 102 of the Bankruptcy Code shall apply to this Plan. The headings in this Plan are for convenience of reference only and shall not limit or otherwise affect the provisions hereof. SECTION 2. ADMINISTRATIVE EXPENSE CLAIMS AND PRIORITY TAX CLAIMS 2.1 ADMINISTRATIVE EXPENSE CLAIMS. Except to the extent that the applicable Debtor and a holder of an Allowed Administrative Expense Claim agree to a different treatment, each Debtor shall pay to each holder of an Allowed Administrative Expense Claim against such Debtor, in full satisfaction of such Claim, Cash in an amount equal to such Claim on, or as soon thereafter as is reasonably practicable, the later of (i) the Effective Date and (ii) the first Business Day after the date that is thirty (30) calendar days after the date such -9- Administrative Expense Claim becomes an Allowed Administrative Expense Claim; provided, however, that Allowed Administrative Expense Claims representing liabilities incurred in the ordinary course of business by such Debtor, as a debtor-in-possession, or liabilities arising under loans or advances to or other obligations incurred by such Debtor, as debtor-in-possession, whether or not incurred in the ordinary course of business, shall be paid by such Debtor in the ordinary course of business, consistently with past practice and in accordance with the terms and subject to the conditions of any agreements governing, instruments evidencing, or other documents relating to such transactions. 2.2 COMPENSATION AND REIMBURSEMENT CLAIMS. All entities seeking an award by the Bankruptcy Court of compensation for services rendered or reimbursement of expenses incurred through and including the Confirmation Date under section 503(b)(2), 503(b)(3), 503(b)(4) or 503(b)(5) of the Bankruptcy Code (i) shall file their respective final applications for allowance of compensation for services rendered and reimbursement of expenses incurred by the date that is forty-five (45) days after the Effective Date, and (ii) shall be paid in full in such amounts as are allowed by the Bankruptcy Court (A) upon the later of (i) the Effective Date and (ii) the date upon which the order relating to any such Administrative Expense Claim is entered, or (B) upon such other terms as may be mutually agreed upon between the holder of such an Administrative Expense Claim and the Plan Proponents or, on and after the Effective Date, the Reorganized Debtors. Each Debtor is authorized to pay compensation for services rendered or reimbursement of expenses incurred after the Confirmation Date in the ordinary course of business and without the need for Bankruptcy Court approval. 2.3 PRIORITY TAX CLAIMS. Except to the extent that a holder of an Allowed Priority Tax Claim and the applicable Debtor agree to a different treatment, each holder of an Allowed Priority Tax Claim shall receive, in full satisfaction of such Claim, payment in Cash of the Allowed Amount of such Claim over a period not exceeding six (6) years after the date of assessment of such Claim, with interest at a rate equal to the Federal Judgment Rate as of the Confirmation Date, payable monthly, in periodic payments having a value, as of the Effective Date, equal to the amount of such Allowed Priority Tax Claim. All Allowed Priority Tax Claims that are not due and payable on or before the Effective Date shall be paid in the ordinary course of business as such obligations become due. SECTION 3. CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS This Plan constitutes a separate chapter 11 plan of reorganization for each Debtor. Except for Administrative Expense Claims and Priority Tax Claims, all Claims against and Equity Interests in a particular Debtor are placed in the following Classes for -10- each of the Debtors. In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Expense Claims and Priority Tax Claims, as described in Section 2, have not been classified and thus are excluded from the following Classes. The following table designates the Classes of Claims against and Equity Interests in each Debtor (as and to the extent that such Class of Claims or Equity Interests is applicable to such Debtor) and specify which of those Classes are (i) impaired or unimpaired by this Plan and (ii) entitled to vote to accept or reject this Plan in accordance with section 1126 of the Bankruptcy Code or deemed to reject this Plan. 3.1 CLASSES.
CLASS DESIGNATION IMPAIRMENT ENTITLED TO VOTE ----- ----------- ---------- ---------------- CLASS 1 SUBCLASS 1-A CCA Secured Claim Unimpaired No (deemed to accept) SUBCLASS 1-B Miscellaneous Secured Claims Impaired Yes CLASS 2 Priority Non-Tax Claims Unimpaired No (deemed to accept) CLASS 3 General Unsecured Claims Impaired Yes CLASS 4 Intentionally Omitted CLASS 5 Convenience Claims Impaired Yes CLASS 6 Intentionally Omitted CLASS 6A CLASS 7 Intentionally Omitted CLASS 8 Intentionally Omitted CLASS 9 Equity Interests Unimpaired No (deemed to accept) CLASS 10 Intentionally Omitted CLASS 11 Subordinated Claims Impaired No (deemed to reject)
3.2 SUBCLASSES FOR CLASS 1. For convenience of identification, this Plan classifies the Allowed Claims in Class 1 as a single Class. This Class is actually a group of two Subclasses, the CCA Secured Claim Subclass and the Miscellaneous Secured Claims Subclass. The treatment of the Claims in the CCA Secured Claim Subclass is the contractual treatment as provided for in the CCA Settlement Agreement and, as such, Subclass 1-A is unimpaired. The treatment of the Miscellaneous Secured Claims Subclass depends upon the Collateral securing such Allowed Claims. Each Subclass is treated under this Plan as a separate class for voting and distribution purposes. 3.3 SUBCLASSES FOR CLASS 3. For convenience of identification, this Plan classifies the Allowed Claims in Class 3 as a single Class. This Class is actually a group of two Subclasses, one for the -11- Allowed Class 3 Claims against each Debtor. Although each Subclass is treated under this Plan as a separate class for voting purposes, each of the holders of claims in each Subclass will receive, as a distribution under this Plan, its Pro Rata Share from the aggregate amount of Cash in the Class 3 Cash Pool. SECTION 4. TREATMENT OF CLAIMS AND EQUITY INTERESTS In full satisfaction and discharge of all of the Claims against or Equity Interests in the Debtors: 4.1 SECURED CLAIMS (CLASS 1). (a) On or as soon as reasonably practicable after the Effective Date, each holder of an Allowed Claim in a Class 1 Subclass shall receive (i) the treatment specified for such Subclass in the following table, except to the extent that a holder of an Allowed Claim in such Subclass and the applicable Debtor have agreed to a different treatment, or (ii) such other treatment as the Bankruptcy Court shall approve in connection with confirmation of applicable Debtor's Plan through a "cram down" of such Subclass under section 1129(b) of the Bankruptcy Code.
SUBCLASS DESIGNATION TREATMENT - -------- ----------- --------- 1-A CCA Secured Claim Satisfaction of Settlement Amount pursuant to the terms of the CCA Settlement Agreement. 1-B Miscellaneous Secured Claims At the election of the applicable Debtor, holder will receive (i) Cash equal to 100% of the amount of the Allowed Claim; (ii) the net proceeds of sale of collateral up to the amount of Allowed Claim; (iii) the collateral securing the Allowed Claim; (iv) a note with periodic Cash payments having a present value equal to the amount of the Allowed Claim and secured by the existing collateral; (v) such treatment that leaves unaltered the legal, equitable and contractual rights of the holder; or (vi) such other distribution as is necessary to satisfy the requirements of the Bankruptcy Code. In the event that a Debtor treats a Claim as described under clause (i) or (ii), the liens securing the Claim will be deemed released.
(b) Subclass 1-A Claims are unimpaired and the holder of such Claims in Subclass 1-A is deemed to accept the Plan. (c) Subclass 1-B Claims are impaired, and any holders of Allowed Claims in Subclass 1-B are entitled to vote to accept or reject this Plan. In the event that Subclass 1-B rejects this Plan, the applicable Subclass Debtor(s) reserves the right to request, pursuant to Section 13.10, confirmation of its Plan through a "cram down" of -12- such Subclass under section 1129(b) of the Bankruptcy Code and modification of the Plan to the extent, if any, confirmation under section 1129(b) requires modification. 4.2 PRIORITY NON-TAX CLAIMS (CLASS 2). On or as soon as reasonably practicable after the Effective Date, to the extent not already paid, each holder of an Allowed Claim in Class 2 shall receive Cash equal to the amount of the Allowed Claim, except to the extent that a holder of an Allowed Claim in Class 2 and the applicable Debtor have agreed to a different treatment. 4.3 GENERAL UNSECURED CLAIMS (CLASS 3). (a) On or as soon as reasonably practicable after the Effective Date, each holder of an Allowed Claim in Class 3 (other than an Allowed Inter-Company Claim) shall receive its Pro Rata Share of the Class 3 Cash Pool. (b) No Class 3 distribution will be made on account of Allowed InterCompany Claims. Each holder of an Allowed Inter-Company Claim will be deemed to have contributed its Allowed Claim as part of the Class 9 treatment. (c) Any Tort Claim determined and liquidated pursuant to a judgment obtained in accordance with Section 8.1(b) and applicable non-bankruptcy law, which is no longer appealable or subject to review, shall be deemed an Allowed Claim in Class 3 against the applicable Debtor in such liquidated amount, provided that only the amount of such Allowed Claim that is less than or equal to the Debtor's self-insured retention or deductible in connection with the applicable insurance policy and is not satisfied from proceeds of insurance payable to the holder of such Allowed Claim under the Debtor's insurance policies shall be treated as an Allowed Claim for the purposes of distributions under this Plan. 4.4 INTENTIONALLY OMITTED 4.5 CONVENIENCE CLAIMS (CLASS 5). On or as soon as reasonably practicable after the Effective Date, each holder of an Allowed Claim in Class 5 shall be paid an amount in Cash equal to one-hundred percent (100%) of such Allowed Claim; provided, however, that, in the sole discretion of the applicable Debtor, such Cash payment may be made by the Debtors in one or more installment payments over a period not to exceed twelve (12) months after the Effective Date. -13- 4.6 INTENTIONALLY OMITTED 4.7 INTENTIONALLY OMITTED 4.8 EQUITY INTERESTS (CLASS 9). Except as may otherwise be determined by the applicable Debtor, including, without limitation, the transfer of Equity Interests to affiliates of the Debtors, the legal, equitable and contractual rights of holders of Equity Interests in Class 9 shall remain unaltered. Such Equity Interests shall be unimpaired and reinstated under this Plan as of the Effective Date and shall not be deemed cancelled. 4.9 INTENTIONALLY OMITTED 4.10 SUBORDINATED CLAIMS (CLASS 11). No property will be distributed to or retained by the holders of Allowed Claims in Class 11 on account of such Allowed Claims. All Allowed Claims in Class 11 shall be discharged as of the Effective Date. SECTION 5. ACCEPTANCE OR REJECTION OF PLAN 5.1 VOTING OF CLAIMS. Each holder of an Allowed Claim in an impaired Class or Subclass of Claims (other than Class 11) shall be entitled to vote to accept or reject this Plan. For purposes of calculating the number of Allowed Claims in a Class of Claims that have voted to accept or reject this Plan under section 1126(c) of the Bankruptcy Code, all Allowed Claims in such Class held by one entity or any affiliate thereof (as defined in the Securities Act of 1933 and the rules and regulations promulgated thereunder) shall be aggregated and treated as one Allowed Claim in such Class. 5.2 ACCEPTANCE BY A CLASS. Consistent with section 1126(c) of the Bankruptcy Code and except as provided for in section 1126(e) of the Bankruptcy Code, a Class of Claims shall have accepted this Plan if it is accepted by at least two-thirds in dollar amount, and more than one-half in number of the holders, of Allowed Claims of such Class that have timely and properly voted to accept or reject this Plan. 5.3 PRESUMED ACCEPTANCE OF PLAN. Any Class that is unimpaired under this Plan is conclusively presumed to accept this Plan. -14- 5.4 PRESUMED REJECTION OF PLAN. In accordance with section 1126 of the Bankruptcy Code, holders of Allowed Claims in Class 11 are conclusively presumed to reject this Plan and the votes of such holders will not be solicited with respect to such Claims. SECTION 6. MEANS FOR IMPLEMENTATION 6.1 EXIT FINANCING. On the Effective Date, the Reorganized Debtors (and their designees, including the Exit Financing Borrowers and any other newly created borrowing entities) are authorized to enter into the Exit Financing Agreements, which authorization shall include, without limitation, the creation of the Exit Financing Borrowers and any other special purpose borrowing entities to enter into the Exit Financing Agreements in place of the Reorganized Debtors, and the transfer of assets to the Exit Financing Borrowers and any other newly created borrowing entities. All Cash necessary for the Reorganized Debtors to make payments pursuant to this Plan will be obtained from Lodgian, Inc., the cash balances, operations and borrowings under the Exit Financing Agreements of the Reorganized Debtors (and their designees, including the Exit Financing Borrowers and any other newly created borrowing entities). In furtherance of the transactions contemplated by this Plan and the Exit Financing Agreements, the Reorganized Debtors (and their designees, including the Exit Financing Borrowers and any other newly created borrowing entities) are authorized to sell one or more of their assets (including, without limitation, hotel properties). 6.2 INTENTIONALLY OMITTED 6.3 INTENTIONALLY OMITTED 6.4 WAIVER OF SUBORDINATION. The distributions under this Plan take into account the relative priority of the Claims in each Class in connection with any contractual, legal and equitable subordination rights or provisions relating thereto. Accordingly, the distributions under this Plan to any holder of an Allowed Claim shall not be subject to levy, garnishment, attachment or other legal process by any holder of indebtedness senior by reason of claimed contractual subordination rights to the indebtedness of the holders of such Allowed Claim. On the Effective Date, all creditors shall be deemed to have waived any and all contractual subordination rights which they may have with respect to distributions under this Plan to any holder of an Allowed Claim, and the Confirmation Order shall permanently enjoin, effective as of the Effective Date, all Persons from enforcing or attempting to enforce any such rights with respect to the distributions under this Plan. -15- 6.5 INTENTIONALLY OMITTED 6.6 INTENTIONALLY OMITTED 6.7 INTENTIONALLY OMITTED 6.8 INTENTIONALLY OMITTED 6.9 EXECUTIVE OFFICERS. (a) Prior to the confirmation of this Plan, in accordance with section 1129(a)(5) of the Bankruptcy Code, the Debtors shall disclose (i) the identity and affiliations of any individual proposed to serve, after the Effective Date, as an officer of the Reorganized Debtors, and (ii) the identity of any "insider" (as such term is defined in section 101(31) of the Bankruptcy Code) who shall be employed and retained by the Reorganized Debtors and the nature of any compensation for such insider.(1) (b) The officers of the Debtors immediately before the Effective Date shall continue to serve immediately after the Effective Date in their respective capacities as officers of the Reorganized Debtors. 6.10 AMENDED ORGANIZATIONAL DOCUMENTS. On the Effective Date, the Reorganized Debtors are authorized to, and shall, without the need for any further corporate action, adopt and, as applicable, file their respective Amended Organizational Documents with the applicable Secretary of State. The Amended Organizational Documents shall prohibit the issuance of nonvoting equity securities, as required by sections 1123(a) and (b) of the Bankruptcy Code, subject to further amendment as permitted by applicable law. 6.11 INTENTIONALLY OMITTED 6.12 AUTHORIZATION OF NOTES. On the Effective Date, the applicable Reorganized Debtors, the Exit Financing Borrowers, and any other any newly created subsidiaries are authorized to issue and execute and deliver all notes and related financing documents expressly required under this Plan, including without limitation, any such notes and documents relating to any Allowed Claims in Class 1-B without the need for any further corporate action. - --------------- (1) There are no directors of Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C., as they are member-managed entities. -16- 6.13 INTENTIONALLY OMITTED SECTION 7. DISTRIBUTIONS 7.1 DISTRIBUTION RECORD DATE. As of the close of business on the Distribution Record Date, the applicable Debtor's books and records for each of the Classes of Claims as maintained by such Debtor or its respective agent, shall be deemed closed, and there shall be no further changes in the record holders of any of the Claims. The applicable Debtor shall have no obligation to recognize any transfer of Claims occurring on or after the Distribution Record Date. The applicable Debtor shall be entitled to recognize and deal for all purposes hereunder only with those record holders stated in the books and records of the applicable Debtor or its respective agent, as of the close of business on the Distribution Record Date, to the extent applicable. 7.2 DATE OF DISTRIBUTIONS. Unless otherwise provided herein, any distributions and deliveries to be made hereunder shall be made on the Effective Date or as soon thereafter as is practicable. In the event that any payment or act under this Plan is required to be made or performed on a date that is not a Business Day, then the making of such payment or the performance of such act may be completed on or as soon as reasonably practicable on the next succeeding Business Day, but shall be deemed to have been completed as of the initial due date. 7.3 DISTRIBUTIONS TO CLASSES. (a) The Disbursing Agent shall distribute to the applicable agent and/or recordholder for the individual holders of the applicable Allowed Claims the Cash allocable to Classes 1, 2, 3 and 5. For the purpose of calculating the Pro Rata Share of the Class 3 Cash Pool to be initially distributed to holders of Allowed Claims in Class 3, all Disputed Claims in Class 3 will be treated as though such Claims will be Allowed Claims in the amounts asserted, or as estimated by the Bankruptcy Court, as applicable. On the Final Distribution Date, each holder of an Allowed Claim in Class 3 shall receive, if applicable, a Catch-up Distribution. After the Effective Date but prior to the Final Distribution Date, the applicable Reorganized Debtor, in its sole discretion, may direct the Disbursing Agent to distribute a Pro Rata Share of the Class 3 Cash Pool to a holder of a Disputed Claim in a Class 3, which becomes an Allowed Claim after the Effective Date such that the holder of such Claim receives the Pro Rata Share that such holder would have received had its Claim been an Allowed Claim in such amount on the Effective Date. -17- 7.4 DISBURSING AGENT. (a) The source of the Cash to be distributed under this Plan shall be either (i) the proceeds of the Exit Financing, or (ii) a capital contribution from Lodgian, Inc. to each Debtor to allow such Debtor to discharge the Claims against it. (b) All distributions under this Plan shall be made by the applicable Reorganized Debtor as Disbursing Agent (or such other entity designated by the Reorganized Debtor as a Disbursing Agent on or after the Effective Date). (c) A Disbursing Agent shall not be required to give any bond or surety or other security for the performance of its duties unless otherwise ordered by the Bankruptcy Court, and, in the event that a Disbursing Agent is so otherwise ordered, all costs and expenses of procuring any such bond or surety shall be borne by the applicable Reorganized Debtor. 7.5 RIGHTS AND POWERS OF DISBURSING AGENT. The Disbursing Agent shall be empowered to (i) effect all actions and execute all agreements, instruments and other documents necessary to perform its duties under this Plan, (ii) make all distributions contemplated hereby, (iii) employ professionals to represent it with respect to its responsibilities and (iv) exercise such other powers as may be vested in the Disbursing Agent by order of the Bankruptcy Court, pursuant to this Plan, or as deemed by the Disbursing Agent to be necessary and proper to implement the provisions hereof. 7.6 INTENTIONALLY OMITTED 7.7 DELIVERY OF DISTRIBUTIONS. Distributions to holders of Allowed Claims shall be made at the address of each such holder as set forth on the Schedules filed with the Bankruptcy Court unless superseded by the address as set forth on the proofs of claim and equity interest filed by such holders or other writing notifying the applicable Reorganized Debtor of a change of address. If any holder's distribution is returned as undeliverable, notice shall be given to the Committee and no further distributions to such holder shall be made unless and until the applicable Reorganized Debtor is notified of such holder's then current address, at which time all missed distributions shall be made to such holder, without interest. All claims for undeliverable distributions shall be made on or before one hundred and twenty (120) days after the date such undeliverable distribution was initially made. After such date, all unclaimed property shall, in the applicable Reorganized Debtor's discretion, be used to satisfy the costs of administering and fully consummating this Plan or become property of the applicable Reorganized Debtor, and the holder of any such Claim shall -18- not be entitled to any other or further distribution under this Plan on account of such Claim. 7.8 MANNER OF PAYMENT UNDER PLAN. (a) All distributions of Cash to the holders of Allowed Claims against each of the Debtors under this Plan shall be made by, or on behalf of, the applicable Reorganized Debtor. Any distributions that revert to the applicable Reorganized Debtor or are otherwise canceled (such as pursuant to Section 7.7) shall revest solely in the applicable Reorganized Debtor. (b) At the option of the applicable Reorganized Debtor, any Cash payment to be made hereunder may be made by a check or wire transfer or as otherwise required or provided in applicable agreements. 7.9 RETENTION OF EQUITY INTERESTS. Upon the Effective Date, except as otherwise agreed by the applicable Debtor, the Class 9 Equity Interests shall be automatically reinstated as set forth in Section 4.8 above. As such, except as otherwise agreed by the applicable Debtor, no actions need be taken to implement the distributions of the reinstated Equity Interests of each of the Reorganized Debtors. 7.10 DE MINIMIS DISTRIBUTIONS. The applicable Reorganized Debtor as Disbursing Agent or such other entity designated by such Reorganized Debtor as a Disbursing Agent on or after the Effective Date will not be required to distribute Cash to the holder of an Allowed Claim in an impaired Class if the amount of Cash to be distributed on any distribution date under the Plan (including the Effective Date and the Final Distribution Date) on account of such Claim is less than $50. Any holder of an Allowed Claim on account of which the amount of Cash to be distributed is less than $50 will have its Claim for such distribution discharged and will be forever barred from asserting any such Claim against the Reorganized Debtors or their respective property. Any Cash not distributed pursuant to this Section 7.10 will become the property of the Reorganized Debtors, free of any restrictions thereon, and any such Cash held by a third-party Disbursing Agent will be returned to the Reorganized Debtors. 7.11 SETOFFS. Each Debtor may, in accordance with the provisions of this Plan, section 553 of the Bankruptcy Code and applicable non-bankruptcy law, set off against any Allowed Claim and the distributions to be made pursuant to this Plan on account of such Allowed Claim (before any distribution is made on account of such Allowed Claim), the -19- Claims, rights and causes of action of any nature that such Debtor may hold against the holder of such Allowed Claim; provided, however, that neither the failure to effect such a setoff nor the allowance of any Claim hereunder shall constitute a waiver or release by the applicable Debtor of any such Claims, rights and causes of action that the applicable Debtor may possess against such holder; and provided further, however, that any Claims of each Debtor arising before the Commencement Date shall first be setoff against Claims against such Debtor arising before the Commencement Date. 7.12 ALLOCATION OF PLAN DISTRIBUTION BETWEEN PRINCIPAL AND INTEREST. All distributions in respect of any Allowed Claim shall be allocated first to the principal amount of such Allowed Claim, as determined for federal income tax purposes, and thereafter, to the remaining portion of such Allowed Claim, if any. 7.13 WITHHOLDING AND REPORTING REQUIREMENTS. In connection with this Plan and all instruments issued in connection therewith and distributed thereon, the applicable Debtor shall comply with all applicable withholding and reporting requirements imposed by any federal, state or local taxing authority, and all distributions under this Plan shall be subject to any such withholding or reporting requirements. 7.14 TIME BAR TO CASH PAYMENTS. Checks issued by the Reorganized Debtors in respect of Allowed Claims shall be null and void if not negotiated within sixty (60) days after the date of issuance thereof. Requests for reissuance of any check shall be made to the applicable Reorganized Debtor by the holder of the Allowed Claim to whom such check originally was issued. Any Claim in respect of such a voided check shall be made on or before thirty (30) days after the expiration of the sixty day period following the date of issuance of such check. After such date, all funds held on account of such voided check shall, in the discretion of the applicable Reorganized Debtor, be used to satisfy the costs of administering and fully consummating this Plan or become property of the applicable Reorganized Debtor, and the holder of any such Allowed Claim shall not be entitled to any other or further distribution under this Plan on account of such Allowed Claim. 7.15 TRANSACTIONS ON BUSINESS DAYS. If the Effective Date or any other date on which a transaction may occur under this Plan shall occur on a day that is not a Business Day, the transactions contemplated by this Plan to occur on such day shall instead occur on the next succeeding Business Day. -20- 7.16 CLOSING OF CHAPTER 11 CASES. When all Disputed Claims filed against the Debtors have become Allowed Claims or have been disallowed by Final Order, and all distributions in respect of Allowed Claims have been made in accordance with this Plan, or at such earlier time as the Reorganized Debtors deem appropriate, the Reorganized Debtors shall seek authority from the Bankruptcy Court to close their respective Chapter 11 Cases in accordance with the Bankruptcy Code and the Bankruptcy Rules. SECTION 8. PROCEDURES FOR RESOLVING AND TREATING DISPUTED CLAIMS 8.1 PAYMENTS AND DISTRIBUTIONS WITH RESPECT TO DISPUTED CLAIMS. (a) Notwithstanding any other provision hereof, if any portion of a Claim is a Disputed Claim, no payment or distribution provided hereunder shall be made on account of such Claim unless and until such Disputed Claim becomes an Allowed Claim. (b) All Tort Claims are Disputed Claims. At the applicable Debtor's option, any unliquidated Tort Claim as to which a proof of claim was timely filed in the Chapter 11 Cases shall be determined and liquidated in the administrative or judicial tribunal(s) in which it is pending on the Effective Date or, if no action was pending on the Effective Date, in any administrative or judicial tribunal of appropriate jurisdiction. Notwithstanding the foregoing, at all times prior to or after the Effective Date, the Bankruptcy Court shall retain jurisdiction relating to Tort Claims, including the applicable Debtor's right to have such Claims determined and liquidated in the Bankruptcy Court. Any Tort Claim determined and liquidated pursuant to a judgment obtained in accordance with this Section 8.1(b) and applicable non-bankruptcy law which is no longer appealable or subject to review shall be deemed an Allowed Claim in Class 3 against the applicable Debtor in such liquidated amount, provided that only the amount of such Allowed Claim that is less than or equal to the Debtor's self-insured retention or deductible in connection with the applicable insurance policy and is not satisfied from proceeds of insurance payable to the holder of such Allowed Claim under the Debtors' insurance policies shall be treated as an Allowed Claim for the purposes of distributions under this Plan. Nothing contained in this Section 8.1(b) shall constitute or be deemed a waiver of any Claim, right or cause of action that the applicable Debtor may have against any Person in connection with or arising out of any Tort Claim, including, without limitation, any rights under section 157(b)(5) of title 28 of the United States Code. This entire Section 8.1(b) is subject to the applicable Debtor's right to elect to follow the procedures provided for in Section 8.5. -21- 8.2 PRESERVATION OF INSURANCE. Nothing in this Plan, including the discharge and release of the Debtors as provided in this Plan, shall diminish or impair the enforceability of any insurance policies that may cover Claims against either of the Debtors. 8.3 RESOLUTION OF DISPUTED CLAIMS. (a) Unless otherwise ordered by the Bankruptcy Court after notice and a hearing, and except as otherwise expressly provided for below, each Debtor, in coordination and consultation with the Committee, shall have the exclusive right (except as to applications for allowances of compensation and reimbursement of expenses under sections 330 and 503 of the Bankruptcy Code) to make and file objections to Claims and shall serve a copy of each objection upon the holder of the Claim to which the objection is made as soon as practicable, but in no event later than one hundred and twenty (120) days after the Effective Date; provided, however, that such one hundred and twenty (120) day period may be automatically extended by the applicable Debtor, without any further application to, or approval by, the Bankruptcy Court, for an additional thirty (30) days with the consent of the Committee (not to be unreasonably withheld). The foregoing deadlines for filing objections to Claims shall not apply to Tort Claims and, accordingly, no such deadline shall be imposed by this Plan. Notwithstanding any authority to the contrary, an objection to a Claim shall be deemed properly served on the holder thereof if the Debtors effect service in any of the following manners: (i) in accordance with Federal Rule of Civil Procedure 4, as modified and made applicable by Bankruptcy Rule 7004; (ii) to the extent that counsel for the holder is unknown, by first class mail, postage prepaid, on the signatory on the proof of claim or equity interest or other representative identified in the proof of claim or equity interest or any attachment thereto; or (iii) by first class mail, postage prepaid, on any counsel that has appeared on the holder's behalf in the Chapter 11 Cases. (b) Notwithstanding the foregoing, the Committee shall also have the right to make and file objections to Claims filed against any Debtor, which objections shall be made in consultation with such Debtor(s) and shall be made within the time frames provided for in this Section 8.3. From and after the Confirmation Date, subject to the Effective Date, all objections shall be litigated to a Final Order except to the extent that the applicable Debtor (with the consent of the Committee not to be unreasonably withheld) or the Committee (with the consent of the applicable Debtor not to be unreasonably withheld), as applicable, elects to withdraw any such objection or the applicable Debtor (with the consent of the Committee not to be unreasonably withheld) or the Committee (with the consent of the applicable Debtor not to be unreasonably withheld), as applicable, and the holder of the Disputed Claim elects to compromise, settle or otherwise resolve any such objection, in which event they may settle, compromise or otherwise resolve any such Disputed Claim without approval of the -22- Bankruptcy Court. At its option, upon the consent of the Committee, the applicable Debtor may make a single, lump sum payment of the settlement amount to the claimant. To the extent that an objection is filed by the Committee, at its option, the Committee, upon the consent of the applicable Debtor, may make a single, lump sum payment of the settlement amount to the claimant. The applicable Debtor shall prepare, issue and deliver to the Committee, within forty-five (45) days following the end of each month, a report with respect to the status of the resolution of Disputed Claims, in a form to be agreed upon by the professionals for the applicable Debtor and the Committee. 8.4 DISTRIBUTIONS AFTER ALLOWANCE. If, on or after the Effective Date, any Disputed Claim becomes, in whole or in part, an Allowed Claim, the applicable Reorganized Debtor shall distribute to the holder thereof the distributions, if any, to which such holder is then entitled under this Plan. Any Cash distributions shall be made as soon as practicable after the date that the order or judgment of the Bankruptcy Court allowing such Disputed Claim (or portion thereof) becomes a Final Order, but in no event more than thirty (30) days thereafter. Any Pro Rata Share of the Class 3 Cash Pool distributable to the holder of a Disputed Claim which becomes an Allowed Claim (in whole or in part) as a result of the entry of such order or judgment of the Bankruptcy Court allowing such Disputed Claim (or portion thereof) shall be made in accordance with the next scheduled distribution date to the holders of Allowed Claims. 8.5 RESERVE ACCOUNTS FOR CLASS 3 DISPUTED CLAIMS. On and after the Effective Date, the Debtors shall hold in the Disputed Claims Reserve, Cash in an aggregate amount sufficient to pay to each holder of a Disputed Claim in Class 3 the amount of Cash that such holder would have been entitled to receive under this Plan if such Claim had been an Allowed Claim on the Effective Date. Cash withheld and reserved for payments to holders of Disputed Claims in Class 3 shall be held and deposited by the Debtors in one or more segregated interest-bearing reserve accounts, as determined by the Plan Proponents, to be used to satisfy such Claims if and when such Disputed Claims in Class 3 become Allowed Claims, net of any taxes payable on, or attributable to, the interest income. To the extent that any portion of the net operating losses of the Confirmed Debtors are used to offset or satisfy any taxes otherwise attributable to any such interest, the Confirmed Debtors shall be reimbursed in the amount of the reduction in such taxes from the Disputed Claims Reserve. The amount of Cash to be held in the Disputed Claims Reserve shall not exceed the amount of the Class 3 Cash Pool. -23- 8.6 INVESTMENT OF DISPUTED CLAIMS RESERVES. The Plan Proponents shall be permitted, from time to time, in their discretion to invest all or a portion of the Cash in the Disputed Claims Reserve in United States Treasury Bills, interest-bearing certificates of deposit, tax exempt securities or investments permitted by section 345 of the Bankruptcy Code or otherwise authorized by the Bankruptcy Court, using prudent efforts to enhance the rates of interest earned on such Cash without inordinate credit risk or interest rate risk. All interest earned on such Cash shall be held in the Disputed Claims Reserve and, after satisfaction of any expenses incurred in connection with the maintenance of the Disputed Claims Reserve, including taxes payable on, or attributable to, such interest income shall be transferred out of the Disputed Claims Reserve and, in the discretion of the Debtors (in consultation with the Committee), be used to satisfy the costs of administering and fully consummating this Plan. To the extent that any portion of the net operating losses of the Confirmed Debtors are used to offset or satisfy any taxes otherwise attributable to any such interest, the Confirmed Debtors shall be reimbursed in the amount of the reduction in such taxes from the Disputed Claims Reserve. 8.7 RELEASE OF FUNDS FROM DISPUTED CLAIMS RESERVES. If at any time or from time to time after the Effective Date, there shall be Cash in the Disputed Claims Reserves in an amount in excess of the Debtors' maximum remaining payment obligations to the then existing holders of Disputed Claims in Class 3 against the Debtors under this Plan, such excess funds shall revert back to the Debtors. 8.8 ESTIMATION OF CLAIMS. The applicable Debtor or the Committee may, at any time, and in consultation with each other, request that the Bankruptcy Court estimate any contingent, unliquidated or Disputed Claim pursuant to section 502(c) of the Bankruptcy Code, regardless of whether the applicable Debtor previously objected to such Claim or whether the Bankruptcy Court has ruled on any such objection, and the Bankruptcy Court will retain jurisdiction to estimate any Claim at any time during litigation concerning any objection to any Claim, including, without limitation, during the pendency of any appeal relating to any such objection. In the event that the Bankruptcy Court estimates any contingent, unliquidated or Disputed Claim, the amount so estimated shall constitute either the allowed amount of such Claim or a maximum limitation on such Claim, as determined by the Bankruptcy Court. If the estimated amount constitutes a maximum limitation on the amount of such Claim, the applicable Debtor or the Committee may pursue supplementary proceedings to object to the allowance of such Claim. All of the aforementioned objection, estimation and resolution procedures are intended to be cumulative and not exclusive of one another. On and after the Confirmation Date, subject to the Effective Date, Claims which have been estimated may be subsequently -24- compromised, settled, withdrawn or otherwise resolved without further order of the Bankruptcy Court. 8.9 NO RECOURSE. No holder of any Disputed Claim that becomes an Allowed Claim in any applicable Class shall have recourse against any Disbursing Agent, the Debtors, the Confirmed Debtors, the Committee, the Reorganized Debtors or any other holder of an Allowed Claim in such Class, or any of their respective professional consultants, officers, directors or members of their successors or assigns, or any of their respective property, if the Cash allocated to such Class and not previously distributed is insufficient to provide a distribution to such holder in the same proportion to that received by other holders of Allowed Claims in such Class. However, nothing in this Plan shall modify any right of a holder of a Claim under section 502(j) of the Bankruptcy Code. 8.10 MEDIATION OF DISPUTED CLAIMS. The automatic stay of section 362 of the Bankruptcy Code shall remain in effect after the Effective Date with respect to all Disputed Claims. All holders of Disputed Claims (other than Tort Claims) shall comply with the following procedures: (a) At its option, the applicable Debtor may (i) request that the holder of a Disputed Claim provide documentation to evidence the validity and amount of such Claim, and/or (ii) submit a written counter-proposal to the holder of a Disputed Claim. In lieu of, or in addition to, the foregoing, the applicable Debtor may file an objection to such Disputed Claim. (b) The holder of a Disputed Claim may accept the applicable Debtor's counter-proposal at any time within fourteen (14) days of the applicable Debtor's mailing of such counter-proposal. (c) If no settlement is reached pursuant to paragraphs (a) and (b) above, the applicable Debtor, at its discretion (in consultation with the Committee), shall have the option to require the holder of a Disputed Claim to participate in a non-binding mediation process. All mediation pursuant to this Section 8.7 shall be conducted at the applicable Debtor's option in either Atlanta, Georgia or New York, New York, pursuant to the Local Bankruptcy Rules of the Bankruptcy Court. In the event that a mediation is scheduled and the holder of the Disputed Claim does not participate in the mediation, the Disputed Claim shall be disallowed in its entirety. (d) If the applicable Debtor and the holder of a Disputed Claim are unable to reach an agreement on a Claim amount pursuant to the procedures set forth above, the Disputed Claim shall be submitted to the Bankruptcy Court for resolution. If it is determined that the United States Bankruptcy Court for the Southern District of New -25- York does not have jurisdiction to resolve any Disputed Claim, then the Disputed Claim shall be submitted to the United States District Court for the Southern District of New York for resolution. (e) The applicable Debtor (with the consent of the Committee not to be unreasonably withheld) and the holder of a Disputed Claim may seek to settle, compromise or otherwise resolve any Disputed Claim at any time in accordance with this Plan or any order of the Bankruptcy Court approving a settlement procedure for Disputed Claims for the applicable Debtor and the Committee. (f) At its option, the applicable Debtor may require the holder of a Disputed Tort Claim to either (i) comply with the mediation procedures provided for in this Section 8.7 or (ii) comply with any other separate mediation and/or arbitration procedures approved in the Chapter 11 Cases relating to Tort Claims. SECTION 9. EXECUTORY CONTRACTS AND UNEXPIRED LEASES 9.1 GENERAL TREATMENT. On the Effective Date, all executory contracts and unexpired leases to which each Debtor is a party shall be deemed rejected as of the Effective Date, except for an executory contract or unexpired lease that (i) has been assumed or rejected pursuant to a Final Order of the Bankruptcy Court, (ii) is specifically designated as a contract or lease to be assumed on the Schedule of Assumed Contracts set forth in the Plan Supplement, provided however, that the Debtors reserve the right to amend the Plan Supplement at any time on or before the Effective Date to amend the Schedule of Assumed Contracts to add or delete any executory contract or unexpired lease, thus providing for its assumption, assumption and assignment, or rejection, or (iii) is the subject of a separate motion to assume, assume and assign, or reject filed under section 365 of the Bankrup tcy Code by the applicable Debtor on or before the Effective Date. 9.2 CURE OF DEFAULTS. (a) Except to the extent that a different treatment has been agreed to by the non-Debtor party or parties to any executory contract or unexpired lease to be assumed pursuant to Section 9.1 hereof, the applicable Debtor shall, pursuant to the provisions of sections 1123(a)(5)(G) and 1123(b)(2) of the Bankruptcy Code and consistently with the requirements of section 365 of the Bankruptcy Code, within thirty (30) days after the Effective Date, file and serve a pleading with the Bankruptcy Court listing the cure amounts of all executory contracts or unexpired leases to be assumed. The parties to such executory contracts or unexpired leases to be assumed by the applicable Debtor shall have fifteen (15) days from service to object to the cure amounts listed by the applicable Debtor. If there are any objections filed, the Bankruptcy Court -26- shall hold a hearing. The applicable Debtor shall retain its right to reject any of its executory contracts or unexpired leases, including contracts or leases that are subject to a dispute concerning amounts necessary to cure any defaults. Notwithstanding the foregoing, at all times through the date that is five (5) Business Days after the Bankruptcy Court enters an order resolving and fixing the amount of a disputed cure amount, the Debtors shall have the right to reject such executory contract or unexpired lease. (b) Subject to Section 9.1 of this Plan, the executory contracts and unexpired leases on the Schedule of Assumed Contracts shall be assumed by the respective Debtors as indicated on such Schedule. Except as may otherwise be ordered by the Bankruptcy Court, the Debtors shall have the right to cause any assumed executory contract or unexpired lease to vest in the Reorganized Debtor designated for such purpose by the Debtors. 9.3 ASSUMPTIONS AND ASSIGNMENTS OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES. In furtherance of the Exit Financing Agreements, pursuant to sections 365 and 1123(a)(5) of the Bankruptcy Code, the Debtors are authorized to assume and assign to one or more of the Exit Financing Borrowers or any other newly created borrowing entities one or more executory contracts and unexpired leases to be assumed under this Plan. Entry of the Confirmation Order shall constitute the approval of such assumptions and assignments pursuant to sections 365 and 1123(a)(5) of the Bankruptcy Code. Any provision in any such assumed and assigned contract and lease that prohibits, restricts or conditions such assignment is unenforceable under section 365(f) of the Bankruptcy Code. The requirements of section 365(b) of the Bankruptcy Code shall be deemed satisfied with respect to each such assumed and assigned contract and lease, and because each such assumption and assignment is a necessary part of the Debtors' Exit Financing, such assumptions and assignments are in the best interests of the Debtors and their Estates. 9.4 APPROVAL OF REJECTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES. Entry of the Confirmation Order shall constitute the approval, pursuant to section 365(a) of the Bankruptcy Code, of the rejection of any executory contracts and unexpired leases to be rejected as and to the extent provided in Section 9.1 of this Plan. 9.5 BAR DATE FOR FILING PROOFS OF CLAIM RELATING TO EXECUTORY CONTRACTS AND UNEXPIRED LEASES REJECTED PURSUANT TO PLAN. Claims arising out of the rejection of an executory contract or unexpired lease pursuant to Section 9.1 of this Plan must be filed with the Bankruptcy Court no later than twenty (20) days after the Effective Date. Any Claims not filed within such time -27- period will be forever barred from assertion against either of the applicable Debtors and/or the Estates. 9.6 SURVIVAL OF DEBTORS' CORPORATE INDEMNITIES. Any obligations of any of the Debtors pursuant to the applicable Debtor's corporate charters and bylaws or agreements entered into any time prior to the Effective Date, to indemnify any Releasee, with respect to all present and future actions, suits and proceedings against such Debtor or such Releasee, based upon any act or omission for or on behalf of such Debtor, shall not be discharged or impaired by confirmation of this Plan. Such obligations shall be deemed and treated as executory contracts to be assumed by the applicable Debtor pursuant to this Plan, and shall continue as obligations of the applicable Reorganized Debtor. SECTION 10. CONDITIONS PRECEDENT TO EFFECTIVE DATE 10.1 CONDITIONS TO EFFECTIVE DATE. The following are conditions precedent to the Effective Date: (a) The Bankruptcy Court shall have entered the Confirmation Order in form and substance satisfactory to the Plan Proponents; (b) No stay of the Confirmation Order shall then be in effect; and (c) All documents, instruments and agreements, including, without limitation, the Exit Financing Agreements, in form and substance satisfactory to the Plan Proponents, provided for under or necessary to implement this Plan shall have been executed and delivered by the parties thereto, unless such execution or delivery has been waived by the parties benefited thereby. 10.2 WAIVER OF CONDITIONS. The Plan Proponents may waive the conditions to effectiveness of this Plan set forth in Section 10.1(c) of this Plan without leave of or notice to the Bankruptcy Court and without any formal action other than proceeding with confirmation of this Plan -28- SECTION 11. EFFECT OF CONFIRMATION 11.1 VESTING OF ASSETS. Upon the Effective Date, pursuant to sections 1141(b) and (c) of the Bankruptcy Code, except for leases and executory contracts that have not yet been assumed or rejected (which leases and contracts shall be deemed vested when and if assumed), all property of each Debtor's Estate shall vest in each of the applicable Exit Financing Borrowers and any other newly created subsidiaries of the Reorganized Debtors free and clear of all Claims, liens, encumbrances, charges and other interests, except as provided herein. Each Reorganized Debtor is authorized to execute the necessary documentation to effectuate the vesting of property in the Exit Financing Borrowers or any other newly created subsidiaries. Each Reorganized Debtor may operate its businesses and may use, acquire and dispose of property free of any restrictions of the Bankruptcy Code or the Bankruptcy Rules and in all respects as if there were no pending cases under any chapter or provision of the Bankruptcy Code, except as provided herein. 11.2 DISCHARGE OF CLAIMS. Except as otherwise provided herein or in the Confirmation Order, the rights afforded in this Plan and the entitlement to receive payments and distributions to be made hereunder shall discharge all existing Claims, of any kind, nature or description whatsoever against each of the Debtors or any of their assets or properties to the fullest extent permitted by section 1141 of the Bankruptcy Code. Except as provided in this Plan, on the Effective Date, all existing Claims against each of the Debtors shall be, and shall be deemed to be, discharged or canceled and all holders of Claims shall be precluded and enjoined from asserting against then Reorganized Debtors, or any of their assets or properties, any other or further Claim based upon any act or omission, transaction or other activity of any kind or nature that occurred prior to the Effective Date, whether or not such holder has filed a proof of claim or equity interest. 11.3 DISCHARGE OF DEBTORS. Upon the Effective Date and in consideration of the distributions to be made hereunder, except as otherwise expressly provided herein, each holder (as well as any trustees and agents on behalf of each holder) of a Claim of such holder shall be deemed to have forever waived, released and discharged each of the Debtors, to the fullest extent permitted by section 1141 of the Bankruptcy Code, of and from any and all Claims, Equity Interests, rights and liabilities that arose prior to the Effective Date. Upon the Effective Date, all such Persons shall be forever precluded and enjoined, pursuant to section 524 of the Bankruptcy Code, from prosecuting or asserting any such discharged Claim against each of the Debtors. -29- 11.4 BINDING EFFECT. Except as otherwise provided in section 1141(d)(3) of the Bankruptcy Code, on and after the Confirmation Date, and subject to the Effective Date, the provisions of this Plan shall bind any holder of a Claim against the applicable Debtor and its respective successors and assigns, whether or not the Claim of such holder is impaired under this Plan and whether or not such holder has accepted this Plan. 11.5 TERM OF INJUNCTIONS OR STAYS. Unless otherwise provided herein, all injunctions or stays arising under section 105 or 362 of the Bankruptcy Code, any order entered during the Chapter 11 Cases under section 105 or 362 of the Bankruptcy Code or otherwise, and in existence on the Confirmation Date, shall remain in full force and effect until the later of the Effective Date and the date indicated in such order. 11.6 INJUNCTION AGAINST INTERFERENCE WITH PLAN. Upon the entry of the Confirmation Order, all holders of Claims and other parties in interest, along with their respective present or former employees, agents, officers, directors or principals, shall be enjoined from taking any actions to interfere with the implementation or consummation of this Plan. 11.7 EXCULPATION. None of the Debtors nor any Releasee shall have or incur any liability to any holder of a Claim or Equity Interest for any act or omission (and in the case of any director, officer, agent or employee of any Debtor who was employed or otherwise serving in such capacity on the Confirmation Date, any claims against such Persons) in connection with, or arising out of, the Chapter 11 Cases, the pursuit of confirmation of this Plan, transactions or relationships with the applicable Debtor (either prior to or after the Commencement Date), the consummation of this Plan, the administration of this Plan or the property to be distributed under this Plan, except for willful misconduct or gross negligence, and, in all respects, the Plan Proponents and such Persons shall be entitled to rely upon the advice of counsel with respect to their duties and responsibilities during the Chapter 11 Cases and under this Plan. 11.8 RIGHTS OF ACTION. On and after the Effective Date, and except as may otherwise be agreed to by the Plan Proponents, the Reorganized Debtors will retain and have the exclusive right to enforce any and all present or future rights, claims or causes of action against any Person and rights of the Reorganized Debtors that arose before or after the Commencement Date, including, but not limited to, rights, claims, causes of action, -30- avoiding powers, suits and proceedings arising under sections 544, 545, 548, 549, 550 and 553 of the Bankruptcy Code. The Reorganized Debtors may pursue, abandon, settle or release any or all such rights of action, as they deem appropriate, without the need to obtain approval or any other or further relief from the Bankruptcy Court. The Reorganized Debtors may, in their discretion, offset any such claim held against a Person against any payment due such Person under this Plan; provided, however, that any claims of any of the Reorganized Debtors arising before the Commencement Date shall first be offset against Claims against any of the Reorganized Debtors arising before the Commencement Date. 11.9 RELEASE BY DEBTORS. From and after the Effective Date, the Releasees shall be released by each Debtor from any and all claims (as defined in section 101(5) of the Bankruptcy Code), obligations, suits, judgments, damages, rights, causes of action and liabilities whatsoever, whether known or unknown, foreseen or unforeseen, existing or hereafter arising, in law, equity or otherwise, that any Debtor is entitled to assert in its own right or on behalf of the holder of any Claim or Equity Interest or other Person, based in whole or in part upon any act or omission, transaction, agreement, event or other occurrence taking place on or prior to the Effective Date in any way relating to any Debtor, the Chapter 11 Cases or the negotiation, formulation and preparation of this Plan or any related document, except for (i) claims or causes of action against any Releasee resulting from the willful misconduct or gross negligence of such Releasee and (ii) claims against or liabilities of directors, officers or employees of any Debtor in respect of any loan, advance or similar payment by any Debtor to any such Person or any contractual obligation owed by such Person to any Debtor. 11.10 RELEASE OF RELEASEES BY OTHER RELEASEES. From and after the Effective Date, the Releasees shall release each other from any and all claims (as defined in section 101(5) of the Bankruptcy Code), obligations, suits, judgments, damages, rights, causes of action and liabilities whatsoever, whether known or unknown, foreseen or unforeseen, existing or hereafter arising, in law, equity or otherwise, that any Releasee is entitled to assert against any other Releasee, based in whole or in part upon any act or omission, transaction, agreement, event or occurrence taking place on or before the Effective Date in any way relating to any Debtor, the Chapter 11 Cases or the negotiation, formulation and preparation of this Plan or any related document, except for claims or causes of actions against any Releasee resulting from the willful misconduct or gross negligence of such Releasee. -31- 11.11 CLAIMS OF THE UNITED STATES GOVERNMENT. Nothing in this Plan shall effect a release of any non-Debtor from any claim by the United States Government or any of its agencies; nor shall anything in this Plan enjoin the United States from bringing any claim, suit, action or other proceeding against any non-Debtor; provided, however, that this Section 11.11 shall in no way affect or limit the discharge granted to any Debtor under Chapter 11 of the Bankruptcy Code. SECTION 12. RETENTION OF JURISDICTION On and after the Effective Date, the Bankruptcy Court shall retain jurisdiction over all matters arising in, arising under, or related to the Chapter 11 Cases and this Plan for, among other things, the following purposes: (a) To hear and determine motions for the assumption or rejection of executory contracts or unexpired leases and the allowance of Claims resulting therefrom; (b) To hear and determine motions for the sale of all or any part of the Debtors' or Reorganized Debtors' assets, free and clear of all liens, claims and encumbrances in accordance with sections 363 and 1123(a)(5) of the Bankruptcy Code; (c) To determine any motion, adversary proceeding, application, contested matter, and other litigated matter pending on or commenced after the Confirmation Date; (d) To ensure that distributions to holders of Allowed Claims are accomplished as provided herein; (e) To consider Claims or the allowance, classification, priority, compromise, estimation or payment of any Claim, Administrative Expense Claim, or Disputed Claim; (f) To enter, implement or enforce such orders as may be appropriate in the event that the Confirmation Order is for any reason stayed, reversed, revoked, modified or vacated; (g) To issue injunctions, enter and implement other orders, and take such other actions as may be necessary or appropriate to restrain interference by any Person with the consummation, implementation or enforcement of this Plan, the Confirmation Order or any other order of the Bankruptcy Court; (h) To hear and determine any application to modify this Plan in accordance with section 1127 of the Bankruptcy Code, to remedy any defect or omission or reconcile any inconsistency in this Plan, the disclosure statement for this Plan, or any -32- order of the Bankruptcy Court, including the Confirmation Order, in such a manner as may be necessary to carry out the purposes and effects thereof; (i) To hear and determine all applications under sections 330, 331 and 503(b) of the Bankruptcy Code for awards of compensation for services rendered and reimbursement of expenses incurred prior to the Confirmation Date; (j) To hear and determine disputes arising in connection with the interpretation, implementation or enforcement of this Plan, the Confirmation Order, any transactions or payments contemplated hereby, or any agreement, instrument, or other document governing or relating to any of the foregoing; (k) To take any action and issue such orders as may be necessary to construe, enforce, implement, execute and consummate this Plan or to maintain the integrity of this Plan following consummation; (l) To hear any disputes arising out of, and to enforce, the order approving alternative dispute resolution procedures to resolve personal injury, employment litigation and similar Claims pursuant to section 105(a) of the Bankruptcy Code; (m) To determine such other matters and for such other purposes as may be provided in the Confirmation Order; (n) To hear and determine matters concerning state, local, and federal taxes in accordance with sections 346, 505 and 1146 of the Bankruptcy Code (including any requests for expedited determinations under section 505(b) of the Bankruptcy Code filed, or to be filed, with respect to tax returns for any and all taxable periods ending after the Commencement Date through, and including, the Final Distribution Date); (o) To hear and determine any other matters related hereto and not inconsistent with the Bankruptcy Code and title 28 of the United States Code; (p) To recover all assets of any of the Debtors and property of the applicable Debtor's Estate, wherever located; and (q) To enter a final decree closing the Chapter 11 Cases. SECTION 13. MISCELLANEOUS PROVISIONS 13.1 RETIREE BENEFITS. On and after the Effective Date, pursuant to section 1129(a)(13) of the Bankruptcy Code, the applicable Reorganized Debtors shall continue to pay any applicable retiree benefits of such Debtors (within the meaning of section 1114 of the -33- Bankruptcy Code), at any such level established in accordance with section 1114 of the Bankruptcy Code, at any time prior to the Confirmation Date, for the duration of the period for which the applicable Debtor had obligated itself to provide any such benefits. 13.2 DELETION OF CLASSES AND SUBCLASSES. Any Class or Subclass of Claims that does not contain as an element thereof an Allowed Claim or a Claim temporarily allowed under Bankruptcy Rule 3018 as of the date of the commencement of the confirmation hearing shall be deemed deleted from this Plan for purposes of voting to accept or reject this Plan and for purposes of determining acceptance or rejection of this Plan by such Class or Subclass under section 1129(a)(8) of the Bankruptcy Code. 13.3 ADDITION OF CLASSES AND SUBCLASSES. In the event that Class 1-B would contain as elements thereof two or more Secured Claims collateralized by different properties or interests in property or collateralized by liens against the same property or interest in property having different priority, such Claims shall be divided into separate Subclasses of Class 1-B. 13.4 COMMITTEE. (a) The Committee shall continue in existence from and after the Effective Date. In addition to the powers and duties ascribed to the Committee in this Plan, from and after the Effective Date, the Committee may perform such other functions as are consistent with discharging its duties to the holders of General Unsecured Claims. (b) References herein to the "Committee" shall include the Committee from and after the Effective Date. 13.5 EXEMPTION FROM TRANSFER TAXES. Pursuant to section 1146(c) of the Bankruptcy Code, neither (i) the issuance, transfer or exchange of any security under, in furtherance of, or in connection with, this Plan, nor (ii) the assignment or surrender of any lease or sublease, or the delivery of any deed or other instrument of transfer or of any mortgage, deed of trust or other instrument of encumbrance under, in furtherance of, or in connection with, this Plan, including any deeds, bills of sale or assignments executed in connection with any disposition of assets contemplated by this Plan (including real and personal property) or the disposition and/or encumbrance of assets in connection with the Exit Financing Agreements (including any subsequent sale of property under section 6.1 of this Plan), shall be subject to any stamp, real estate transfer, mortgage recording sales, use or other similar tax. -34- 13.6 SUBSTANTIAL CONSUMMATION. On the Effective Date, this Plan shall be deemed to be substantially consummated under sections 1101 and 1127(b) of the Bankruptcy Code. 13.7 PAYMENT OF STATUTORY FEES. All fees payable pursuant to chapter 123 of title 28, United States Code, as determined by the Bankruptcy Court on the Confirmation Date, shall be paid on the Effective Date. Any statutory fees accruing after the Confirmation Date shall constitute Administrative Expense Claims and be paid in accordance with SECTION 2.1 of this Plan. 13.8 AMENDMENTS. The Plan Proponents reserve the right, in accordance with the Bankruptcy Code and the Bankruptcy Rules, to amend or modify this Plan at any time prior to the entry of the Confirmation Order. After the entry of the Confirmation Order, the Plan Proponents may, upon order of the Bankruptcy Court, amend or modify this Plan, in accordance with section 1127(b) of the Bankruptcy Code, or remedy any defect or omission or reconcile any inconsistency in this Plan in such manner as may be necessary to carry out the purpose and intent of this Plan. A holder of an Allowed Claim that is deemed to have accepted this Plan shall be deemed to have accepted this Plan as modified if the proposed modification does not materially and adversely change the treatment of the Claim of such holder. 13.9 REVOCATION OR WITHDRAWAL OF PLAN. The Plan Proponents may withdraw or revoke this Plan at any time prior to the Confirmation Date. If the Plan Proponents revoke or withdraw this Plan prior to the Confirmation Date, or if the Confirmation Date does not occur, then this Plan shall be deemed null and void. In such event, nothing contained herein shall be deemed to constitute a waiver or release of any Claim by or against the respective Debtor or any other Person or to prejudice in any manner the rights of the respective Debtor or any other Person in any further proceedings involving the respective Debtor. 13.10 CRAMDOWN. The Plan Proponents request confirmation of the Plan under section 1129(b) of the Bankruptcy Code with respect to any Class that is deemed to have not accepted this Plan pursuant to section 1126(g) of the Bankruptcy Code. The Plan Proponents reserve the right to (i) request confirmation of this Plan under section 1129(b) of the Bankruptcy Code with respect to any Class or Subclass that does not accept this Plan pursuant to section 1126 of the Bankruptcy Code and (ii) to modify this Plan to the -35- extent, if any, that confirmation of this Plan under section 1129(b) of the Bankruptcy Code requires modification. 13.11 SEVERABILITY. In the event that the Bankruptcy Court determines, prior to the Confirmation Date, that any provision of this Plan is invalid, void or unenforceable, the Bankruptcy Court shall, with the consent of the Plan Proponents, have the power to alter and interpret such term or provision to make it valid or enforceable to the maximum extent practicable, consistently with the original purpose of the term or provision held to be invalid, void or unenforceable, and such term or provision shall then be applicable as altered or interpreted. Notwithstanding any such holding, alteration or interpretation, the remainder of the terms and provisions of this Plan shall remain in full force and effect and shall in no way be affected, impaired or invalidated by such holding, alteration or interpretation. The Confirmation Order shall constitute a judicial determination and shall provide that each term and provision of this Plan, as it may have been altered or interpreted in accordance with the foregoing, is valid and enforceable pursuant to its terms. 13.12 REQUEST FOR EXPEDITED DETERMINATION OF TAXES. Each Debtor shall have the right to request an expedited determination under section 505(b) of the Bankruptcy Code with respect to tax returns filed, or to be filed, for any and all taxable periods ending after the Commencement Date through and including the Final Distribution Date. 13.13 COURTS OF COMPETENT JURISDICTION. If the Bankruptcy Court abstains from exercising, or declines to exercise, jurisdiction or is otherwise without jurisdiction over any matter arising out of this Plan, such abstention, refusal or failure of jurisdiction shall have no effect upon and shall not control, prohibit or limit the exercise of jurisdiction by any other court having competent jurisdiction with respect to such matter. 13.14 GOVERNING LAW. Except to the extent that the Bankruptcy Code or Bankruptcy Rules are applicable, or to the extent that an Exhibit hereto or a Schedule in the Plan Supplement provides otherwise, the rights, duties and obligations arising under this Plan shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, without giving effect to the principles of conflict of laws thereof. -36- 13.15 TIME. In computing any period of time prescribed or allowed by this Plan, unless otherwise set forth herein or determined by the Bankruptcy Court, the provisions of Bankruptcy Rule 9006 shall apply. 13.16 HEADINGS. Headings are used in this Plan for convenience and reference only and shall not constitute a part of this Plan for any other purpose. 13.17 EXHIBITS. All Exhibits and Schedules to this Plan are incorporated into and are a part of this Plan as if set forth in full herein. 13.18 NOTICES. Any notices to or requests of the Plan Proponents by parties in interest under or in connection with this Plan shall be in writing and served either by (i) certified mail, return receipt requested, postage prepaid, (ii) hand delivery or (iii) reputable overnight delivery service, all charges prepaid, and shall be deemed to have been given when received by the following parties: Impac Hotels II, L.L.C. Impac Hotels III, L.L.C. c/o Lodgian, Inc. 3445 Peachtree Road - Suite 700 Atlanta, Georgia 30326 Attn: Daniel E. Ellis, Esq. with copies to: CADWALADER, WICKERSHAM & TAFT LLP Attorneys for the Debtors and Debtors-In-Possession 100 Maiden Lane New York, New York 10038 (212) 504-6000 Attn: Adam C. Rogoff, Esq. -and- -37- CURTIS, MALLET-PREVOST, COLT & MOSLE, LLP Co-Attorneys for the Debtors and Debtors-In-Possession 101 Park Avenue New York, New York 10178 (212) 696-6000 Attn: Steven J. Reisman, Esq. -and- DEBEVOISE & PLIMPTON Attorneys for the Official Committee of Unsecured Creditors 919 Third Avenue New York, New York 10022 (212) 909-6000 Attn: George E.B. Maguire, Esq. -38- Dated: New York, New York As of March 3, 2003 Respectfully submitted, IMPAC HOTELS II, L.L.C. By: /s/ Daniel E. Ellis -------------------------------------- Name: Daniel E. Ellis Title: Authorized Officer IMPAC HOTELS III, L.L.C. By: /s/ Daniel E. Ellis -------------------------------------- Name: Daniel E. Ellis Title: Authorized Officer OFFICIAL COMMITTEE OF UNSECURED CREDITORS By: Debevoise & Plimpton, its counsel By: /s/ George E.B. Maguire -------------------------------------- Name: George E.B. Maguire -39- EXHIBIT A
CLASS 3 SUBCLASS DEBTOR CASE NO. ----------------------- -------- ~~Impac Hotels II, L.L.C. 01-16367 Impac Hotels III, L.L.C. 01-16375~~
EX-10.13.3 38 g87458exv10w13w3.txt EX-10.13.3 ORDER CONFIRMING JOINT PLAN EXHIBIT 10.13.3 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK - ---------------------------------x Chapter 11 In re: : Case No. 01-16345 (BRL) LODGIAN, INC., et al., : (Jointly Administered) Debtors. : - ---------------------------------x FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER UNDER 11 U.S.C. SS. 1129(A) AND (B) AND FED. R. BANKR. P. 3020 CONFIRMING JOINT PLAN OF REORGANIZATION OF IMPAC HOTELS II, L.L.C. AND IMPAC HOTELS III, L.L.C., TOGETHER WITH THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE INTRODUCTION Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C., as debtors and debtors-in-possession (collectively, the "Impac Debtors")(1) in the above-captioned chapter 11 cases (the "Chapter 11 Cases") and the Official Committee of Unsecured Creditors (the "Committee" and, together with the Impac Debtors, the "Plan Proponents"), have proposed the Joint Plan Of Reorganization Of Impac Hotels II, L.L.C. And Impac Hotels III, L.L.C., Together With The Official Committee Of Unsecured Creditors Under Chapter 11 Of The Bankruptcy Code, dated as of March 3, 2003, a true and correct copy of which is annexed hereto as Exhibit A (such as has been amended or modified prior to the entry of this Confirmation Order, the "Impac Plan").(2) - ------------- (1) From time to time during the Chapter 11 Cases, the Impac Debtors have been referred to as the "CCA Debtors." These terms are synonymous for all purposes. (2) Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to such terms in the Plan and/or the Disclosure Statement Approval Order (as is defined below). Any capitalized term not defined in the Plan, the Disclosure Statement Approval Order, or this Confirmation Order, but used in title 11 of the United States Code, as amended (the "Bankruptcy Code") or the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"), shall have the meaning ascribed to that term in the Bankruptcy Code or the Bankruptcy Rules. DISCLOSURE STATEMENT AND SOLICITATION After a hearing held on March 20, 2003 (the "Disclosure Statement Hearing"), the Disclosure Statement in support of the Impac Plan, dated as of March 3, 2003 (as transmitted to parties in interest, the "Disclosure Statement"), was approved by an order of this Court as containing "adequate information" pursuant to section 1125 of the Bankruptcy Code (the "Disclosure Statement Approval Order"). On or before March 25, 2003, the Impac Debtors having mailed or caused to be mailed, by first class mail, the solicitation packages (the "Solicitation Packages") containing copies of, inter alia, (1) the Disclosure Statement Approval Order, (2) the Disclosure Statement Approval Notice, setting forth, among other things, (a) notice of entry of the Disclosure Statement Approval Order, (b) the Voting Deadline for the submission of Ballots to accept or reject the Impac Plan, (c) the time fixed for filing objections to confirmation of the Impac Plan, and (d) the time, date and place of the Confirmation Hearing, (3) a Ballot or Notice of Non-Voting Status, as applicable, and (4) the approved form of the Disclosure Statement (together with the Impac Plan annexed thereto as Exhibit B) to (a) the parties in interest listed on the Master Service List (as defined in this Court's Order Establishing Notice Procedures, dated December 21, 2001), (b) attorneys for the Committee, (c) the U.S. Trustee, (d) all persons or entities that filed proofs of claim on or before the date of the Disclosure Statement Notice, except to the extent that a claim was paid pursuant to, or expunged by, prior order of this Court, (e) all persons or entities listed in the Debtors' Schedules as holding liquidated, noncontingent, and undisputed claims in an amount greater than zero, (f) all other parties in interest that filed a request for notice pursuant to Bankruptcy Rule 2002 in the Debtors' Chapter 11 Cases, (g) the Securities and Exchange Commission, (h) the Internal Revenue Service, (i) the Department of Justice, (j) the Pension Benefit Guaranty Corporation, (k) any entity that had filed with the Court 2 a notice of transfer of a claim under Bankruptcy Rule 300l(e) prior to date of the Disclosure Statement Notice, and (1) any other known holders of claims against the Debtors. The Impac Debtors filed the certificates of publication of Bridgette Tryoski, Advertising Clerk of the Publisher of The Wall Street Journal sworn to on March 5, 2003; Arlene Moller, Principal Clerk of the Publisher of The New York Times, sworn to on March 5, 2003; and Cheryl Rothlein, Principal Clerk of USA Today, sworn to on March 5, 2003, attesting to the fact that notice of the Confirmation Hearing was published on March 5, 2003 in accordance with this Court's scheduling order dated March 3, 2003. The Impac Debtors filed the Declaration of Debra L. Reyes Certifying Voting On and Tabulation Of Ballots Accepting and Rejecting the Impac Plan, sworn to on April 17, 2003 (the "Reyes Certification") attesting to and certifying the method and results of the ballot tabulation for the Classes of Claims entitled to vote to accept or reject the Impac Plan (the "Voting Report"). PLAN CONFIRMATION No objections or purported objections to confirmation of the Impac Plan were timely filed and served. If any objections remain, they are overruled on the merits pursuant to this Confirmation Order. The Debtors filed (i) a memorandum of law in support of confirmation of the Impac Plan, dated April 21, 2003 (the "Confirmation Memorandum"), (ii) the Plan Supplement, dated April 17, 2003 (as may be amended, the "Plan Supplement"); and (iii) the Declaration of Manuel Artime in Support of Confirmation of the Impac Plan, dated April 17, 2003 (the "Artime Affidavit," together with the Reyes Certification, the "Confirmation Affidavits"). 3 The provisions of the Impac Plan are amended to reflect any amendments to the Impac Plan as may be filed with this Court and by the Plan Proponents on the record at the Confirmation Hearing. The Impac Plan is a separate plan for each Impac Debtor's estate. Accordingly, the provisions of the Impac Plan, including without limitation the definitions and distributions to creditors shall apply to the respective assets of, claims against, and equity interests in, such Impac Debtor's separate estate. Based upon the Bankruptcy Court's review of the Disclosure Statement, the Impac Plan, the Plan Supplement, the Voting Report, the Confirmation Affidavits, and the Confirmation Memorandum; and upon (a) all of the evidence proffered or adduced at, memoranda and objections filed in connection with, and arguments of counsel made at, the Confirmation Hearing, and (b) the entire record of these Chapter 11 Cases; and after due deliberation thereon and good cause appearing therefor, FINDINGS OF FACT AND CONCLUSIONS OF LAW IT IS HEREBY FOUND AND DETERMINED THAT:(3) (A) Exclusive Jurisdiction; Venue; Core Proceeding (28 U.S.C. ss.ss. 157(b)(2) 1334(a)). This Bankruptcy Court has jurisdiction over these cases pursuant to sections 157 and 1334 of title 28 of the United States Code. Venue is proper pursuant to sections 1408 and 1409 of title 28 of the United States Code. Confirmation of the Impac Plan is a core proceeding pursuant to 28 U.S.C. ss. 157(b)(2)(L), and this Bankruptcy Court has exclusive jurisdiction to determine whether the Impac Plan complies with the applicable provisions of the Bankruptcy Code and should be confirmed. - -------------- (3) Pursuant to Bankruptcy Rule 7052, findings of fact shall be construed as conclusions of law and conclusions of law shall be construed as findings of fact when appropriate. 4 (B) Judicial Notice. This Bankruptcy Court takes judicial notice of the docket in the Lodgian, Inc., et al Chapter 11 Cases maintained by the Clerk of the Bankruptcy Court and/or its duly-appointed agent, including, without limitation, all pleadings and other documents filed, all orders entered, and evidence and argument made, proffered, or adduced at the hearings held before the Bankruptcy Court during the pendency of the Chapter 11 Cases of the Impac Debtors and the Confirmed Debtors, including, but not limited to, the hearings to consider the adequacy of the Disclosure Statement. (C) Burden of Proof. The Impac Debtors have the burden of proving the elements of sections 1129(a) and (b) of the Bankruptcy Code by a preponderance of evidence. (D) Transmittal and Mailing of Materials; Notice. The Disclosure Statement, the Impac Plan, the Ballots or Notice of Non-Voting Status, as the case may be, the Disclosure Statement Approval Order, and the Disclosure Statement Approval Notice, which were transmitted and served as set forth in the Reyes Certification, shall be deemed to have been transmitted and served in compliance with the Disclosure Statement Approval Order and the Bankruptcy Rules, and such transmittal and service were adequate and sufficient, and no other or further notice is or shall be required. (E) Voting. Votes to accept and reject the Impac Plan have been solicited and tabulated fairly, in good faith, and in a manner consistent with the Bankruptcy Code, the Bankruptcy Rules, the Disclosure Statement Approval Order, and industry practice. (F) Classes deemed to have accepted the Impac Plan. Classes 1 -A, 2 and 9 are unimpaired and are deemed to have accepted the Impac Plan pursuant to section 1126(f) of the Bankruptcy Code. (G) Class deemed to have rejected the Impac Plan. Class 11 will not receive any property under the Impac Plan, and therefore is deemed to have rejected the Impac Plan 5 pursuant to section 1126(g) of the Bankruptcy Code. However, there are no known members of Class 11. (H) Plan Compliance with Bankruptcy Code (11 U.S.C. ss. 1129(a)(1)). The Impac Plan complies with the applicable provisions of the Bankruptcy Code, thereby satisfying section 1129(a)(l) of the Bankruptcy Code. (1) Proper Classification (11 U.S.C. ss.ss. 1122, 1123(a)(l)).(4) In addition to the Administrative Expense Claims (consisting of Claims under the headings Compensation and Reimbursement Claims and Priority Tax Claims) listed in Section 2 of the Impac Plan, which need not be designated, Section 3 of the Impac Plan designates six Classes of Claims against and Equity Interests in each Impac Debtor. Each Secured Claim and General Unsecured Claim shall be deemed to be separately classified in a subclass of Classes 1 and 3, respectively, and shall have all rights associated with separate classification under the Bankruptcy Code. The Claims and Equity Interests placed in each Class are substantially similar to other Claims and Equity Interests, as the case may be, in each such Class. Valid business, factual, and legal reasons exist for separately classifying the various Classes of Claims and Equity Interests created under the Impac Plan, and such Classes do not unfairly discriminate between holders of Claims and Equity Interests. The Impac Plan satisfies sections 1122 and 1123(a)(l) of the Bankruptcy Code. (2) Specified Unimpaired Classes (11 U.S.C. ss. 1123(a) (2)) Section 4 of the Impac Plan specifies that Classes 1-A, 2 and 9 are unimpaired under the Impac Plan, thereby satisfying section 1123(a) (2) of the Bankruptcy Code. - ----------- (4) The Impac Plan is based upon the confirmed Joint Plan of Lodgian, Inc., et al., and provisions that do not apply to the Impac Debtors were intentionally left blank. Consequently, the numbering of the classes in the Impac Plan is not consecutive. 6 (3) Specified Treatment of Impaired Classes (11 U.S.C. s 1123(a)(3)). Section 4 of the Impac Plan designates Classes 1-B, 3, 5 and 11 as impaired and specifies the treatment of Claims in those Classes, thereby satisfying section 1123(a)(3) of the Bankruptcy Code. (4) No Discrimination (11 U.S.C. ss. 1123(a)(4)). The Impac Plan provides for the same treatment by the Impac Debtors for each Claim or Equity Interest in each respective Class unless the holder of a particular Claim or Equity Interest has agreed to a less favorable treatment of such Claim or Equity Interest, thereby satisfying section 1123(a)(4) of the Bankruptcy Code. (5) Implementation of Plan (11 U.S.C. ss. 1123(a)(5)). The Impac Plan provides adequate and proper means for the Impac Plan's implementation, including, among other things, (i) the Exit Financing Agreements; (ii) the waiver of subordination rights; (iii) the selection of officers for the Reorganized Impac Debtors, as disclosed on Lodgian Inc.'s ("Lodgian") website; (iv) the Amended Organizational Documents, if applicable; (v) the issuance of Class 1-B notes and the related financing documents; (vi) the transfer of assets; and (vii) the establishment of new entities. (6) Non-Voting Equity Securities (11 U.S.C. ss. 1123(a)(6)). Section 6.10 of the Impac Plan provides that the Amended Organization Documents, if applicable, shall prohibit the issuance of nonvoting equity securities. Thus, the requirements of section 1123(a)(6) of the Bankruptcy Code are satisfied. (7) Designation of Officers (11 U.S.C. ss. 1123(a)(7)). Section 6.9 of the Impac Plan provides that the current officers of the Impac Debtors shall continue to serve as the officers of the Reorganized Impac Debtors consistent with the interests of 7 creditors, equity security holders, and public policy in accordance with section 1123(a)(7). (8) Additional Plan Provisions (11 U.S.C. ss. 1123(b)). The Impac Plan's provisions are appropriate and not inconsistent with the applicable provisions of the Bankruptcy Code. (9) Bankruptcy Rule 3016(a). The Impac Plan is dated and identifies the entities submitting it as the Plan Proponents, thereby satisfying Bankruptcy Rule 3016(a). (I) Impac Debtors' Compliance with Bankruptcy Code (11 U.S.C. ss. 1129(a)(2)). The Impac Debtors have complied with the applicable provisions of the Bankruptcy Code, thereby satisfying section 1129(a)(2) of the Bankruptcy Code. Specifically: (i) The Impac Debtors are proper debtors under section 109 of the Bankruptcy Code. (ii) The Impac Debtors have complied with applicable provisions of the Bankruptcy Code, except as otherwise provided or permitted by orders of the Bankruptcy Court. (iii) The Impac Debtors have complied with the applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, and the Disclosure Statement Approval Order in transmitting the Impac Plan, the Disclosure Statement, the Ballots or Notices of Non-Voting Status, as the case may be, and related documents in soliciting and tabulating votes on the Impac Plan. (J) Plan Proposed in Good Faith (11 U.S.C. ss. 1129(a)(3)). The Plan Proponents have proposed the Impac Plan in good faith and not by any means forbidden by law, thereby satisfying section 1129(a)(3) of the Bankruptcy Code. The Plan Proponents' good faith 8 is evident from the facts and records of these Chapter 11 Cases, the Disclosure Statement and the hearings thereon, and the record of the Confirmation Hearing and other proceedings held in these Chapter 11 Cases. The Impac Plan was proposed with the legitimate and honest purpose of maximizing the value of the Impac Debtors' estates and to effectuate a successful reorganization of the Impac Debtors. (K) Payments for Services or Costs and Expenses (11 U.S.C. ss. 1129(a)(4)). Any payment made or to be made by any of the Impac Debtors for services or for costs and expenses in or in connection with the Chapter 11 Cases, or in connection with the Impac Plan and incident to the Chapter 11 Cases, has been approved by, or is subject to the approval of, the Bankruptcy Court as reasonable, thereby satisfying section 1129(a)(4) of the Bankruptcy Code. (L) Officers and Insiders (11 U.S.C. ss. 1129(a)(5)). The Plan Proponents have complied with section 1129(a)(5) of the Bankruptcy Code. The identity and affiliations of the persons who serve and shall continue to serve as officers of the Reorganized Impac Debtors after confirmation of the Impac Plan have been fully disclosed in the Plan Supplement, and the appointment to, or continuance in, such offices of such persons is consistent with the interests of holders of Claims against and Equity Interests in the Impac Debtors and with public policy. The identity of any insider that will be employed or retained by the Reorganized Impac Debtors and the nature of such insider's compensation have also been fully disclosed in the Plan Supplement. (M) No Rate Changes (1l U.S.C. ss. 1129(a)(6)). After confirmation of the Impac Plan, the Impac Debtors' businesses will not involve rates established or approved by, or otherwise subject to, any governmental regulatory commission. Thus, section 1129(a)(6) of the Bankruptcy Code is not applicable in these Chapter 11 Cases. (N) Best Interests of Creditors (11 U.S.C. ss. 1129(a)(7)). The Impac Plan satisfies section 1129(a)(7) of the Bankruptcy Code. The liquidation analysis provided in the 9 Disclosure Statement, the Plan Supplement, the Confirmation Affidavits, and other evidence proffered or adduced at or prior to the Confirmation Hearing (a) are persuasive and credible, (b) have not been controverted by other evidence, and (c) establish that each holder of an impaired Claim or Equity Interest either has accepted the Impac Plan or will receive or retain under the Impac Plan, on account of such Claim or Equity Interest, property of a value, as of the Effective Date, that is not less than the amount that such holder would receive or retain if the Impac Debtors were liquidated under chapter 7 of the Bankruptcy Code on such date. (O) Acceptance of Certain Classes (11 U.S.C. ss. 1129(a)(8)). Classes 1 -A, 2 and 9 of the Impac Plan are Classes of unimpaired Claims and Equity Interest that are conclusively presumed to have accepted the Impac Plan under section 1126(f) of the Bankruptcy Code and the accepting Classes as set forth in the Reyes Certification have voted to accept the Impac Plan in accordance with sections 1126(c) and (d) of the Bankruptcy Code (the "Accepting Classes") and therefore satisfy section 1129(a)(8) of the Bankruptcy Code. Though section 1129(a)(8) does not appear to be satisfied with respect to Class 11, which will not receive any property under the Impac Plan and, was therefore deemed to have rejected the Impac Plan pursuant to section 1126(g) of the Bankruptcy Code, there are no known members of Class 11. Should any Class of Claims reject the Impac Plan, the Impac Plan remains confirmable because it satisfies section 1129(b) of the Bankruptcy Code with respect to any rejecting Classes. (P) Treatment of Administrative and Tax Claims (11 U.S.C. ss. 1129(a)(9)). The treatment of Administrative Expense Claims and Priority Non-Tax Claims pursuant to Sections 2.1 and 4.2 of the Impac Plan satisfies the requirements of sections 1129(a)(9)(A) and (B) of the Bankruptcy Code, and the treatment of Priority Tax Claims pursuant to Section 2.3 of the Impac Plan satisfies the requirements of section 1129(a)(9)(C) of the Bankruptcy Code. Allowed Priority Tax Claims only constitute unsecured Claims against the applicable Impac 10 Debtor's estate and the holder of such Allowed Priority Tax Claim shall not have any lien securing such Claim or otherwise be permitted to assert any other encumbrance against property of the applicable Debtor relating to such Claim. Except to the extent that a holder of an Allowed Priority Tax Claim and the applicable Impac Debtor agree to a different treatment, each holder of an Allowed Priority Tax Claim shall receive, in full satisfaction of such Claim, payment in Cash of the Allowed Amount of such Claim over a period not exceeding six (6) years after the date of assessment of such Claim, with interest at a rate equal to the Federal Judgment Rate as of the Confirmation Date, payable monthly, in periodic payments having a value, as of the Effective Date, equal to the amount of such Allowed Priority Tax Claim. The treatment of Allowed Priority Tax Claims will be memorialized in a tax note (the "Tax Note"), substantially in the form annexed hereto as Exhibit B, which shall be given to each holder of an Allowed Priority Tax Claim. (Q) Treatment of Secured Tax Claims. In connection with any Allowed Secured Claim relating to a tax claim that is not an Allowed Priority Tax Claim and which is treated as a Secured Claim under Class 1-B of the Impac Plan, except to the extent that a holder of such an Allowed Secured Claim and the applicable Impac Debtor agree to a different treatment, each holder of such an Allowed Secured Claim shall receive a Tax Note pursuant to section 4.1 of the Impac Plan. (R) Acceptance By Impaired Classes (11 U.S.C. ss. 1129(a)(10)). At least one Class of Claims against each of the Impac Debtors that is impaired under the Impac Plan has accepted the Impac Plan, determined without including any acceptance of the Impac Plan by any insider, thus satisfying the requirements of section 1129(a)(10) of the Bankruptcy Code. (S) Feasibility (11 U.S.C. ss. 1129(a)(11). The Disclosure Statement, the Impac Plan, the Plan Supplement, the Voting Report, the Confirmation Affidavits, the 11 Confirmation Memorandum, and all evidence proffered or adduced at the Confirmation Hearing (a) is persuasive and credible, (b) has not been controverted by other evidence, and (c) establishes that confirmation of the Impac Plan is not likely to be followed by the liquidation, or the need for further financial reorganization, of the Reorganized Impac Debtors, thus satisfying the requirements of section 1129(a)(l1) of the Bankruptcy Code. (T) Payment of Fees (11 U.S.C. ss. 1129(a)(12)). All fees payable under section 1930 of title 28, United States Code, as determined by the Bankruptcy Court on the Confirmation Date, have been paid or will be paid pursuant to Section 13.7 of the Impac Plan on the Effective Date, thus satisfying the requirements of section 1129(a)(12) of the Bankruptcy Code. (U) Continuation of Retiree Benefits (11 U.S.C. ss. 1129(a)(13)). Section 13.1 of the Impac Plan provides that, on and after the Effective Date, the Reorganized Impac Debtors will continue to pay all "retiree benefits" (as defined in section 1114(a) of the Bankruptcy Code), at the level established pursuant to section 1114 of the Bankruptcy Code at any time prior to confirmation of the Impac Plan, for the duration of the period the Impac Debtors have obligated themselves to provide such benefits. Thus, the requirements of section 1129(a)(13) of the Bankruptcy Code are satisfied. (V) Fair and Equitable: No Unfair Discrimination (11 U.S.C. ss. 1129(b)). Based upon the Confirmation Affidavits and the evidence proffered, adduced, or presented by the Impac Debtors at the Confirmation Hearing, the Impac Plan does not discriminate unfairly and is fair and equitable, as required by section 1129(b)(l) of the Bankruptcy Code, with respect to any Classes that may reject the Impac Plan. Thus, the Impac Plan may be confirmed notwithstanding the Impac Debtors' failure to satisfy section 1129(a)(8) of the Bankruptcy Code. 12 Accordingly, upon confirmation and the occurrence of the Effective Date, the Impac Plan shall be binding upon the members of any rejecting Classes. (W) Principal Purpose of the Plan (11 U.S.C. ss. 1129(d)). The principal purpose of the Impac Plan is not the avoidance of taxes or the avoidance of the application of Section 5 of the Securities Act of 1933. (X) Modifications to the Plan. The modifications to the Impac Plan as may be set forth in any plan modifications filed with this Court and on the record at the Confirmation Hearing constitute technical changes and/or changes with respect to particular Claims by agreement with holders of such Claims, and do not materially adversely affect or change the treatment of any Claims or Equity Interests. Accordingly, pursuant to Bankruptcy Rule 3019, these modifications do not require additional disclosure under section 1125 of the Bankruptcy Code or resolicitation of votes under section 1126 of the Bankruptcy Code, nor do they require that holders of Claims or Equity Interests be afforded an opportunity to change previously cast acceptances or rejections of the Impac Plan. (Y) Good Faith Solicitation (11 U.S.C. ss. 1125(e)). Based on the record before the Bankruptcy Court in these Chapter 11 Cases, the Impac Debtors and their officers, employees, shareholders, members, agents, advisors, accountants, investment bankers, consultants, attorneys, and other representatives have acted in "good faith" within the meaning of section 1125(e) of the Bankruptcy Code in compliance with the applicable provisions of the Bankruptcy Code and Bankruptcy Rules in connection with all their respective activities relating to the solicitation of acceptances to the Impac Plan and their participation in the activities described in section 1125 of the Bankruptcy Code, and are entitled to the protections afforded by section 1125(e) of the Bankruptcy Code and the exculpation provisions set forth in Section 11.7 of the Impac Plan. 13 (Z) Assumption and Rejection. Section 9 of the Impac Plan governing the assumption and rejection of executory contracts and unexpired leases satisfies the requirements of section 365(b) of the Bankruptcy Code. Pursuant to Section 9.2 of the Impac Plan, except as may otherwise be agreed to by the parties, within thirty (30) days after the Effective Date, the Impac Debtors shall file and serve a statement with the Bankruptcy Court listing the cure amounts of all executory contracts or unexpired leases to be assumed. The parties to such executory contracts or unexpired leases to be assumed by the applicable Impac Debtor shall have fifteen (15) days from service to object to the cure amounts listed by the applicable Impac Debtor. If there are any objections filed which are not resolved consensually by the applicable Impac Debtor, then, upon request of the applicable Impac Debtor, the Bankruptcy Court shall hold a hearing. Prior to and after the Effective Date, the applicable Impac Debtor shall retain its right to reject any of its executory contracts or unexpired leases, including contracts or leases that are subject to a dispute concerning amounts necessary to cure any defaults. Notwithstanding the foregoing, at all times through the date that is five (5) Business Days after the Bankruptcy Court enters an order resolving and fixing the amount of a disputed cure amount, the applicable Impac Debtor shall have the right to reject such executory contract or unexpired lease. (AA) Assumption and Assignments. In furtherance of the Exit Financing Agreements, pursuant to sections 365 and 1123(a)(5) of the Bankruptcy Code, the Impac Debtors are authorized to assume and assign to one or more of the Exit Financing Borrowers or any other newly created borrowing entities one or more executory contracts and unexpired leases to be assumed under the Impac Plan. Any provision in any executory contract or unexpired lease that prohibits or conditions the assignment of such executory contract or unexpired lease or allows a non-debtor party to such executory contract or unexpired lease to terminate, recapture, impose any penalty, condition renewal or extension, or modify any term or condition upon the 14 assignment of such executory contract or unexpired lease, constitutes an unenforceable anti-assignment provision, which is void and of no force and effect. Entry of this Confirmation Order shall constitute the approval of such assumptions and assignments pursuant to sections 365 and 1123(a)(5) of the Bankruptcy Code. Any provision in any such assumed and assigned contract and lease that prohibits, restricts or conditions such assignment is unenforceable under section 365(f) of the Bankruptcy Code. The requirements of section 365(b) of the Bankruptcy Code shall be deemed satisfied with respect to each such assumed and assigned contract and lease, and because each such assumption and assignment is a necessary part of the Impac Debtors' Exit Financing, such assumptions and assignments are in the best interests of the Impac Debtors and their Estates. (BB) Transfer of Property. The transfer by the Impac Debtors to one or more of the Exit Financing Borrowers (i) is a legal, valid and effective transfer of property, (ii) vests in one or more of the Exit Financing Borrowers good title to such property free and clear of all liens, claims, charges, encumbrances, or interests, except as expressly provided in the Impac Plan or this Confirmation Order, (iii) does not constitute an avoidable transfer under the Bankruptcy Code or under applicable nonbankruptcy law, and (iv) does not and shall not subject any of the Exit Financing Borrowers to any liability by reason of such transfer under the Bankruptcy Code or under applicable nonbankruptcy law. The transfers of property of the Impac Debtors to the Exit Financing Borrowers under or in connection with the Impac Plan are for good consideration and value. (CC) Satisfaction of Confirmation Requirements. The Impac Plan satisfies the requirements for confirmation set forth in section 1129 of the Bankruptcy Code. 15 (DD) Retention of Jurisdiction. The Bankruptcy Court may properly retain jurisdiction over the matters set forth in Section 12 of the Impac Plan and section 1142 of the Bankruptcy Code. DECREES NOW, THEREFORE, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED THAT: 1. Confirmation. The Impac Plan, as modified, is approved and confirmed under section 1129 of the Bankruptcy Code. The terms of the Impac Plan and the Plan Supplement are incorporated by reference into and are an integral part of the Impac Plan and this Confirmation Order. 2. Amendments. The modifications of the Impac Plan, to the extent reflected on the record at the Confirmation Hearing, meet the requirements of sections 1127(a) and (c), such modifications do not adversely change the treatment of the Claim of any creditor or Equity Interest of any equity security holder within the meaning of Bankruptcy Rule 3019, and no further solicitation or voting is required. 3. Objections. All objections that have not been withdrawn, waived, or settled, and all reservations of rights pertaining to confirmation of the Impac Plan included therein, are overruled on the merits. 4. Plan Classification Controlling. The classifications of Claims and Equity Interests for purposes of the distributions to be made under the Impac Plan shall be governed solely by the terms of the Impac Plan. The classifications set forth on the Ballots tendered to or returned by the Impac Debtors' creditors in connection with voting on the Impac Plan (a) were set forth on the Ballots solely for purposes of voting to accept or reject the Impac Plan, (b) do not necessarily represent, and in no event shall be deemed to modify or otherwise affect, the actual 16 classification of such Claims and Equity Interests under the Impac Plan for distribution purposes, and (c) shall not be binding on the Impac Debtors or the Reorganized Impac Debtors. 5. Binding Effect. The Impac Plan and its provisions shall be binding upon the Impac Debtors, the Reorganized Impac Debtors, the Disbursing Agent, the Committee, any entity acquiring or receiving property or a distribution under the Impac Plan, and any holder of a Claim against or Equity Interest in the Impac Debtors, including all governmental entities (including without limitation all taxing authorities), whether or not the Claim or Equity Interest of such holder is impaired under the Impac Plan, whether or not the Claim or Equity Interest is Allowed, and whether or not such holder or entity has accepted the Impac Plan. 6. Vesting of Assets (11 U.S.C. ss. 1141(b) and (c)). Pursuant to Section 11.1 of the Impac Plan, except as otherwise provided in the Impac Plan, each Impac Debtor will, as a Reorganized Impac Debtor, continue to exist after the Effective Date as a separate limited liability company, with all the powers of a limited liability company under applicable law and without prejudice to any right to alter or terminate such existence (whether by merger, dissolution, or otherwise) under applicable state law. Except as otherwise expressly provided in the Impac Plan, upon the Effective Date all property of the Impac Debtors' estates shall vest in each of the applicable Exit Financing Borrowers and any other newly created subsidiaries of the Reorganized Impac Debtors free and clear of all Claims, liens, encumbrances, charges and other interests, and all such Claims, liens, encumbrances, charges, and other interests shall be extinguished. Each Reorganized Impac Debtor is authorized to execute the necessary documentation to effectuate the vesting of property of the Impac Debtors in the Exit Financing Borrowers or any other newly created subsidiaries. Each Reorganized Impac Debtor may operate its businesses and may use, acquire and dispose of property and compromise or settle any Claims without supervision or approval by the Bankruptcy Court and free of any restrictions of 17 the Bankruptcy Code or Bankruptcy Rules, other than those restrictions expressly imposed by the Impac Plan or this Confirmation Order. 7. Assumption or Rejection of Executory Contracts and Unexpired Leases (11 U.S.C. ss. 1123(b)(2)). Except as otherwise provided for herein, pursuant to Section 9.1 of the Impac Plan, on the Effective Date, all executory contracts and unexpired leases to which each Impac Debtor is a party shall be deemed rejected as of the Effective Date, except for an executory contract or unexpired lease that (i) has been assumed or rejected pursuant to a Final Order of the Bankruptcy Court, (ii) is specifically designated as a contract or lease to be assumed on the Schedule of Assumed Contracts set forth in the Plan Supplement, provided however, that the Impac Debtors reserve the right to amend the Plan Supplement at any time on or before the Effective Date to amend the Schedule of Assumed Contracts to add or delete any executory contract or unexpired lease, thus providing for its assumption, assumption and assignment, or rejection; or (iii) is the subject of a separate motion to assume, assume and assign, or reject filed under section 365 of the Bankruptcy Code by the applicable Impac Debtor on or before the Effective Date. Listing a contract or lease on the Schedule of Assumed Contracts shall not constitute an admission by the Impac Debtors that such contract or lease is an executory contract or unexpired lease or that the Impac Debtors have any liability thereunder. Any provision in any executory contract or unexpired lease that prohibits or conditions the assignment of such executory contract or unexpired lease or allows a non-debtor party to such executory contract or unexpired lease to terminate, recapture, impose any penalty, condition renewal or extension, or modify any term or condition upon the assignment of such executory contract or unexpired lease, constitutes an unenforceable anti-assignment provision, which is void and of no force and effect. 8. Bar Date for Rejection Damage Claims. Pursuant to Section 9.4 of the Impac Plan, if the rejection of an executory contract or unexpired lease by any of the Impac 18 Debtors, pursuant to Section 9.1 of the Impac Plan, results in damages to the other party or parties to such contract or lease, a Claim for such damages, if not heretofore evidenced by a filed proof of claim, shall be forever barred and shall not be enforceable against the Impac Debtors or Reorganized Impac Debtors, or their respective properties or interests in property as agents, successors, or assigns, unless a proof of claim is filed with the Bankruptcy Court and served upon counsel for the Impac Debtors on or before the date that is twenty (20) days after the Effective Date or such later rejection date that occurs as a result of a dispute concerning amounts necessary to cure any defaults. 9. General Authorizations. The approvals and authorizations specifically set forth in this Confirmation Order are nonexclusive and are not intended to limit the authority of any Impac Debtor, Reorganized Impac Debtor, Exit Financing Borrower or officer or member thereof to take any and all actions necessary or appropriate to implement, effectuate and consummate any and all documents or transactions contemplated by the Impac Plan or this Confirmation Order including but not limited to the execution, delivery, filing, or recording of such contracts, instruments, releases, and other agreements or documents and taking such actions as may be necessary or appropriate to effectuate, implement, and further evidence the terms and conditions of the Impac Plan, including without limitation any notes or securities issued pursuant to the Impac Plan. The Impac Debtors, the Reorganized Impac Debtors, the Exit Financing Borrowers and their respective officers, members, agents, and attorneys, are authorized and empowered to issue, execute, deliver, file, or record any agreement, document, or security, including, without limitation, the documents contained in the Plan Supplement, as such documents may be modified, amended, and supplemented, in substantially the form included therein, and to take any action necessary or appropriate to implement, effectuate, and consummate the Impac Plan in accordance with its terms, or take any or all corporate actions 19 authorized to be taken pursuant to the Impac Plan, and to make any release, amendment, or restatement of any bylaws, certificates of incorporation, or other organization documents of the Impac Debtors, the Reorganized Impac Debtors or the Exit Financing Borrowers, whether or not specifically referred to in the Impac Plan or the Plan Supplement, without further order of this Bankruptcy Court, and any or all such documents shall be accepted by each of the respective state filing offices and recorded in accordance with applicable state law and shall become effective in accordance with their terms and the provisions of state law. Pursuant to section 1142 of the Bankruptcy Code, to the extent that, under applicable nonbankruptcy law, any of the foregoing actions otherwise would require the consent or approval of the stockholders, members, or managers of any of the Impac Debtors, Reorganized Impac Debtors or Exit Financing Borrowers, this Confirmation Order shall constitute such consent or approval, and such actions are deemed to have been taken by appropriate action of the Impac Debtors, the Reorganized Impac Debtors or the Exit Financing Borrowers, as the case may be. 10. Authorization to Enter into Stipulations. In addition to the general authorization given to each of Impac Debtors, the Reorganized Impac Debtors, and the Exit Financing Borrowers through this Confirmation Order and the Impac Plan, each of the Impac Debtors, Reorganized Impac Debtors, and Exit Financing Borrowers are authorized to execute and take such actions as may be necessary or appropriate to effectuate and implement the terms of that certain settlement agreement approved by Order of this Court Pursuant to Sections 362 and 363(b) of the Bankruptcy Code and Rule 9019(a) of the Federal Rules of Bankruptcy Procedure Between the Impac Debtors and The Capital Company of America LLC, entered on October 31, 2002 (the "Settlement Agreement"), including the satisfaction of the CCA Secured Claims under Class 1-A of the Impac Plan. Further, nothing in the Impac Plan or this Confirmation Order shall modify or affect the terms of the Settlement Agreement or any 20 stipulations entered into by one or more of the Impac Debtors, each of which shall remain valid and binding obligations of the parties thereto in accordance with the terms thereof. In the event of any conflict between this Confirmation Order and the Settlement Agreement or any of the aforementioned stipulations, the terms of the Settlement Agreement or the stipulations shall control. Also in addition to the general authorization given to each of the Impac Debtors, the Reorganized Impac Debtors and the Exit Financing Borrowers through this Confirmation Order and the Impac Plan, each of the Impac Debtors, the Reorganized Impac Debtors and the Exit Financing Borrowers are authorized to execute and take such actions as may be necessary or appropriate to effectuate and implement the various stipulations relating to the treatment of holders of Allowed Secured Claims or Allowed Unsecured Claims under the Impac Plan. Specifically, nothing in the Impac Plan or this Confirmation Order shall modify or affect the terms of any stipulation entered into by and between the applicable Impac Debtor(s) and their franchisors relating to the assumption or rejection of the applicable franchise agreements by the applicable Impac Debtor(s), including any stipulation to be entered into at the Confirmation Hearing or prior to the entry of this Confirmation Order, among Impac Hotels II, L.L.C., on the one hand, and Holiday Hospitality Franchising, Inc., an affiliate of Six Continents Hotels, Inc., on the other hand. 11. Authorization in Connection with Exit Financing Agreements. (a) Without limitation on the general authorizations provided for in this Confirmation Order and the Impac Plan, each of the Impac Debtors, the Reorganized Impac Debtors and the Exit Financing Borrowers are authorized, without further order of this Court, upon, or simultaneously in connection with, consummation of the transactions contemplated in the Settlement Agreement, to take all actions necessary or desirable in furtherance of the consummation and implementation of the Exit Financing Agreements, and the transactions 21 contemplated by the Impac Plan, including without limitation, the following: (1) executing the Exit Financing Agreements; (2) executing such other documents as the Exit Financing Lender may reasonably require in order to effectuate the treatment afforded to such parties under the Exit Financing Agreements without further order of this Court; (3) performing all obligations necessary to effectuate compliance with the terms and conditions of the Exit Financing Agreements; and (4) specifically the following (a) Impac Hotels II, L.L.C. is authorized to create thirteen single purpose, single member Delaware limited liability companies in connection with the Exit Financing, each of which will own one of the Impac Hotel Properties and be wholly-owned by Impac Hotels II, L.L.C.; and (b) Impac Hotels III, L.L.C. is authorized to create five single purpose, single member Delaware limited liability companies in connection with the Exit Financing, each of which will own one of the Impac Hotel Properties and be wholly-owned by Impac Hotels III, L.L.C. (b) Notwithstanding any contrary provision in this Confirmation Order or the Impac Plan, in connection with the payment of the CCA Settlement Amount and the Exit Financing, which will result in the reorganizing of the Impac Debtors, (i) the Impac Debtors are authorized, but are not obligated, to transfer the Impac Hotel Properties to one or more of the Exit Financing Borrowers; (ii) the Impac Debtors shall have the right, but are not obligated, to cause the CCA Agreements(5) to be assigned to the Exit Financing Lender, as is contemplated in the Settlement Agreement; (iii) the Exit Financing Lender shall have the right to amend and restate the CCA Agreements to effectuate the terms and conditions of the Exit Financing; and (iv) the Impac Debtors are authorized to execute such other and further documents as are - ------------------- (5) The term "CCA Agreements" is defined in the Impac Plan as the Mortgage Financing Agreements dated as of August 31, 2000 between CCA and the respective Impac Debtors, as such agreements have been modified by the CCA Settlement Agreement. 22 necessary in order to effectuate the assignment, amendment, and restatement of the CCA Agreements to the Exit Financing Lender. 12. Corporate Action. It is not necessary for the Reorganized Impac Debtors to file Amended Organizational Documents because their organizational structure shall remain the same after the Effective Date. However, to the extent such documents require amendment in order to satisfy, for example, section 1123(a)(6) of the Bankruptcy Code or to remove provisions required by CCA in connection with the financing represented by the CCA Secured Claims, such amendment is authorized. 13. Exit Financing Agreements. (a) The eighteen single purpose, single member Delaware limited liability companies being formed in connection with the Exit Financing, each of which will own one of the Impac Hotel Properties and be wholly-owned by the applicable Impac Debtor (together, the "Exit Financing Borrowers"), are authorized to enter into new financing arrangements (the "Exit Financing Agreements") on the Effective Date between the Exit Financing Lender, the Exit Financing Borrowers and such other parties as are necessary in order to effectuate the Exit Financing Agreements, in the case of the principal exit financing agreements, substantially in the form set forth in the Plan Supplement (subject to such modifications that are consistent with the terms of the Impac Plan as the Plan Proponents may approve). All Cash necessary for the Reorganized Impac Debtors to make payments pursuant to the Impac Plan will be obtained from either (i) the proceeds of the Exit Financing, or (ii) a capital contribution from Lodgian to each Impac Debtor to allow such Impac Debtor to discharge the Claims against it in accordance with the terms of the Impac Plan. (b) On the Effective Date, all of the liens and security interests to be created under, or in connection with, the Exit Financing Agreements shall be deemed approved and shall 23 be valid and perfected without any requirement of filing or recording of financing statements, mortgages, deeds of trust, deeds to secured debt or other evidence of such liens and security interests and without any approvals or consents from governmental entities and no further act shall be required for the perfection of the liens and security interests granted by the Exit Financing Agreements, provided however, that the Exit Financing Lender may file financing statements, mortgages, deeds of trust, deeds to secured debt or other documents and take any and all actions as they deem necessary and appropriate, in their reasonable discretion, to confirm the perfection of such security interests and liens. In furtherance of the foregoing, the Reorganized Impac Debtors and the Exit Financing Borrowers are authorized to make all filings and recordings and to obtain all governmental approvals and consents necessary to establish and perfect such liens and security interests under the provisions of state, provincial, federal, or other law (whether domestic or foreign) that would be applicable in the absence of this Confirmation Order, and will thereafter cooperate to make all other filings and recordings that otherwise would be necessary under applicable law to give notice of such liens and security interests to third parties. 14. Plan Supplement. The documents contained in the Plan Supplement and any amendments, modifications, and supplements thereto (to the extent consistent with the terms of the Impac Plan as the Plan Proponents may approve), and all documents and agreements introduced into evidence by the Impac Debtors at the Confirmation Hearing (including all exhibits and attachments thereto and documents referred to therein), and the execution, delivery, and performance thereof by the Reorganized Impac Debtors or the Exit Financing Borrowers, are authorized and approved, including, but not limited to, the Exit Financing Agreements. Without need for further order or authorization of the Bankruptcy Court, the Impac Debtors, the Reorganized Impac Debtors and the Exit Financing Borrowers are authorized and empowered to 24 execute and deliver all documents, agreements, and instruments and take all actions reasonably necessary to effectuate the consummation and implementation of the Impac Plan including, without limitation, to make any and all modifications to any and all documents included as part of the Plan Supplement or as are necessary in connection with the execution, delivery and performance of the Exit Financing Agreements, provided that in the reasonable judgment of the Impac Debtors, such modifications do not materially modify the terms of such documents and are consistent with the Impac Plan (subject to the approval of the Committee). 15. Governmental Approvals Not Required. This Confirmation Order shall constitute all approvals and consents required, if any, by the laws, rules, or regulations of any state or any other governmental authority with respect to the implementation or consummation of the Impac Plan and any documents, instruments, or agreements, and any amendments or modifications thereto, and any other acts referred to in or contemplated by the Impac Plan, including the execution and consummation of the transactions contemplated by the Exit Financing Agreements, the Disclosure Statement, and any documents, instruments, or agreements, and any amendments or modifications thereto. 16. Exemption From Certain Taxes and Recording Fees. Pursuant to section 1146(c) of the Bankruptcy Code, the issuance, transfer or exchange of any security, or the making, delivery, filing or recording of any instrument of transfer under, or in connection with, the Impac Plan, shall not be taxed under any law imposing a recording tax, a stamp tax, transfer tax, or similar tax. Without limiting the foregoing, any transfers (including, without limitation, any transfer of the Impac Hotel Properties and any and all assets, contracts, tangible property, intangible property or other property of the Impac Debtors) from an Impac Debtor to a Reorganized Impac Debtor or to any other Person, including, without limitation, the Exit Financing Borrowers, including, without limitation, the granting of a mortgage lien or other lien 25 by the Exit Financing Borrowers in favor of the Exit Financing Lender, or the assignment of the CCA Agreements to the Exit Financing Lender and the amendment and restatement of the CCA Agreements by the Exit Financing Lender, including effectuating the closing of the Exit Financing with the Exit Financing Lender (or any subsequent sale of the Impac Hotel Properties made by an Exit Financing Borrower within 180 days of the date of this Confirmation Order) will not be subject to any document recording tax, stamp tax, conveyance fee, intangible or similar tax, sales or use tax, mortgage tax, stamp act, real estate transfer tax, mortgage recording tax, or any other recording fee or similar tax or government assessment. All filing or recording officers (or any other Person with authority over any of the foregoing), wherever located, and by whomever appointed, shall comply with the requirements of this Confirmation Order and shall forego the collection of any such tax, fee or governmental assessment, and shall accept for filing and recordation any of the foregoing instruments or other documents without the payment of any such tax, fee or governmental assessment. The Reorganized Impac Debtors or the Exit Financing Borrowers or any agent or representative of either is authorized to serve upon all filing and recording officers a notice, in connection with the filing and recording of any instruments of transfer contemplated by the Impac Plan, to evidence and implement this paragraph of the Confirmation Order. This Bankruptcy Court retains specific jurisdiction to enforce the foregoing direction by contempt proceedings or otherwise. 17. Distributions. Pursuant to Section 7.3 of the Impac Plan, on the Effective Date or as soon thereafter as is practicable, the Disbursing Agent shall distribute to the holders of the applicable Allowed Claims (i) the Cash allocable to Classes 1, 2, 3 and 5. For the purpose of calculating the Pro Rata Share of the Class 3 Cash Pool to be initially distributed to holders of Allowed Claims in Class 3, all Disputed Claims in Class 3 will be treated as though such Claims will be Allowed Claims in the amounts asserted, or as estimated by the Bankruptcy Court, as 26 applicable. On the Final Distribution Date, each holder of an Allowed Claim in Class 3 shall receive, if applicable, a Catch-up Distribution. After the Effective Date but prior to the Final Distribution Date, the applicable Reorganized Impac Debtor, in its sole discretion, may direct the Disbursing Agent to distribute a Pro Rata Share of the Class 3 Cash Pool to a holder of a Disputed Claim in Class 3, which becomes an Allowed Claim after the Effective Date such that the holder of such Claim receives the Pro Rata Share that such holder would have received had its Claim been an Allowed Claim in such amount on the Effective Date. 18. Waiver of Subordination. The distributions under the Impac Plan take into account the relative priority of the Claims in each Class in connection with any contractual subordination provisions relating thereto. Accordingly, the distributions under the Impac Plan to any holder of an Allowed Claim shall not be subject to levy, garnishment, attachment or other legal process by any holder of indebtedness senior by reason of claimed contractual subordination rights to the indebtedness of the holders of such Allowed Claim. On the Effective Date, all creditors shall be deemed to have waived any and all contractual subordination rights which they may have with respect to distributions under the Impac Plan to any holder of an Allowed Claim, and the Confirmation Order shall permanently enjoin, effective as of the Effective Date, all Persons from enforcing or attempting to enforce any such rights with respect to the distributions under the Impac Plan; provided, however, that nothing herein shall affect the classification or treatment of any Subordinated Claims in Class 11 of the Impac Plan. All rights and obligations of CCA and the Impac Debtors and their affiliates, with respect to the Settlement Agreement, shall be governed in all respects by the Settlement Agreement. 19. Final Fee Applications. Pursuant to Section 2.2 of the Impac Plan, all entities seeking an award by the Bankruptcy Court of compensation for services rendered or reimbursement of expenses incurred through and including the Confirmation Date under section 27 503(b)(2), 503(b)(3), 503(b)(4) or 503(b)(5) of the Bankruptcy Code (i) shall file their respective final applications for allowance of compensation for services rendered and reimbursement of expenses incurred by the date that is forty-five (45) days after the Effective Date, and (ii) shall be paid in full in such amounts as are allowed by the Bankruptcy Court (A) upon the latter of (i) the Effective Date and (ii) the date upon which the order relating to any such Administrative Expense Claim is entered, or (B) upon such other terms as may be mutually agreed upon between the holder of such an Administrative Expense Claim and the Plan Proponents or, on and after the Effective Date, the Reorganized Impac Debtors. Fees payable to or for the benefit of CCA shall be governed by the Settlement Agreement and are not subject to the provisions of this paragraph. Each Impac Debtor is authorized to pay compensation for services rendered or reimbursement of expenses incurred after the Confirmation Date in the ordinary course of business and without the need for Bankruptcy Court approval. 20. Discharge of Claims. Pursuant to Section 11.2 of the Impac Plan, except as otherwise provided in the Impac Plan or the Confirmation Order, the rights afforded in the Impac Plan and the entitlement to receive payments and distributions to be made hereunder shall discharge all existing Claims, of any kind, nature or description whatsoever against each of the Impac Debtors or any of their assets or properties. Except as provided in the Impac Plan, on the Effective Date, all existing Claims against each of the Impac Debtors shall be, and shall be deemed to be, discharged or canceled and all holders of Claims shall be precluded and enjoined from asserting against the Impac Debtors and/or the Reorganized Impac Debtors, or any of their assets or properties, any other or further Claim based upon any act or omission, transaction or other activity of any kind or nature that occurred prior to the Effective Date, whether or not such holder has filed a proof of claim or equity interest. 28 21. Discharge of Impac Debtors. Pursuant to Section 11.3 of the Impac Plan, upon the Effective Date and in consideration of the distributions to be made under the Impac Plan, except as otherwise expressly provided in the Impac Plan, each holder (as well as any trustees and agents on behalf of each holder) of a Claim of such holder shall be deemed to have forever waived, released and discharged each of the Impac Debtors, of and from any and all Claims, rights and liabilities that arose prior to the Effective Date. Upon the Effective Date, all such Persons shall be forever precluded and enjoined, pursuant to section 524 of the Bankruptcy Code, from prosecuting or asserting any such discharged Claim against each of the Impac Debtors. 22. Survival of Corporate Indemnities. Pursuant to Section 9.6 of the Impac Plan, any obligations of any of the Impac Debtors pursuant to the applicable Impac Debtor's corporate charters and bylaws or agreements entered into any time prior to the Effective Date, to indemnify any Releasee, with respect to all present and future actions, suits and proceedings against such Impac Debtor or such Releasee, based upon any act or omission for or on behalf of such Impac Debtor, shall not be discharged or impaired by confirmation of the Impac Plan. Such obligations shall be deemed and treated as executory contracts to be assumed by the applicable Impac Debtor pursuant to the Impac Plan, and shall continue as obligations of the applicable Reorganized Impac Debtor. 23. Releases, Exculpations, and Injunctions. The release, exculpation, and injunction provisions contained in the Impac Plan are fair and equitable, are given for valuable consideration, and are in the best interests of the Impac Debtors and their chapter 11 estates, and such provisions shall be effective and binding upon all persons and entities. 24. Termination of Injunctions and Automatic Stay. Pursuant to Section 11.5 of the Impac Plan, unless otherwise provided in the Impac Plan, all injunctions or stays arising 29 under section 105 or 362 of the Bankruptcy Code, any order entered during the Chapter 11 Cases under section 105 or 362 of the Bankruptcy Code or otherwise, and in existence on the Confirmation Date, shall remain in full force and effect until the later of the Effective Date and the date indicated in such order. 25. Disallowance of Adequate Protection Claims. As of the Effective Date, all Adequate Protection Claims (as hereinafter defined) shall be deemed to be disallowed. As used herein, "Adequate Protection Claims" shall mean any and all claims for (a) adequate protection arising under section 361, 362, 363 or 364 of the Bankruptcy Code, or (b) any diminution in the value of a creditor's interest in property of the Impac Debtor's estates, from the Petition Date through and including the Effective Date, whether such claim arises by stipulation, agreement, statute, court order or otherwise. 26. Termination of Adequate Protection Liens. As of the Effective Date, all liens, charges or other encumbrances on property of the Impac Debtors' estates securing the payment of any Adequate Protection Claim shall be deemed to be discharged and released, without the need for the filing of any releases or termination statements or similar documents or taking any further action whatsoever. 27. Nonoccurrence of Effective Date. In the event that the Effective Date does not occur, then (i) the Impac Plan, (ii) assumption or rejection of executory contracts or unexpired leases pursuant to the Impac Plan, (iii) any document or agreement executed pursuant to the Impac Plan, and (iv) any actions, releases, waivers, or injunctions authorized by this Confirmation Order or any order in aid of consummation of the Impac Plan shall be deemed null and void. In such event, nothing contained in this Confirmation Order, any order in aid of consummation of the Impac Plan, or the Impac Plan, and no acts taken in preparation for consummation of the Impac Plan, (a) shall be deemed to constitute a waiver or release of any 30 Claims or Equity Interests by or against the Impac Debtors or any other persons or entities, to prejudice in any manner the rights of the Impac Debtors or any person or entity in any further proceedings involving the Impac Debtors or otherwise, or to constitute an admission of any sort by the Impac Debtors or any other persons or entities as to any issue, or (b) shall be construed as a finding of fact or conclusion of law in respect thereof. Notwithstanding the foregoing, in the event the Effective Date does not occur, nothing in this Confirmation Order shall be deemed to affect or impact in any manner the rights and remedies of CCA or the obligations of the Impac Debtors and their affiliates under the terms and conditions of the Settlement Agreement. 28. Notice of Entry of Confirmation Order. On or before the tenth (10th) Business Day following the date of entry of this Confirmation Order, the Impac Debtors shall electronically file with the Court and serve notice of entry of this Confirmation Order on the parties identified in the Master Service List as defined in this Court's Order Establishing Notice Procedures, dated December 21, 2001, by causing notice of entry of the Confirmation Order (the "Notice of Confirmation"), to be delivered to such parties by first-class mail, postage prepaid. The notice described herein is adequate under the particular circumstances and no other or further notice is necessary. The Impac Debtors also shall cause the Notice of Confirmation to be published as promptly as practicable after the entry of this Confirmation Order once in each of The New York Times (National Edition), The Wall Street Journal (National Edition), and USA Today. 29. Notice of Effective Date. Within five (5) Business Days following the occurrence of the Effective Date, the Reorganized Impac Debtors shall file notice of the occurrence of the Effective Date and shall serve a copy of same on the parties identified in the Master Service List as defined in this Court's Order Establishing Notice Procedures, dated December 21,2001. 31 30. Authorization to File Conformed Plan. The Impac Debtors are authorized to file a conformed plan, dated on the date hereof, which incorporates the amendments to the Impac Plan within thirty (30) days of the entry at this Confirmation Order. 31. Binding Effect. Pursuant to sections 1123(a) and 1142(a) of the Bankruptcy Code and the provisions of this Confirmation Order, the Impac Plan, the Plan Supplement, and the Plan Documents shall apply and be enforceable notwithstanding any otherwise applicable nonbankruptcy law. 32. Severability. Each term and provision of the Impac Plan, as it may have been altered or interpreted by the Bankruptcy Court in accordance with Section 13.11 of the Impac Plan, is valid and enforceable pursuant to its terms. 33. Conflicts Between Confirmation Order and Impac Plan. To the extent of any inconsistency between the provisions of the Impac Plan and this Confirmation Order, the terms and conditions contained in this Confirmation Order shall govern. The provisions of this Confirmation Order are integrated with each other and are nonseverable and mutually dependent unless expressly stated by further order of this Bankruptcy Court. Dated: April 24, 2003 New York, New York /s/Burton R. Lifland ------------------------------ UNITED STATES BANKRUPTCY JUDGE 32 EX-10.13.4 39 g87458exv10w13w4.txt EX-10.13.4 POST CONFIRMATION ORDER AND NOTICE EXHIBIT 10.13.4 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK - --------------------------------x Chapter 11 In re: : Case No. 01-16345 (BRL) LODGIAN, INC., et al., : Jointly Administered Debtors. : - --------------------------------x POST CONFIRMATION ORDER AND NOTICE FOR JOINT PLAN OF REORGANIZATION OF IMPAC HOTELS II, L.L.C. AND IMPAC HOTELS III, L.L.C., TOGETHER WITH THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE WHEREAS, an order confirming the Joint Plan Of Reorganization Of Impac Hotels II, L.L.C. and Impac Hotels III, L.L.C. (collectively, the "Impac Debtors"),1 Together With The Official Committee Of Unsecured Creditors (the "Committee") Under Chapter 11 Of The Bankruptcy Code, dated as of March 3, 2003 (the "Impac Plan") was entered by this Court on April 24, 2003 (the "Confirmation Order"); and WHEREAS, it is the Impac Debtors' responsibility to inform the Court of the progress made toward (i) consummation of the Impac Plan under 11 U.S.C. Section 1101(2); (ii) entry of a final decree under Rule 3022 of the Federal Rules of Bankruptcy Procedure; and (iii) case closing under 11 U.S.C.Section350; it is therefore ORDERED that the Impac Debtors or such other party as the Court may direct (the "Responsible Party") shall comply with the following: (1) Periodic Status Reports. Subject to the requirements set forth in paragraph 5 of this Order and 11 U.S.C.Section1106(a)(7), the Responsible Party shall file, within 45 days after the date of this Order, a status report detailing the actions taken by the Responsible Party and the progress made toward the consummation - ---------- (1) From time to time during the chapter 11 cases, the Impac Debtors have been referred to as the "CCA Debtors." These terms are synonymous for all purposes. of the Impac Plan. Reports shall be filed thereafter every January 15th, April 15th, July 15th and October 15th until a final decree has been entered. (2) Notices. The Responsible Party shall mail a copy of the Confirmation Order and this Order to counsel for the Committee and all parties who have filed a notice of appearance with the Court in these Chapter 11 cases. (3) Clerk's Charges and Report Information. Within 15 days of the date of this Order, the Responsible Party shall submit a written request to the Clerk to obtain the amount of any notice and excess claim charges. The amount shall be paid in full not later than May 21, 2003. (4) Closing Report and Final Decree. Within 15 days following the distribution of any deposit required by the Impac Plan, or, if no deposit was required, upon the payment of the first distribution to all creditors as required by the Impac Plan, the Responsible Party shall file a closing report in accordance with Local Bankruptcy Rule 3022-1 and an application for a final decree. (5) Case Closing. Unless the Court orders otherwise, the Responsible Party shall submit the information described in paragraph 4 herein, including a final decree closing the case, within twelve (12) calendar months from the date of the Confirmation Order, which time may be extended at the option of the Impac Debtors for an additional six month period provided notice of such option is filed with the Court. If the Responsible Party fails to comply with this Order, the Clerk shall so inform the Judge and an order to show cause may be issued. Dated: April 24, 2003 New York, New York /s/Burton R. Lifland -------------------------------------- HONORABLE BURTON R. LIFLAND UNITED STATES BANKRUPTCY JUDGE -2- EX-10.14.1 40 g87458exv10w14w1.txt EX-10.14.01 LEASE AGREEMENT EXHIBIT 10.14.1 LEASE AGREEMENT THE STATE OF GEORGIA COUNTY OF FULTON THIS LEASE AGREEMENT (this "Lease") is made and entered into this 7th day of April, 1997, by and between CSB - Georgia Limited Partnership, a Georgia limited partnership, whose address for purposes hereof is c/o Hines, One Live Oak Center, 3475 Lenox Road N.E., Suite 1050, Atlanta, Georgia 30326, and whose facsimile number is (404) 233-1692 (hereinafter called "Landlord"), and Impac Hotel Group, L.L.C., a Georgia limited liability company address for purposes hereof prior to the commencement of the "Term" (defined below) is The Lenox Building, 3399 Peachtree Road, N.E., Atlanta, Georgia 30326, Attention: Robert S. Cole, and whose facsimile number prior to the commencement of the Term is (404) 364-0088, and whose address after the commencement of the Term is 3445 Peachtree Road, Suite 700, Atlanta, Georgia 30326, Attention: Robert S. Cole, and whose facsimile number after the commencement of the Term is (___) ______________ (hereinafter called "Tenant"). WITNESSETH I. 1.01 LEASED PREMISES. (a) Subject to and upon the terms hereinafter set forth, and in consideration of the sum of Ten Dollars ($10.00), the premises, and the mutual covenants set forth herein, the receipt and sufficiency of which are hereby acknowledged, Landlord does hereby lease and demise to Tenant and Tenant does hereby lease and take from Landlord those certain premises (the "Leased Premises") in the building (the "Building") commonly known as Two Live Oak Center, as generally depicted on Exhibit A attached hereto and incorporated herein, on that certain tract or parcel of land (the "Land") located near the intersection of Peachtree Road and Lenox Road in Atlanta, Fulton County, Georgia, as more particularly described on Exhibit A-1 attached hereto and incorporated herein (the Building, the Land, the "Parking Facility" [hereinafter defined] and all improvements and facilities now or hereafter located on the Land and relating thereto being referred to herein collectively as the "Project"), such Leased Premises being more particularly described as follows: Approximately 21,817 square feet of net rentable area on floor 7 of the Building, being all of the net rentable area on the 7th floor, and as generally described or depicted on Exhibit B attached hereto and incorporated herein. (b) The term "net rentable area," as used herein, shall refer to (i) in the case of a floor leased to a single tenant, the total square footage of all floor area measured from the inside surface of the exterior glass line of the Building to the inside surface of the opposite exterior glass line, excluding only Service Areas (defined below) and General Common Areas (defined below), plus an allocation of the square footage of the General Common Areas, and (ii) in the case of a floor leased to more than one tenant, the total square footage of all floor areas within the inside surface of the exterior glass line of the Building enclosing the Leased Premises and measured to the mid-point of demising walls (i.e., walls separating the Leased Premises from areas leased to or held for lease to other tenants, from On-Floor Common Areas (defined below), and from General Common Areas), excluding only Service Areas, plus an allocation of the square footage of the General Common Areas and an allocation of the square footage of the On-Floor Common Areas. No deductions from net rentable area shall be made for columns or projections necessary to the Building. "Service Areas" shall mean the areas within (and measured from the midpoint of the walls enclosing, or from the inside surface of the exterior glass enclosing, as the case may be) Building stairs, elevator shafts, flues, vents, stacks, pipe shafts and vertical ducts. Areas for the specific use of Tenant or other tenants of the Building or installed at the request of Tenant such as special stairs or elevators are not included within the definition of Service Areas. "General Common Areas" shall mean those areas within (and measured from the midpoint of the walls or from the inside surface of the exterior glass enclosing) the Building's elevator machine rooms, main mechanical rooms, electrical rooms, and public lobbies, that portion of the on-site Building management office or that portion of the offsite management office reasonably allocated to the Building by Landlord, engineering and cleaning staging areas, and other areas not leased or held for lease within the Building but which are reasonably necessary for the proper utilization of the Building or to provide customary services to the Building. The allocation of the square footage of the General Common Areas shall be equal to the total square footage of the General Common Areas multiplied by a fraction, the numerator of which is the net rentable area of the Leased Premises (excluding the allocation of the General Common Areas) and the denominator of which is the total of all net rentable area contained in the Building (excluding the allocation of the General Common Areas). "On-Floor Common Areas" shall mean the total square footage of all areas within (and measured from the midpoint of the walls enclosing) public corridors, elevator foyers, restrooms, mechanical rooms, janitor closets, telephone and equipment rooms, and other similar facilities for the use of all tenants on the floor on which the Leased Premises are located. The allocation of the square footage of the On-Floor Common Areas shall be equal to the total On-Floor Common Areas on said floor multiplied by a fraction, the numerator of which is the net rentable area of the portion of the Leased Premises (excluding the allocations of General Common Areas and On-Floor Common Areas) located on said floor and the denominator of which is the total of all net rentable area on said floor (excluding the allocations of General Common Areas and On-Floor Common Areas). "Parking Facility" shall mean the parking structure located adjacent to the Building, together with any connecting walkways, covered walkways, or other means of access to the Building, the grounds related thereto and any additional improvements at any time related thereto. (c) Within five (5) days after the Commencement Date (defined below), Landlord shall deliver to Tenant an execution original of Exhibit G attached hereto and incorporated herein, which shall contain an acknowledgment of the date upon which the Commencement Date (defined below) of this Lease occurred, and Landlord's calculation of the exact number of square feet of net rentable area within the Leased Premises. Tenant shall have the right to object to Exhibit G, by delivering written notice to Landlord within seven (7) days after Landlord delivers Exhibit G to Tenant, failing which Tenant shall be deemed to have agreed that all information contained in Exhibit G is correct. If Tenant objects to Exhibit G within said seven (7) day period, Landlord and Tenant shall work together to resolve their differences and, after such differences have been resolved, Landlord shall execute Exhibit G and deliver same to Tenant and Tenant shall have a period of five (5) days to give written notice to Landlord objecting to Exhibit G, failing which Tenant shall be deemed to have agreed that Exhibit G is correct. Upon Tenant agreeing or being deemed to have agreed that all information contained in Exhibit G is correct, the Commencement Date as shown on Exhibit G, shall be the Commencement Date for purposes of Section 1.02(a) of this Lease and for all other purposes under this Lease and the net rentable area of the Leased 2 Premises as shown on Exhibit G shall replace the net rentable area of the Leased Premises as shown in Section 1.01 (a) and as defined in Section 1.01(b) and shall be deemed to be the net rentable area of the Leased Premises for all purposes under this Lease. All payments of Net Rental (defined below), Additional Rental (defined below), and all other payments of rent and other sums of money required of Tenant herein shall be made as and when required herein, notwithstanding any unresolved objections to Exhibit G. All such payments shall be based upon the Exhibit G prepared by Landlord until such objections have been finally resolved, whereupon any overpayment or any underpayment theretofore made shall be adjusted by increasing or reducing, as the case may be, the next installment of Net Rental coming due. (d) The Leased Premises shall extend from the floor slab to the Building Standard ceiling height (approximately eight [8] feet six [6] inches above the floor slab). Tenant shall have the nonexclusive right to install lighting, HVAC equipment and telecommunications cabling above said Building Standard ceiling height. 1.02 TERM. (a) Subject to and upon the terms and conditions set forth herein, or in any exhibit hereto, the term of this Lease (the "Term") shall commence on the Commencement Date (defined below) and shall expire at 6:00 P.M. on June 30, 2003. (b) As used herein, "Commencement Date" means the earlier of (i) July 7, 1997, (ii) the Completion Date, as, such term is defined in Part 111.1 of Exhibit D attached hereto and incorporated herein, or (iii) the date upon which Tenant commences conducting its business from all or any portion of the Leased Premises. 1.03 USE. The Leased Premises are to be used and occupied by Tenant (and its permitted assignees and subtenants) solely for the purpose of office space and for no other purpose. The Leased Premises shall not be used for any purpose which would (i) adversely affect the appearance of the Building and be visible from the outside of the Building or from the public areas of the Building used by other tenants in the Building, (ii) adversely affect ventilation in other areas of the Building (including without limitation the creation of offensive odors), (iii) create unreasonable elevator loads, (iv) cause structural load capacity to be exceeded, (v) require a change to Base Building Improvements, or (vi) otherwise unreasonably interfere with Project operations or other tenants of the Building, and Tenant shall not engage in any activity which is not in keeping with the first class standards of the Project. In no event shall the Leased Premises be used for the purpose of installing, marketing, operating, or providing electronic telecommunications, information or data processing, storage or transmissions, or other electronic office services or equipment for tenants or other occupants of the Building on a shared-usage basis through a central switch or a local area network. 1.04 LANDLORD'S RELOCATION RIGHT. Intentionally Deleted. 1.05 SURVIVAL. Any claim, cause of action, liability or obligation arising under the terms of this Lease in favor of a party hereto against or obligating the other party hereto shall survive the expiration or any earlier termination of this Lease. 3 II. 2.01 RENTAL PAYMENTS. (a) Commencing on the Commencement Date, and continuing thereafter throughout the full Term of this Lease, Tenant hereby agrees to pay the Net Rental (defined below) in accordance with this Section 2.01 and Section 2.02, and Additional Rental (defined below) in accordance with this Section 2.01 and Section 2.03. Except for year-end reconciliations as provided in Section 2.03(c), the Net Rental and Additional Rental shall be due and payable in equal monthly installments on the first day of each calendar month during the Term of this Lease and any extensions or renewals hereof, and Tenant hereby agrees to so pay such Net Rental and Additional Rental to Landlord at Landlord's address as provided herein (or such other address as may be designated by Landlord from time to time) monthly in advance. As used in this Lease, the term "Rent" shall mean Net Rental, Additional Rental, and any other periodic payments due of Tenant hereunder. (b) If the Commencement Date is other than the first day of a calendar month or if this Lease expires or is terminated on other than the last day of a calendar month, then the installments of Net Rental and Additional Rental for such month or months shall be prorated and the installment or installments so prorated shall be paid in advance. Said installments for such prorated month or months shall be calculated by multiplying the equal monthly installment by a fraction, the numerator of which shall be the number of days of the Term occurring during said commencement, expiration or termination month, as the case may be, and the denominator of which shall be thirty (30). If the Term of this Lease commences on other than the first day of a calendar year, or expires or is terminated on other than the last day of a calendar year, Additional Rental shall be prorated for such commencement, expiration or termination year, as the case may be, by multiplying Additional Rental by a fraction, the numerator of which shall be the number of days in the Term during the commencement or expiration year, as the case may be, and the denominator of which shall be Three Hundred Sixty-Five (365). (c) Tenant agrees to pay all Rent and other sums of money as shall become due from and payable by Tenant to Landlord under this Lease at the times and in the manner provided in this Lease, without abatement, demand, set-off or counterclaim. All Rent and other sums of whatever nature owed by Tenant to Landlord under this Lease shall bear interest from the fifth (5th) day after the date due thereof until paid at the lesser of (i) a per annum rate equal to the "prime rate" announced by Chase Manhattan Bank, New York, New York, or its successor, (or if the "prime rate" is discontinued, the rate announced as that being charged to the most credit-worthy commercial borrowers) plus two percent (2%), or (ii) the maximum interest rate per annum allowed by law. (d) Notwithstanding the foregoing, if Tenant shall occupy the Leased Premises prior to July 1, 1997, then Net Rental shall be abated from the Commencement Date to June 30, 1997. 2.02 NET RENTAL. Throughout the full Term of this Lease, Tenant hereby agrees to pay a net annual rental equal to Fourteen and 57/100 Dollars ($14.57) per square foot of net rentable area of the Leased Premises in accordance with the terms hereof. As used herein, "Net Rental" shall mean an annual amount equal to the product of Fourteen and 57/100 Dollars ($ 14.57) times the number of square feet of net rentable area of the Leased Premises, as such dollar amount may be adjusted from lease year to lease year pursuant to the terms of this Lease. 4 2.03 ADDITIONAL RENTAL. (a) Commencing with the calendar year in which the Commencement Date occurs and continuing thereafter for each calendar year during the full term of this Lease, Landlord shall present to Tenant prior to the beginning of said calendar year (or for the calendar year in which the lease term commences, on the Commencement Date) a statement of Landlord's estimate of Additional Rental for the coming calendar year (or, in the calendar year in which the lease term commences, for such calendar year). (b) "Additional Rental," as that term is used herein, shall be computed on a calendar year basis and shall mean Tenant's Percentage Share (defined below) of Operating Expenses (defined below). As used herein, "Tenant's Percentage Share" shall mean a fraction, the numerator of which is the total number of square feet of net rentable area within the Leased Premises and the denominator of which is the greater of (i) ninety-five percent (95%) of the total square footage of all net rentable area in the Building held for lease, or (ii) the total square footage of all net rentable area in the Building actually leased. (c) No later than one hundred twenty (120) days after the end of the calendar year in which the Commencement Date occurs and of each calendar year thereafter during the Term of this Lease, Landlord shall provide Tenant a statement, prepared by a certified public accounting firm, detailing the Operating Expenses for each such calendar year and a statement prepared by Landlord comparing the Additional Rental paid by Tenant during such calendar year with Tenant's Percentage Share of the actual Operating Expenses during such calendar year. In the event that the Additional Rental paid by Tenant during such calendar exceeds Tenant's Percentage Share of actual Operating Expenses for such calendar year, Landlord shall pay Tenant (in the form of a credit against rentals next due or, at Landlord's option, in the form of Landlord's check) an amount equal to such excess. In the event that Tenant's Percentage Share of actual Operating Expenses for such calendar year exceeds the Additional Rental paid by Tenant during such calendar year, Tenant hereby agrees to pay Landlord, as Additional Rental, within thirty (30) days of receipt of the statement, an amount equal to such difference. Landlord and Tenant hereby agree that the provisions of this Section 2.03(c) shall survive the expiration or termination of this Lease. (d) Provided Tenant is not in default under the terms of this Lease, Tenant, at Tenant's sole cost and expense, shall have the right, to be exercised by written notice given to Landlord within ninety (90) days after receipt of aforesaid statement showing Operating Expenses for the preceding calendar year, to audit Landlord's books and records pertaining only to such Operating Expenses for such preceding calendar year, provided such audit commences within thirty (30) days after Tenant's notice to Landlord and thereafter proceeds regularly and continuously to conclusion and, provided further, that such audit does not unreasonably interfere with the conduct of Landlord's business, and provided, further, that such audit shall be performed by a certified public accounting firm, or a certified public accountant employed by Tenant, which is approved (for purposes of conducting the audit only) in writing by Landlord, which approval shall not be unreasonably withheld, delayed or conditioned. Landlord agrees to cooperate in good faith with Tenant in the conduct of any such audit. (e) Notwithstanding the terms and conditions of Paragraphs 2.03(a) and (b) of this Lease, except as described below, in no event shall Tenant's Percentage Share of Operating Expenses for any year exceed what Tenant's Percentage Share of Operating Expenses would have been had Operating Expenses increased by five percent (5%) over Operating Expenses for the preceding calendar year; provided, however, and notwithstanding the above limitation, that for the purposes of determining whether or not the aforesaid limit on increases in Tenant's Percentage Share of Operating Expenses from year to year is exceeded or not, the components of Operating Expenses related to (i) taxes and assessments attributable to the Land, the Building, the Project or their operation, (ii) labor costs of contract service providers for services performed for the benefit of the Land, Building, Project or Leased 5 Premises (but specifically excluding management fees), (iii) utilities costs to the Building, Project or Leased Premises, and (iv) insurance premiums related to or payable in connection with the Land, Building, Project or Leased Premises, shall not be considered or factored in to such determination, and there shall be no limit on the amounts of Operating Expenses related to taxes, labor costs, utilities and insurance premiums for the Land, Building, Project or Leased Premises that can be passed on by Landlord to Tenant or that shall be due of Tenant at any time and from year to year, except as otherwise expressly provided for in this Lease. 2.04 OPERATING EXPENSES. (a) For the purposes of this Lease, "Operating Expenses" shall mean all expenses, costs and accruals (excluding therefrom, however, specific costs billed to or otherwise incurred for the particular benefit of specific tenants of the Building or to other buildings or projects within Live Oak Center) of every kind and nature, computed on an accrual basis, incurred or accrued in connection with, or relating to, the operation of the Project and said common areas (including an appropriate allocation of any such expenses, costs and accruals incurred or accrued for Live Oak Center on a project-wide basis) during each calendar year, including, but not limited to, the following: (1) wages and salaries, including taxes, insurance and benefits, of all on and off-site employees engaged in operations, maintenance or access control, as reasonably allocated by Landlord; (2) cost of all supplies, tools, equipment materials and professional fees to the extent used in operations and maintenance, as reasonably allocated by Landlord; (3) cost of all utilities including, but not limited to, the cost of electricity, the cost of water and the cost of power for heating, lighting, air conditioning and ventilating; (4) cost of all maintenance and service agreements and the equipment therein, including, but not limited to, security service, garage operations, window cleaning, elevator maintenance, janitorial service and landscaping maintenance; (5) cost of repairs and general maintenance (excluding repairs, alterations and general maintenance paid by proceeds of insurance); (6) amortization of the cost (together with reasonable financing charges and installation costs) of any system, apparatus, device, or equipment which is installed for the principal purpose of (i) reducing Operating Expenses, (ii) promoting safety or (iii) complying with governmental requirements; (7) the cost of all insurance, including, but not limited to, the cost of casualty, rental abatement and liability insurance, and insurance on Landlord's personal property, plus the cost of all deductible payments made by Landlord in connection therewith; and (8) a management fee and other customary expenses incurred for the general operation and management of the Project, consistent with other Class A office buildings in the Buckhead market; and (9) all taxes, assessments and governmental charges, whether or not directly paid by Landlord, whether federal, state, county or municipal and whether they be by taxing districts or authorities presently taxing the Project or by others subsequently created or otherwise, and any other taxes and assessments 6 attributable to the Project or its operation, excluding, however, taxes and assessments attributable to the personal property of other tenants, federal and state taxes on income, death taxes, franchise taxes, and any taxes imposed or measured on or by the income of Landlord from the operation of the Project or imposed in connection with any change of ownership of the Project; provided, however, that if at any time during the Term of this Lease, the present method of taxation or assessment shall be so changed that the whole or any part of the taxes, assessments, levies, impositions or charges now levied, assessed or imposed on real estate and the improvements thereon shall be discontinued and as a substitute therefor, or in lieu of or in addition thereto, taxes, assessments, levies, impositions or charges shall be levied, assessed or imposed, wholly or partially, as a capital levy or otherwise, on the rents received from the Project or the rents reserved herein or any part thereof, then such substitute or additional taxes, assessments, levies, impositions or charges, to the extent so levied, assessed or imposed with respect to the Project, shall be deemed to be included within the Operating Expenses. Consultation, legal fees and costs resulting from any challenge of tax assessments as reasonably allocated by Landlord shall also be included in Operating Expenses. It is agreed that Tenant will be responsible for ad valorem taxes on its personal property and on the value of the leasehold improvements in the Leased Premises to the extent that the same exceed Building standard allowances (and if the taxing authorities do not separately assess Tenant's leasehold improvements, Landlord may make a reasonable allocation of the ad valorem taxes allocated to the Project to give effect to this sentence). In the case of special taxes and assessments which may be payable in installments, only the amount of each installment accruing during a calendar year shall be included in the Operating Expenses for such year. (b) Expressly excluded from the definition of the term "Operating Expenses" are: (1) except as otherwise provided in Paragraph 2.04(a)(6) above, the cost of capital alterations, capital improvements, equipment replacements, and other items which under generally accepted accounting principles are properly classified as capital expenditures; (2) any tenant work performed or alteration of space leased to Tenant or other tenants or occupants of the Building, whether such work or alteration is performed for the initial occupancy by such tenant or thereafter; (3) any cash or other consideration paid by Landlord on account of, with respect to or in lieu of the tenant work or alteration described in paragraph 2.04(b)(2) above; (4) ground rent; (5) except as otherwise provided in paragraph 2.04(a)(6) above, depreciation or amortization; (6) legal costs incurred in connection with the enforcement of leases; (7) interest on indebtedness or any costs of financing or refinancing the Building; (8) management fees in excess of the greater of (i) three percent (3%) of gross rental, or (ii) market management fees; (9) leasing commissions and advertising expenses; (10) legal fees incurred for matters not benefiting the Building generally; (11) the cost of repairs incurred by reason of fire or other casualty or condemnation to the extent that either (i) Landlord is compensated therefore through proceeds of insurance or 7 condemnation awards (or would have been compensated had Landlord obtained insurance, if insurance was available at a commercially reasonable rate against a risk of such nature at the time of same); or (ii) Landlord is not fully compensated therefore due to the coinsurance provisions of its insurance policies on account on Landlord's failure to obtain a sufficient amount of coverage against such risk; (12) overtime HVAC costs or electricity costs for other Building tenants; (13) the cost of performing additional services or installation to or for tenants to the extent that such services exceed those provided by Landlord to tenants generally without charge hereunder; (14) "takeover expenses" (i.e., expenses incurred by Landlord with respect to space located in another building of any kind or nature in connection with the leasing of space in the Building); (15) any amounts payable by Landlord by way of indemnity or for damages of which constitute a fine, interest, or penalty, including penalties for any late payments of Operating Costs (but excluding any fines, penalties or interest imposed as a result of the failure to pay real property taxes in full if Landlord is protesting such taxes in good faith); (16) any cost representing an amount paid for services or materials to a related person, firm, or entity to the extent such amount exceeds the amount that would be paid for such services or materials to an unrelated person, firm or corporation with similar experience and expertise providing services and materials of the same quality; (17) if any taxes paid by Landlord and previously included in Operating Expenses are refunded, Landlord shall, at Landlord's option, either pay Tenant or credit against the next installment of Net Rental an amount equal to the amount of such refund (less the reasonable expenses incurred by Landlord in obtaining such refund) multiplied by Tenant's Percentage Share in effect for the period to which such refund related; (18) the cost of correcting material structural defects in construction; and (19) the cost of any service to the extent Landlord is paid by third parties (by means other than payment of Operating expenses). (c) Notwithstanding any language contained herein to the contrary, Tenant hereby agrees that, during any calendar year in which the entire Building is not provided with Building Standard Services (as defined in 3.01 below) or is not completely occupied, Landlord shall compute all Variable Operating Expenses (defined below) for such calendar year as though the entire Building were provided with Building Standard Services and were completely occupied. For purposes of this Lease the term "Variable Operating Expenses" shall mean any Operating Expense that is variable with the level of occupancy of the Building (e.g. tenant utilities and tenant cleaning services). In the event that Landlord excludes from Operating Expenses any specific costs billed to or otherwise incurred for the particular benefit of specific tenants of the Building or to other buildings or projects within Live Oak Center, Landlord shall have the right to increase Operating Expenses by an amount equal to the cost of providing standard services similar to the services for which such excluded specific costs were billed or incurred. In no event shall Landlord receive from all tenants of the Building more than one hundred percent (100%) of any Operating Expenses. (d) Landlord has informed Tenant that Landlord estimates that the Operating Expenses for calendar year 1997 will be approximately $7.43 multiplied by the number of net rentable square feet of 8 space in the Building. Said figure is an estimate only, and Additional Rental shall be payable based on actual Operating Expenses, adjusted in accordance with this Lease; provided however, in no event shall Tenant be required to pay Additional Rental in calendar year 1997 in excess of 110% of $7.43 multiplied by the number of net rentable square feet in the Building. 2.05 SECURITY DEPOSIT. Intentionally Deleted. 2.06 RENEWAL OPTION. Landlord hereby grants to Tenant the Renewal Option set forth in Exhibit H, attached hereto and incorporated herein. 2.07 RIGHT OF FIRST OFFER. Landlord hereby grants to Tenant the Right of First Offer set forth in Exhibit I attached hereto and incorporated herein. 2.08 NET RENTAL ESCALATION. Landlord and Tenant agree that at each anniversary of the Commencement Date during the Term of this Lease, the Net Rental shall be increased to an amount equal to the product derived by multiplying the Net Rental (as increased by any prior rental adjustments pursuant to this Section 2.08) for the lease year immediately preceding such anniversary by 1.03. 3.01 SERVICES. Landlord shall furnish the following services to Tenant during the Term of this Lease ("Building Standard Services"): (a) Hot and cold domestic water in common use rest rooms and toilets at locations provided for general use and as reasonably deemed by Landlord to be in keeping with the first class standards of the Project. (b) Subject to curtailment as required by governmental laws, rules or mandatory regulations, central heat and air conditioning in season, at such temperatures and in such amounts as are reasonably deemed by Landlord to be in keeping with the first class standards of the Project, and on such dates and at such times as are more particularly described on Exhibit E attached hereto and incorporated herein. The Building's air-conditioning system is designed to maintain an average indoor temperature of 74 degrees F (plus or minus 2 degrees) and 50% relative humidity when the outdoor temperature is 94 degrees F dry bulb. The Building's heating system is designed to maintain an average indoor temperature of 74 degrees F (plus or minus 2 degrees) when the outdoor temperature is 15 degrees F. (c) Condenser water service in the Building for use by tenants as an alternative source of cooling for small tenant-installed HVAC units (e.g., small room for computer or telephone equipment). Landlord shall provide condenser water to Tenant on a proportionate basis, provided Tenant agrees to pay its allocable share of the costs incurred, on an hourly basis, for the use of that system Tenant's allocable share of such costs shall be determined for each floor of the Leased Premises by a water meter which shall be installed by Tenant at Tenant's sole cost and expense. 9 (d) Electric lighting service for all public areas and special service areas of the Project in the manner and to the extent reasonably deemed by Landlord to be in keeping with the first class standards of the Project. (e) Janitor service shall be provided five (5) days per week, exclusive of holidays, in a manner that Landlord reasonably deems to be consistent with the first class standard of the Project; provided, however, if Tenant's floor coverings or other improvements are other than Building Standard and will require nonstandard janitorial service, Tenant shall pay one hundred and ten percent (110%) of the actual additional cleaning cost, if any, attributable thereto. (f) Access control for the Project comparable as to coverage, control and responsiveness (but not necessarily as to means for accomplishing same) to other similarly situated first class multi-tenant office buildings in suburban Atlanta, Georgia; provided, however, Landlord shall have no responsibility to prevent, and shall not be liable to Tenant for, any liability or loss to Tenant, its agents, employees and visitors arising out of losses due to theft, burglary, or damage or injury to persons or property caused by persons gaining access to the Leased Premises, unless such theft, burglary or damage or injury is caused by the gross negligence or intentional misconduct of Landlord, and Tenant hereby releases Landlord from all liability for such losses, damages or injury. (g) Sufficient electrical capacity (i) to operate incandescent lights, typewriters, calculating machines, photocopying machines and other machines of similar low voltage electrical consumption (120/208 volts), provided that the total rated electrical design load for said lighting and machines of low electrical voltage shall not exceed two (2.00) watts per square foot of Useable Area ("Useable Area" as used in this Lease shall mean the net rentable area of the Leased Premises minus all On-Floor Common Areas and General Common Areas which were included therein); (ii) to operate lighting and equipment of high voltage electrical consumption (277/480 volts), provided that the total rated electrical design load for said lighting and equipment of high electrical voltage shall not exceed two (2.00) watts per square foot of Usable Area (each such rated electrical design load specified in (i) and (ii) to be hereinafter referred to as the "Building Standard Rated Electrical Design Load"); and (iii) at the buss duct on each floor of the Building to accommodate a total connected electrical load for office use of approximately six (6) watts per square foot of Usable Area. Landlord shall also provide a total of sixteen (16) grid circuits, three (3) spare circuits and eighteen (18) spaces in one (1) low voltage panel on each floor and twelve (12) grid lighting circuits, three (3) spare circuits and five (5) spaces in one (1) high voltage panel on each floor (such Landlord-provided low voltage or high voltage circuits being hereinafter referred to as the "Building Standard Circuits"). Tenant shall be allocated Tenant's pro rata share of the Building Standard Circuits provided on the floor(s) Tenant occupies. Should Tenant's total rated electrical design load exceed the Building Standard Rated Electrical Design Load for either low or high voltage electrical consumption, or if Tenant's electrical design requires low voltage or high voltage circuits in excess of Tenant's pro rata share of the Building Standard Circuits, Landlord will (at Tenant's expense) install one (1) additional high voltage panel and/or one (1) additional low voltage panel with associated transformer, space for which has been provided in the base building electrical closets based on a maximum of two (2) such additional panels per floor for all tenants on the floor (which additional panels and transformers shall be hereinafter referred to as the "Additional Electrical Equipment"). If the Additional Electrical Equipment is installed because Tenant's low or high voltage rated electrical design load exceeds the applicable Building Standard Rated Electrical Design Load, then a meter shall also be added (at Tenant's expense) to measure the electricity used through the Additional Electrical Equipment. The design and installation of any Additional Electrical Equipment (or any related meter) required by Tenant shall be subject to the prior approval of Landlord (which approval shall not be 10 unreasonably withheld, delayed or conditioned). All expenses incurred by Landlord in connection with the review and approval of any Additional Electrical Equipment shall also be reimbursed to Landlord by Tenant. Tenant shall also pay on demand the actual metered cost of electricity consumed through the Additional Electrical Equipment (if applicable), plus any actual accounting expenses incurred by Landlord in connection with the metering thereof. If Tenant requires that certain areas within Leased Premises must operate in excess of the normal Building Operating Hours (as defined in Exhibit E, the electrical service to such areas shall be separately circuited and metered such that Tenant shall be billed the costs associated with electricity consumed during hours other than Building Operating Hours. (h) All Building Standard fluorescent bulb replacement in all areas and all incandescent bulb replacement in General Common Areas, Service Areas and On-Floor Common Areas. (i) Nonexclusive multiple cab passenger service to the Leased Premises during normal Building Operating Hours and at least one (1) cab passenger service to the Leased Premises twenty-four (24) hours per day and nonexclusive freight elevator service during Building Operating Hours (all subject to temporary cessation for ordinary repair and maintenance and during times when life safety systems override normal Building operating systems) with such freight elevator service available at other times upon reasonable prior notice and the payment by Tenant to Landlord of any additional expense actually incurred by Landlord in connection therewith. To the extent the services described in subsections 3.01(a), (b), (c), (d), (g) and (i) above require electricity and water supplied by public utilities, Landlord's covenants thereunder shall only impose on Landlord the obligation to use its good faith, reasonable efforts to cause the applicable public utilities to furnish the same. Failure by Landlord to furnish the services described in this Section 3.01, or any cessation thereof, shall not render Landlord liable for damages to either person or property, nor be construed as an eviction of Tenant, nor work an abatement of Rent, nor relieve Tenant from fulfillment of any covenant or agreement hereof. In addition to the foregoing, should any of the equipment or machinery, for any cause, fail to operate, or function properly, Tenant shall have no claim for rebate of Rent or damages on account of an interruption in service occasioned thereby or resulting therefrom; provided, however, Landlord agrees to use reasonable efforts to promptly repair said equipment or machinery and to restore said services. 3.02 KEYS AND LOCKS. Landlord shall furnish Tenant with two (2) keys for each Building Standard lockset on code required doors entering the Leased Premises from public areas. Additional keys will be furnished by Landlord upon an order signed by Tenant and at Tenant's expense. All such keys shall remain the property of Landlord. No additional locks shall be allowed on any door of the Leased Premises without Landlord's permission (which shall not be unreasonably withheld or delayed, but which may be conditioned upon, among other items, Tenant's agreement to provide Landlord copies of the keys for any such locks), and Tenant shall not make or permit to be made any duplicate keys. Upon termination of this Lease, Tenant shall surrender to Landlord all keys to any locks on doors entering or within the Leased Premises, and give to Landlord the explanation of the combination of all locks for safes, safe cabinets and vault doors, if any, in the Leased Premises. 3.03 GRAPHICS, BUILDING DIRECTORY AND NAME. (a) Landlord shall provide and install all graphics, letters, and numerals at the entrance to the Leased Premises and strips (based on the ratio that the net rentable area of the Leased Premises bears to 11 the total net rentable area of the Building) containing a listing of Tenant's name and suite number and the names and titles of Tenant's senior managers on the Building directory board to be placed in the main lobby of the Building. All such letters and numerals shall be in the Building Standard graphics. Tenant agrees that Landlord shall not be liable for any inconvenience or damage occurring as a result of any error or omission in any directory or graphics. No signs, numerals, letters or other graphics shall be used or permitted on the exterior of, or may be visible from outside the Leased Premises, unless approved in writing by Landlord. (b) Tenant may install signage displaying Tenant's name in the elevator lobby of any floor occupied entirely by Tenant, provided such signage shall be subject to Landlord's reasonable approval. The cost of design, preparation and installation of such signage shall be borne solely by Tenant 3.04 PARKING. (a) Landlord hereby agrees to make available to Tenant, for Tenant's exclusive use during the full Term of this Lease, up to three (3) permits to park in the Parking Facility for each 1,000 square feet of net rentable area from time to time contained in the Leased Premises upon the terms and conditions set forth below (the "Unassigned Parking Permits"). (b) As rental for the Unassigned Parking Permits, Tenant covenants and agrees to pay Landlord as additional rental a monthly amount equal to Landlord's published rate per Unassigned Parking Permit as it may exist from time to time for monthly contract parking in the Parking Facility, multiplied by the number of Unassigned Parking Permits to be made available to Tenant as provided above, payable monthly in advance on the first day of each and every calendar month. The current monthly rate for Unassigned Parking is $45.00 per permit per month. Landlord agrees that at all times during the Term the rate charged Tenant shall be consistent with (i) the rates then being charged generally to other tenants in the Building for unassigned parking (excluding tenants, if any, paying lower negotiated rates in return for higher rental or other concessions), and (ii) the rates then being charged for unassigned parking in similar parking facilities in Class A office buildings in the Buckhead market which charge for parking. (c) At Tenant's request up to five percent (5%) of Tenant's Unassigned Parking Permits may be converted for reserved spaces in the Parking Facility in a location determined by Landlord (the "Assigned Parking Permits"). Landlord reserves the right to relocate the reserved parking spaces from time to time in its reasonable discretion. At any one time, no more than 5% of Tenant's permits to park in the Parking Facility may be Assigned Parking Permits. (d) As rental for the Assigned Parking Permit, Tenant covenants and agrees to pay Landlord as additional rental a monthly amount equal to Landlord's published rate per Assigned Parking Permit as it may exist from time to time for monthly assigned contract parking in the Parking Facility payable monthly in advance on the first (1st) day of each and every calendar month. (e) Landlord or the operator of the Parking Facility may make, modify and enforce reasonable rules and regulations relating to the parking of vehicles in the Parking Facility, and Tenant agrees to abide by such rules and regulations. (f) Tenant may validate the parking tickets of its visitors, in which case Landlord will bill Tenant monthly, and Tenant hereby agrees to pay as additional rental within fifteen (15) days after receipt of an invoice, the parking charges for all such validated visitor parking tickets. 12 IV. 4.01 CARE OF LEASED PREMISES. Tenant shall not commit or allow to be committed by Tenant's employees, invitees, agents or contractors, any waste or damage to any portion of the Leased Premises or the Project. Upon the expiration or any earlier termination of this Lease, Tenant shall surrender the Leased Premises to Landlord in as good condition as existed on the date of possession by Tenant, ordinary wear and tear excepted. Upon such expiration or termination of this Lease, Landlord shall have the right to re-enter and resume possession of the Leased Premises immediately. 4.02 ENTRY FOR REPAIRS AND INSPECTION. Tenant shall permit Landlord and its contractors, agents or representatives to enter into and upon any part of the Leased Premises during reasonable hours to inspect or clean the same, make repairs, alterations or additions thereto, and, upon reasonable prior notice to Tenant, for the purpose of showing the same to prospective purchasers or, during the last twelve (12) months of the Term, to prospective tenants, and Tenant shall not be entitled to any abatement or reduction of Rent by reason thereof. Landlord shall use its reasonable efforts not to interfere materially with the operation of Tenant's business during any such entry. 4.03 NUISANCE. Tenant shall conduct its business and control its agents, employees, invitees, contractors and visitors in such a manner as not to create any nuisance, or interfere with, annoy or disturb any other tenant or Landlord in its operation of the Project. 4.04 LAWS AND REGULATIONS; RULES OF PROJECT. Tenant shall comply with, and Tenant shall cause its employees, contractors and agents to comply with, and shall use its reasonable good faith efforts to cause its visitors and invitees to comply with, all laws, ordinances, orders, rules and regulations of all state, federal, municipal and other governmental or judicial agencies or bodies relating to the use, condition or occupancy of the Leased Premises, and with the rules of the Project reasonably adopted and altered by Landlord from time to time for the safety, care and cleanliness of the Leased Premises and Project and for the preservation of good order therein. The initial rules of the Project are attached hereto and incorporated herein as Exhibit F. Landlord shall employ its reasonable good faith efforts to enforce such rules in a consistent and even-handed manner as to all tenants of the Project 4.05 LEGAL USE AND VIOLATIONS OF INSURANCE COVERAGE. Except as provided in Section 1.03 above, Tenant shall not occupy or use the Leased Premises, or permit any portion of the Leased Premises to be occupied or used, for any business or purpose which is unlawful, disreputable or deemed to be hazardous in any manner, which creates noxious or offensive odors or which creates an environment which attracts pests and insects, or permit anything to be done which would in any way increase the rate of fire, liability, or any other insurance coverage on the Project or its contents. 13 V. 5.01 LEASEHOLD IMPROVEMENTS. (a) Tenant hereby agrees that the provisions of Exhibit D shall govern the construction of Tenant's initial leasehold improvements. After execution of the Tenant Construction Agreement described in Exhibit D, Tenant will oversee the tenant interior contractor's preparation of the Leased Premises in accordance therewith; provided, however, Tenant shall not be allowed to install any improvements which are not compatible with Landlord's plans and specifications for the Building or which are not approved by Landlord. Landlord shall bear the expense of installing only the Base Building Improvements and shall provide the Allowance (as defined in Exhibit C attached hereto and incorporated herein) toward the cost of designing and installing Tenant's leasehold improvements. The amount by which the cost of designing and installing Tenant's leasehold improvements and Tenant's relocation costs exceed the Allowance (and any Additional Allowance provided pursuant to Exhibit C) shall be paid by Tenant. It is stipulated that time is of the essence in connection with Tenant's compliance with the terms of Exhibit D. (b) Notwithstanding any language contained herein or in Exhibit D to the contrary, if for any reason (other than Landlord's gross negligence or intentional misconduct) the Leased Premises should not be ready for occupancy by the Commencement Date, Landlord shall not be liable or responsible for any claims, damages or liabilities in connection therewith or by reason thereof. (c) Other than pursuant to Exhibit D, Tenant shall not make or allow to be made any material alterations or physical additions in or to the Leased Premises, or place safes, vaults or other heavy furniture or equipment within the Leased Premises or place signs in the Leased Premises which are visible from outside the Leased Premises, without first obtaining the written consent of Landlord which consent shall not be unreasonably withheld, delayed or conditioned so long as said alterations meet all applicable codes, do not exceed the base building specifications and are not unsightly from outside the Leased Premises. Tenant shall deliver to Landlord a copy of the "as built" plans and specifications for all alterations or physical additions so made in or to the Leased Premises. Tenant further specifically agrees that no food, soft drink or other vending machine will be installed within the Leased Premises without the written consent of Landlord, which consent shall not be unreasonably withheld, delayed or conditioned. (d) All alterations, physical additions, or improvements in or to the Leased Premises (including fixtures) shall become the property of Landlord upon the expiration or any earlier termination of this Lease; provided, however, that this subsection shall not apply to Tenant's trade fixtures, or movable equipment or furniture. If Tenant fails to remove such movables immediately upon the expiration or earlier termination of this Lease, Landlord may have the same removed at Tenant's expense or, at Landlord's option such movables will become the property of the Landlord and may be disposed of by Landlord in its sole discretion without any right of reimbursement therefor to Tenant. (e) Tenant shall indemnify and hold Landlord harmless from and against all costs (including reasonable attorneys' fees and costs of suit), losses, liabilities, or causes of action arising out of or relating to any alterations, additions or improvements made by Tenant to the Leased Premises, including, but not limited to, any mechanics' or materialmen's liens asserted in connection therewith. (f) Should any mechanic's or other liens be filed against any portion of the Project by reason of Tenant's acts or omissions or because of a claim against Tenant, Tenant shall cause the same to be canceled or discharged of record by bond or otherwise within thirty (30) days after written notice by Landlord. If Tenant shall fail to cancel or discharge said lien or liens, within said thirty (30)-day period, 14 Landlord may, at its sole option, cancel or discharge the same and upon Landlord's demand, Tenant shall promptly reimburse Landlord for all reasonable costs (including, without limitation, attorneys' fees) incurred in canceling or discharging such liens. 5.02 REPAIRS BY LANDLORD. All repairs, alterations or additions that affect the Project's structural components or the Project's mechanical, electrical and plumbing systems shall be made solely by Landlord or its contractor. In the event of any damage to such components or systems caused by Tenant or Tenant's agents, contractors or employees, the cost of repair or restoration of such damage shall be paid for solely by Tenant in an amount equal to Landlord's costs plus ten percent (10%) for administrative cost recovery. Landlord may make such repairs to Base Building Improvements as may be deemed necessary by Landlord for normal maintenance operations and Landlord shall not otherwise be obligated to make improvements to, or repairs of, the Leased Premises; provided, however, Landlord may, at Tenant's expense, make such improvements to, or repairs of, the Leased Premises as Tenant shall request in writing, at a cost equal to the costs incurred by Landlord in such maintenance or such repairs, plus an additional charge of ten percent (10%) for administrative cost recovery. 5.03 REPAIRS BY TENANT. Subject to Section 5.02, Tenant shall at its own cost and expense, keep the Leased Premises and all leasehold improvements in a condition similar to the condition as of the Commencement Date, normal wear and tear excepted and shall perform all repairs and improvements required by any governmental law, ordinance, rule or regulation. If Tenant fails to commence any such repairs to the Leased Premises and leasehold improvements within twenty (20) days after written notice from Landlord to Tenant and thereafter diligently proceed with such repair work until completion, Landlord may, at its option, make such repairs or any replacements deemed necessary by Landlord, and Tenant shall pay to Landlord on demand Landlord's cost thereof plus a charge of ten percent (10%) for administrative cost recovery. VI. 6.01 CONDEMNATION. If all or substantially all of the Leased Premises, or such portion of the Leased Premises or the Project as would render, in Landlord's and Tenant's reasonable judgment, the continuance of Tenant's business from the Leased Premises impracticable, shall be permanently taken or condemned for any public purpose, then this Lease, at the option of Tenant or Landlord upon the giving of written notice to the other party within thirty (30) days from the date of such condemnation or taking, shall forthwith cease and terminate. If any material portion of the Project shall be permanently taken or condemned for any public purpose, then Landlord shall have the option of terminating this Lease by written notice to Tenant within ten (10) days from the date of such condemnation or taking, so long as Landlord also terminates the leases of all similarly situated tenants. If this Lease is terminated as provided above, this Lease shall cease and expire as if the date of transfer of possession of the Leased Premises, the Project, or any portion thereof, was the expiration date of this Lease. In the event that this Lease is not terminated by either Landlord or Tenant as aforesaid, Tenant shall pay the Net Rental, Additional Rental and all other Rent up to the date of transfer of possession of such portion of the Leased Premises so taken or condemned and this Lease shall thereupon cease and terminate with respect to such portion of the Leased Premises so taken or condemned as if the date of transfer of possession of the Leased Premises was the expiration date of the Term of this Lease relating to such portion of the Leased Premises. Thereafter the Net Rental and Additional Rental shall be adjusted on a pro rata basis. 15 In the event of any such condemnation or taking and this Lease is not so terminated, Landlord shall promptly repair the Leased Premises or the Project, as the case may be, to Building Standard condition (with Base Building Improvements) so that the remaining portion of the Leased Premises or Project, as the case may be, shall constitute an architectural unit, fit for Tenant's occupancy and business; provided, however, that Landlord's obligation to repair hereunder shall be limited to the extent of the net proceeds made available to Landlord for such repair from any such condemnation or taking. In the event of any temporary taking or condemnation for any public purpose of the Leased Premises or any portion thereof, then this Lease shall continue in full force and effect except that Net Rental and Additional Rental shall be adjusted on a pro rata basis for the period of time that the Leased Premises are so taken as of the date of transfer of possession of the Leased Premises and Landlord shall be under no obligation to make any repairs or alterations. In the event of any condemnation or taking of the Leased Premises, Tenant hereby assigns to Landlord the value of all or any portion of the unexpired Term of this Lease and all leasehold improvements and Tenant may not assert a claim for a condemnation award therefor; provided, however, Tenant may pursue a separate attempt to recover an award or compensation against or from the condemning authority for (i) the value of any fixtures, furniture, furnishings, Tenant's Extra Work and other personal property which were condemned but which under the terms of this Lease Tenant is permitted to remove at the end of the Term of this Lease, (ii) the unamortized cost of Tenant's Extra Work, which are not so removable by Tenant at the end of the Term of this Lease but which were installed solely at Tenant's expense, (iii) relocation and moving expenses, and (iv) compensation for loss to Tenant's business. 6.02 DAMAGES FROM CERTAIN CAUSES. Landlord shall not be liable or responsible to Tenant for any loss or damage to any property or person occasioned by theft, fire, act of God, public enemy, riot, strike, insurrection, war, requisition or order of governmental body or authority, court order or injunction, or any cause beyond Landlord's control or, except in the case of the gross negligence or intentional misconduct of Landlord, for any damage or inconvenience which may arise through repair or alteration of any part of the Project. All goods, property or personal effects stored or placed by Tenant in or about the Project or Leased Premises shall be at the sole risk of the Tenant. 6.03 CASUALTY CLAUSE. (a) In the event any portion of the Leased Premises or any portion of the General Common Areas is damaged by fire or other casualty, earthquake or flood or by any other cause of any kind or nature (hereinafter collectively referred to as the "Damaged Property") and the Damaged Property can, in the opinion of the Landlord's architect, be repaired within ninety (90) calendar days from the date of notice of Landlord's architect's opinion, then Landlord shall proceed to rebuild or restore the Damaged Property to Building Standard condition (with Base Building Improvements), subject to Section 6.03(e) hereof. (b) In the event the Damaged Property cannot, in the opinion of Landlord's architect, be repaired within ninety (90) days from the date of notice of Landlord's architect's opinion, but can be repaired within one hundred eighty (180) days from the date of notice of Landlord's architect's opinion, Landlord, at Landlord's sole option, shall have the right (i) to terminate this Lease by notifying Tenant of such termination within twenty (20) days of receipt of Landlord's architect's opinion, or (ii) to restore or rebuild the Damaged Property to Building Standard condition (with Base Building Improvements), subject to Section 6.03(e) hereof. (c) If, in the opinion of Landlord's architect, damage to the Damaged Property cannot be repaired within one hundred eighty (180) days from the date of notice of Landlord's architect's opinion, 16 then both Landlord and Tenant shall have the right to terminate this Lease by notifying the other party in writing of such termination within twenty (20) days of receipt of Landlord's architect's opinion. (d) Notwithstanding any language herein to the contrary, if at the time of any such damage, less than one (1) year remains in the Term of this Lease, exclusive of any renewal options, then Landlord, at Landlord's sole option, shall have the right to terminate this Lease. (e) Notwithstanding any language contained herein to the contrary, in the event this Lease is not terminated as provided hereunder (i) Landlord shall be obligated to rebuild or restore the Damaged Property only to the extent of the net insurance proceeds available to Landlord for the purpose of rebuilding and restoration, (ii) if the Damaged Property is all or any portion of the Leased Premises, Landlord shall be obligated to rebuild or restore the Damaged Property only to Building Standard condition (with Base Building Improvements), except that Tenant shall have the right to require Landlord to rebuild or restore the Damaged Property substantially to the condition which existed immediately prior to such damage, provided that Tenant shall bear all costs and expenses, including without limitation, rentals that are lost due to extended construction time, in excess of the lesser of (A) any net insurance proceeds available to Landlord for the purpose of rebuilding or restoration, or (B) the cost to Landlord of rebuilding and restoring the Damaged Property to Building Standard condition (with Base Building Improvements); and (iii) Tenant shall be entitled to a pro rata abatement of Net Rental and Additional Rental during the period of time the Leased Premises, or any portion thereof, are untenable due to such damage. Landlord's architect's opinion shall be given to both Landlord and Tenant in accordance with Section 9.01 within thirty (30) days from the date of any such damage. In the event of any termination of this Lease under this Section 6.03, this Lease shall cease and terminate as if the date of such damage was the expiration date of the Term of this Lease. Notwithstanding any contrary language in this Section 6.03, if the Leased Premises, the Project, or any portion thereof shall be damaged through the gross negligence or willful misconduct of Tenant, such damage shall be repaired by Landlord at the sole expense of Tenant and Rent shall continue hereunder unabated. 6.04 TENANT'S INSURANCE. Tenant shall carry (at its sole expense during the Term) (i) fire and extended coverage insurance insuring Tenant's interest in its improvements to the Leased Premises and any and all furniture, equipment, supplies, contents and other property owned, leased, held or possessed by it and contained therein, such insurance coverage to be in an amount equal to the full insurable value of such improvements and property, as such may increase from time to time; and (ii) workers' compensation insurance as required by applicable law. Tenant shall also procure and maintain throughout the Term a policy or policies of insurance, insuring Tenant, Landlord and any other person designated by Landlord, against any and all liability for injury to or death of a person or persons and for damage to property occasioned by or arising out of any construction work being done on the Leased Premises, or arising out of the condition, use, or occupancy of the Leased Premises, or other portions of the Building or Project, such policy to have a combined single limit of not less than Two Million and No/100 Dollars ($2,000,000) for any bodily injury or property damage occurring as a result of or in conjunction with the above. Landlord and Tenant shall each have included in all policies of insurance respectively obtained by them with respect to the Project, the Building or the Leased Premises a waiver by the insurer of all right of subrogation against the other in connection with any loss or damage thereby insured against. To the full extent permitted by law, Landlord and Tenant each waives all right of recovery against the other for, and agrees to release the other from liability for, loss or damage to the extent such loss or damage is covered by valid and collectible insurance in effect at the time of such loss or damage; provided however, that the foregoing release by each party is conditioned upon the other party's carrying insurance with the above described waiver of subrogation, and if such coverage is not obtained or maintained by either party, then the other party's foregoing release shall be deemed to be rescinded until such waiver is either obtained or 17 reinstated. All said insurance policies shall be carried with companies licensed to do business in the State of Georgia reasonably satisfactory to Landlord and shall be noncancelable except after twenty (20) days' written notice to Landlord. At Landlord's request, duly executed certificates of such insurance shall be delivered to Landlord prior to the Commencement Date and at least thirty (30) days prior to the expiration of each respective policy term. 6.05 HOLD HARMLESS. Landlord shall not be liable to Tenant, its agents, servants, employees, contractors, customers or invitees for any damage to person or property caused by any act, omission or neglect of Tenant, its agents, servants or employees, and Tenant agrees to indemnify and hold Landlord harmless from all liability and claims for any such damage. Tenant shall not be liable to Landlord, or to Landlord's agents, servants, employees, contractors, customers or invitees for any damage to person or property caused by any act, omission or neglect of Landlord, its agents, servants or employees, and Landlord agrees to indemnify and hold Tenant harmless from all claims for such damage. The indemnifications granted by each of Landlord and Tenant herein are subject to any express provisions to the contrary in this Lease. 6.06 ENVIRONMENTAL MATTERS (a) Tenant shall not cause or permit to be brought upon, kept or used in or about the Leased Premises or the Project, any hazardous or toxic substance, material or waste that is or becomes regulated under any applicable local, state or federal law (collectively "Hazardous Material"); provided however, that Tenant may keep and use general office supplies and office cleaning supplies in accordance with applicable law. If Tenant breaches the foregoing covenant, or if the presence of Hazardous Material on the Leased Premises or Project caused or permitted by Tenant results in contamination thereof, then Tenant shall indemnify, defend and hold harmless Landlord from any and all claims, judgments, damages, penalties, fines, costs, liabilities and loss (including, without limitation, diminution in value of the Leased Premises and Project, damages for the loss or restriction on use of rentable or usable space or of any amenity of the Leased Premises or Project, damages arising from any adverse impact on marketing of space, and sums paid in settlement of claims, attorneys' fees, consultant fees and expert fees) which arise during or after the Term as a result of such contamination. This indemnification of Landlord by Tenant includes, without limitation, costs incurred in connection with any investigation of site conditions or any clean-up, remedial, removal or restoration work required by any federal, state or local governmental agency or political subdivision because of Hazardous Material present in the soil or ground water on or under the Leased Premises or Project. Without limiting the foregoing, if the presence of any Hazardous Material on the Leased Premises or Project caused or permitted by Tenant results in the contamination of the Leased Premises or Project, Tenant shall promptly take all actions at its sole expense as are necessary to return the same to the condition existing prior to the introduction of any such Hazardous Material thereto; provided that Landlord's approval of such actions shall first be obtained, which approval shall not be unreasonably withheld so long as such actions would not potentially have any material adverse long-term, or short-term effect on the Leased Premises and Project. The foregoing indemnity shall survive for two (2) years after the expiration or earlier termination of this Lease; provided, if prior to the expiration of said two (2) year period Landlord has made a claim, or has given Tenant notice of its intent to make a claim, against Tenant under said indemnity, the indemnity shall survive until said claim is paid in full, Landlord waives such claim in writing, or it is finally determined that no amount is due from Tenant to Landlord. (b) Landlord covenants and agrees that if any Hazardous Material other than "Permitted Hazardous Material" (as defined herein) is found in the Project in such amounts and locations as would require Landlord to remove such materials as a matter of law, then Landlord shall remove or cause to be removed such Hazardous 18 Material. The term "Permitted Hazardous Material" shall mean such Hazardous Material as is commonly and legally used or stored as a consequence of using, maintaining or operating the Project, so long as the quantities thereof do not pose a threat to public health or to the environment or would necessitate a "response action" as that term is defined under applicable law. VII. 7.01 DEFAULT AND REMEDIES. (a) The occurrence of any of the following shall constitute events of default: (i) Net Rental, Additional Rental or any other Rent or other sum of money payable under this Lease is not paid within five (5) days after written notice from Landlord that the same is due; (ii) The Leased Premises are deserted, vacated, or not used as regularly or consistently as would normally be expected for similar premises put to general office use, even though the Tenant continues to pay the stipulated rent; provided, however, Tenant shall not be in default hereunder if Tenant gives Landlord written notice not less than thirty (30) days prior to such abandonment or vacation (a "Permitted Vacation"); provided further, that if any such Permitted Vacation continues for more than ninety (90) days, Landlord shall have the right, but not the obligation, to terminate this Lease at any time by giving Tenant not less than fifteen (15) days' notice of such termination (which notice may, at Landlord's option, be given during said ninety [90] day period, to be effective upon the expiration of said ninety [90] day period); (iii) Tenant's interest in this Lease or the Leased Premises shall be subjected to any attachment, levy, or sale pursuant to any order or decree entered against Tenant in any legal proceeding, and such order or decree shall not be vacated within sixty (60) days of entry thereof; (iv) Tenant assigns or sublets all or any portion of the Leased Premises except as permitted herein; or (v) Tenant breaches or fails to comply with any term, provision, condition, or covenant of this Lease, other than as described in Section 7.01(a)(i), or with any of the Rules and Regulations now or hereafter established to govern the operation of the Building or Project, and such breach or failure is not cured within thirty (30) days after written notice from Landlord of such breach or failure, or, if such breach or failure is of a nature that it cannot be cured within thirty (30) days, if Tenant fails to commence to cure such breach or failure as soon as reasonably practicable (and in all events within thirty [30] days after written notice from Landlord), and thereafter diligently pursue such cure to completion within ninety (90) days after the date of Landlord's notice. (b) Upon the occurrence of an event of default, Landlord shall have the option to do and perform any one or more of the following in addition to, and not in limitation of, any other remedy or right permitted it by law or in equity or by this Lease: (i) Landlord, with or without terminating this Lease, may immediately or at any time thereafter re-enter the Leased Premises and correct or repair any condition which shall constitute a failure on Tenant's part to keep, observe, perform, satisfy, or abide by any term, condition, covenant, agreement, or obligation of this Lease or of the Rules and Regulations now in effect or hereafter adopted or of any notice given Tenant by Landlord pursuant to the terms of this Lease, and Tenant shall fully reimburse and compensate Landlord on demand 19 (ii) Landlord, with or without terminating this Lease, may immediately or at any time thereafter demand in writing that Tenant vacate the Leased Premises and thereupon Tenant shall vacate the Leased Premises and remove therefrom all property thereon belonging to or placed on the Leased Premises by, at the direction of, or with consent of Tenant within ten (10) days of receipt by Tenant of such notice from Landlord, whereupon Landlord shall have the right to re-enter and take possession of the Leased Premises. Any such demand, re- entry and taking possession of the Leased Premises by Landlord shall not of itself constitute an acceptance by Landlord of a surrender of this Lease or of the Leased Premises by Tenant and shall not of itself constitute a termination of this Lease by Landlord. (iii) Landlord, with or without terminating this Lease, may immediately or at any time thereafter, re-enter the Leased Premises and remove therefrom Tenant and all property belonging to or placed on the Leased Premises by, at the direction of, or with consent of Tenant. Any such re-entry and removal by Landlord shall not of itself constitute an acceptance by Landlord of a surrender of this Lease or of the Leased Premises by Tenant and shall not of itself constitute a termination of this Lease by Landlord. (iv) Landlord, with or without terminating this Lease, may immediately or at any time thereafter relet the Leased Premises or any part thereof for such time or times, at such rental or rentals and upon such other terms and conditions as Landlord in its sole discretion may deem advisable, and Landlord may make any alterations or repairs to the Leased Premises which it may deem necessary or proper to facilitate such reletting; and Tenant shall pay all costs of such reletting including but not limited to the cost of any such alterations and repairs to the Leased Premises, attorneys' fees, leasing inducements, and brokerage commissions; and if this Lease shall not have been terminated, Tenant shall continue to pay all Rent and all other charges due under this Lease up to and including the date of beginning of payment of rent by any subsequent tenant of part or all of the Leased Premises, and thereafter Tenant shall pay monthly during the remainder of the Term of this Lease the difference, if any, between the rent and other charges collected from any such subsequent tenant or tenants and the Rent and other charges reserved in this Lease, but Tenant shall not be entitled to receive any excess of any such rents collected over the Rent reserved herein. (v) Landlord may immediately or at any time thereafter terminate this Lease, and this Lease shall be deemed to have been terminated upon receipt by Tenant of written notice of such termination; upon such termination Landlord shall recover from Tenant all damages Landlord may suffer by reason of such termination including, without limitation, unamortized sums expended by Landlord for construction of leasehold improvements, all arrears in rentals, costs, charges, additional rentals, and reimbursements, the cost (including court costs and attorneys' fees) of recovering possession of the Leased Premises, the cost of any alteration of or repair to the Leased Premises which is necessary or proper to prepare the same for reletting and, in addition thereto, Landlord at its election shall have and recover from Tenant either (1) an amount equal to the excess, if any, of the total amount of all rents and other charges to be paid by Tenant for the remainder of the Term discounted to present value using a reasonable discount rate selected by Landlord over the then reasonable rental value of the Leased Premises for the remainder of the Term also discounted to present value using a reasonable discount rate selected by Landlord (taking into consideration the probable costs of marketing and reletting the Leased Premises, then-current rental rates, probable rental rates for the remainder of the Term, probable concession packages, the probability of reletting the Leased Premises and the probable amount of time which will elapse before the Leased Premises are relet); provided however, that such payment shall not constitute a penalty or forfeiture but shall constitute liquidated damages for Tenant's failure to comply with the terms and provisions of this Lease (Landlord and Tenant agreeing that Landlord's actual damages in such an event are impossible to ascertain and that the amount set forth herein is a reasonable estimate thereof), or (2) the rents and other charges which Landlord would be entitled to receive from Tenant pursuant to the provisions of Section 7.01 (b)(iv) if the Lease were not terminated. Such election 20 shall be made by Landlord by serving written notice upon Tenant of its choice of one of the two said alternatives within thirty (30) days of the notice of termination. (c) If Landlord re-enters the Leased Premises or terminates this Lease pursuant to any of the provisions of this Lease, Tenant hereby waives all claims for damages which may be caused by such re-entry or termination by Landlord. Tenant shall and does hereby indemnify and hold Landlord harmless from any loss, cost (including court costs and attorneys' fees), or damages suffered by Landlord by reason of such re-entry or termination. No such re-entry or termination shall be considered or construed to be a forcible entry. (d) The exercise by Landlord of any one or more of the rights and remedies provided in this Lease shall not prevent the subsequent exercise by Landlord of any one or more of the other rights and remedies herein provided. All remedies provided for in this Lease are cumulative and may, at the election of Landlord, be exercised alternatively, successively, or in any other manner and are in addition to any other rights provided for or allowed by law or in equity. 7.02 INSOLVENCY OR BANKRUPTCY. The appointment of a receiver to take possession of all or substantially all of the assets of Tenant, or any general assignment by Tenant for the benefit of creditors, or any action taken or suffered by Tenant under any insolvency, bankruptcy, or reorganization act, shall, at Landlord's option, constitute a breach of this Lease by Tenant. Upon the happening of any such event or at any time thereafter, this Lease shall terminate five (5) days after written notice of termination from Landlord to Tenant. In no event shall this Lease be assigned or assignable by operation of law or by voluntary or involuntary bankruptcy proceedings or otherwise and in no event shall this Lease or any rights or privileges hereunder be an asset of Tenant under any bankruptcy, insolvency, or reorganization proceedings. 7.03 LATE PAYMENTS. Tenant shall pay, as a late charge in the event any installment of Net Rental, Additional Rental or any other charge owed by Tenant hereunder is not paid when due, the greater of $100.00 or an amount equal to five percent (5%) of the amount due for each and every thirty (30) day period that said amount remains unpaid (but in no event shall the amount of such late charge exceed an amount based upon the highest legally permissible rate chargeable at any time by Landlord under the circumstances). Should Tenant make a partial payment of past due amounts, the amount of such partial payment shall be applied first to reduce all accrued and unpaid late charges, in inverse order of their maturity, and then to reduce all other past due amounts, in inverse order of their maturity. 7.04 ATTORNEY'S FEES. If any Rent or other debt owing by Tenant to Landlord hereunder is collected by or through an attorney at law, Tenant agrees to pay Landlord's reasonable attorneys' fees in collecting the same. Further, in the event of any lawsuit or court action between Landlord and Tenant arising out of or under this Lease or the terms and conditions stated herein, the prevailing party in such lawsuit or court action shall be entitled to and shall collect from the nonprevailing party the reasonable attorney's fees and court costs actually incurred by the prevailing party with respect to said lawsuit or court action. 7.05 WAIVER OF HOMESTEAD. Tenant hereby waives and renounces all homestead or exemption rights which Tenant may have under or by virtue of the Constitutions and Laws of the United States, the State of Georgia, and any other 21 State as against any debt or sum Tenant may owe Landlord under this Lease and hereby transfers, conveys, and assigns to Landlord all homestead or exemption rights which may be allowed or set apart to Tenant, including such as may be set apart in any bankruptcy proceeding, to pay any debt or sum owing by Tenant to Landlord hereunder. 7.06 NO WAIVER OF RIGHTS. No failure or delay of Landlord to exercise any right or power given it herein or to insist upon strict compliance by Tenant of any obligation imposed on it herein and no custom or practice of either party hereto at variance with any term hereof shall constitute a waiver or a modification of the terms hereof by Landlord or any right it has herein to demand strict compliance with the terms hereof by Tenant. No waiver of any right of Landlord or any default by Tenant on one occasion shall operate as a waiver of any of Landlord's other rights or of any subsequent default by Tenant. No express waiver shall affect any condition, covenant, rule, or regulation other than the one specified in such waiver and then only for the time and in the manner specified in such waiver. No person has or shall have any authority to waive any provision of this Lease unless such waiver is expressly made in writing and signed by an authorized officer of Landlord. 7.07 HOLDING OVER. In the event of holding over by Tenant after expiration or termination of this Lease without the written consent of Landlord, Tenant shall pay as liquidated damages, solely for such holding over, one hundred fifty percent (150%) Rent (including, without limitation, all Net Rental and Additional Rental as would have been payable if this Lease had not so terminated or expired) for the entire holdover period. No holding over by Tenant after the Term of this Lease shall be construed to extend this Lease. In the event of any unauthorized holding over, Tenant shall indemnify Landlord against all claims for damages by any other tenant to whom Landlord shall have leased all or any part of the Leased Promises effective upon the termination of this Lease. Any holding over with the express written consent of Landlord shall thereafter constitute this Lease to be a lease from month to month at a Net Rental, Additional Rental and all other sums required to be paid by Tenant prior to the expiration or termination of this Lease as may be determined by Landlord. 7.08 SUBORDINATION. (a) Tenant agrees that the rights of Tenant under this Lease are subject and subordinate to, and upon the request of Landlord made in writing, Tenant will confirm the subordination of this Lease to each ground or land lease now or hereafter covering all or any part of the Land and to each mortgage or deed to secure debt which may now or hereafter encumber the Project and/or the Land, as well as to all renewals, modifications, consolidations, replacements and extensions thereof in a written form reasonably acceptable to Tenant and the lessor under any such ground or land lease and the holder of any such mortgage or deed to secure debt; provided, however, that the lessor under any such ground or land lease and the holder of any such mortgage or deed to secure debt shall, so long as Tenant shall not be in default under this Lease, not disturb Tenant in its possession of the Leased Premises or terminate Tenant's rights hereunder. Tenant expressly recognizes and agrees that the lessor under any such ground or land lease and the holder of any such mortgage or deed to secure debt or any of their successors or assigns or any other holder of such instrument may sell the Project or the Land in the manner provided for by law or in such instrument; and further, such sale may be made subject to this Lease. In the event of the enforcement by the lessor under any such ground or land lease or the grantee under any such mortgage or deed to secure debt of the remedies provided for by law or by such land or ground lease, mortgage or deed to secure debt, Tenant will, upon request of any person or party succeeding to the interest of said lessor or grantee, as a result of such enforcement, automatically become the tenant of such successor in interest without 22 change in the terms or provisions of this Lease; provided, however, that such successor in interest shall not be bound by (x) any payment of Rent for more than one month in advance except prepayments in the nature of security for the performance by Tenant of its obligations under this Lease, or (y) any amendment or modification of this Lease made without the written consent of such lessor or grantee or such successor in interest if such lessor, grantee or successor in interest had previously notified Tenant in writing of its interest. Upon request by such successor in interest, Tenant shall execute and deliver an instrument or instruments confirming the attornment herein provided for in a form reasonably acceptable to Tenant and such successor in interest. Notwithstanding anything contained in this Lease to the contrary, in the event of any default by Landlord in performing its covenants or obligations hereunder which would give Tenant the right to terminate this Lease, Tenant shall not exercise such right unless and until (aa) Tenant gives written notice of such default (which notice shall specify the exact nature of said default and how the same may be cured) to any lessor under any such land or ground lease and any holder(s) of any such mortgage or deed to secure debt who has theretofore notified Tenant in writing of its interest and the address to which notices are to be sent, and (bb) said lessor and holder(s) fail to undertake action to cure said default within thirty (30) days from the giving of such notice by Tenant. The provisions of Section 9.01 shall govern the manner and effective date of any notice to be given by Tenant to any such parties. (b) Landlord warrants to Tenant that there is, as of the date of this Lease, no ground lease affecting the Land, and the only deed to secure debt encumbering the Land is held by The Prudential Insurance Company of America ("Prudential"). Landlord shall (i) use its best efforts to obtain a nondisturbance agreement in substantially the form attached hereto as Exhibit J from Prudential (and use its reasonable efforts to assist Tenant in negotiating reasonable revisions to said nondisturbance agreement), and (ii) use its reasonable efforts to obtain nondisturbance agreements from all parties secured by any future mortgage or deed to secure debt, and from any and all ground lessors holding an interest in the Land, which agreements shall provide that Tenant will not be joined as a party defendant in any action to enforce any mortgage or deed to secure debt, or to terminate any ground lease, nor will Tenant's rights under this Lease be affected by any such action or any judgment rendered as a result of such action, so long as there exists no uncured default on the part of Tenant under this Lease. All nondisturbance agreements obtained pursuant to the provisions hereof shall be conditioned upon Tenant's agreement to attorn to and recognize the purchaser at any foreclosure sale under such mortgage or deed to secure debt or to recognize any such ground lessor or its successors or assigns as the successor in interest to Landlord in the event of termination of such ground lease, and shall include the terms and provisions set forth in this Section 7.08. 7.09 ESTOPPEL CERTIFICATE OR THREE-PARTY AGREEMENT. At the request of either Landlord or Tenant, the other party will execute, from time to time, either an estoppel certificate or a three-party agreement among Landlord, Tenant and any third party certifying to such facts (if true) as Landlord or Tenant, as the case may be, or such third party, may reasonably require in connection with the business dealings of the parties. Tenant agrees to execute and deliver any such estoppel certificate and/or three-party agreement within fifteen (15) days after the date Landlord requests the same, and hereby irrevocably appoints Landlord as its attorney-in-fact, coupled with an interest, to execute and deliver, for and in the name of Tenant, any such estoppel certificate and/or three-party agreement, if Tenant fails to execute and deliver the same within said fifteen (15) day period. 23 VIII. 8.01 SUBLEASE OR ASSIGNMENT BY TENANT. (a) Tenant shall not, without the Landlord's prior written consent, (i) assign, convey, mortgage, pledge, encumber, or otherwise transfer (whether voluntarily, by operation of law, or otherwise) this Lease or any interest hereunder; (ii) allow any lien to be placed upon Tenant's interest hereunder; (iii) sublet the Leased Premises or any part thereof; or (iv) permit the use or occupancy of the Leased Premises or any part thereof by any one other than Tenant. Any attempt to consummate any of the foregoing without Landlord's consent shall be of no force or effect For purposes hereof, the transfer of the ownership or voting rights in a controlling interest of the voting stock of Tenant (if Tenant is a corporation) or the transfer of a general partnership interest or a majority of the limited partnership interest in Tenant (if Tenant is a partnership), at any time throughout the Term of this Lease, shall be deemed to be an assignment of this Lease. Notwithstanding the foregoing (but subject to the other terms and provisions of this Section 8.01), Tenant shall have the right to assign the Lease or sublet the Premises, or any part thereof, without Landlord's consent, but subject to Landlord's rights to notice and prohibition contained herein, to any parent, subsidiary, affiliate or controlled corporation, partnership or limited liability company (so long as Tenant remains liable under this Lease) or to the corporation, partnership or limited liability company into which Tenant may be converted or into which it may merged (an "Affiliated Assignee"). Tenant shall have the obligation to notify Landlord of its intent of any such arrangement, and if Landlord reasonably determines that the proposed assignee or sublessee is engaged in a business which would materially interfere with the operation of the Project or that permitting the assignment of subletting would cause a violation by Landlord of its obligations under any lease covering a portion of the Project, Landlord shall have the right to prohibit such arrangement based upon the issue of the business of the proposed assignee or sublessee or the compatibility of the proposed assignee or sublessee with the business in the Project. Tenant shall not assign this Lease or any interest herein, or sublet all or any portion of the Leased Premises, or request Landlord's consent to any such assignment or subletting, and Landlord shall not be required to consider any requested assignment or subletting, to any of the following: any governmental body, agency, or bureau of the United States, any state, county, municipality or any subdivision thereof, any agency exercising governmental authority or any quasi-governmental agency (e.g., the United States Postal Service); any foreign government or subdivision thereof; any healthcare professional or healthcare service organization (unless the same agree to use the Leased Premises only for general office purposes); schools or similar organizations (unless the same agree to use the Leased Premises only for general office purposes); employment agencies; radio, television or other communication stations; restaurants; and retailers offering retail services from the Leased Premises. (b) Notwithstanding anything herein to the contrary (other than Tenant's right to sublet or assign to an Affiliated Assignee without Landlord's consent, but subject to Landlord's right to notice and prohibition as specified in Section 8.01 (a) above), if at any time or from time to time during the Term of this Lease Tenant desires to sublet all or any portion of the Leased Premises or assign all or any portion of Tenant's interest in this Lease, Tenant shall notify Landlord in writing (hereinafter referred to in this Section 8.01 as the "Notice") of the terms of the proposed subletting or assignment, the identity of the proposed sublessee or assignee, the nature of the proposed sublessee's or assignee's business, the area proposed to be sublet or covered by the assignment (hereinafter referred to as "Sublet Space"), and such other information as Landlord may request to evaluate Tenant's request to sublet or assign. Landlord shall then have the option (i) to sublet the Sublet Space from Tenant as provided in subsection (c) hereof at the same Net Rental and Additional Rental as Tenant is required to pay to Landlord under this Lease for the Sublet Space, (ii) to terminate this Lease as to the Sublet Space as provided in subsection (d) hereof, (iii) to allow the proposed sublease or assignment subject to the final review for approval as provided in subsection (e) hereof, or (iv) to refuse to consent to Tenant's assignment of this Lease or sublease of the 24 Leased Premises and elect to continue this Lease in full force and effect as to the entire Leased Premises; provided however, that Landlord may not elect options (i) or (ii) if Tenant is requesting Landlord's consent to a subletting of a portion of the Leased Premises to a contractor or agent of Tenant (such as a travel agent, attorney or accountant) for the purpose of providing services to Tenant. Landlord's option to sublet, to terminate, or to allow the proposed sublease or assignment subject to final review, or to refuse consent, as the case may be, shall be exercisable by Landlord in writing within a period of thirty (30) calendar days after receipt of the Notice and any failure by Landlord to exercise any of such options within said thirty (30) day period shall be deemed to constitute the election of option (iv) above. (c) In the event Landlord exercises the option to sublet the Sublet Space pursuant to Landlord's options set forth above, the term of the subletting from the Tenant to Landlord shall be the term set forth in the Notice (which shall not be longer than the then current Term of this Lease unless Landlord expressly agrees in writing that any extension or renewal option contained in this Lease will apply to such Sublet Space) and shall be on such terms and conditions as are contained in this Lease to the extent applicable, except that the Landlord shall have the right to further sublet the Sublet Space freely and without any consent or approval from Tenant and upon such terms and for such rent as Landlord shall agree upon in its sole and absolute discretion. (d) If Landlord elects to terminate this Lease pursuant to Landlord's options set forth above, then this Lease shall terminate as to the Sublet Space on the date set forth in Landlord's notice to Tenant, which date shall be no less than thirty (30) days and no more than ninety (90) days after the date of such notice. If the Sublet Space does not constitute the entire Leased Premises and Landlord exercises its option to terminate this Lease with respect to the Sublet Space, as to that portion of the Leased Premises which is not part of the Sublet Space, this Lease shall remain in full force and effect except that Net Rental and Additional Rental shall be calculated on the difference between the net rentable area prior to such termination and the net rentable area of the Sublet Space. (e) If Landlord elects to allow the proposed sublease or assignment subject to final review, provided that at the time of any such assignment or subletting this Lease is in full force and effect and there is no default hereunder on the part of the Tenant, Tenant shall submit to Landlord, within twenty (20) calendar days after receipt of Landlord's notice of election, a copy of the proposed sublease or assignment, which sublease or assignment must provide for the assumption of all of Tenant's obligations under this Lease, and such additional information concerning the business, reputation and credit-worthiness of the proposed sublessee or assignee as shall be sufficient to allow Landlord to form a commercially reasonable judgment with respect thereto. Landlord agrees not to unreasonably withhold its approval of any proposed sublease or assignment and, in the event Landlord fails to approve or disapprove any such sublease or assignment within thirty (30) days after Landlord's receipt of such submission from Tenant, such sublease or assignment shall be deemed to be approved, provided, however, that if Landlord approves any proposed sublease or assignment, Landlord shall receive from Tenant as additional Rent hereunder fifty percent (50%) of any rents or other sums received by Tenant pursuant to said sublease or assignment, in excess of the rentals payable to Landlord by Tenant under this Lease with respect to the Sublet Space (after deducting all of Tenant's reasonable costs associated therewith, including reasonable brokerage fees and the reasonable cost of remodeling or otherwise improving the Leased Premises for said sublessee or assignee), as such rents or other sums are received by Tenant from the approved sublessee or assignee. Landlord may require that any rent or other sums paid by a sublessee or assignee be paid directly to Landlord. If Landlord approves in writing the proposed sublessee or assignee and the terms of the proposed sublease or assignment, but a fully executed counterpart of such sublease or assignment is not delivered to Landlord within ninety (90) calendar days after the date of Landlord's written approval, then Landlord's approval of the proposed sublease or assignment shall be deemed null and void and Tenant shall again comply with all the conditions of this Section 8.01 as if the Notice and options hereinabove referred to had not been given, received or 25 exercised. If Landlord fails to approve the form of sublease or assignment or the sublessee or assignee, Tenant shall have the right to submit amended forms or other sublessees or assignees to Landlord to review for approval. (f) Notwithstanding the giving by Landlord of its consent to any sublease or assignment with respect to the Leased Premises, no sublessee or assignee may exercise any expansion option, right of first refusal option, right of first offer option, or renewal option under this Lease except in accordance with a separate written agreement entered into directly between such sublessee or assignee and Landlord. (g) Notwithstanding the giving by Landlord of its consent to any subletting, assignment or occupancy as provided hereunder or any language contained in such lease, sublease or assignment to the contrary, unless this Lease is expressly terminated by Landlord, Tenant shall not be relieved of any of Tenant's obligations or covenants under this Lease and Tenant shall remain fully liable hereunder. (h) If, with the consent of the Landlord, the Leased Premises or any part thereof is sublet or occupied by other than Tenant or this Lease is assigned, Landlord may, after default by Tenant, collect rent from the subtenant, assignee or occupant, and apply the net amount collected to the Net Rental, Additional Rental and any other sums herein reserved. No such subletting, assignment, occupancy, or collection shall be deemed (i) a waiver of any of Tenant's covenants contained in this Lease, (ii) a release of Tenant from further performance by Tenant of its covenants under this Lease, or (iii) a waiver of any of Landlord's other rights hereunder. 8.02 ASSIGNMENT BY LANDLORD. Landlord shall have the right to transfer and assign, in whole or in part, all its rights and obligations hereunder, in the Project, the Building, the Land and all other property referred to herein, and in such event and upon such transfer (any such transferee to have the benefit of, and be subject to, the provisions of Sections 8.03 and 8.04 hereof) and the assumption of this Lease by the transferee no further liability or obligation shall thereafter accrue against Landlord hereunder. 8.03 PEACEFUL ENJOYMENT. Landlord covenants that Tenant shall and may peacefully have, hold and enjoy the Leased Premises, subject to the other terms hereof, provided that Tenant pays the rental and other sums herein recited to be paid by Tenant and performs all of Tenant's covenants and agreements herein contained. It is understood and agreed that this covenant and any and all other covenants of Landlord contained in this Lease shall be binding upon Landlord and its successors only with respect to breaches occurring during the ownership of the Landlord's interest hereunder. 8.04 LIMITATION OF LANDLORD'S PERSONAL LIABILITY. Tenant specifically agrees to look solely to Landlord's interest in the Project and the rent and other income derived therefrom, and any insurance proceeds or condemnation award received in connection therewith, for the recovery of any monetary judgment against Landlord, it being agreed that Landlord (and its partners and shareholders) shall never be personally liable for any such judgment. The provision contained in the foregoing sentence is not intended to, and shall not, limit any right that Tenant might otherwise have to obtain injunctive relief against Landlord or Landlord's successors in interest or any suit or action in connection with enforcement or collection of amounts which may become owing or payable under or on account of insurance maintained by Landlord. 26 8.05 FORCE MAJEURE. Landlord and Tenant (except with respect to the payment of Net Rental, Additional Rental, or any other monetary obligation under this Lease, including any obligations arising pursuant to Exhibit D hereto) shall be excused for the period of any delay and shall not be deemed in default with respect to the performance of any of the terms, covenants and conditions of this Lease when prevented from so doing by a cause or causes beyond the Landlord's or Tenant's (as the case may be) control, which shall include, without limitation, all labor disputes, governmental regulations or controls, fire or other casualty, inability to obtain any material or services, acts of God, or any other cause not within the reasonable control of Landlord or Tenant (as the case may be); provided, however, that any delay or prevention caused by Delay Items (defined in Exhibit D) shall be deemed to be due to a cause or causes within Tenant's control. IX. 9.01 NOTICES. Any notice or other communications required or permitted to be given under this Lease must be in writing and shall be effectively given or delivered if hand delivered to the addresses for Landlord and Tenant stated above, sent by certified or registered United States Mail, return receipt requested, to said addresses, or if sent by facsimile to the facsimile numbers for Landlord and Tenant stated above, with copies of any notice or other communication sent by facsimile also being sent by hand delivery or regular, certified or registered United States Mail. Any notice mailed shall be deemed to have been given upon receipt or refusal thereof. Notice effected by hand delivery shall be deemed to have been given at the time of actual delivery. Notice sent by facsimile shall be deemed to have been given only if and when it is actually received. Either party shall have the right to change its address to which notices shall thereafter be sent and the party to whose attention such notice shall be directed by giving the other party notice thereof in accordance with the provisions of this Section 9.01. Additionally, Tenant agrees to send copies of all notices required or permitted to be given to Landlord to: Hines Five Ravinia Drive Atlanta, Georgia 30346 Attention: Controller Facsimile Number: (770) 206-5325 and to each lessor under any ground or land lease covering all or part of the Land and each holder of a mortgage or deed to secure debt encumbering the Project and/or the Land that notifies Tenant in writing of its interest and the address to which notices are to be sent. 9.02 MISCELLANEOUS. This Lease shall be binding upon and inure to the benefit of the successors and assigns of Landlord, and shall be binding upon and inure to the benefit of Tenant, its successors, and, to the extent assignment may be approved by Landlord hereunder, Tenant's assigns. Where appropriate the pronouns of any gender shall include the other gender, and either the singular or the plural shall include the other. Landlord and Tenant each warrant and represent to the other that there are no brokers' fees, real estate commissions, or similar fees due to any broker, agent or other party in connection with the negotiation or execution of this Lease on behalf of either of them other than Richard Bowers & Co. ("Broker") on behalf of Tenant and Hines Properties, Inc. on behalf of Landlord. Landlord shall pay 27 Broker and Hines a commission pursuant to separate agreements. Landlord and Tenant hereby agree to indemnify and hold the other harmless from and against any and all costs, expenses, liabilities, causes of action, claims or suits by any other party other than those aforementioned firms for compensation, commissions, fees or other sums claimed to be due or owing as a result of any relationship with the indemnitor in connection with the execution of this document. All rights and remedies of Landlord and Tenant under this Lease shall be cumulative and none shall exclude any other rights or remedies allowed by law. This Lease is declared to be a Georgia contract, and all of the terms hereof shall be construed according to the laws of the State of Georgia. This Lease may not be altered, changed or amended, except by an instrument in writing executed by all parties hereto. Further, the terms and provisions of this Lease shall not be construed against or in favor of a party hereto merely because such party is the "Landlord" or the "Tenant" hereunder or such party or its counsel is the draftsman of this Lease. If Tenant is a corporation, partnership or other entity, Tenant warrants that all consents or approvals required of third parties (including but not limited to its Board of Directors or partners) for the execution, delivery and performance of this Lease have been obtained and that Tenant has the right and authority to enter into and perform its covenants contained in this Lease. Likewise, if Landlord is a corporation, partnership or other entity, Landlord warrants that all consent or approvals required of third parties (including but not limited to its Board of Directors or partners) for the execution, delivery and performance of this Lease have been obtained and that Landlord has the right and authority to enter into and perform its covenants contained in this Lease. Wherever in this Lease there is imposed upon Landlord the obligation to use best or reasonable efforts or due diligence, Landlord shall be required to do so only to the extent the same is economically feasible and otherwise will not impose upon Landlord extreme financial or other burdens. If any term or provision of this Lease, or the application thereof to any person or circumstance, shall to any extent be invalid or unenforceable, the remainder of this Lease, or the application of such provision to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each provision of this Lease shall be valid and shall be enforceable to the extent permitted by law. Time is of the essence in this Lease. This Lease shall not convey any leasehold estate from Landlord to Tenant. Landlord and Tenant hereby agree that this Lease creates only the interest of a usufruct in Tenant which may not be levied upon or assigned without Landlord's permission. This Lease shall not be binding until and unless all parties have duly executed the same and a fully executed counterpart hereof has been delivered to Tenant. This instrument and any attached addendum or exhibits by the parties constitutes the entire agreement between Landlord and Tenant. No prior or contemporaneous promises, inducements, representations, or agreements, oral or otherwise, between the parties hereto embodied herein shall be binding or have any force or effect. Tenant will make no claim on account of any representations whatsoever, whether made by any renting agent, broker, officer, or other representative of Landlord or which may be contained in any circular, brochure, prospective, proposal or advertisement relating to the Leased Premises or the project or otherwise, unless the same is specifically set forth in this Lease. 28 IN WITNESS WHEREOF, the parties hereto have executed and sealed this Lease as of the date aforesaid. LANDLORD: CSB - Georgia Limited Partnership, a Georgia limited partnership By: Peachtree Investors Limited Partnership, its general partner By: /s/ Douglas M. Firstenberg ---------------------------------------- Douglas M. Firstenberg Its: General Partner TENANT: Impac Hotel Group, L.L.C. By: /s/ Robert S. Cole ---------------------------------------- Its: President ---------------------------------------- Attest: /s/ Nancy Wolff ---------------------------------------- Its: Asst. Secretary ---------------------------------------- [CORPORATE SEAL] 29 EXHIBIT "A" TWO LIVE OAK CENTER [Architectural Design of Building and adjacent buildings] ACCESSIBILITY PLAN EXHIBIT A-1 All that tract or parcel of land lying and being in Land Lot 45, 17th District, City of Atlanta, Fulton County, Georgia, being more particularly described as follows: Commence at the intersection of the southwest right-of-way of Oak Valley Road, having a 40 foot right-of-way, and the northwest right-of-way of Kingsboro Road, having a varying right-of-way; thence, southwesterly, along said Kingsboro Road right-of-way, South 61 degrees 13 minutes 09 seconds West, a distance of 151.70 feet to a point; thence, North 28 degrees 39 minutes 50 seconds West, a distance of 2.50 feet to a point; thence, South 61 degrees 20 minutes 10 seconds West, a distance of 270.80 feet to a point; thence, along an arc of curve to the right (which has a radius of 11.00 feet, and a central angle of 90 degrees 18 minutes 58 seconds, and a chord distance of 15.60 feet, along a bearing of North 73 degrees 49 minutes 24 seconds West), an arc distance of 17.34 feet to a point, said point being the intersection of said Kingsboro Road right-of-way and the northeast right-of-way of Lenox Road, having a varying right-of way; thence, northwesterly, along said Lenox Road right-of-way, North 28 degrees 58 minutes 48 seconds West, a distance of 344.00 feet to a point; and THE TRUE POINT OF BEGINNING. Thence, North 28 degrees 58 minutes 48 seconds West, a distance of 241.58 feet to a point; thence, North 61 degrees 36 minutes 39 seconds East, a distance of 176.00 feet to a point; thence, North 61 degrees 36 minutes 39 seconds East, a distance of 95.70 feet to a point; thence, South 28 degrees 56 minutes 47 seconds East, a distance of 150.00 feet to a point; thence, South 28 degrees 56 minutes 55 second East, a distance of 100.22 feet to a point; thence, North 61 degrees 11 minutes 27 seconds East, a distance of 160.74 feet to a point, said point being located on the aforementioned Oak Valley Road right-of-way; thence, southeasterly, along said right-of way, South 29 degrees 18 minutes 25 seconds East, a distance of 59.90 feet to a point; thence, leaving said right-of-way, South 61 degrees 09 minutes 28 seconds West, a distance of 150.31 feet to a point; thence, South 28 degrees 45 minutes 21 seconds East, a distance of 140.00 feet to a point; thence, South 61 degrees 12 minutes 40 seconds West, a distance of 121.90 feet to a point; thence, North 28 degrees 58 minutes 20 seconds West, a distance of 210.20 feet to a point; thence, South 61 degrees 19 minutes 38 seconds West, a distance of 160.00 feet to a point, said point being located on the aforementioned Lenox Road right-of-way and THE TRUE POINT OF BEGINNING. EXHIBIT "B" [Architectural Design of Floor Space] TWO LIVE OAK CENTER PEACHTREE AT LENOX Seventh Floor 3445 Peachtree Road Vacant - Suite 700 20,698 USF/21,817 RSF Hines (404) 261-5900 (404) 233-1692 (fax) PREPARED BY: NILES Bolton Interior Design EXHIBIT C BUILDING STANDARD; BASE BUILDING IMPROVEMENTS; ALLOWANCE (a) When used in the Lease, the term "Building Standard" shall mean such materials as are described or depicted in the Building plans and specifications by Thompson, Ventulett, Stainback and Associates or materials of comparable quality as may be substituted therefor by Landlord. (b) The following Base Building Improvements in the Leased Premises shall be substantially complete upon delivery of Leased Premises to Tenant: 1. Building Standard "shell" heating, ventilation and air conditioning system installed in accordance with the Building Plans and Specifications, which system includes one Building Standard horizontal multi-zone blow through air handling unit in the air handling room on each floor, with full floor distribution ductwork to provide ten (10) zones of heating and cooling on each floor. Landlord shall install the perimeter slot diffusers. 2. Building Standard automatic fire sprinkler system, which system is designed to meet NFPA light hazard occupancy but not to exceed one (1) Building Standard sprinkler head per two hundred twenty-five (225) usable square feet as affixed to the structure and ready for extension and/or relocation by Tenant, at Tenant's cost, to accommodate Tenant's leasehold improvements. 3. Building Standard fire protection alarm and voice communications system designed to meet NFPA and applicable local code based upon an assumed open floor plan, ready for extension at Tenant's cost to accommodate Tenant's leasehold improvements. 4. New Perimeter glass and metal curtain wall at the exterior of the Building, including Building Standard mini-blinds on all exterior window openings. Perimeter drywall shall be taped, floated and sanded, ready for paint by Tenant. 5. Restrooms, stairs, vestibules and other building core areas shall be installed in accordance with the Building plans and specifications. Core walls will be sanded and ready for paint by Tenant. Interior columns will be concrete. 6. On floors to be occupied by a single tenant, the on floor elevator lobby will be turned over in the Building Standard shell condition, ready for Tenant's finishes. 7. Other than noted above or shown in the Building plans and specifications, the Leased Premises is leased in an "as-is, where-is" condition. Tenant shall be responsible for verification of all existing building conditions and acknowledges that Landlord is not responsible for conflicts between existing conditions and plans and specifications other than the Building plans and specifications identified in Paragraph (a) above. (c) Landlord shall provide an allowance to offset the cost for the design, construction and installation of the tenant fit-up and finish work (including telecommunications systems) in the Leased Premises, and to offset Tenant's relocation costs, of Twenty-Seven and No/100 Dollars ($27.00) per rentable square foot within the Leased Premises (the "Allowance"). To the extent the costs to design and complete the tenant fit-up and finish work in the Premises and Tenant's relocation costs are less than the Allowance, then Landlord shall retain the difference. To the extent the costs to design and complete the tenant fit-up and finish work in the Leased Premises and Tenant's relocation costs are greater than the Allowance, then, at Tenant's written request, the Landlord shall provide an additional allowance (the "Additional Allowance") equal to the amount of such excess, subject to a maximum Additional Allowance of One Dollar and 50/100 ($1.50) per rentable square foot within the Leased Premises. In the event Landlord provides the Additional Allowance, Net Rental (as defined in Section 2.02) shall be increased by an amount equal to the Additional Allowance (on a per net rentable square foot basis) amortized over the Term at an eleven percent (11 %) interest rate. (For example, for each $0.50 per rentable square foot provided by Landlord as an Additional Allowance, the Net Rental shall increase by $0.12 per rentable square foot). The Allowance (and, if applicable, the Additional Allowance) shall be paid to Tenant, based on paid invoices, upon Tenant occupying the Leased Premises, commencing the conduct of its business therefrom, payment of the first installment of Net Rental, and execution and delivery to Landlord of Exhibit G, and provided that Tenant is not in default under any terms and covenants of this Lease. To the extent the costs to design and complete the tenant fit-up and finish work in the Leased Premises and Tenant's relocation costs are greater than the Allowance and the Additional Allowance, then the amount of such excess shall be paid by Tenant. (d) In addition to the Allowance, Landlord shall provide an allowance of up to $0.10 per rentable square foot within the Leased Premises to offset the cost of the preparation and revision of the Space Plan. All additional costs for the preparation and revision of the Space Plan shall be paid for by Tenant. EXHIBIT D CONSTRUCTION OF INITIAL LEASEHOLD IMPROVEMENTS FOR IMPAC HOTEL GROUP I. SCHEDULE OF CRITICAL DATES The following is a schedule of certain critical dates relating to Landlord's and Tenant's respective obligations with respect to construction of the leasehold improvements for the Leased Premises. These dates, the specific references (e.g. the "Tenant Construction Documents Delivery Date") and the respective obligations of Landlord and Tenant are more fully described in Section II below. All references to days mean calendar days, not working or business days.
Responsible Date Due Party Reference May 9, 1997 Tenant "Tenant Construction Documents Delivery Date" Within 7 days after Landlord "Tenant Construction Landlord Submits Documents Delivery Date" Tenant Construction Documents Within 7 days after Tenant "Tenant Construction Landlord receives Documents Resubmittal Date" Tenant's written comments on Tenant Construction Documents
II. LANDLORD AND TENANT PRE-CONSTRUCTION OBLIGATIONS 1. Tenant shall inform Landlord of the architect and engineer which Tenant proposes to employ to prepare the Space Plan, the Preliminary Tenant Construction Documents and the Tenant Construction Documents, and Landlord shall have the right to approve the proposed architect and engineer, which approval shall not be unreasonably withheld, delayed or conditioned. 2. Tenant has delivered to Landlord Space Plan PP-7 dated March 10, 1997 prepared by Niles Bolton (the "Space Plan"), which Space Plan will be used to prepare the Tenant Construction Documents (defined below). 3. Landlord, by letter dated April 4, 1997, a copy of which is attached hereto as Exhibit D-2 has approved the Space Plan with the comments indicated therein. 4. Tenant shall cause to be furnished to Landlord, on or before the Tenant Construction Documents Delivery Date, working drawings which shall consist of Tenant's architectural plans and specifications along with sets of structural, mechanical, electrical and plumbing plans and specifications and which collectively will contain and present at least the information described in Section IV. below (the "Tenant Construction Documents"). 5. Landlord shall provide a general review of the Tenant Construction Documents for conformity with the Space Plan and for possible conflicts with the base Building systems and shall deliver any comments to Tenant on or before the Tenant Construction Documents Review Date. Tenant will pay the reasonable cost of Landlord's engineer's review of the proposed connections to and/or modification of the base Building systems as shown on the Preliminary Tenant Construction Documents. 6. If necessary, Tenant shall revise the Tenant Construction Documents to incorporate Landlord's comments and shall resubmit the revised Tenant Construction Documents to Landlord on or before the Tenant Construction Documents Resubmittal Date. Tenant shall remain responsible for the accuracy, coordination and completeness of the Tenant Construction Documents. 7. Tenant shall be responsible for the cost of preparing, printing and submitting the Tenant Construction Documents for pricing. 8. Tenant shall pay Landlord a fee in the amount equal to twenty-five cents ($0.25) multiplied by the number of net rentable square feet within the Leased Premises for reviewing the Space Plan, the Preliminary Tenant Construction Documents and the Tenant Construction Documents. III. CERTAIN PROVISIONS RELATING TO CONSTRUCTION 1. As used in this Lease, the "Completion Date" means the date upon which Tenant's leasehold improvements, as shown on the Tenant Construction Documents, are substantially completed by Tenant. 2. As used herein, "Delay Items" shall refer to (i) delays in the completion of design, documentation or construction of Tenant's leasehold improvements which are caused by Tenant, its architects, engineers, vendors, contractors, suppliers or consultants (a delay attributable to Tenant), and (ii) delays in the completion of construction of Tenant's leasehold improvements due to limited supplies or suppliers, delays in fabrication, installation or delivery, labor problems or other foreseeable circumstances, provided that Landlord identifies to Tenant in writing, on or before the Tenant Construction Agreement Submittal Date,. any such portion of Tenant's Extra Work which may delay completion of construction of the Leased Premises beyond the date of completion of construction of the Leased Premises, had the Leased Premises contained only Building Standard improvements, and (iii) those items defined in Paragraph 3 below. 3. Delay Items shall include but not be limited to the following: (a) failure by Tenant or its architects, engineers, space planners or others employed by Tenant to timely comply with the schedule set forth in Section I, or the provisions of Sections II or IV, or to timely provide such supplemental information as Landlord may request, but only to the extent such failure results in Tenant's leasehold improvements being substantially completed later than they would have been substantially completed absent said failure (a delay attributable to Tenant); and (b) failure by Landlord to timely comply with the schedule set forth in Section I (a delay attributable to Landlord); and (c) changes in the Tenant Construction Documents made by Tenant during the general contractor pricing process which result in a delay in Landlord's ability to release the contractor to commence construction (a delay attributable to Tenant); and (d) changes in the Tenant Construction Documents made by Tenant during construction of Tenant's leasehold improvements, which result in Tenant's leasehold improvements being substantially completed later than they would have been substantially completed absent said changes (a delay attributable to Tenant); and (e) any "long-lead time" above-Building Standard (a description of Building Standard leasehold improvements being attached hereto as Schedule D- 1) leasehold improvement item (e.g. millwork) which cannot be fabricated, delivered to the job, and completely installed within the same time frame as the remainder of the leasehold improvements shown on the Tenant Construction Documents (a delay attributable to Tenant); and (f) failure by Tenant to timely execute a change order for changes requested by Tenant (a delay attributable to Tenant). 4. If Tenant makes any changes in the work after Landlord has been released to commence construction of the improvements, Tenant shall be responsible for any increases in the cost thereof (or any delays resulting therefrom) plus an additional charge equal to fifteen percent (15%) of such costs as a construction management administrative cost recovery payable to Hines. 5. The failure of Tenant to comply with the requirements of this Exhibit D shall constitute a default by Tenant under this Lease. 6. As used in this Lease, the "Applicable Amount" shall be an amount equal to ten percent (10%) of the costs identified in the Tenant Construction Agreement (including any contractors' fees and general conditions) which will be incurred by Landlord in installing the Tenant Extra Work. 7. Any and all work which affects the connections to a Base Building system (including, without limitation, life safety and fire alarm systems, domestic, chilled or condenser water systems, primary HVAC systems, Building temperature control systems, access control systems, plumbing, mechanical systems or electrical systems) shall, at Landlord's election, be completed by contractors selected by Landlord, at Tenant's sole expense. 8. All change orders to the Tenant Construction Documents shall be approved in writing by both Landlord and Tenant. Prior to such approval, Tenant's Architect shall issue a Change Order Request including changed plans and/or specifications delineating the change to Landlord's general contractor for a quotation of the cost of the proposed change and any time delay resulting therefrom. Upon such approval of a change order, the Tenant Construction Documents shall be deemed revised to incorporate the change. IV. MINIMUM INFORMATION REQUIRED OF TENANT CONSTRUCTION DOCUMENTS Floor Plans Indicating: 1. Location and type of all partitions (1/8" = 1'-0" scale). 2. Location and types of all doors with hardware and keying information provided (door and hardware schedule). 3. Location and type of glass partitions, windows and framing. 4. Location of telephone equipment room (note type of telephone system, square feet of mounting boards and HVAC and electrical requirements). 5. Critical dimensions necessary for construction. 6. Location and type of all Building Standard electrical items including outlets, switches, and telephone outlets. 7. Reflected ceiling plan showing location and switching of all Building Standard lighting, exit signs, emergency lighting and life safety devices. 8. Location and type of all non-Building Standard electrical items, including lighting, security and data/voice communication work. 9. Location and type of equipment that will require special electrical requirements (i.e., dedicated circuits, data, GFI, special grounding, etc.). Provide manufacturers specifications for use and operation. 10. Electrical panel schedule with total rated electrical design load calculation in watts. 11. Location, weight per square foot and description of any exceptionally heavy equipment or filing system exceeding 50 pounds per square foot live load. 12. Requirement for any special air conditioning, ventilation or exhaust. 13. HVAC Reflected Ceiling Plan. 14. Mechanical equipment schedule indicating sizes, specifications and characteristics of all equipment. 15. Complete heating and cooling load calculation for all equipment. 16. Type and color of floor covering (including type of padding). 17. Location, type and color of wall covering. 18. Location, type and color of paint and all other finishes. 19. Location and type of plumbing (including all fixtures). 20. Location and type of kitchen, pantry or coffee bar equipment, millwork and shelving. 21. All millwork and built-in equipment fully dimensioned. 22. Corridor entrance doors and frame, as well as work required in the adjacent corridor and elevator lobby. 23. Bracing or support of special walls, glass partitions, etc. 24. All connections to or modifications of the Base Building mechanical, electrical, plumbing and fire protection systems. 25. All new mechanical, electrical and plumbing metering devices or systems. V. OUTSIDE CONTRACTOR Tenant may use Impac Development & Construction, L.L.C. (the "Outside Contractor") to install the improvements shown on the Tenant Construction Documents. If Tenant so elects to use the Outside Contractor, then the following shall apply 1. Tenant shall obtain the prior written consent of Landlord as to the Outside Contractor to be used by Tenant. 2. Tenant shall provide, at Tenant's cost, all required copies of the Tenant Construction Documents and other required documents to the Outside Contractor. 3. It shall be Tenant's responsibility to ensure that the Outside Contractor shall (i) conduct its work in such a manner so as not to unreasonably interfere with any other construction occurring on or in the Building or the Leased Premises; (ii) comply with the rules and regulations relating to the construction activities in or on the Building, and such other reasonable rules and regulations as may be promulgated from time to time by Landlord or any contractor or subcontractor Landlord selects to perform the Landlord's Work (hereinafter called the "Tenant General Contractor"), or the Base Building contractor, (iii) maintain such insurance and bonds in force and effect as may be reasonably requested by Landlord or as required by applicable law (but in any event said insurance shall be in amounts at least equal to those required of the Tenant General Contractor and the Base Building contractor); and (iv) be responsible for reaching agreement with Landlord, the Tenant General Contractor and the Base Building contractor as to the terms and conditions for all Outside Contractor items relating to conducting its work, including but not limited to those matters relating to the payment for utilities, parking, the storage of materials and access to the Leased Premises. As a condition precedent to Landlord's approving the Outside Contractor under Paragraph I above, Tenant and the Outside Contractor shall deliver to Landlord such assurances or instruments to evidence the Outside Contractor's compliance or agreement to comply with the provisions of this Paragraph 3. Landlord retains the right to make periodic inspections to assure conformity with the rules and regulations and with the Tenant Construction Documents. 4. Tenant shall indemnify and hold harmless Landlord, the Tenant General Contractor, the Base Building contractor or any of Landlord's other contractors from and against any and all losses, damages, costs (including costs of suits and attorneys' fees), liabilities, or causes of action arising out of or relating to the work of the Outside Contractor, including but not limited to mechanics', materialmen's or other liens or claims (and all costs or expenses associated therewith) asserted, filed or arising out of any such work. All materialmen, contractors, artisans, mechanics, laborers and other parties hereafter contracting with Tenant for the furnishing of any labor, services, materials, supplies or equipment with respect to any portion of the Leased Premises are hereby charged with notice that they must look solely to Tenant for payment for same. Without limiting the generality of the foregoing, Tenant shall be responsible for the payment of any and all costs of repairing any and all damage caused by the Outside Contractor, its subcontractors or their employees. Any costs incurred by Landlord to repair any damage caused by the Outside Contractor, its subcontractors or their employees, and any costs incurred by Landlord in requiring the Outside Contractor's, its subcontractors' or their employees' compliance with the rules and regulations in Paragraph 3(ii) above, will become the obligation of Tenant under this Lease. 5. Tenant shall, at Tenant's sole cost and expense, cause Tenant's mechanical and electrical engineer(s) to prepare a report, in form and substance acceptable to Landlord, for the benefit of Landlord, certifying to the compliance of the work constructed by the Outside Contractor with the Tenant Construction Documents. 6. Unless Landlord otherwise agrees, the Outside Contractor shall not have access to the Leased Premises, or be allowed to commence work therein, until Landlord releases and Tenant accepts the Leased Premises. Landlord and Tenant will cooperate in good faith to document any deficiencies or incomplete items relative to the Leased Premises so as not to cause any delay in work of the Outside Contractor. 7. The "Completion Date" shall mean the date upon which the Outside Contractor (or Tenant) could have completed the work shown on the Tenant Construction Documents, accelerated by any Delay Items identified therein (and agreed upon as days for purposes hereof). 8. Upon request from Landlord, whether written or oral, the Outside Contractor shall perform any activity that is disrupting to the conduct of business within the Building including any activity creating loud noises or undesirable odors, during nonbusiness hours. The Outside Contractor shall provide for adequate ventilation in the Leased Premises at all times. 9. Tenant shall receive from the Outside Contractor and subcontractors and provide to Landlord monthly lien waivers and affidavits in a form satisfactory to Landlord. 10. Upon substantial completion, the Outside Contractor shall provide the Landlord with As-Built Drawings, Operation and Maintenance Manuals (for any equipment installed), a Master Warranty Schedule and copies of all warranties and guarantees. 11. Tenant shall ensure that the Outside Contractor pays all of its suppliers and subcontractors within fifteen (15) days of receipt of payment by Tenant. 12. If the terms of this Section V conflict with any of the other terms of this Exhibit D or the Lease, the terms of this Section V shall govern. SCHEDULE D-1 BUILDING STANDARD LEASEHOLD IMPROVEMENTS DECEMBER 17, 1996 THIS IS NOT A SPECIFICATION. THE DESIGN ARCHITECT SHOULD DEVELOP A COMPLETE SPECIFICATION OF EACH ITEM. LANDLORD DOES NOT STOCK ANY OF THESE ITEMS. Drywall Partition: Ceiling high partition consisting of 3-5/8," 25 gauge metal studs 24" on center and 1/2" drywall on each side. Partitions receive two coats of eggshell latex paint. Door: Full height, flush face, solid core, stain grade mahogany wood door; finish to match Landlord Architect's color. Frame: 3' x 8'-6" hollow metal field painted door frame. Hardware: Sargent 8200 LNB mortise latchset with "B" lever handles and LN Rose in a US 32 (polished stainless steel) finish. Entrance doors are equipped with locksets. Carpet: Shaw Commercial "Cypress Point IV and Patcraft Jazz 36" 36 oz cut pile carpet glued down in manufacturer's standard colors. Base: 4" rubber cove base. Acoustical Ceiling: 2' x 2' lay in with Donn Centricitee 9/16" exposed tee fineline grid ceiling system and 24 x 24" Armstrong #589 Cirrus white beveled regular tile; shadow molding at exterior window to be 3/8" reveal. Sprinkler Head: Fast response semi-recessed pendant type sprinkler head. Light Fixture: 2' x 4' lay in 277 volt fluorescent fixture with an 18 cell silver semi-specular anodized aluminum parabolic lens, 3-lamp, using energy saving cool white T-8 lamps with electronic ballast. Electronic ballast will have less than 10% harmonic distortion and a power factor equal to or greater than .99. Light Switch: Beige decorator style light switch mounted 4' - 6" above the floor. Power Outlet: Beige decorator style wall-mounted 15 amp, 120 volt duplex outlet mounted 18" above the floor (measured to centerline of outlet). Telephone/Data Outlet: Outlet box mounted 18" above the floor with a conduit extended to the ceiling plenum. Wire and face plate are provided by the Tenant's telephone contractor. Exit Signs: Lithonia "Precise" Edgelit, LPR, Brushed Aluminum Housing, 6" GREEN Lettering on Clear Lexan, 120/277 Dual Voltage, LED Lamps, Ceiling Mounted. Life Safety Devices: Simplex 4900 Series Notification Appliances. EXHIBIT D-2 April 4, 1997 Mr. Sam Davis Impac Hotel Group 3399 Peachtree Road, N.E. Suite 1220 Atlanta, GA 30326 RE: IMPAC HOTEL GROUP TENANT SPACE AT TWO LIVE OAK Dear Mr. Davis: In accordance with the proposed lease, the Landlord has reviewed and approves the Space Plan with the following comments: 1. The emergency doors at the elevator lobby are serving as security doors for the premise. Please conform to code requirements regarding coordination of security and fire alarm systems between the building and tenant system. 2. The corridor doors adjacent to fire stairs A and B must not impede fire egress requirements. Please conform to code requirements. 3. Please submit a drawing indicating ceiling heights and locations of different types of ceiling materials. Sincerely, /s/ Sean Patrick McArdle Sean Patrick McArdle Assistant Construction Manager cc Steve Dolman Milton Baker Ben Pargman, Troutman Sanders Suzanne Seymour, NBID Hines Five Ravinia Drive Atlanta. Georgia 30346-2102 (770) 206-5300 (770) 206-5325 or 5327 FAX EXHIBIT E AIR CONDITIONING AND HEATING SERVICES Subject to the provisions of Section 3.01(b), Landlord will furnish Building Standard air conditioning and heating between 7 a.m. and 6 p.m. on weekdays (from Monday through Friday, inclusive) and between 8 a.m. and 1:00 p.m. on Saturdays, all exclusive of Holidays as defined below (the "Building Operating Hours"). Upon request of Tenant made in accordance with the rules and regulations for the Building, Landlord will furnish air conditioning and heating at other times (that is, at times other than the times specified above), in which event Tenant shall reimburse Landlord for Landlord's actual cost of furnishing such services. The following dates shall constitute "Holidays" as said term is used in this Lease: (a) New Year's Day (b) Memorial Day (c) Independence Day (d) Labor Day (e) Thanksgiving Day (f) Friday following Thanksgiving Day (g) Christmas (h) Any other holiday generally recognized as such by landlords of office space in the metropolitan Atlanta office market, as determined by Landlord in good faith. If in the case of any holiday described in (a) through (g) above, a different day shall be observed than the respective day above described, then that day which constitutes the day observed by national banks in Atlanta, Georgia on account of such holiday shall constitute the holiday under this Lease. EXHIBIT F BUILDING RULES & REGULATIONS 1. Sidewalks, doorways, vestibules, halls, stairways and other similar areas shall not be used for the disposal of trash, be obstructed by tenants or be used by tenants for any purpose other than entrance and exit to and from the Leased Premises and for going from one part of the Building to another part of the Building. 2. Plumbing fixtures shall be used only for the purposes for which they are designed and no sweepings, rubbish, rags or other unsuitable materials shall be disposed therein. Damage to any such fixtures proven to result from misuse by a tenant shall be the liability of the tenant. 3. Signs, advertisements, graphics, or notices visible in or from public corridors or from outside the Building shall be subject to Property Management's prior written consent. 4. Tenant will not make any alterations or physical additions in or to its leased premises without first obtaining the written consent of Property Management, except as otherwise permitted in its lease. Such alterations include, but are not limited to, any communication equipment and associated wiring which must meet fire code. 5. All locks for doors in each tenant's leased premises shall be Building Standard except as otherwise permitted in its lease and no tenant shall place any additional lock or locks on any door in its leased premises without Property Management's written consent except as otherwise permitted in the Lease. All requests for duplicate keys shall be made to the Property Management office. 6. Movement in or out of the Building of furniture, office equipment, or any other bulky or heavy materials shall be restricted to such hours as Property Management reasonably designates. Landlord will determine the method and routing of said items so as to ensure the safety of all concerned. Tenant will assume all risks of damage or injury to the Building, equipment or people. Advance written notice of intent to move such items must be made to the Property Management office at least twenty-four (24) hours before the time of such move. 7. All routine deliveries to tenant's leased premises between 8:00 a.m. and 5:30 p.m. weekdays shall be made through the freight elevator. Passenger elevators are to be used only for the movement of persons unless an exception is approved by the Property Management office. All non hand-carried items must be delivered via the appropriate freight elevator. Absolutely no carts or dollies are allowed through the main entrances or on passenger elevators. After hours removal of hand-carried items must be accompanied by an "equipment removal form" or "Property Pass." A letter signed by the tenant representative on company letterhead will also be acceptable. 8. Property Management shall have the authority to prescribe the weight and manner that safes and other heavy equipment are positioned except as otherwise provided in the lease. 9. Corridor doors when not in use shall be kept closed. 10. Each tenant shall cooperate with Property Management's employees in keeping its leased premises neat and clean. No tenant shall employ any person for the purpose of such cleaning other than the Building's cleaning and maintenance personnel without prior approval by Landlord. 11. All freight elevator lobbies are to be kept neat and clean. The disposal of trash or storage of materials in these areas is prohibited. 12. No vending machines of any type shall be allowed in a tenant's leased premises without the prior written consent of Property Management. 13. No birds or animals shall be brought into or kept in, on or about public or tenant areas (except seeing eye dogs actively in use by a person declared legally blind in the State of Georgia). 14. Tenant shall not tamper with or attempt to adjust temperature control thermostats its leased premises. Property Management shall adjust thermostats as required to maintain the Building Standard temperature. Landlord requests that all window blinds remain down and tilted at a 45 degree angle toward the street to help maintain comfortable room temperatures and conserve energy. 15. Tenant will comply with all requirements necessary for the security of its leased premises both during business hours and after hours and on weekends. 16. Tenants are requested to lock all office doors leading to corridors and to turn out all lights at the close of their working day. 17. All requests for overtime air conditioning or heating must be submitted in writing to the Property Management office by 4:00 p.m. on the day desired for weekday requests and by 4:00 p.m. Friday for weekend requests. 18. All tenant modifications resulting from remodeling on or to its leased premises must conform to the Fulton County Building and Fire Codes. Tenant shall obtain approval from the Property Management office of any such modifications and shall deliver "As Built" plans therefore to the Property Management office upon completion except as otherwise permitted in its lease. The contractor conducting the renovation is subject to the contractor rules and regulations while performing work in the Building. 19. Tenants shall not make or permit any improper noises in the Building or otherwise interfere in any way with other tenants or their visitors. 20. Neither Landlord nor Property Management will be liable or responsible for lost or stolen money, jewelry or other personal property from the tenant's leased premises or public areas regardless or whether such loss occurs when the area are locked against entry or not 21. No machinery of any kind other than normal office equipment shall be operated by any tenant in its leased premises without the prior written consent of Property Management, nor shall any tenant use or keep in the Building any flammable or explosive fluid or substance except in accordance with local fire codes and procedure approved by Landlord. 22. Tenant may not place any items on the balconies of the Building without obtaining Property Management's prior written consent 23. Canvassing, peddling, soliciting and distribution of hand bills in the Building are prohibited. Each tenant is requested to notify Property Management if such activities occur. 24. A "Tenant Contractor Entrance Authorization" form will be required for the following: a. Base building access to mechanical or electrical rooms (e.g., Bell Telephone employee). b. After hours freight elevator use. c. After hours building access by tenant's contractor. Please note that the tenant will be responsible for contacting the Building Security for clearance of such tenant contractors. 25. Smoking is not permitted in the common areas of the building (i.e. restrooms, stairwells, elevators or public corridors). Tenant shall not permit smoke from cigarettes, cigars, or any other type of smoking instrument used by tenant or tenant's employees, agents, invitees, or licensees to filter into the Common Areas of the Building, or into any other tenant's premises, or to create in any manner a nuisance which annoys or disturbs other tenants in the Building, or interferes with other tenant's rights of quiet enjoyment of their premises in the Building (collectively the "Smoking Nuisance"). Additionally, tenant shall inform all of its employees (and all other agents and contractors who regularly occupy the premises) of the foregoing restrictions set forth in this paragraph. If a Smoking Nuisance is generated in the tenant's Premises, Landlord shall notify tenant, and tenant shall cause the situation to be remedied within ten (10) days after Landlord's request, or if repeated breaches occur that, even if cured as they arise after notice from Landlord, result in Landlord's making demand upon tenant, Landlord shall have the right to undertake such modifications to the Building HVAC system as shall be necessary to prevent further breaches, and tenant shall pay Landlord's costs in connection therewith within ten (10) days after demand by Landlord accompanied by invoices or receipts evidencing such costs, plus a fifteen percent (15%) management fee. 26. Tenants and tenant's contractors are responsible for removal of trash resulting from large deliveries or move-ins, not using building facilities for dumping. 27. Tenants may not leave or store equipment, supplies, furniture or trash in the common areas outside their leased premises. 28. Portable space heaters are prohibited. 29. Live Christmas trees are prohibited. 30. Property Management reserves the right to rescind any of these rules and regulations and to make such other and further reasonable rules and regulations as in its judgment shall from time-to-time be required for the safety, care and cleanliness of the Building, the operation thereof, the preservation of good order therein and the protection and comfort of the tenants and their agents. 31. Tenant agrees to comply with Building Fire Safety procedures and to participate in all the Fire Safety and Emergency Training and Drills. EXHIBIT G NET RENTABLE AREA AND COMMENCEMENT DATE The net rentable area of Tenant's Leased Premises is 21,817 net rentable square feet. The below date represents Landlord's determination of the Commencement Date, as defined in Section 1.02 (b) of the Lease between Landlord and Tenant to which this EXHIBIT G is attached, and shall be deemed to be the Commencement Date for all purposes under the Lease. LANDLORD: TENANT: By: ----------------------------------- Its: ----------------------------------- IMPAC HOTEL GROUP, L.L.C. EXHIBIT G NET RENTABLE AREA AND COMMENCEMENT DATE The calculation below represents Landlord's final determination of the net rentable area of Tenant's Leased Premises and shall be used to define the net rentable area of the Leased Premises for purposes of Section 1.01(c) of the Lease between Landlord and Tenant to which this EXHIBIT G is attached. The date below represents Landlord's determination of the Commencement Date, as defined in Section 1.02(b) of the Lease between Landlord and Tenant to which this EXHIBIT G is attached, and shall be deemed to be the Commencement Date for all purposes under the Lease. Calculation of Net Rentable Area: 21,817 Square Feet Commencement Date: July 7,1997 Expiration Date: June 30, 2003 LANDLORD: CSB - Georgia Limited Partnership By: Cousins Properties Incorporated, managing agent By: /s/ Jack A. LaHue ------------------------------------ Its: Vice President ------------------------------------ TENANT: Impac Hotel Group, L.L.C. By: /s/ Robert S. Cole ------------------------------------ Its: President ------------------------------------ EXHIBIT H RENEWAL OPTION As long as Tenant is not in default in the performance of its covenants under this lease, Tenant is hereby granted the option to renew the Term of this Lease for a period of five (5) additional years ("Renewal Term"), to commence at the expiration of the initial Term of this Lease. If Tenant intends to exercise this renewal option, then Tenant shall deliver written notice of Tenant's preliminary intent to renew to Landlord at least twelve (12) months prior to the expiration of the initial Term of this Lease. Landlord shall within thirty (30) days of Landlord's receipt of Tenant's preliminary notice of intent to renew, provide written notice to Tenant of the Market Net Rental Rate, defined below. Tenant shall, within thirty (30) days of Tenant's receipt of Landlord's notice of Market Net Rental Rate, give written notice to Landlord of Tenant's intent to renew. The renewal of this Lease shall be upon the same terms and conditions of this lease, except (a) the Net Rental during the Renewal Term shall be the prevailing Market Net Rental Rate at the time the Renewal Term commences, but in no event less than the Net Rental that Tenant is then paying under the terms of this Lease, (b) Tenant shall have no option to renew this lease beyond the expiration of the Renewal Term, (c) Tenant shall not have the right to assign its renewal rights to any sublessee of the Leased Premises or assignee of the lease, nor may any such sublessee or assignee exercise such renewal rights, and (d) the leasehold improvements will be provided in their then-existing condition (on an "as is" basis) at the time the Renewal Term commences. MARKET NET RENTAL RATE. Whenever used in this Lease, the term "Market Net Rental Rate" shall mean Landlord's determination of the annual net rental rate per square foot (exclusive of expense pass-through additions) of net rentable area then being charged in first-class office buildings located in suburban Atlanta, Georgia, for space comparable to the space for which the Market Net Rental Rate is being determined (taking into consideration use, location, and/or floor level within the applicable building, the definition of Net Rentable Area, leasehold improvements provided, remodeling credits or allowances granted, quality, age and location of the applicable building, rental concessions [such as abatements or lease assumptions], the provision of free or paid unassigned parking, the time the particular rate under consideration became effective, size of tenant, relative operating expenses, relative services provided, term, etc.) It is agreed that BONA FIDE written offers to lease comparable space located elsewhere in the Building from third parties (at arm's length) may be used by Landlord as an indication of Market Net Rental Rate. If Tenant gives notice that it disagrees with Landlord's determination of Market Net Rental Rate, Tenant's notice shall include Tenant's determination of Market Net Rental Rate. Landlord and Tenant will then use their reasonable good faith efforts to reach a mutual agreement on the Market Net Rental Rate within thirty (30) days after Landlord's receipt of Tenant's notice. If Landlord and Tenant are unable to reach agreement as to the Market Net Rental Rate within said thirty (30) day period, the dispute shall be submitted to arbitration as set forth herein. Not later than ten (10) days after the arbitration procedure has commenced, each party shall appoint an arbitrator and notify the other party of such appointment, identifying the appointee. Each party hereto agrees to select as its respective appointee a licensed real estate broker, who is an individual of substantial experience with respect to office building ownership, management and marketing in Atlanta, Georgia, which person shall not be regularly employed or have been retained during the last two (2) years as a consultant by the party selecting such person. Neither party may consult directly or indirectly with any arbitrator regarding the Market Net Rental Rate prior to appointment, or after appointment, outside the presence of the other party. The arbitration shall be conducted in Atlanta, Georgia, under the provisions of the commercial arbitration rules of the American Arbitration Association and the applicable Laws of the State of Georgia governing the arbitrator. Not later than ten (10) days after both arbitrators are appointed, each party shall separately, but simultaneously, submit in a sealed envelope to each arbitrator their separate suggested Market Net Rental Rate and shall provide a copy of such submission to the other party. After reviewing such submissions, the two (2) selected arbitrators shall determine whether Landlord's or Tenant's estimate of the Market Net Rental Rate is closer to the actual Market Net Rental Rate. If both arbitrators agree that one of said declared estimates is closer to the actual Market Net Rental Rate, they shall declare that estimate to be the Market Net Rental Rate, and their decision shall be final and binding upon the parties. If the two selected arbitrators are unable to agree on the Market Net Rental Rate within thirty (30) days after receipt of Landlord's and Tenant's submitted estimates, then the arbitrators shall inform the parties. Unless the parties shall both otherwise then direct, said arbitrators shall select a third arbitrator, not later than ten (10) days after the expiration of said thirty (30) day period. If no arbitrator is selected within such ten (10) day period, either party may immediately petition a court with appropriate jurisdiction to appoint such third arbitrator. The third arbitrator shall have the qualifications and restrictions set forth above, and shall conduct an arbitration pursuant to the commercial arbitration rules of the American Arbitration Association. The third arbitrator's decision shall be final and binding as to which estimate (as between Landlord's and Tenant's) of the Market Net Rental Rate is closer to the actual Market Net Rental Rate, and shall select such rate as the Market Net Rental Rate. Such third arbitrator shall make a decision not later than thirty (30) days after appointment. Each party shall be responsible for the costs, charges and/or fees of its respective appointee, and the parties shall share equally in the costs, charges and/or fees of the third arbitrator. EXHIBIT I RIGHT OF FIRST OFFER If at any time during the initial Term of this Lease Landlord is in serious discussions with a third party (excluding, however, any discussions arising out of or relating to an expansion option, renewal option, first right to lease, or other right granted to a tenant of the Building as of the date of this Lease) to lease any portion of the sixth (6th) floor of the Building consisting of less than the number of net rentable square feet determined by subtracting the number of net rentable square feet then leased by Tenant on the sixth (6th) floor (if any) from 10,000, Landlord shall submit written notice of the third party discussion to Tenant (the "Notice"). In addition, if (i) Tenant has theretofore leased less than approximately 7,000 net rentable square feet of space on the sixth (6th) floor, and (ii) the balance of the sixth (6th) floor not leased to Tenant has been leased to third parties pursuant to leases expiring after the expiration of the Term, then if Landlord is in serious discussions with a third party (excluding, however, any discussions arising out of or relating to any expansion option, renewal option, first right to lease, or other right granted to a tenant in the Building either prior to or after the date of this Lease) to lease any other space in the Building consisting of less than the number of net rentable square feet determined by subtracting the number of net rentable square feet then leased by Tenant pursuant to this Exhibit I from 7,000, Landlord shall submit a Notice thereof to Tenant. Upon receipt of the aforesaid Notice from the Landlord, so long as Tenant is not in default of Tenant's covenants under this Lease, Tenant shall have the right (the "Right of First Offer"), exercisable at any time within ten (10) days from the date of such Notice, to lease the space which is the subject of the Notice. Tenant acknowledges that the aggregate size of all space Tenant may lease under this Exhibit I is approximately 10,000 net rentable square feet; provided, if Tenant's right to lease space on floors other than the sixth (6th) floor is triggered, the aggregate size of all space Tenant may lease under this Exhibit I is approximately 7,000 net rentable square feet. Net Rental for such space shall be at the then Market Net Rental Rate, and Landlord shall provide Tenant a Market Improvement Allowance for the construction of Tenant's leasehold improvements. If Tenant elects to exercise the Right of First Offer, Tenant shall, prior to the end of said ten (10) day period, deliver written notice of such exercise to the Landlord, and Tenant's obligation to pay Rent for said space shall commence on the earlier of (x) the date Tenant first occupies all or any portion of such space for the conduct of its business, or (y) sixty (60) business days from Tenant's receipt of the Notice, and the leasing of such space shall be evidenced by an amendment to this Lease which lease amendment shall be fully executed within thirty (30) business days from Tenant's receipt of the Notice. If Tenant elects to exercise the Right of First Offer, but does not within thirty (30) days of its receipt of the Notice execute a lease amendment for the space subject to the Right of First Offer, then Tenant shall forfeit its Right of First Offer for the space in consideration and Tenant shall be deemed to have waived its Right of First Offer with respect to any other space in the Building. If Tenant shall not exercise such Right of First Offer within said ten (10) day period or shall fail to deliver written notice of such exercise as provided above, Landlord shall be free to enter into a lease for the space which was the subject of the Notice, or any portion thereof, with any other person or entity, at any time during the one hundred eighty (180) day period following the expiration of said ten (10) day period. MARKET NET RENTAL RATE. Whenever used in this Lease, the term "Market Net Rental Rate" shall mean Landlord's determination of the annual net rental rate per square foot (exclusive of expense pass-through additions) of net rentable area then being charged in first-class office buildings located in suburban Atlanta, Georgia, for space comparable to the space for which the Market Net Rental Rate is being determined (taking into consideration use, location, and/or floor level with the applicable building, the definition of Net Rentable Area, leasehold improvements, provided, remodeling credits or allowances granted, quality, age and location of the applicable building, rental concessions [such as abatements or lease assumptions], the provision of free or paid unassigned parking, the time the particular rate under consideration became effective, size of tenant, relative operating expenses, relative services provided, etc.) It is agreed that bona fide written offers to lease comparable space located elsewhere in the Building from third parties (at arm's length) may be used by Landlord as an indication of Market Net Rental Rate. MARKET IMPROVEMENT ALLOWANCE. Whenever used in this Lease, the term "Market Improvement Allowance" shall mean Landlord's determination of the tenant improvement allowance then being granted in first-class office buildings located in suburban Atlanta, Georgia, for space comparable to the space for which the Market Improvement Allowance is being determined (taking into consideration existing improvements, size of tenant, length of term, etc.). If Tenant gives notice that it disagrees with Landlord's determination of Market Net Rental Rate and/or Market Improvement Allowance, Tenant's notice shall include Tenant's determination of Market Net Rental Rate and/or Market Improvement Allowance, as the case may be. Landlord and Tenant will then use their reasonable good faith efforts to reach a mutual agreement on the Market Net Rental Rate and/or Market Improvement Allowance within thirty (30) days after Landlord's receipt of Tenant's notice. If Landlord and Tenant are unable to reach agreement as to the Market Net Rental Rate and/or Market Improvement Allowance within said thirty (30) day period, the dispute shall be submitted to arbitration as set forth herein. Not later than ten (10) days after the arbitration procedure has commenced, each party shall appoint an arbitrator and notify the other party of such appointment, identifying the appointee. Each party hereto agrees to select as its respective appointee a licensed real estate broker, who is an individual of substantial experience with respect to office building ownership, management and marketing in Atlanta, Georgia, which person shall not be regularly employed or have been retained during the last two (2) years as a consultant by the party selecting such person. Neither party may consult directly or indirectly with any arbitrator regarding the Market Net Rental Rate or Market Improvement Allowance prior to appointment, or after appointment, outside the presence of the other party. The arbitration shall be conducted in Atlanta, Georgia, under the provisions of the commercial arbitration rules of the American Arbitration Association and the applicable Laws of the State of Georgia governing the arbitrator. Not later than ten (10) days after both arbitrators are appointed, each party shall separately, but simultaneously, submit in a sealed envelope to each arbitrator their separate suggested Market Net Rental Rate and/or Market Improvement Allowance, as applicable, and shall provide a copy of such submission to the other party. After reviewing such submissions, the two (2) selected arbitrators shall determine whether Landlord's or Tenant's estimate of the Market Net Rental Rate and/or Market Improvement Allowance is closer to the actual Market Net Rental Rate and/or Market Improvement Allowance. If both arbitrators agree that one of said declared estimates is closer to the actual Market Net Rental Rate and/or Market Improvement Allowance, they shall declare that estimate to be the Market Net Rental Rate and/or Market Improvement Allowance, and their decision shall be final and binding upon the parties. If the two selected arbitrators are unable to agree on the Market Net Rental Rate and/or Market Improvement Allowance within thirty (30) days after receipt of Landlord's and Tenant's submitted estimates, then the arbitrators shall inform the parties. Unless the parties shall both otherwise then direct, said arbitrators shall select a third arbitrator, not later than ten (10) days after the expiration of said thirty (30) day period. If no arbitrator is selected within such ten (10) day period, either party may immediately petition a court with appropriate jurisdiction to appoint such third arbitrator. The third arbitrator shall have the qualifications and restrictions set forth above, and shall conduct an arbitration pursuant to the commercial arbitration rules of the American Arbitration Association. The third arbitrator's decision shall be final and binding as to which estimate (as between Landlord's and Tenant's) of the Market Net Rental Rate and/or Market Improvement Allowance is closer to the actual Market Net Rental Rate and/or Market Improvement Allowance, and shall select such rate as the Market Net Rental Rate and/or Market Improvement Allowance. Such third arbitrator shall make a decision not later than thirty (30) days after appointment. Each party shall be responsible for the costs, charges and/or fees of its respective appointee, and the parties shall share equally in the costs, charges and/or fees of the third arbitrator. EXHIBIT J SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT THIS AGREEMENT made this _____ day of ________________________________, 19___, between THE PRUDENTIAL INSURANCE COMPANY OF AMERICA (hereinafter called "Lender") and ______________________________________________ (hereinafter called "Tenant"). R E C I T A L S: A. Lender is the owner and the holder of a certain promissory note (the "Note") dated ___________________________ in the face amount of $_______________ payable to the order of Lender or Lender's predecessor in interest under said Note. The note is secured by a [here insert the name of the security instrument] (hereinafter called the "Mortgage") dated of even date with said Note, filed for record under _____________________________ of the Real Property Records of __________________, covering the real property described in Exhibit "A" attached hereto and by reference made part hereof (hereinafter called the "Mortgaged Premises"). B. Tenant is the tenant under that certain Lease Agreement dated ____________________________ (hereinafter called the "Lease), between Tenant and ________________________________ as landlord (said landlord and its successors and assigns under the Lease hereinafter called "Landlord"), covering all or part of the Mortgaged Premises as set forth under the Lease (hereinafter called the "Demised Premises"). C. Tenant and Lender desire to confirm their understanding with respect to the Lease and the Mortgage and to provide herein for the automatic amendment of the Lease in the event Lender shall become the owner of the Mortgaged Premises or the Mortgaged Premises shall be sold by reason of foreclosure or other proceedings brought to enforce the Mortgage or the Mortgaged Premises shall be covered by deed in lieu of foreclosure. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good valuable consideration, the receipt and sufficiency of which are herby acknowledged by all parties, Lender and Tenant hereby agree and covenant as follows: 1. SUBORDINATION. The Lease now is, and shall at all times and for all purposes continue to be, subject and subordinate, in each and every respect, to the Mortgage, with the provisions of the Mortgage controlling in all respects over the provisions of the Lease; moreover the Lease is subordinate and subject, in each and every respect, to any and all increases, renewals, modifications, extensions, substitutions, replacements and/or consolidations of the Mortgage, and all other loan documents securing the Note, provided that any and all such increases, renewals, modifications, extensions, substitutions, replacements and/or consolidations shall nevertheless be subject to the terms of this Agreement. 2. NON-DISTURBANCE. So long as Tenant is not in default (beyond any period given Tenant to cure such default in the Lease) in the payment of rent or additional rent or in the performance of any of the terms, covenants or conditions of the Lease on Tenant's part to be performed, (i) Tenant's possession, occupancy, use and quiet enjoyment of the Demised Premises under the Lease, or any extensions or renewals thereof or acquisition of additional space, which may be effected in accordance with any option therefor in the Lease, shall not be terminated or interfered with by Lender in the exercise of any of its rights under the Mortgage, and (ii) Lender will not join Tenant as a part defendant in any action or proceeding for the purpose of terminating Tenant's interest and estate under the Lease because of any default under the Mortgage. 3. ATTORNMENT. If any proceedings are brought for the foreclosure of the Mortgage or if the Mortgaged Premises be sold pursuant to a trustee's power of sale under the Mortgage, or Lender shall succeed to the interest of Landlord under the Lease in any manner, Tenant shall attorn and be bound to such party (whether Lender or another party) upon any such succession in interest, foreclosure sale, or trustee's sale and shall recognize such party as the Landlord under the Lease. Such attornment shall be effective and self-operative without the execution of any further instrument on the part of any of the parties hereto. Tenant agrees, however, to execute and deliver at any time and from time to time, upon the request of Lender or of any holder(s) of any of the indebtedness or other obligations secured by the Mortgage or any purchaser, any instrument or certificate which, in the sole judgment of the requesting party may be necessary or appropriate (in any such foreclosure proceeding or otherwise) to evidence such attornment. Tenant hereby irrevocably appoints Landlord and any other or future holders of the Note or other obligations secured by the Mortgage or any purchaser at any foreclosure or trustee's sale, jointly and severally, the agent and attorney in fact of Tenant to execute and deliver for and on behalf of Tenant any such instrument of certificate. Such power of attorney shall not terminate on disability of the principal. In the event of any such attornment, Tenant further waives the provisions of any statute or rule of law, now or hereafter in effect, which may give or purport to give Tenant any right or election to terminate or otherwise adversely affect the Lease and the obligation of Tenant thereunder as a result of any such foreclosure proceeding or trustee's sale. 4. OBLIGATIONS OF LENDER. If Lender shall succeed to the interest of the Landlord under the Lease, or if any purchaser acquires the Demised Premises upon any foreclosure of the Mortgage or any trustee's sale under the Mortgage, Lender or such purchaser, as the case may be, shall have the same remedies by entry, action or otherwise in the event of any default by Tenant (beyond any period given Tenant to cure such default) in the payment of rent or additional rent by Tenant or in the performance of any of the terms, covenants and conditions of the Lease on Tenant's part to be performed that the Landlord under the Lease had or would have had if Lender or such purchaser had not succeeded to the interest of Landlord. From and after any such attornment, Lender or such purchaser shall be bound to Tenant under all of the terms, covenants, and conditions of the Lease (as the Lease may be amended by this Agreement upon such attornment), and Tenant shall, from and after the succession to the interest of Landlord under the Lease by Lender or such purchaser, have the same remedies against Lender or such purchaser for the breach of any agreement contained in the Lease that Tenant might have had under the Lease against the Landlord if Lender or such purchaser had not succeeded to the interest of Landlord; provided further, however, that Lender or such purchaser shall not be liable or bound to Tenant as follows: (a) for any act or omission of any prior landlord (including Landlord); or (b) for any offsets or defenses which Tenant might have against any landlord (including Landlord); or (c) for or by any rent or additional rent which Tenant might have paid for more than the current month to any prior landlord (including Landlord); or (d) by any amendment or modification of the Lease made without Lender's consent; or (e) for any security deposit, rental deposit or other deposit paid by Tenant to a prior landlord (including Landlord) unless such deposit is actually paid over to Lender or such purchaser by the prior landlord; or (f) for any repairs or replacements to or required by the Demised Premises or the Mortgaged Premises arising prior to the date Lender takes possession of the Demised Premises; or (g) for any moving, relocation or refurbishment allowance or any construction of or payment or allowance for tenant improvements to the Demised Premises or any part thereof or to the Mortgaged Premises or any part thereof for the benefit of Tenant; or (h) for the payment of any leasing commissions or other expenses for which any prior landlord (including Landlord) incurred the obligation to pay; or (i) by any notice given by Tenant to a prior landlord (including Landlord) unless a copy thereof was also then given to Lender. The person or entity to whom Tenant attorns shall be liable to Tenant under the Lease only for matters arising during such person's or entity's period of ownership, and such liability shall terminate upon the transfer by such person or entity of its interest in the Lease and the Mortgaged Premises and the assumption of such liability by the transferee. 5. NOTICES OF DEFAULT TO LENDER. Tenant agrees to give Lender a copy of any default notice sent by the Landlord under the Lease to Tenant or by Tenant to the Landlord and promptly send written notice to Lender upon learning of any default under the Lease by any party to the Lease. 6. TENANT WARRANTY. Tenant affirms and warrants to Lender that it has validly executed the Lease; the Lease has not been amended except as stated herein, is valid, binding and enforceable, in full force and effect in accordance with its terms, and that there are not any defaults thereunder or any set-offs of counter-claims. 7. RENT PAYMENT. Tenant agrees to pay all rents directly to Lender in accordance with the Lease immediately upon notice of Lender's succeeding to the Landlord's interest under the Lease or that Lender is exercising its rights under the Mortgage or any other loan documents acting to secure the Note (including but not limited to any Conditional Assignment of Rents or any Assignment of Lessor's Interest in Leases held by Lender) following a default by Landlord or other applicable party. 8. NOTICE OF MORTGAGE. To the extent that the Lease shall entitle the Tenant to notice of any mortgage or security agreement, this Agreement shall constitute such notice to the Tenant with respect to the Mortgage and to any and all other mortgages and security agreements which may hereafter be subject to the terms of this Agreement. 9. SUCCESSOR OF LENDER. The term "Lender" as used throughout this Agreement includes any successor, assigns or holder(s) in interest of the indebtedness secured by the Mortgage. 10. LANDLORD DEFAULTS. Tenant agrees with Lender that effective as of the date of this Agreement; (i) that Tenant shall not take any steps to terminate the Lease for any default by Landlord or any succeeding owner of the Mortgaged Premises until after giving Lender written notice of such default, stating the nature of the default and giving Lender thirty (30) days from receipt of such notice to effect cure of the same, or if cure cannot be effected within said thirty (30) days due to the nature of the default, Lender shall have a reasonable time to cure provided that it commences cure within said thirty (30) day period of time and diligently carries such cure to completion; and (ii) that notice to the Landlord under the Lease (oral or written) shall not constitute notice to Lender. 11. NO ABRIDGMENT. Nothing herein contained is intended, nor shall it be construed to abridge or adversely affect any right or remedy of the Landlord under the Lease in the event of any default by Tenant (beyond any period given Tenant to cure such default) in the payment of rent or additional rent or in the performance of any of the terms, covenants or conditions of the Lease on Tenant's part to be performed. 12. AUTOMATIC AMENDMENT OF LEASE. If any proceedings are brought for the foreclosure of the Mortgage or if the Mortgaged Premises shall be sold pursuant to a trustee's power of sale under the Mortgage, of if Lender shall succeed to the interest of Landlord under the Lease in any manner, Tenant agrees that the Lease at such time shall be automatically amended without the necessity of executing any other instrument or agreement so as to be consistent with and subject to each of the following provision notwithstanding anything to the contrary contained in the Lease: (a) LANDLORD'S INSURANCE. If the Prudential Insurance Company of America, a New Jersey corporation ("Prudential"), or any subsidiary or affiliate company of Prudential insured under the master property insurance policy carried by Prudential covering its assets or Prudential's comprehensive general liability policy succeeds to the interest of the Landlord under the Lease, the following provision shall control Landlord's insurance obligations under the Lease: (i) TYPES OF COVERAGE. Landlord covenants and agrees that from and after the date of delivery of the Demised Premises from Landlord to Tenant, Landlord will carry and maintain, at its sole cost and expense, the insurance set forth in paragraphs (A) and (B) below. (A) PUBLIC LIABILITY INSURANCE. General Comprehensive Public Liability Insurance covering the Building and all common areas, but excluding the Demised Premises, insuring against claims for personal or bodily injury or death or property damage occurring upon, in or about the Building or common areas to afford protection to the limit of not less than $2,000,000 combined single limit in respect to injury or death to any number of persons and property damage arising out of any one (1) occurrence. This insurance coverage shall extend to any liability of Landlord arising out of any indemnities provided for in the Lease. (B) FIRE AND EXTENDED COVERAGE INSURANCE. Landlord shall at all times during the term of the Lease maintain in effect a policy or policies of fire and extended coverage insurance covering the Building (excluding property required to be insured by Tenant) in such amounts as Landlord may from time to time determine, providing protection against perils included within the standard Texas form of fire and extended coverage insurance policy, together with insurance against sprinkler damage, vandalism and malicious mischief, and such other risks as Landlord may from time to time determine and with any such deductibles as Landlord may from time to time determine. (ii) SELF INSURANCE. Any insurance provided for above may be effected by self-insurance or by a policy or policies of blanket insurance covering additional items or locations or assureds, provided that the requirements of this paragraph are otherwise satisfied. Tenant shall have no rights in any policy or policies maintained by Landlord. (b) LANDLORD'S INDEMNITIES. Any indemnity provision, hold harmless provision or similar provision(s) creating liability or obligations under the Lease which run in favor of the Tenant and are given by Landlord under the Lease: (i) if relating to, arising out of or connected with the presence, installation, use, transportation, disposal or contamination from or exposure to any hazardous or toxic materials or chemicals or wastes at the Mortgaged Premises or injury or death associated therewith, such indemnities shall be deleted in their entirety and are hereby agreed to be without any force or effect against Lender, and Tenant hereby waives any and all claims, liability and causes of action under the Lease or otherwise against Landlord by reason of any such indemnities; and (ii) if relating to Landlord's actions, failure to act, negligence, gross negligence or intentional misconduct, such indemnities shall be deleted in their entirety and Tenant hereby waives any and all claims, liability and causes of action under the Lease or otherwise against Landlord by reason of any such indemnities, except as to Landlord's gross negligence and intentional misconduct for which Landlord shall remain liable to Tenant, except as otherwise deleted under (i) above. (c) DEFAULTS BY TENANT. With respect to the failure by Tenant to pay rent or to make any other payment required to be made by Tenant under the Lease and with respect to the failure by Tenant to observe and perform any other provision of the Lease to be observed or performed by Tenant, the following provisions shall control notwithstanding anything to the contrary that may be contained in the Lease: (i) FAILURE TO PAY RENT. Any failure by Tenant to pay base rent, additional rent or to make any other payment required to be made by Tenant hereunder when due shall constitute an event of default and a breach of this Lease by Tenant, no notice to Tenant being required for default in payment. Notwithstanding the foregoing, Tenant shall not be in default with respect to the first two (2) failures in any calendar year if such failures do not continue for more than ten (10) days after written notice to Tenant. (ii) FAILURE TO PERFORM. Any failure by Tenant to observe and perform any other provision of this Lease to be observed or performed by Tenant where such failure continues for twenty (20) days after written notice to Tenant shall constitute an event of default and breach of this Lease by Tenant or if such failure cannot reasonably be cured within said twenty (20) day period, Tenant shall be in default hereunder by reason of such failure only if Tenant (i) fails to commence the cure of said failure within said twenty (20) day period or (ii) commences the curative action within the said twenty (20) day period, but fails to diligently pursue such cure or (iii) commences the curative action within such twenty (20) day period and thereafter diligently pursues such cure, but fails to effect such cure within sixty (60) days after the date of the initial twenty (20) day notice to Tenant. (d) NOTICES. The following provision shall control the giving of notices under this Agreement and under the Lease: NOTICES. Any notice or communication required or permitted in this Lease shall be given in writing, sent by (a) personal delivery, (b) expedited delivery service with proof of delivery, (c) United States mail, postage prepaid, registered or certified mail, return receipt requested or (d) prepaid telegram (provided that such telegram is confirmed by expedited delivery service or by mail in the manner previously described), addressed as provided below or to such other address or to the attention of such other person as shall be designated from time to time in writing by the applicable party and sent in accordance herewith. Notice also may be given by telex or telecopy, provided each such transmission is confirmed (and such confirmation is supported by documented evidence) as received and further provided a telex or telecopy number, as the case may be, is set forth below for the applicable party. To Landlord: The Prudential Insurance Company of America One Ravinia Drive Suite 1400 Atlanta, Georgia 30346 Attn: Vice President, Prudential Realty Group Law Department, Prudential Realty Group Telecopy: (404) 512-0495 To Tenant: ----------------------------------------------------- ----------------------------------------------------- ----------------------------------------------------- Attn: -------------------------------------------- Telecopy: ------------------------------------------ Any such notice or communication shall be deemed to have been given either at the time of personal delivery or, in the case of delivery service or mail, as of the date of first attempted delivery at the address and in the manner provided herein, or in the case of a telegram or telex or telecopy, upon receipt. (e) SPECIFIC LEASE AMENDMENTS. In addition to the foregoing, the following particular provisions of the Lease shall be amended as follows: [ADD SPECIFIC LEASE AMENDMENTS] 13. NO AMENDMENT OR TERMINATION OF LEASE. Lender and Tenant agree that Tenant's interest in and obligations under the Lease shall not be altered, modified or terminated without the prior written consent of Lender. Lender and Tenant also agree that Tenant shall neither assign the Lease or allow it to be assigned in any manner nor sublet the Demised Premises or any part thereof without the prior written consent of Lender in any situation where Landlord's consent to any such action is required under the Lease. 14. INTERPRETATION. This Agreement may not be modified orally or in any manner other than by an agreement in writing signed by the parties hereto or their respective successors in interest. This Agreement shall inure to the benefit of and be binding upon the parties hereto, their successors and assigns, and any purchaser or purchasers at foreclosure of the Property, and their respective heirs, personal representatives, successors and assigns. This Agreement is subject to the laws of the State of __________________. IN WITNESS WHEREOF, the parties hereto have hereunto caused this Agreement to be duly executed as of the day and year first above written. LENDER THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: ----------------------------------- Name: ------------------------------ Title: ----------------------------- TENANT: ----------------------------------- a ------------------------------------- By: ----------------------------------- Name: ------------------------------ Title: ----------------------------- EX-10.14.2 41 g87458exv10w14w2.txt EX-10.14.2 FIRST AMENDMENT TO LEASE AGREEMENT EXHIBIT 10.14.2 FIRST AMENDMENT TO LEASE AGREEMENT THIS FIRST AMENDMENT TO LEASE AGREEMENT (this "First Amendment") is made and entered into this 8th day of May, 1998 by and between Cousins LORET Venture, L.L.C. ("Landlord") and Impac Hotel Group, L.L.C. ("Tenant"). WITNESSETH: WHEREAS, CSB-Georgia Limited Partnership (predecessor-in-interest to Landlord) and Tenant have entered into that certain Lease Agreement (the "Lease") dated April 7, 1997, the purpose of which was to lease and rent approximately 21,817 square feet of net rentable area (the "Initial Premises) on floor 7 of the building known as Two Live Oak Center (the "Building"); and WHEREAS, Landlord and Tenant desire to amend the Lease in order to increase the size of the premises leased thereunder, and for the other purposes set forth herein; NOW THEREFORE, for and in consideration of the premises, the mutual covenants contained herein, Ten Dollars ($10.00) in hand paid and other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged by Landlord and Tenant, Landlord and Tenant do hereby covenant and agree as follows: 1. Addition to Leased Premises. (a) The "Leased Premises", as that term is defined in the Lease, shall include, from and after the date hereof, an additional approximately 7,597 square feet of net rentable area on floor 3 of the Building as generally depicted on EXHIBIT "A" attached hereto and incorporated herein (the "Expansion Space"), such that the Leased Premises shall contain approximately 29,414 square feet of net rentable area. (b) The "Commencement Date" with respect to the Expansion Space shall be the earlier of (i) July 1, 1998, or (ii) the "Completion Date" with respect to the Expansion Space (said earlier date being referred to herein as the "Expansion Space Commencement Date"). (c) The Net Rental and Additional Rental due and payable with respect to the Expansion Space shall be, on a per rentable square foot basis, the same as the Net Rental and Additional Rental due with respect to the Initial Premises. Concurrently with its execution of this First Amendment Tenant shall pay Landlord $14,244.38 representing a portion of the first month's Net Rental and estimated Additional Rental for the Expansion Space (Tenant acknowledging that the Net Rental rate increase from $14.57 per square foot of net rentable area to $15.01 per square foot of net rentable area on July 7, 1998). No portion of said amount shall be 1 refunded to Tenant should Tenant terminate this First Amendment pursuant to Paragraph 3 below. (d) Provided Tenant does not terminate this First Amendment pursuant to Paragraph 3 below, Landlord shall provide an allowance to offset the cost for the design, construction and installation of the tenant fit-up and finish work (including telecommunications systems) in the Expansion Space of Twenty-Five and No/100 Dollars ($25.00) per square foot of net rentable area within the Expansion Space (the "Expansion Allowance"). To the extend the costs to design and complete the tenant fit-up and finish work in the Expansion Space are less than the Expansion Allowance, the Landlord shall retain the difference. To the extent the costs to design and complete the tenant fit-up and finish work in the Expansion Space are greater than the Expansion Allowance, then, at Tenant's written request, Landlord shall provide an additional allowance (the "Additional Expansion Allowance") equal to the amount of such excess, subject to a maximum Additional Expansion Allowance of One Dollar and 50/100 ($1.50) per rentable square foot within the Expansion Space. In the event Landlord provides the Additional Expansion Allowance, Net Rental shall be increased by an amount equal to the Additional Expansion Allowance (on a per net rentable square foot basis) amortized over the remaining Term at an eleven percent (11%) interest rate. The Expansion Allowance (and, if applicable, the Additional Expansion Allowance) shall be paid to Tenant, based on paid invoices, upon Tenant acknowledging, in writing, that its right to terminate this First Amendment has expired (or, if such right has not then expired, Tenant waiving said right in writing), occupying the Expansion Space and commencing the conduct of its business therefrom, provided that Tenant is not in default under any terms and covenants of the Lease. To the extent the costs to design and complete the tenant fit-up and finish work in the Expansion Space are greater than the Expansion Allowance and the Additional Expansion Allowance, then the amount of such excess shall be paid by Tenant. In no event shall any Expansion Allowance or Additional Expansion Allowance be due or payable if Tenant terminates this First Amendment pursuant to Paragraph 3 below. (e) The tenant improvements within the Expansion Space shall be constructed in accordance with EXHIBIT "D" to the Lease, except that Section I and the first three paragraphs of Section II of said EXHIBIT "D" shall be replaced with the following: "I. SCHEDULE OF CRITICAL DATES The following is a schedule of certain critical dates relating to Landlord's and Tenant's respective obligations with respect to construction of the leasehold improvements for the Expansion Space. These dates, the specific references (e.g. the "Tenant Construction Documents Delivery Date") and the respective obligations of Landlord and Tenant are more fully described in Section II below. All references to days mean calendar days, not working or business days. 2
Due Date Responsible Party Reference -------- ----------------- --------- May 15, 1998 Tenant "Space Plan Delivery Date" Within 7 days after Landlord "Space Plan Final Space Plan Delivery Date Approval Date" Within 21 days after Space Plan Tenant "Tenant Construction Final Approval Date Documents Delivery Date" Within 7 days after Tenant Landlord "Tenant Construction submits Tenant Construction Documents Review Date" Documents Within 7 days after Tenant Tenant "Tenant Construction receives Landlord's written Documents Resubmittal Date" comments on Tenant Construction Documents
II. LANDLORD AND TENANT PRE-CONSTRUCTION OBLIGATIONS 1. Tenant shall inform Landlord of the architect and engineer which Tenant proposes to employ to prepare the Space Plan and the Tenant Construction Documents, and Landlord shall have the right to approve the proposed architect and engineer, which approval shall not be unreasonably withheld, delayed or conditioned. 2. Tenant shall cause to be furnished to Landlord on or before the Space Plan Delivery Date an architectural space plan (the "Space Plan"). 3. On or before the Space Plan Final Approval Date, Landlord will advise Tenant in writing of any required changes to the Space Plan. If Landlord requests revisions to the Space Plan, then Tenant will revise the Space Plan in accordance with Landlord's request." (f) Tenant acknowledges and agrees that Tenant has no further expansion rights under the Lease including, without limitation, under EXHIBIT "I" to the Lease. 2. Building Monument Sign. Tenant shall have the nonexclusive right, at Tenant's sole cost and expense, to place Tenant's graphics identifying the name of Tenant on the building monument sign located in front of the Building along Lenox Road. The size, type, location, material, design and color of Tenant's graphics for such sign and the method of attachment 3 thereto shall be subject to the prior written approval of Landlord, which approval shall not be unreasonably withheld or delayed (Landlord agreeing that the size of Tenant's graphics shall be similar to the size of the graphics of the majority of other parties whose names are on the monument sign from time to time). All costs and expenses relating to the design, preparation, installation and removal of Tenant's identification on the monument sign shall be borne by Tenant. 3. Termination Right. (a) If Tenant has not completed/closed its merger with Servico Inc. by August 31, 1998, then Tenant shall have the right to terminate this First Amendment by providing Landlord with notice of Tenant's election to terminate the First Amendment on or before September 7, 1998, and by the payment to Landlord of $28,488.75 (the "Release Payment"). The Release Payment shall be due and payable concurrently with the giving of said notice. In the event Tenant so terminates this First Amendment, no commissions or fees shall be due or payable to "Broker" (as defined below) in connection with this First Amendment. 4. Brokerage Disclosure. Tenant warrants and represents to Landlord that there are no brokers' fees, real estate commissions, or similar fees due to any broker, agent or other party in connection with the negotiation or execution of this First Amendment on behalf of Tenant other than Richard Bowers & Co. ("Broker"). Landlord shall pay Broker a commission pursuant to a separate agreement. Tenant hereby agrees to indemnify and hold Landlord harmless from and against any and all costs, expenses, liabilities, causes of action, claims or suits by any other party other than those Broker for compensation, commissions, fees or other sums claimed to be due or owing as a result of any relationship with the Tenant in connection with the execution of this document. 5. Capitalized Terms. Except as otherwise provided herein, capitalized terms used herein shall have the meanings given them in the Lease. 6. No Other Modifications. Except as modified by this First Amendment, the Lease remains unmodified and of full force and effect. 7. Georgia Law. This First Amendment shall be construed and interpreted under and pursuant to the laws of the State of Georgia. 8. Binding Nature. This First Amendment shall be binding upon and inure to the benefit of Landlord, Tenant and their respective legal representatives, transfers, successors and assigns. 4 IN WITNESS WHEREOF, Landlord and Tenant have caused this First Amendment to be executed under seal and delivered as of the day and year first above written. LANDLORD Cousins LORET Venture, L.L.C., a Georgia limited liability company By: Cousins Properties Incorporated, a Georgia corporation, Member By: /s/ Jack A. LaHue ------------------------------------------ Name: Jack A. LaHue Title: Sr. Vice President (CORPORATE SEAL) By: LORET Holdings, L.L.L.P., a Georgia limited liability limited partnership, Member By: Peachtree Investors Limited Partnership, a Pennsylvania limited partnership By: /s/ Douglas M. Firstenberg ------------------------------------------ Name: Douglas M. Firstenberg, general partner TENANT Impac Hotel Group, L.L.C. By: /s/ Robert S. Cole ------------------------------------------ Its: President ATTEST: /s/ [ILLEGIBLE] ------------------------------------- Its: Executive Secretary (CORPORATE SEAL) 5 EXHIBIT "A" EXPANSION SPACE [Architectural Design of Floor Space] APPROXIMATELY 6,594 USABLE SQUARE FEET 7,597 RENTABLE SQUARE FEET Third Floor Plan TWO LIVE OAK CENTER ATLANTA, GEORGIA 6 EX-10.14.3 42 g87458exv10w14w3.txt EX-10.14.3 SECOND AMENDMENT TO LEASE AGREEMENT EXHIBIT 10.14.3 SECOND AMENDMENT TO LEASE AGREEMENT THIS SECOND AMENDMENT TO LEASE AGREEMENT (this "Second Amendment") is made and entered into this 7th day of June, 2000 by and between Cousins LORET Venture, L.L.C. ("Landlord") and Lodgian, Inc. ("Tenant"). WITNESSETH: WHEREAS, CSB-Georgia Limited Partnership (predecessor-in-interest to Landlord) and Impac Hotel Group, L.L.C. ("Impac"; Impac being predecessor-in-interest to Tenant) have entered into that certain Lease Agreement (the "Original Lease") dated April 7, 1997, the purpose of which was to lease and rent approximately 21,817 square feet of net rentable area on floor 7 of the building known as Two Live Oak Center (the "Building"); WHEREAS, Landlord and Impac have entered into that certain First Amendment to Lease Agreement dated May 8, 1998 (the "First Amendment"; the Original Lease and the First Amendment being referred to collectively as the "Lease"), the purpose of which was to increase the size of the premises to approximately 29,414 square feet of net rentable area (said space being referred to herein as the "Initial Premises"); and WHEREAS, Landlord and Tenant desire to amend the Lease in order to increase the size of the premises leased thereunder, and for the purposes set forth herein. NOW THEREFORE, for and in consideration of the premises, the mutual covenants contained herein, Ten Dollars ($10.00) in hand paid and other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged by Landlord and Tenant, Landlord and Tenant do hereby covenant and agree as follows: 1. Addition to Leased Premises. (a) The "Leased Premises", as that term is defined in the Lease, shall include, from and after June 11, 2000, an additional approximately 4,910 square feet of net rentable area on floor 3 of the Building as generally depicted on Exhibit "A" attached hereto and incorporated herein (the "Expansion Space"), such that the Leased Premises shall contain approximately 34,324 square feet of net rentable area. (b) The Net Rental due with respect to the Expansion Space shall be as follows: (i) Throughout the period beginning June 11, 2000 and ending April 30, 2001 (said period being the first "Expansion Space Lease Year"), Tenant hereby agrees to pay a net annual rental equal to Sixteen and 60/100 Dollars ($16.60) per square 1 foot of net rentable area of the Expansion Space (the "Expansion Space Net Rental Rate") in accordance with the terms hereof. As used herein, "Net Rental" for the Expansion Space shall mean an annual amount equal to the product of the yearly Expansion Space Net Rental Rate times the number of square feet of net rentable area of the Expansion Space, as such Expansion Net Rental Rate may be adjusted from Lease Year to Lease Year pursuant to the terms of this Second Amendment. (ii) On the first day of each Subsequent Year (defined below), the Expansion Space Net Rental Rate shall be increased to an amount equal to the Expansion Space Net Rental Rate for the first Expansion Space Lease Year ($16.60) as set forth in Paragraph 1(b)(i) above, plus an amount equal to the product of ten (10) times the percentage increase in the Consumer Price Index for the Comparison Month (defined below) as compared to the Consumer Price Index for the Base Month (defined below), multiplied by the Expansion Space Net Rental Rate for the first Lease Year ($16.60); provided, however, in no event shall the Expansion Space Net Rental Rate for the Subsequent Year be less than the Expansion Space Net Rental Rate applicable to the Price Year (defined below) and in no event shall the Expansion Space Net Rental Rate for the Subsequent Year be greater than the amounts for the Expansion Space Lease Years shown: Expansion Space Maximum Net Lease Year Rental Rate Second Expansion Space Lease Year $17.19 Third Expansion Space Lease Year $17.79 Fourth Expansion Space Lease Year $18.41 (iii) As used in this Paragraph 1, the term "Expansion Space Lease Year" shall mean each twelve month period commencing on May 1 and expiring the following April 30 (except that (A) the first Expansion Space Lease Year shall begin June 11, 2000 and expire April 30, 2001, and (B) the final Expansion Space Lease Year shall begin May 1, 2003 and expire June 30, 2003). The term "Subsequent Year" shall mean each Expansion Space Lease Year of the lease term following the first Expansion Space Lease Year. The term "Prior Year" shall mean the Expansion Space Lease Year prior to each Subsequent Year. The term "Base Month" shall mean March, 2000. The term "Comparison Month" shall mean the calendar month which is two (2) months prior to the first full month of each Subsequent Year in question. The term "Consumer Price Index" shall mean the Consumer Price Index for all Urban Consumers (U.S. City Average; Base 1982-84=100), published by the Bureau of Labor Statistics of the United States Department of Labor. If the Consumer Price Index is changed so that it affects the calculations achieved hereunder, the Consumer Price Index shall be redefined in accordance with a conversion factor published by the United States Department of Labor, Bureau of Labor Statistics. If the Consumer Price Index is discontinued or revised during the Term of the Lease, such other government index or computation with which it is replaced shall be used in order to obtain substantially the same result as would have been 2 obtained if the Consumer Price Index had not been discontinued or revised. If the Consumer Price Index is discontinued and no government index or computation replaces same, Landlord and Tenant shall in good faith agree upon a suitable substitute. (c) The Additional Rental due and payable with respect to the Expansion Space shall be, on a per rentable square foot basis, the same as the Additional Rental due with respect to the Initial Premises. (d) Tenant shall accept the Expansion Space in its "AS IS" condition, and Landlord shall have no obligation to improve, or to provide any allowance for the improvement of, the Expansion Space. 2. Additional Electrical Equipment. At the request, and at the expense, of the previous occupant of the Expansion Space, Landlord installed one (1) additional high voltage panel and one additional low voltage panel with associated transformers in the base building electrical closet on floor 3 of the Building (the "Additional Electrical Equipment"), and a meter to measure the electricity used through the Additional Electrical Equipment. Tenant shall have the right to use the Additional Electrical Equipment, and shall pay on demand the actual metered cost of electricity consumed through the Additional Electrical Equipment, plus any actual accounting expenses incurred by Landlord in connection with the metering thereof. 3. Brokerage Disclosure. Tenant warrants and represents to Landlord that there are no broker's fees, real estate commissions, or similar fees due to any broker, agent or other party in connection with the negotiation or execution of this Second Amendment on behalf of Tenant other than Richard Bowers & Co. ("Broker"). Notwithstanding anything to the contrary contained in the Lease or any other agreement between Landlord and Broker, by its execution of this Second Amendment Broker hereby waives any commission or other fees otherwise due or payable in connection with Tenant leasing or occupying the Expansion Space. Tenant hereby agrees to indemnify and hold Landlord harmless from and against any and all costs, expenses, liabilities, causes of action, claims or suits by any other party, including Broker, for compensation, commissions, fees or other sums claimed to be due or owing as a result of any relationship with the Tenant in connection with the execution of this document or in connection with Tenant's occupancy of the Expansion Space. 4. Capitalized Terms. Except as otherwise provided herein, capitalized terms used herein shall have the meanings given them in the Lease. 5. No Other Modifications. Except as modified by this Second Amendment, the Lease remains unmodified and of full force and effect. 6. Georgia Law. This Second Amendment shall be construed and interpreted under and pursuant to the laws of the State of Georgia. 7. Binding Nature. This Second Amendment shall be binding upon and inure to the benefit of Landlord, Tenant and their respective legal representatives, transfers, successors and assigns. 3 IN WITNESS WHEREOF, Landlord and Tenant have caused this Second Amendment to be executed under seal and delivered as of the day and year first above written. LANDLORD COUSINS LORET VENTURE, L.L.C., a Georgia limited liability company By: Cousins Properties Incorporated, a Georgia corporation, Member By: /s/ Jack A. LaHue ---------------------------------------------- Name: Jack A. LaHue Title: Sr. Vice President (CORPORATE SEAL) By: LORET Holdings, L.L.L.P., a Georgia limited liability limited partnership, Member By: Peachtree Investors Limited Partnership, a Pennsylvania limited partnership By: /s/ Douglas M. Firstenberg ---------------------------------------------- Name: Douglas M. Firstenberg, general partner [Signatures continued on Next Page] 4 [Signatures continued from Previous Page] TENANT Lodgian, Inc. By: /s/ Robert S. Cole ---------------------------------------------- Its: President Attest: /s/ [ILLEGIBLE] ------------------------------------------ Its: Secretary (CORPORATE SEAL) Acknowledged, agreed to and consented to this ____ day of June, 2000 BROKER Richard Bowers & Co. By: /s/ Richard E. Bowers ---------------------------------------------- Its: --------------------------------------------- Attest: ------------------------------------------ Its: --------------------------------------------- (CORPORATE SEAL) 5 EXHIBIT "A" EXPANSION SPACE 6 EXHIBIT "A" [Architectural Design of Floor Space] APPROXIMATELY 4,185 USABLE SQUARE FEET Third Floor Plan TWO LIVE OAK CENTER ATLANTA, GEORGIA 7 EX-10.14.4 43 g87458exv10w14w4.txt EX-10.14.4 THIRD AMENDMENT TO LEASE AGREEMENT EXHIBIT 10.14.4 THIRD AMENDMENT TO LEASE AGREEMENT THIS THIRD AMENDMENT TO LEASE AGREEMENT (this "Third Amendment"), dated this 1st day of April, 2002, by and between COUSINS LORET VENTURE, L.L.C., a Georgia limited liability company, as successor-in-interest to CSB-GEORGIA LIMITED PARTNERSHIP, a Georgia limited partnership ("CSB") (the "Landlord") and LODGIAN, INC., a Delaware corporation, as successor-in-interest to IMPAC HOTEL GROUP, L.L.C. (the "Tenant"), is effective April 1, 2002 (the "Effective Date"). RECITALS: WHEREAS, CSB as predecessor-in-interest to Landlord) and IMPAC HOTEL GROUP, L.L.C., as predecessor-in-interest to Tenant entered into that certain Lease Agreement dated April 7, 1997 (the "Lease") for that certain office space consisting of 21,817 square feet of net rentable area, located on the 7th floor at the Building known as Two Live Oak, 3445 Peachtree Road NE, Atlanta, Georgia 30326 (the "Leased Premises"), with a Lease Term beginning on July 7, 1997 and ending at midnight on June 30, 2003; WHEREAS, the Lease was amended by First Amendment to Lease Agreement dated May 8, 1998 (the "First Amendment") whereby 7,597 square feet of net rentable area, located on the 3rd floor of the Building, was added to the Leased Premises, thereby increasing the net rentable area of the Leased Premises from 21,817 square feet to 29,414 square feet; WHEREAS, the Lease was amended by Second Amendment to Lease Agreement dated June 7, 2000 (the "Second Amendment"), whereby 4,910 square feet of net rentable area, located on the 3rd floor of the Building, was added to the Leased Premises, thereby increasing the net rentable area of the Leased Premises from 29,414 square feet to 34,324 square feet; WHEREAS, Tenant hereby wishes to reduce the net rentable area of the Premises; and AGREEMENT: NOW THEREFORE, in consideration of the mutual promises contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree that effective on the Effective Date: 1. That portion of the Lease Premises consisting of 12,507 square feet of net rentable area and located on the 3rd floor of the Building, as shown on Exhibit "A" attached hereto and incorporated herein by reference (the "Deleted Space"), is expressly withdrawn from the Leased Premises, thereby decreasing the net rentable area of the Leased Premises from 34,324 square feet to 21,817 square feet. 2. Tenant's Percentage Share for the payment of Additional Rental shall be adjusted accordingly, to exclude the net rentable area of the Deleted Space. 1 3. Net Rental for the remaining Premises on 7th floor of the Building consisting of 21,817 square feet of net rentable area, shall be reduced and calculated at the annual rate of fifteen dollars ($15.00) per square foot of net rentable area. 4. This Third Amendment, in the sole discretion of the Landlord, may be declared null and void if any of the following events occurs: (a) the Tenant's existing bankruptcy case (jointly administered under Changer 11 Case No. 01-16345-brl [Bankr. S.D.N.Y.]) (the "Bankruptcy Case") is converted to a Chapter 7 case under Title 11 of the United States Code; (b) a trustee is appointed in the Bankruptcy Case; or (c) the Lease is rejected (by operation of law or by motion) in the Bankruptcy Case. In the event that any of these Bankruptcy Events occurs, Tenant waives the right to object to any claim filed by Landlord in the Bankruptcy Case solely on the basis that it should be reduced by virtue of the reduction of any monthly rent or related charges agreed to in this Third Amendment. This Third Amendment shall apply solely for the benefit of the Tenant (or its affiliates) and not to any assignee of Tenant under the Lease. It is further agreed that this Third Amendment is made in "the ordinary course of business" as set forth in 11 U.S.C. Section 363(c)(1). Nothing herein constitutes an assumption of the Lease. 5. Tenant shall pay Landlord the sum of one thousand dollars ($1,000.00) to defray Landlord's costs in affecting this Third Amendment and such sum is due and payable upon execution of this Third Amendment by Tenant and the deliverance to Landlord for execution. 6. Exhibit I (Right of First Offer) to the Lease shall be deleted entirely. 7. Paragraph 3 (Termination Right) of the First Amendment shall be deleted entirely. 8. The parties hereto acknowledge that in this transaction, no one has acted as agent for Landlord and no one has acted as agent for Tenant and each party represents and warrants to the other party that neither party has employed or dealt with any broker, agent or finder in the negotiations of this Third Amendment and each party shall indemnify and hold the other party harmless from and against any liability, claim, damage, cost or expense in the event of the inaccuracy of such representation and warranties. 9. Except as modified herein, all other terms and conditions of the Lease, as the same may have been previously modified from time to time, between the parties above described, shall continue in full force and effect. 10. The undersigned executing this Third Amendment on behalf of the Tenant represents and warrants that they are authorized to execute this Third Amendment on behalf of Tenant. All capitalized terms used herein, and not otherwise defined herein, shall have the meanings ascribed in the Lease. [signatures begin on the next page] 2 IN WITNESS WHEREOF, the parties have executed this Third Amendment as of the date and year first above written. LANDLORD: COUSINS LORET VENTURE, L.L.C., a Georgia limited liability company By: COUSINS PROPERTIES INCORPORATED, a Georgia corporation, member By: /s/ Jack A. LaHue -------------------------------------------------- Jack A. LaHue - ----------------------------------------------------- (print or type name) Its: Senior Vice President ------------------------------------------------- [Corporate Seal] By: LORET Holdings, L.L.L.P., a Georgia limited liability limited partnership, member By: Peachtree Investors, L.P., a Pennsylvania limited partnership, general partner By: /s/ Douglas M. Firstenberg -------------------------------------------------- Name: Douglas M. Firstenberg Its: General Partner [Corporate Seal] [Signatures continued on the next page] 3 TENANT: LODGIAN, INC., a Delaware corporation By: /s/ Daniel Ellis -------------------------------------------------- Daniel Ellis - ----------------------------------------------------- (print or type name) Its: Vice President ------------------------------------------------- [Corporate Seal] [end of signatures] 4 [Architectural Design of Floor Space] [Deleted Space] Third Floor Plan TWO LIVE OAK CENTER ATLANTA, GEORGIA A DEVELOPMENT OF COUSINS PROPERTIES 12-29-99 This floor plan is intended only to show the general layout of the property or a part thereof. Landlord reserves the right to alter, vary, add to or omit in whole or in part, any structures, and/or improvements, and/or common areas shown on this plan. This plan is not to scale and all measurements and distances are approximate. EXHIBIT "A" Deleted Space 5 EX-10.14.5 44 g87458exv10w14w5.txt EX-10.14.5 FOURTH AMENDMENT TO LEASE AGREEMENT EXHIBIT 10.14.5 FOURTH AMENDMENT TO LEASE AGREEMENT This Fourth Amendment to Lease Agreement (the "Fourth Amendment"), made and dated this 28 day of April, 2003, by and between COUSINS LORET VENTURE, L.L.C., a Georgia limited liability company, as successor-in-interest to CSB-GEORGIA LIMITED PARTNERSHIP, a Georgia limited partnership ("CSB") (the "Landlord") and LODGIAN, INC., a Delaware corporation, as successor-in-interest to IMPAC HOTEL GROUP, L.L.C. (the "Tenant"), is effective July 1, 2003 (the "Effective Date"). RECITALS: WHEREAS, CSB as predecessor-in-interest to Landlord and IMPAC HOTEL GROUP, L.L.C., as predecessor-in-interest to Tenant entered into that certain Lease Agreement dated April 7, 1997 (the "Lease"), for that certain office space consisting of 21,817 square feet of net rentable area, located on the 7th floor at the Building known as Two Live Oak, 3445 Peachtree Road NE, Atlanta, Georgia 30326 (the "Leased Premises"), with a Lease Term beginning on July 7, 1997 and ending at midnight on June 30, 2003; WHEREAS, the Lease was amended by First Amendment to Lease Agreement dated May 8, 1998 (the "First Amendment"), whereby 7,597 square feet of net rentable area, located on the 3rd floor of the Building, was added to the Leased Premises, thereby increasing the net rentable area of the Leased Premises from 21,817 square feet to 29,414 square feet; WHEREAS, the Lease was amended by Second Amendment to Lease Agreement dated June 7, 2000 (the "Second Amendment"), whereby 4,910 square feet of net rentable area, located on the 3rd floor of the Building, was added to the Leased Premises, thereby increasing the net rentable area of the Leased Premises from 29,414 square feet to 34,324 square feet; WHEREAS, the Lease was amended by Third Amendment to Lease Agreement dated April 1, 2002, whereby 12,507 square feet of net rentable area, on the 3rd floor of the Building, was withdrawn from the Leased Premises, thereby reducing the net rentable area from 34,324 square feet to 21,817 square feet; WHEREAS, Landlord and Tenant wish to extend the Lease Term; and AGREEMENT: NOW THEREFORE, in consideration of the mutual promises contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree that, effective on the Effective Date: 1. The Lease Term shall be extended for a period of twenty-six (26) months, so that the Lease is now scheduled to expire at midnight on August 31, 2005 (the "Extension Term"). 1 2. Net Rental for the Leased Premises, during the Extension Term, is set forth below:
Annual Net Square Feet Rental Rate of Net Per Square Rentable Foot of Net From Through Area Rentable Area ---------------------------------------------------------------------------- ~~07-01-03 07-31-04 21,817 $18.50 08-01-04 08-31-05 21,817 $19.50~~
3. a) Notwithstanding anything contained in this Fourth Amendment to the contrary, Tenant shall not be obligated to pay the Net Rental under the Lease, (the "Abated Rent"), for calendar months January, 2004 and January 2005 (the "Abatement Period"), provided Tenant is not then in default under any of the terms and conditions of the Lease at any time during the Abatement Period. b) Upon the occurrence of any of event of material default, and in addition to any other remedies provided to Landlord under the Lease, Landlord shall be entitled to recover as damages, without limitation, the total amount of such Abated Rent, without any notice or demand whatsoever. 4. a) Landlord agrees to contribute an allowance of forty-three thousand six hundred thirty-four dollars ($43,634.00) (the "Extension Construction Allowance") for the plans and construction of the improvements, to be constructed by Landlord, within the Leased Premises (the "Tenant Improvements"). Any costs that exceed the Extension Construction Allowance ("Tenant's Cost") shall be paid to Landlord by Tenant, upon demand. b) Notwithstanding anything contained in the Lease to the contrary, if the total cost of the Tenant Improvements shall be less than the sum of the Extension Construction Allowance and any payment previously made to Landlord with respect thereto, Landlord and Tenant understand and agree that the Leased Premises shall receive the benefit of such excess Extension Construction Allowance, that such excess shall not be used for any other purpose and, further, in no event shall Landlord be obligated to disburse any portion of the Extension Construction Allowance at any time following the last day of the twelfth (12th) month from the Effective Date. c) Tenant agrees to pay to Landlord, or Landlord's designated agent, a fee for program management of the construction of the Tenant Improvements, in an amount equal to three and one half percent (3-1/2%) of the total costs of the plans and the Tenant Improvements, which shall be deducted from the Extension Construction Allowance. d) Tenant shall not make any alterations, additions or improvements in or to the Leased Premises without Landlord's prior written consent, which consent shall not be unreasonably withheld. Tenant shall not make any alterations, additions or improvements to any common areas without Landlord's prior written consent, which consent may be granted or withheld in Landlord's sole discretion. Any alterations, additions or improvements requested by Tenant and approved by Landlord shall be performed (i) by Landlord's contractor or another contractor approved by Landlord, (ii) in a good and workmanlike manner, and (iii) in accordance with all applicable codes, laws, ordinances, rules and regulations of governmental authorities having jurisdiction over the Demised Premises, including OSHA Regulations. e) Other than set forth above, Tenant agrees to accept the Leased Premises in its then existing condition (on an "as-is" basis). 2 5. Exhibit "H" (Renewal Option) of the Lease shall be deleted entirely. 6. Tenant shall not be obligated or required to pay Additional Rental, as set forth in Article 2.03 of the Lease, during the Extension Term or the "Renewal Term," as defined below. 7. a) Provided Tenant is not in default under any of the terms and conditions of the Lease, Tenant may extend the Term of the Lease for a period of one (1) year (the "Renewal Term") by giving written notice to Landlord at least six (6) months prior to the expiration of the Extension Term. Notwithstanding the foregoing, Tenant shall have no right to exercise such option to renew unless Tenant is not in default on the date Tenant exercises such option and on the last day of the Extension Term. b) If Tenant exercises its option to renew, the Net Rental shall be calculated at the annual rate of $20.50 per square foot of net rentable area. c) If Tenant shall fail to exercise its option for the Renewal Term, or if all conditions set forth above are not entirely satisfied, the Lease shall expire at the expiration of the Extension Term and Tenant shall have no further right thereafter to renew the Lease or to require any interest whatsoever in the Leased Premises. d) This option to renew is not transferable and shall be "personal" to Tenant as set forth above and that, in no event, will any assignee or sublessee have any rights to exercise the aforesaid option to renew. 8. The parties hereto acknowledge that in this transaction, Cousins Properties Incorporated, a Georgia corporation, has acted as agent for Landlord and shall be paid a commission by Landlord for representation, pursuant to a separate agreement. No one has acted as agent for Tenant. Landlord and Tenant each represent and warrant to the other that, except as provided herein, neither of them has employed or dealt with any broker, agent or finder in the negotiations of this Fourth Amendment and each party shall indemnify and hold the other party harmless from and against any liability, claim, damage, cost or expense in the event of the inaccuracy of such representations and warranty. Except as modified herein, all other terms and conditions of the Lease, as the same may have been previously modified from time to time, between the parties above described, shall continue in full force and effect. The undersigned officers and representatives of the parties executing this Fourth Amendment represent and warrant that they are officers of the parties with authority to execute this Fourth Amendment on behalf of the parties. All capitalized terms used herein, and not otherwise defined herein, shall have the meanings ascribed to them in the Lease. 3 IN WITNESS WHEREOF, the parties have executed this Fourth Amendment as of the date and year first above written. LANDLORD: COUSINS LORET VENTURE, L.L.C., a Georgia limited liability company By: COUSINS PROPERTIES INCORPORATED, a Georgia corporation, member By: /s/ Jack A. LaHue -------------------------------------------- Jack A. LaHue (print or type name) --------------------------------------------- Its: Senior Vice President --------------------------------------------- [Corporate Seal] By: LORET HOLDINGS, L.L.L.P., a Georgia limited liability limited partnership, member By: PEACHTREE INVESTORS, L.P. a Pennsylvania limited partnership, general partner By: /s/ Douglas M. Firstenberg -------------------------------------------- Douglas M. Firstenberg Its: General Partner [Corporate Seal] TENANT: LODGIAN, INC., a Delaware corporation By: /s/ Daniel E. Ellis --------------------------------------------- Daniel E. Ellis (print or type name) --------------------------------------------- Its: Senior Vice President --------------------------------------------- [Corporate Seal] 4 EX-10.14.6 45 g87458exv10w14w6.txt EX-10.14.6 FIFTH AMENDMENT TO LEASE AGREEMENT EXHIBIT 10.14.6 FIFTH AMENDMENT TO LEASE AGREEMENT This Fifth Amendment To Lease Agreement (this "Fifth Amendment"), made and dated this 23rd day of December, 2003, by and between COUSINS LORET VENTURE, L.L.C., a Georgia limited liability company (the "Landlord") and LODGIAN, INC., a Delaware corporation (the "Tenant"), is effective December 22, 2003 (the "Effective Date"). RECITALS: WHEREAS, CSB as predecessor-in-interest to Landlord and IMPAC HOTEL GROUP, L.L.C., as predecessor-in-interest to Tenant entered into that certain Lease Agreement dated April 7, 1997 (the "Lease"), for that certain office space consisting of 21,817 square feet of net rentable area, located on the 7th floor at the Building known as Two Live Oak, 3445 Peachtree Road NE, Atlanta, Georgia 30326 (the "Leased Premises"), with a Lease Term beginning on July 7, 1997 and ending at midnight on June 30, 2003; WHEREAS, the Lease was amended by First Amendment to Lease Agreement dated May 8, 1998 (the "First Amendment"), whereby 7,597 square feet of net rentable area, located on the 3rd floor of the Building, was added to the Leased Premises, thereby increasing the net rentable area of the Leased Premises form 21,817 square feet to 29,414 square feet; WHEREAS, the Lease was amended by Second Amendment to Lease Agreement dated June 7, 2000 (the "Second Amendment"), whereby 4,910 square feet of net rentable area, located on the 3rd floor of the Building, was added to the Leased Premises, thereby increasing the net rentable area of the Leased Premises from 29,414 square feet to 34,324 square feet; WHEREAS, the Lease was amended by Third Amendment to Lease Agreement dated April 1, 2002, whereby 12,507 square feet of net rentable area, on the 3rd floor of the Building, was withdrawn from to the Leased Premises, thereby reducing the net rentable area from 34,324 square feet to 21,817 square feet; WHEREAS, the Lease was amended by Forth Amendment to Lease Agreement dated April 28, 2003, whereby the Lease Term was extended to expire at midnight on August 31, 2005; WHEREAS, Landlord and Tenant wish to include within the Leased Premises, certain temporary storage area; and AGREEMENT: NOW THEREFORE, in consideration of the mutual promises contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree that, effective on the Effective Date: 1. Storage. Suite 355 containing 979 square feet of net rentable area, located on the 3rd floor of the Building and shown on Exhibit "A" attached hereto and incorporated herein by reference (the "Storage Space"), shall be added to the Leased Premises, on a month-to-month basis. 1 2. Operating Expenses. Tenant's Percentage Share for the payment of Additional Rental does not include the Storage Space. 3. Net Rental. The annual net rental rate for the Storage Space shall be $18.50 per square foot of net rentable area of the Storage Space; or $1,509.30 per month. 4. Construction. Tenant agrees to accept the Storage Space in its then existing condition (on an "as-is" basis and Tenant shall not make, or suffer to be made, any alterations, additions or improvements, including, but not limited to the attachment of any fixtures or equipment in, or to the Storage Space or any part thereof, without the prior written consent of Landlord. Landlord is under no obligation, whatsoever, to provide or control heated or cooled air or ventilation, within the Storage Space. 5. Parking. Tenant shall have no rights to parking permits in connection with or as a part of the lease of the Storage Space. 6. Relocation. Landlord reserves the right at any time or from time to time, at its option and upon giving at least thirty (30) days prior written notice to Tenant, to transfer and remove Tenant from the Storage Space to any other available area of substantially equal size within the Building and at an equivalent annual net rental, subject to adjustments set forth herein. 7. Cancellation. Landlord or Tenant shall have the right to terminate the Lease Term for the Storage Space, for any reason, effective at any time, by delivering written notice of such election to the other party, at least thirty (30) days prior to the effective date of the termination. 8. Broker. The parties hereto acknowledge and agree and warrant to the other party that, neither party has employed or dealt with any broker, agent of finder in the negotiations of this Fifth Amendment and each party shall indemnify and hold the other party harmless from and against any liability, claim, damage, cost or expense in the event of the inaccuracy of such representation and warranties. 9. Assignment or Sublease. Tenant shall not sublet or assign the Storage Space, in whole or in part, without the prior written consent of Landlord. 10. Use. Tenant shall use the Storage Space for the storage of non-Hazardous Substances and for no other purpose. "Hazardous Substances" shall mean and include those elements of compounds which are contained in the list of Hazardous Substances adopted by the United States Environmental Protection Agency (EPA) or in any list of toxic pollutants designated by Congress or the EPA or which are defined as hazardous, toxic, pollutant, infectious or radioactive by any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating to or imposing liability (including, without limitation, strict liability) or standards of conduct concerning, any hazardous, toxic or dangerous waste, substance or material, as now or at any time hereinafter in effect (collectively, "Environmental Laws"). 11. Indemnification. Tenant hereby indemnifies and holds Landlord harmless from and against any all claims, including but not limited to, loss or theft of or injury and damage to Tenant's property located within the Storage Space. Except as modified herein, all other terms and conditions of the Lease, as the same may have been previously modified from time to time, between the parties above described, shall continue in full force and effect. 2 The undersigned officers and representatives of the parties executing this Fifth Amendment represent and warrant that they are officers of the parties with authority to execute this Fifth Amendment on behalf of the parties. All capitalized terms used herein, and not otherwise defined herein, shall have the meanings ascribed to them in the Lease. IN WITNESS WHEREOF, the parties have executed this Fifth Amendment as of the date and year first above written. LANDLORD: COUSINS LORET VENTURE, L.L.C., a Georgia limited liability company By: COUSINS PROPERTIES INCORPORATED, a Georgia corporation, member By: /s/ Jack A. LaHue ------------------------------------------------------ Jack A. LaHue - --------------------------------------------------------- (print or type name) Its: Senior Vice President ----------------------------------------------------- [Corporate Seal] By: LORET HOLDINGS, L.L.L.P., a Georgia limited liability limited partnership, member By: PEACHTREE INVESTORS, L.P., a Pennsylvania limited partnership, general partner By: /s/ Douglas M. Firstenberg ------------------------------------------------------ Name: Douglas M. Firstenberg Its: General Partner [Corporate Seal] [signatures continue on the next page] 3 TENANT: LODGIAN, INC., a Delaware corporation By: /s/ Daniel Ellis -------------------------------------------------- Daniel Ellis - ----------------------------------------------------- (print or type name) Its: Vice President ------------------------------------------------- [Corporate Seal] 4 [Architectural Design of Floor Space] 979 Rentable Square Feet EXISTING THIRD FLOOR PLAN TEMPORARY STORAGE AREA TWO LIVE OAK, SUITE 350 ATLANTA, GEORGIA 30326 A Development of Cousins Properties Joel Laseter Architect PC 12-19-03 This floor plan is intended only to show that the general layout of the property or a part thereof. Landlord reserves the right to alter, vary, add to or omit in whole or in part, any structures, and/or improvements, and/or common areas shown on this plan. This plan is not to scale and all measurements and distances are approximate. EXHIBIT "A" Storage Space 5 EX-21.1 46 g87458exv21w1.txt EX-21.1 SUBSIDIARIES OF LODGIAN, INC. EXHIBIT 21.1 LODGIAN, INC. AND ITS SUBSIDIARIES 1075 Hospitality, LP 12801 NWF Beverage Management, Inc. Albany Hotel, Inc. AMI Operating Partners, L.P. AMIOP Acquisition Corp. AMIOP Acquisition General Partner SPE Corp. Apico Hills. Inc. Apico Inns of Greentree, Inc. Apico Inns of Pennsylvania, Inc. Apico Inns of Pittsburgh, Inc. Apico Management Corp. Atlanta-Boston Holdings, LLC Atlanta-Boston Lodging, LLC Atlanta-Boston SPE, Inc. Atlanta-Rio Rancho Beverage Management, Inc. Brecksville Hospitality, Inc. Brecksville Hospitality, LP Brunswick Motel Enterprises, Inc. Columbus Hospitality Associates, LP Courtyard Club Dedham Lodging Associates I, LP Dedham Lodging SPE, Inc. Dothan Hospitality 3053, Inc. Dothan Hospitality 3071, Inc. East Washington Hospitality, LP European Ventures, Inc. Fayetteville Motel Enterprises, Inc. Fort Wayne Hospitality Associates II, LP Fourth Street Hospitality, Inc. Gadsden Hospitality, Inc. Harrisburg Motel Enterprises, Inc. Hilton Head Motel Enterprises, Inc. Impac Holdings III, LLC Impac Hotel Group Mezzanine, LLC Impac Hotel Group, LLC Impac Hotel Management, LLC Impac Hotels I, LLC Impac Hotels II, LLC Impac Hotels III, LLC Impac Hotels Member SPE, Inc. Impac SPE #2, Inc. Impac SPE #4, Inc. Impac SPE #6, Inc. Island Motel Enterprises, Inc. KDS Corporation Kinser Motel Enterprises, Inc. Lafayette Beverage Management, Inc. Lawrence Hospitality Associates, LP Little Rock Beverage Management, Inc. Little Rock Lodging Associates I, LP Lodgian Abeline Beverage Corp. Lodgian Acquisition, LLC Lodgian AMI, Inc. Lodgian Augusta LLC Lodgian Austin Beverage Corp. Lodgian Bridgeport LLC Lodgian Cincinnati LLC Lodgian Coconut Grove, LLC Lodgian Colchester LLC Lodgian Dallas Beverage Corp. Lodgian Denver LLC Lodgian Fairmont LLC Lodgian Financing Corp. Lodgian Financing Mezzanine, LLC Lodgian Florence LLC Lodgian Fort Mitchell LLC Lodgian Hamburg LLC Lodgian Hotels, Inc. Lodgian Jackson LLC Lodgian Lafayette LLC Lodgian Lancaster North, Inc. Lodgian Little Rock SPE, Inc. Lodgian Management Corp. Lodgian Market Center Beverage Corp. Lodgian Memphis LLC Lodgian Merrimack LLC Lodgian Memphis Property Owner, LLC Lodgian Mezzanine Springing Member, Inc. Lodgian Morgantown LLC Lodgian Mortgage Springing Member, Inc. Lodgian Mount Laurel, Inc. Lodgian North Miami LLC Lodgian Ontario, Inc. Lodgian Syracuse LLC Lodgian Tulsa LLC Lodgian York Market Street, Inc. Lodgian, Inc. Macon Hotel Associates LLC Manhattan Hospitality Associates, LP McKnight Motel, Inc. Melbourne Hospitality Associates, LP Minneapolis Motel Enterprises, Inc. Moon Airport Motel, Inc. New Orleans Airport Motel Associates, LP New Orleans Airport Motel Enterprises, Inc. NH Motel Enterprises, Inc. Penmoco, Inc. Prime American Realty Corp. Raleigh Downtown Enterprises, Inc. REPL, Inc. Royce Management Corp of Morristown Saginaw Hospitality, LP Second Fayetteville Motel Enterprises, Inc. Servico Austin, Inc. Servico Cedar Rapids, Inc. Servico Centre Associates, Ltd. Servico Colesville, Inc. 2 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 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 Lawrence II, Inc. Servico Lawrence, Inc. Servico Management Corporation (FL) Servico Management Corporation (TX) Servico Manhattan II, Inc. Servico Manhattan, 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 Operations Corporation Servico Operations Mezzanine, LLC Servico Palm Beach General Partner SPE, Inc. Servico Pensacola 7200, Inc. Servico Pensacola 7330, Inc. Servico Pensacola, Inc. Servico Rolling Meadows, Inc. Servico Roseville, Inc. Servico Saginaw, Inc. Servico Silver Springs, Inc. Servico Tucson, Inc. Servico West Des Moines, Inc. Servico Wichita, Inc. Servico Windsor, Inc. Servico Winter Haven, Inc. Servico Worcester, Inc. Servico, Inc. Sharon Motel Enterprises, Inc. Sheffield Motel Enterprises, Inc. Sioux City Hospitality, LP Sixteen Hotels, Inc. South Carolina Interstate Motel Enterprises Southfield Hotel Group II, LP W.V.B.M., Inc. 3 Washington Motel Enterprises, Inc. Wilpen, Inc. Worcester Hospitality Associates, LP 4 EX-23.1 47 g87458exv23w1.txt EX-23.1 CONSENT OF DELOITTE & TOUCHE LLP EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the use in this Registration Statement of Lodgian, Inc. on Form S-1 of our report dated March 5, 2004 (which expresses an unqualified opinion and includes an explanatory paragraph relating to the Successor Company's change in its method of accounting for discontinued operations to conform with Statement of Financial Accounting Standards No. 144 and the Successor Company's adoption of the provisions of Statement of Financial Accounting Standards No. 150), appearing in the Prospectus, which is part of this Registration Statement. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ Deloitte & Touche LLP Atlanta, Georgia March 5, 2004 GRAPHIC 49 g87458g8745801.jpg GRAPHIC begin 644 g87458g8745801.jpg M_]C_X``02D9)1@`!`@``9`!D``#_[``11'5C:WD``0`$````,@``_^X`#D%D M;V)E`&3``````?_;`(0`"`8&!@8&"`8&"`P(!P@,#@H("`H.$`T-#@T-$!$, M#@T-#@P1#Q(3%!,2#Q@8&AH8&",B(B(C)R>U,MQ1TKZF;EOR\1KTZ+=PLKYK,DDN8V1[(G'6K&G3W&H M4)WC+B<19F^NX9FNN7&(36Y-!(6ES?F-Y-%'<3J!5>6'?/;5O!!97UZRTNHX MVA[',>UATT-Q]P=52((<`YIJ#J"-B%FTU=-=31-.S3Z'J(L4US;6XK<3,B'61P;_ M`(BH),J*$N>[NW;0D2WS'$>$0=)\8VN"U6=_=JN-'7QC/YXI1\0PA76+(]5" M7TRCR05Y+[+*BBK;N;MZ[-+?)VSG'9AE:UWZ7D%2@<'`.:00=01J%5Q:NFNI M9-.S3Z'J(B@D(B(`B(@"(B`JO[BVXG[2OB15T)BD9ZQ*UI/Z7%<7[BO<;?NM MW8^WDMQ%&(W,D=SH`!0!^[M:[T7?^XL>[*8._L&:R30N$8ZO;YV#]0"_.$[" M"01JO1]"CB^8R;_TC@]VJDN)+\,BI6KYM[NYM7UMYI(M?P.+=?[I6>5JTWBA M7IK5'G/1U+!;97(/'%]W,X'<&1Y'VJ8LYBXU<:D[D[JIVDFRG[*798Y(K9&^ M.3>Y-3-J*]5&3LW4HT\XO4LN-P&0SMS]/8QU`_JS.TC8#XN/\!JL5)1JVZ)& MSBWHE5LJD[=U/=M]L][7SVRX1UQC[-K>UN(*;`N/\`F,]CO#H0NZJK]]]O_P#>X.3Y+.5[9UFM MJ:DT'GC'\S1[P%T>KE_GD5;2T9C[&/OQNEUJC\]3-6E(U2DL9-:"M-311\K5 M[46>/)&*W=Q=13MG)LJ^#Q>"K3VMA,CW#?,LL?'6E#-,?N1-_M//V#Q49&E% MR;HEN3BJVHI59:>V<5"E%XN?-_26GBK?L]C#B[(Z^ M3N$1%@:A$1`$1$`1$0!$1`$1$!R_OOMN3"?^AP!DBCFE:,E:1N=P?R=R8>`_ M"7Z%NU2**CR]B]PY2ZGDP^/=+;U#AS='$6\P'\")G,U;RHOT0HAP^@SC7C2# M(LX.Z":/5I]K=/25U8_;G!423:5WNOGH+GN.KCZ2M]%GE] MC+E\WIPM$:XO7QXO!:\NX1$6)J%\"6,NXAP+NE5&YC*,LHS&PUF=L.BJK+ZY M9(9`\U.JTAB/@] MR]9W!R.GV*/YRX)[X\E@11466Y[A;T5TR3PHJN+5R4TS.B\J$4$GJ(B`+1RU MJ^ZLGMBTGB(F@<-Q(SS-IZ]EO(B#550P6=RV\M8KEF@E:'$=#XM]AT6=1MB/ MI+VZL-HWGZFW'Y7FCVCU.^U22EW(5@M')Y%EA#IYIGZ1L&]5EO;R.RA^8[S/ M=Y8XQNYQV`6I8X^1TIO[_P`UR_[K-Q&.@]*F*5W;\AMV14+B66:5TDQ/-QUJ ML2Z!-8VEQ_5A:X]::K0D[=Q[S5H+?45LLT=U0R>-\U*W+- MIK4GUKY6[3#2RD%P4W;86&,`O]RE6L:P4:*!>K&623^# M102,,=K!&/*P>U90`-A1>HJ%@B(@"(B`(B(#1R+3'\F_;O:NJ_TQ/\LGN^][ M%LSSQV\1E?J-FM;J7$[-:/$E?*GJ1NZ&:VM'OF^MO*& GRAPHIC 50 g87458g8745803.gif GRAPHIC begin 644 g87458g8745803.gif M1TE&.#EAA0$1`:(``/___\S,S)F9F69F9C,S,P```````````"'Y!``````` M+`````"%`1$!``/_"+K<_C#*2:N]..O-N_]@*(Z7$##!":2+2KYP+,]T;=^> M(*!JL"LNQLX$W`U\Q!]NR6PZG]!H2?'S`097J[(QT"V\.AU+2BZ;S^BT0]!5 M@0-'4[!!4":1*RN0P,>J_X"!@H$!?'4,`WX`=V"+#UA'5">1CG%?`GR#FIN< MG3(!!6)?BS]$E$97#EAR*:B.65N+!)ZTM;:W#Z"J5(M6?BR0N2PH$$H`J40/,BP(8V$418ZG$@1!$0H$BMJW&CA_^*3 MC!Q#BF3G+MG(DRA;M$L#,J7+AAZ=M'Q)$V#,)C-KZKQWDTG.G4#5]5SR,ZC1 M<$-Q%#W*%%O2&TN;2L7UU$;4J5@]5:UQ-:O705LIB)(TI,H<65_3.EW9P`>G5JQ6I'H\5+^[0V'+DR:XA@VX&RK&267`*QVTUVJ\> M7T!.!([5=;60V)!A([\L;I^?7ZX>H?5RY^:+EC\+'%+PL[8SUW[\CANY:OC+X,^_\,I2#@@`1:XUY?G%"V'']\ ME624@N$9Z)Y^EC%XBW\Q`'@0A/%)^!TM'.Z'&8+\;/=2B!5ZF!^([EEH"X8P M:&@0BI6Y*`%^L5%8XX@.!D5C9-4<.`>.KND()(\LF6A!&$PVF5TZ/\KF@)`- M$&F9D5(V1^)`2E)0B"&QG15.E(\%Z=Z0!V)9)I+>=`D!$DX.8)F8X)!IVY1G M5IDFBPNR:8Z;?SGI9(AT;F,G=R$?$:H98\3P!E&"JEUH0.'A6ISJ)G+ MHY\ND.X2[ZX%*6+B0A";I91`2>NKPL;:;FC[/A$O;5LJI&2! 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Delaware	7011	52-2093696
(State or other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)






	Proposed Maximum
Title of Each Class of	Aggregate Offering	Amount of
Securities to be Registered	Price(1)(2)	Registration Fee


Common Stock, $0.01 par value	$175,000,000	$22,173


	Per Share	Total

Public offering price	$	$
Underwriting discount	$	$
Proceeds, before expenses, to us	$	$


	High	Low

2004
First Quarter
2003
Fourth Quarter
Third Quarter
Second Quarter
First Quarter (from January 28, 2003)



			As of
			December 31, 2003

			Actual			As Adjusted


			(in thousands)
Long-term debt:
	Mandatorily redeemable 12.25% cumulative Series A Preferred Stock		$	142,177		$
	Long-term debt			409,115

		Total long-term debt		551,292
Stockholders’ equity:
	Common stock, $.01 par value, 30,000,000 shares authorized; 7,000,774 shares (actual) and shares (as adjusted)			70
	Additional paid-in capital			89,827
	Unearned stock compensation			(508	)
	Accumulated deficit			(50,107	)
	Accumulated other comprehensive income			1,324

		Total stockholders’ equity		40,606

		Total capitalization	$	591,898		$


W. Thomas Parrington President and Chief Executive Officer 3445 Peachtree Road, N.E. — Suite 700 Atlanta, Georgia 30326 (404) 364-9400		Daniel E. Ellis, Esq. Senior Vice President, General Counsel and Secretary 3445 Peachtree Road, N.E. — Suite 700 Atlanta, Georgia 30326 (404) 364-9400


Jeffrey L. Schulte, Esq. David M. Calhoun, Esq. Brandy A. Bayer, Esq. Leigh E. Wilde, Esq. Morris, Manning & Martin, LLP 1600 Atlanta Financial Center 3343 Peachtree Road, N.E. Atlanta, Georgia 30326 (404) 233-7000		Edward F. Petrosky, Esq. J. Gerard Cummins, Esq. Sidley Austin Brown & Wood LLP 787 Seventh Avenue New York, New York 10019 (212) 839-5300


	Page

Prospectus Summary		1
Risk Factors		8
Forward-Looking Statements		20
Use of Proceeds		21
Price Range of Common Stock		21
Dividend Policy		22
Capitalization		23
Dilution		24
Selected Consolidated Financial Data		25
Management’s Discussion and Analysis of Financial Condition and Results of Operations		27
Business and Properties		58
Management		75
Principal Stockholders		85
Related Party Transactions		87
Description of Capital Stock		88
Shares Eligible For Future Sale		91
Underwriting		93
Legal Matters		96
Experts		96
Where You Can Find Additional Information		96
Index to Financial Statements		F-1
EX-3.1 RESTATED CERTIFICATE OF INCORPORATION
EX-3.2 AMENDMENT TO RESTATED CERTIFICATE
EX-3.3 CERTIFICATE OF DESIGNATION
EX-3.4 AMENDED RESTATED BYLAWS OF LODGIAN, INC.
EX-5.1 FORM OF LEGAL OPINION OF MORRIS, MANNING
EX-10.1.1 LOAN AGREEMENT
EX-10.1.2 PROMISSORY NOTE
EX-10.2.1 LOAN AND SECURITY AGREEMENT
EX-10.2.2 PROMISSORY NOTE
EX-10.2.3 MODIFICATION OF LOAN AGREEMENT
EX-10.2.4 NOTE SEVERANCE AGREEMENT
EX-10.2.5 $218,217,000 AMENDED AND RESTATED
EX-10.2.6 $5,539,275 PROMISSORY NOTE B
EX-10.3.1 MEZZANINE LOAN AGREEMENT
EX-10.3.2 PROMISSORY NOTE
EX-10.3.3 GUARANTY OF RESOURCE OBLIGATIONS
EX-10.3.4 MODIFICATION OF LOAN AGREEMENT
EX-10.3.5 $84,080,526 AMENDED, RESTATED
EX-10.3.6 ASSIGNMENT AND ASSUMPTION AGREEMENT
EX-10.4.1 LOAN AGREEMENT
EX-10.4.2 $80,000,000 CONSOLIDATED, AMENDED
EX-10.4.3 $5,000,000 GAP MORTGAGE NOTE
EX-10.4.4 PRINCIPAL'S AGREEMENT
EX-10.4.5 SECURITY AGREEMENT AND LOCKBOX AGREEMENT
EX-10.4.6 FIRST AMENDMENT TO LOAN DOCUMENTS
EX-10.5 2002 STOCK INCENTIVE PLAN OF LODIGAN
EX-10.6 DISCLOSURE STATEMENT FOR JOINT PLAN
EX-10.7 FIRST AMENDED JOINT PLAN OF REORGANIZATION
EX-10.8 ORDER CONFIRMING THE FIRST AMENDED
EX-10.9 CLASS A WARRANT AGREEMENT
EX-10.10 CLASS B WARRANT AGREEMENT
EX-10.11 REGISTRATION RIGHTS AGREEMENT
EX-10.12 EMPLOYMENT AGREEMENT
EX-10.13.1 DISCLOSURE STATEMENT FOR JOINT PLAN
EX-10.13.2 JOINT PLAN OF REORGANIZATION
EX-10.13.3 ORDER CONFIRMING JOINT PLAN
EX-10.13.4 POST CONFIRMATION ORDER AND NOTICE
EX-10.14.01 LEASE AGREEMENT
EX-10.14.2 FIRST AMENDMENT TO LEASE AGREEMENT
EX-10.14.3 SECOND AMENDMENT TO LEASE AGREEMENT
EX-10.14.4 THIRD AMENDMENT TO LEASE AGREEMENT
EX-10.14.5 FOURTH AMENDMENT TO LEASE AGREEMENT
EX-10.14.6 FIFTH AMENDMENT TO LEASE AGREEMENT
EX-21.1 SUBSIDIARIES OF LODGIAN, INC.
EX-23.1 CONSENT OF DELOITTE & TOUCHE LLP


(1)	Includes one property for which we have entered into a voluntary termination of the franchise agreement.

(2)	Includes one property on which the existing debt matures on June 30, 2004 and for which we have escrowed foreclosure documents.


(1)	The number of shares in the successor period ended December 31, 2002 represents the shares issued on the consummation of the first of the two plans of reorganization in November 25, 2002. The 28,479,837 old shares were cancelled and 7,000,000 shares were issued.

(2)	Reported long-term debt was affected in 2001 by our filing for Chapter 11. On the filing of Chapter 11, all our debts (except the debt relating to a non-filed entity) and certain other liabilities were classified as liabilities subject to compromise. On emergence from Chapter 11, some of our debt was discharged. The remaining long-term debt and other settled claims were reclassified out of liabilities subject to compromise to long-term debt (if long-term) and current liabilities (if short-term).

(3)	The Series A Preferred Stock was issued on November 25, 2002. At December 31, 2002, the Series A Preferred Stock was classified between long-term debt and equity on our consolidated balance sheet, called the mezzanine section. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity which was effective on July 1, 2003, we reclassified the Series A Preferred Stock to long-term debt. The Series A Preferred Stock outstanding at December 31, 2003 was $142.2 million compared to $126.5 million at December 31, 2002. In addition, the dividend for the period July 1, 2003 to December 31, 2003 was reported in interest expense. In accordance with SFAS No. 150, we continued to show the dividends for the periods January 1, 2003 to June 30, 2003 and November 23, 2002 to December 31, 2002 as deductions from retained earnings.


	•	Occupancy, ADR and RevPAR for the 78 hotels in our continuing operations for 2003, the 2002 Combined Period and 2001; and

	•	EBITDA for the 77 hotels that we consolidate in our continuing operations for 2003, the 2002 Combined Period and 2001 (we do not calculate EBITDA for our non-controlling equity interest in one hotel because we account for it under the equity method).


	We may not be able to meet the requirements imposed by our franchisors in our franchise agreements and therefore could lose the right to operate one or more hotels under a national brand.


	Any such franchise agreement termination could materially and adversely affect us.


	Hotels require a high level of capital expenditures, maintenance and repairs and if we are not able to meet these requirements of our hotels appropriately, our business and operating results will suffer.


	*The terms of our debt instruments place many restrictions on us, which reduce operational flexibility and create default risks.*


	*Rising interest rates could have an adverse effect on our cash flow and interest expense.*


	*To service our indebtedness, we require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.*


	*The value of our hotels and repayment or refinancing of our debt are dependent upon the successful operation and cash flows of the hotels.*


	Our current and future joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on joint venture partners’ financial condition and performance and any disputes that may arise between us and our joint venture partners.


	*Fresh start reporting will make future financial statements difficult to compare.*


	*Our prior bankruptcy could adversely affect our operations going forward.*


	*We have a history of significant losses and we may not be able to successfully improve our performance to achieve profitability.*


	Acts and threats of terrorism, the ongoing war against terrorism, military conflicts and other factors have had a negative impact on and may continue to have a negative effect on the lodging industry and our results of operations.


	*We may be unable to sell real estate, including our assets held for sale, in a timely manner or at expected prices.*


	*Our expenses may remain constant or increase even if revenues decline.*


	*We may make acquisitions or investments that are not successful and that adversely affect our ongoing operations.*


	*Losses may exceed our insurance coverage or estimated reserves.*


	*Competition in the lodging industry could have a material adverse effect on our business and results of operations.*


	Adverse conditions in markets in which we do substantial amounts of business, such as our four largest markets of Baltimore/Washington, D.C., Pittsburgh, Buffalo/Niagara Falls and Phoenix, could negatively affect our results of operations.


	*We have experienced significant changes in our senior management team.*


	*If we lose or are unable to obtain key personnel, our ability to effectively operate our business could be hindered.*


	*The increasing use of third-party travel websites by consumers may adversely affect our profitability.*


	*We may be unable to utilize our net operating loss carryforwards.*


	*Aspects of our operations are subject to government regulation, and changes in government regulations may adversely affect our results of operations and financial condition.*


	*Costs of compliance with environmental laws and regulations could adversely affect operating results.*