<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 17, 1998.
Registration No. 333-_____
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
LODGIAN, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
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DELAWARE 7011 TO BE APPLIED FOR
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<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
1601 BELVEDERE ROAD
WEST PALM BEACH, FLORIDA 33406
(561) 689-9970
--------------------------------------------
(Address, including Zip Code, and telephone
number, including area code, of registrant's
principal executive offices)
DAVID A. BUDDEMEYER
1601 BELVEDERE ROAD
WEST PALM BEACH, FLORIDA 33406
(561) 689-9970
------------------------------------------
(Name, address, including Zip Code,
and telephone number,
including area code, of agent for service)
Please send copies of all communications to:
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<CAPTION>
<S> <C>
ALISON W. MILLER, ESQ. KEN HARRIGAN, ESQ.
STEVEN D. RUBIN, ESQ. POWELL, GOLDSTEIN, FRAZER & MURPHY LLP
STEARNS WEAVER MILLER WEISSLER 191 PEACHTREE STREET, N.E., SUITE 1600
ALHADEFF & SITTERSON, P.A. ATLANTA, GEORGIA, 30303
150 WEST FLAGLER STREET, SUITE 2200 (404) 572-6744
MIAMI, FLORIDA 33130
(305) 789-3200
</TABLE>
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are being
offered in connection with the formation of a holding compnay and there is
compliance with General Instruction G, check the following box |_|.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================================================
Title of each class Proposed maximum Proposed maxi- Amount of
of securities to be Amount to be offering price per mum aggregate registration
registered retistered Share offering price(1) fee
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<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share 29,951,695(2) $12.73 $381,205,867 $112,456
================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) based on (i) $15.1875, the average of the high and
low per share sale price of the Common Stock, par value $.01 per share (the
"Servico Common Stock"), of Servico, Inc., a Florida corporation, on the
New York Stock Exchange on July 13, 1998, and (ii) $5.23, the book value of
the Class A Ordinary Membership Units (the "Impac Units") of Impac Hotel
Group, L.L.C., a Georgia limited liability company ("Impac"), on March 31,
1998. The proposed maximum offering price is equal to (i) the per share
market value of the Servico Common Stock multiplied by the maximum number
of shares of Servico Common Stock which may be converted in the Mergers
described herein (the "Mergers") for shares of the Common Stock, par value
$.01 per share (the "Lodgian Common Stock"), of Lodgian, Inc., a Delaware
corporation, plus (ii) the per unit book value of the Impac Units
multiplied by the maximum number of Impac Units which may be converted in
the Mergers for shares of Lodgian Common Stock (2) Assumes that all shares
of Lodgian Common Stock issuable to unitholders of Impac are issued
pursuant to the terms of the Agreement and Plan of Merger described herein.
--------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE> 2
[SERVICO LOGO] SERVICO, INC.
1601 Belvedere Road
West Palm Beach, Florida 33406
_____________, 1998
Dear Fellow Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders to be
held at ________, on _____________, 1998, at _____ a.m., Eastern Time. At this
meeting, you will be asked to approve a merger between Servico and Impac Hotel
Group, L.L.C., a private hotel ownership, management and development company.
Impac owns, manages or has under development 55 hotels, with approximately 9,266
rooms in 24 states. In the merger, Servico shareholders and the unitholders of
Impac will become the owners of a combined company to be called Lodgian, Inc.,
with Servico shareholders and Impac unitholders owning approximately 74% and
26%, respectively, of Lodgian's outstanding common stock. The accompanying Joint
Proxy Statement/Prospectus provides a detailed description of the merger and its
effect on Servico and on you as shareholders of Servico.
The purpose of the merger is to create a combined enterprise with the increased
financial strength, franchise base and the expertise necessary to excel in the
increasingly competitive and consolidating hotel industry. However, the combined
company will be subject to significant potential risks including :
o Inability to successfully consolidate the business, operations and
personnel of the two companies;
o High levels of debt which subject the combined company to a greater
risk of default and foreclosure in economic downturns;
o Unavailability of capital for growth through the acquisition,
development or renovation of hotel properties;
o Increased competition for customers and hotel acquisition
opportunities; and
o Illiquidity of real estate and exposure to general economic downturns
in the lodging industry.
At the Annual Meeting, you will also be asked to approve the Lodgian 1998
Short-Term Incentive Compensation Plan, the Lodgian 1998 Stock Incentive Plan
and the Lodgian Non-Employee Directors' Stock Plan and an amendment to Servico's
existing Stock Option Plan to increase the number of shares in the Servico Stock
Option Plan. The Lodgian Plans will replace the Servico Stock Option Plan if the
merger is approved. Servico shareholders will also vote on the election of one
director to serve until the earlier of the year 2001 or the completion of the
merger.
YOUR BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS IN THE BEST INTERESTS OF
SERVICO AND ITS SHAREHOLDERS. THE BOARD HAS UNANIMOUSLY APPROVED THE MERGER AND
RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE MERGER AND FOR EACH OF THE
LODGIAN PLANS. YOUR BOARD OF DIRECTORS ALSO RECOMMENDS THAT YOU VOTE FOR ITS
NOMINEE FOR DIRECTOR AND FOR APPROVAL OF THE AMENDMENT TO SERVICO'S EXISTING
STOCK OPTION PLAN.
Whether or not you plan to attend the Annual Meeting and regardless of the
number of shares you own, please complete, sign and date your proxy card and
promptly return it in the envelope provided. If you attend the Annual Meeting
you may vote in person, even if you previously returned a proxy.
<PAGE> 3
Sincerely yours,
David A. Buddemeyer,
Chairman of the Board, President and
Chief Executive Officer
The Securities and Exchange Commission and state securities regulations have not
approved the transaction described in this Joint Proxy Statement/Prospectus or
the shares of Lodgian common stock to be issued in the transaction, and they
have not determined if this Joint Proxy Statement/Prospectus is truthful or
complete. Furthermore, the Securities and Exchange Commission has not determined
the fairness or merits of the transaction. Any representation to the contrary is
a criminal offense.
SEE "RISK FACTORS" BEGINNING ON PAGE ___ FOR MATERIAL RISKS YOU SHOULD CONSIDER.
This Joint Proxy Statement/Prospectus is dated _________, 1998
and is first being mailed to shareholders and unitholders on or
about _____, 1998.
<PAGE> 4
[SERVICO LOGO]
SERVICO, INC.
1601 Belvedere Road
West Palm Beach, Florida 33406
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON ______________, 1998, AT __ A.M.
To Our Shareholders:
Notice is hereby given that the Annual Meeting of Shareholders (the
"Annual Meeting") of Servico, Inc., a Florida corporation ("Servico"), will be
held at _____________, on ___________, 1998, commencing at ____ a.m. Eastern
Time, and at any adjournments or postponements thereof, for the following
purposes:
1. To approve the Amended and Restated Agreement and Plan of Merger,
dated as of July ___, 1998 (the "Merger Agreement"), among Lodgian, Inc.
("Lodgian"), Servico, Impac Hotel Group, L.L.C., a Georgia limited liability
company ("Impac"), P-Burg Lodging Associates, Inc., a Kentucky corporation
("P-Burg"), Hazard Lodging Associates, Inc., a Kentucky corporation ("Hazard"),
Memphis Lodging Associates, Inc., a Florida corporation ("Memphis"), Delk
Lodging Associates, Inc., a Delaware corporation ("Delk"), Impac Hotel
Development, Inc., a Delaware corporation ("IHD"), Impac Design and
Construction, Inc., a Delaware corporation ("IDC"), Impac Hotel Group, Inc., a
Florida corporation ("IHG") (P-Burg, Hazard, Memphis, Delk, IHD, IDC and IHG
referred to collectively as the "Impac Affiliated Companies") and certain
acquisition subsidiaries providing for mergers which will result in Servico,
Impac and each of the Impac Affiliated Companies becoming wholly-owned
subsidiaries of Lodgian (together referred to as the "Merger");
2. To approve the Lodgian 1998 Short-Term Incentive Compensation Plan,
which appears as Appendix D to the accompanying Joint Proxy
Statement/Prospectus;
3. To approve the Lodgian 1998 Stock Incentive Plan, which appears as
Appendix E to the accompanying Joint Proxy Statement/Prospectus;
4. To approve the Lodgian Non-Employee Directors' Stock Plan, which
appears as Appendix F to the accompanying Joint Proxy Statement/Prospectus (the
Lodgian 1998 Short-Term Incentive Compensation Plan, the Lodgian 1998 Stock
Incentive Plan and the Lodgian Non-Employee Directors' Stock Plan being referred
to as the "Lodgian Plans");
5. To elect one director to the Board of Directors of Servico to serve
until the earlier of the year 2001 or the consummation of the Merger;
6. To approve an amendment of the Servico Stock Option Plan to increase
the number of shares issuable pursuant to the Plan; and
7. To transact such other business that may properly come before the
Annual Meeting or any adjournment or postponement thereof.
<PAGE> 5
Only shareholders of record on __________, 1998 will be entitled to
notice of and to vote at the Annual Meeting and any adjournments thereof. The
presence, either in person or by proxy, of the holders of a majority of the
issued and outstanding shares of common stock of Servico, par value $.01 per
share (the "Servico Common Stock"), is necessary to constitute a quorum at the
Annual Meeting. The affirmative vote of the holders of a majority of the
outstanding shares of Servico Common Stock is required to approve the Merger.
The affirmative vote of a majority of the shares of Servico Common Stock voting
in person or by proxy at the Annual Meeting is required to approve each of the
Lodgian Plans and the amendment of the Servico Stock Option Plan. The nominee
will be elected as a director upon receipt of a plurality of the votes cast.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN, DATE
AND RETURN THE ENCLOSED PROXY IN THE POSTAGE-PAID REPLY ENVELOPE PROVIDED. THE
PROMPT RETURN OF YOUR PROXY WILL ASSIST US IN PREPARING FOR THE ANNUAL MEETING.
SHAREHOLDERS WHO ATTEND THE ANNUAL MEETING IN PERSON MAY REVOKE THEIR PROXIES
AND VOTE IN PERSON IF THEY DESIRE. YOU MAY ALSO REVOKE YOUR PROXY BY SIGNING AND
RETURNING A LATER DATED PROXY WITH RESPECT TO THE SAME SHARES OR BY FILING WITH
THE SECRETARY OF SERVICO A DULY EXECUTED LETTER OF REVOCATION. IF YOU SIGN AND
RETURN YOUR PROXY CARD WITHOUT SPECIFYING HOW YOU WOULD LIKE YOUR SHARES VOTED,
EACH OF YOUR SHARES WILL BE VOTED FOR THE APPROVAL OF THE MERGER, FOR THE
APPROVAL OF THE EACH OF THE LODGIAN PLANS, FOR THE AMENDMENT OF THE SERVICO
STOCK OPTION PLAN AND FOR THE ELECTION OF THE NOMINEE AS DIRECTOR.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL
OF THE MERGER, EACH OF THE LODGIAN PLANS, THE AMENDMENT TO THE SERVICO STOCK
OPTION PLAN AND THE NOMINEE FOR DIRECTOR.
By Order Of The Board Of Directors
CHARLES M. DIAZ
SECRETARY
West Palm Beach, Florida
_____________, 1998
<PAGE> 6
[IMPAC LOGO] IMPAC HOTEL GROUP, L.L.C.
Two Live Oak Center
3445 Peachtree Road, N.E.
Suite 700
Atlanta, Georgia 30326
_____________, 1998
Dear Fellow Unitholders:
I am writing to you to solicit your consent to two very important matters that
directly affect your interest as unitholders of Class A Ordinary Membership
Interests of Impac Hotel Group, L.L.C. The first matter involves a merger with
Servico, Inc., a New York Stock Exchange listed company which owns or manages 89
hotels with approximately 17,937 rooms in 24 states. As a result of the merger,
Servico shareholders and Impac unitholders will become the owners of a combined
company to be called Lodgian, Inc., with Impac unitholders and Servico
shareholders owning approximately 26% and 74%, respectively, of Lodgian's
outstanding common stock. Unitholders of Impac will receive an aggregate of 6
million shares of Lodgian common stock or 0.519 shares for each unit owned
(subject to adjustment based on the average closing price of Servico common
stock over the ten days prior to the merger). In addition, as five of Impac's
hotels that are currently under development are opened, the Impac unitholders
will receive up to an aggregate of 1.4 million additional shares of Lodgian
common stock representing an additional 0.121 shares of Lodgian common stock for
each Impac unit. Impac unitholders and Servico shareholders will then own
approximately 26% and 74% respectively of Lodgian's outstanding common stock.
You are also being asked to approve the Lodgian 1998 Short-Term Incentive
Compensation Plan, the Lodgian 1998 Stock Incentive Plan and the Lodgian
Non-Employee Directors' Stock Plan. The plans are intended to provide Lodgian's
directors and employees with incentives that are aligned with your interests as
a Lodgian shareholder going forward. The accompanying Joint Proxy
Statement/Prospectus provides a detailed description of the merger and its
effect on Impac and on you as unitholders of Impac.
The purpose of the merger is to create a combined enterprise with the increased
financial strength, franchise base, global reach and expertise necessary to
excel in the increasingly competitive and consolidating hotel industry.
However, the merger will be subject to significant potential risks including:
o Inability to successfully consolidate the business, operations and
personnel of the two companies;
o High levels of debt which subject the combined company to a greater
risk of default and foreclosure in economic downturns;
o Unavailability of capital for growth through the acquisition,
development or renovation of hotel properties;
o Increased competition for customers and hotel acquisition
opportunities; and
o Illiquidity of real estate and exposure to general economic downturns
in the lodging industry.
I strongly believe in the merger and have agreed to vote my Impac units in favor
of the merger. My vote, together with the vote of others who have already agreed
to vote their units in favor of the merger, will represent more than
<PAGE> 7
a majority of the outstanding units, thus assuring the approval of the merger
and the Lodgian benefit plans by the Impac unitholders.
AS MANAGER, I HAVE CAREFULLY REVIEWED THE TERMS AND CONDITIONS OF THE MERGER AND
BELIEVE THAT THE MERGER IS FAIR TO AND IN THE BEST INTERESTS OF IMPAC AND ITS
UNITHOLDERS AND RECOMMEND THAT YOU CONSENT TO THE MERGER AND TO THE ADOPTION OF
EACH OF THE LODGIAN BENEFIT PLANS. Please complete, sign and date your written
consent form and promptly return it in the envelope provided.
Sincerely yours,
ROBERT S. COLE
MANAGER
The Securities and Exchange Commission and state securities regulations have not
approved the transaction described in this Joint Proxy Statement/Prospectus or
the shares of Lodgian common stock to be issued in the transaction, and they
have not determined if this Joint Proxy Statement/Prospectus is truthful or
complete. Furthermore, the Securities and Exchange Commission has not determined
the fairness or merits of the transaction. Any representation to the contrary is
a criminal offense.
SEE "RISK FACTORS" BEGINNING ON PAGE ___ FOR MATERIAL RISKS YOU SHOULD CONSIDER.
This Joint Proxy Statement/Prospectus is dated _______, 1998
and is first being mailed to shareholders and unitholders on or
about _____, 1998.
<PAGE> 8
[IMPAC LOGO]
IMPAC HOTEL GROUP, L.L.C.
Two Live Oak Center
3445 Peachtree Road, N.E.
Suite 700
Atlanta, Georgia 30326
SOLICITATION OF WRITTEN CONSENT OF UNITHOLDERS
To Our Unitholders:
Pursuant to Section 5.5(b)(i) of the Second Amended and Restated
Operating Agreement of Impac Hotel Group, L.L.C. ("Impac"), the consent of the
holders of the Class A Ordinary Membership Interests (the "Units") is solicited
in order to take the following actions:
1. To approve the Amended and Restated Agreement and Plan of Merger,
dated as of July ___, 1998 (the "Merger Agreement"), among Lodgian, Inc.
("Lodgian"), Servico, Impac Hotel Group, L.L.C., a Georgia limited liability
company ("Impac"), P-Burg Lodging Associates, Inc., a Kentucky corporation
("P-Burg"), Hazard Lodging Associates, Inc., a Kentucky corporation ("Hazard"),
Memphis Lodging Associates, Inc., a Florida corporation ("Memphis"), Delk
Lodging Associates, Inc., a Delaware corporation ("Delk"), Impac Hotel
Development, Inc., a Delaware corporation ("IHD"), Impac Design and
Construction, Inc., a Delaware corporation ("IDC"), Impac Hotel Group, Inc., a
Florida corporation ("IHG") (defined collectively as the "Impac Affiliated
Companies") and certain acquisition subsidiaries providing for mergers which
will result in Servico, Impac and each of the Impac Affiliated Companies
becoming wholly-owned subsidiaries of Lodgian (together referred to as the
"Merger");
2. To approve the Lodgian 1998 Short-Term Incentive Compensation Plan,
which appears as Appendix D to the accompanying Joint Proxy
Statement/Prospectus;
3. To approve the Lodgian 1998 Stock Incentive Plan, which appears as
Appendix E to the accompanying Joint Proxy Statement/Prospectus; and
4. To approve the Lodgian Non-Employee Directors' Stock Plan, which
appears as Appendix F to the accompanying Joint Proxy Statement/Prospectus (the
Lodgian 1998 Short-Term Incentive Compensation Plan, the Lodgian 1998 Stock
Incentive Plan and the Lodgian Non-Employee Directors' Stock Plan being referred
to as the "Lodgian Plans").
<PAGE> 9
The written consent of the holders of a majority of the outstanding
Units of Impac is required to approve the Merger and each of the Lodgian Plans.
Please sign, date and return promptly the enclosed form of written
consent in the postage-paid reply envelope provided. You may revoke your consent
by filing with the Secretary of Impac a duly executed letter of revocation prior
to completion of the Merger.
THE MANAGER RECOMMENDS THAT UNITHOLDERS CONSENT TO THE MERGER AND THE
ADOPTION OF EACH OF THE LODGIAN PLANS.
ROBERT S. COLE
MANAGER
Atlanta, Georgia
_____________, 1998
<PAGE> 10
TABLE OF CONTENTS
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PAGE
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QUESTIONS AND ANSWERS ABOUT THE SERVICO/IMPAC TRANSACTION..........................................................vi
JOINT PROXY STATEMENT/PROSPECTUS SUMMARY............................................................................1
The Companies .............................................................................................1
What You Will Receive in the Merger........................................................................1
Reasons for the Merger.....................................................................................2
Summary of Risk Factors ...................................................................................2
Recommendations ...........................................................................................2
Opinions of Financial Advisors.............................................................................2
Conflicts of Interests of Certain Persons..................................................................3
Conditions to the Transaction .............................................................................3
Termination of the Merger Agreement .......................................................................3
Termination Fees ..........................................................................................3
Regulatory Approvals ......................................................................................3
Material U.S. Federal Income Tax Consequences .............................................................3
No Appraisal Rights........................................................................................4
Per Share Market Price Information ........................................................................4
Listing of Lodgian Common Stock ...........................................................................4
Lodgian Dividend Policy....................................................................................4
Lodgian Plan Proposals ....................................................................................4
Other Servico Annual Meeting Matters.......................................................................4
Eligibility to Vote........................................................................................4
Vote Required .............................................................................................4
Cautionary Statement.......................................................................................5
Organizational Chart.......................................................................................6
SUMMARY SELECTED HISTORICAL AND UNAUDITED PRO FORMA
COMBINED CONDENSED CONSOLIDATED FINANCIAL INFORMATION...............................................................7
Selected Historical Financial Information - Servico........................................................7
Selected Historical Financial Information - Impac..........................................................8
Selected Unaudited Pro Forma Financial Information.........................................................8
Comparative Per Share Information.........................................................................10
RISK FACTORS.......................................................................................................11
Inability to Successfully Integrate Operations............................................................11
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Risks Associated with High Levels of Debt.................................................................11
Inability to Expand.......................................................................................13
Illiquidity and Possible Declines in Value of Real Estate.................................................13
Delays in Completion or Unanticipated Costs Associated with Development
and Renovation of Properties..............................................................................13
Loss of Flexibility of Ownership of Real Estate with Others...............................................14
Lodging Industry Risks....................................................................................14
Limitations and Requirements of Franchise Agreements......................................................15
Costs of Compliance with Environmental Laws...............................................................16
No Intention to Pay Dividends.............................................................................16
Cost of Compliance with Governmental Regulations..........................................................16
Substantial Reliance on Key Personnel.....................................................................17
Anti-Takeover Provisions..................................................................................17
SERVICO ANNUAL MEETING.............................................................................................18
Date, Time and Place and Purpose..........................................................................18
Record Date for Eligibility to Vote.......................................................................18
Voting of Proxies.........................................................................................18
Revocability of Proxies...................................................................................19
Votes Required; Shares Held by Certain Persons............................................................19
Solicitation of Proxies...................................................................................19
MATTERS TO BE VOTED UPON AT THE SERVICO ANNUAL MEETING.............................................................20
Approval of the Merger ..................................................................................20
Approval of Each of the Lodgian Plans.....................................................................20
Amendment of Servico Stock Option Plan....................................................................20
Election of Directors ...................................................................................21
SOLICITATION OF IMPAC UNITHOLDER CONSENTS..........................................................................21
Purpose .................................................................................................21
Unitholders Entitled to Vote..............................................................................21
Submission of Written Consent.............................................................................21
Revocability of Consent...................................................................................21
Consent Required; Voting Agreements.......................................................................21
Solicitation of Consents..................................................................................22
THE MERGER.........................................................................................................22
General .................................................................................................22
The Merger................................................................................................22
Background of the Merger..................................................................................24
Opinion of Financial Advisors.............................................................................30
Material Federal Income Tax Consequences..................................................................40
Accounting Treatment......................................................................................42
Anti-Trust Approval.......................................................................................43
No Appraisal Rights.......................................................................................43
Stock Exchange Listing....................................................................................43
Delisting and Deregistration of Servico Common Stock......................................................43
</TABLE>
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Securities Law Restrictions...............................................................................43
THE MERGER AGREEMENT...............................................................................................44
General .................................................................................................44
Consideration to be Received in the Merger................................................................44
Exchange of Shares........................................................................................47
Lodgian Following the Merger..............................................................................48
Certain Representations and Warranties....................................................................49
Certain Covenants.........................................................................................49
Restrictions on Solicitation of Alternative Transactions..................................................51
Certain Benefits Matters..................................................................................52
Indemnification and Insurance.............................................................................52
Certain Conditions........................................................................................53
Amendment and Waiver......................................................................................54
Termination...............................................................................................54
Termination Fees; Expenses................................................................................55
Impac Voting Agreements...................................................................................56
Registration Rights Agreement.............................................................................56
CONFLICTS OF INTEREST OF CERTAIN PERSONS IN THE MERGER.............................................................57
Certain Arrangements Regarding Management and Directors of Lodgian........................................57
Arrangements with Executive Officers......................................................................57
Development Agreements....................................................................................59
Registration Rights Agreement.............................................................................59
Indemnification and Insurance.............................................................................59
Release of Guarantees.....................................................................................59
MARKET PRICE AND DIVIDEND DATA.....................................................................................61
Servico .................................................................................................61
Impac .................................................................................................61
LODGIAN, INC. UNAUDITED PRO FORMA COMBINED CONSOLIDATED
FINANCIAL STATEMENTS...............................................................................................63
LODGIAN, INC. UNAUDITED PRO FORMA COMBINING BALANCE SHEET
MARCH 31, 1998.....................................................................................................64
SERVICO, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA FINANCIAL
STATEMENTS FOR THE OFFERING, EXCLUDING THE MERGER.................................................................69
SERVICO, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEETS MARCH 31, 1998.........................................................................70
SERVICO, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA STATEMENT
OF INCOME YEAR ENDED DECEMBER 31, 1997.............................................................................71
SERVICO, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA STATEMENT
OF INCOME THREE MONTHS ENDED MARCH 31, 1998........................................................................72
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
SERVICO, INC. AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA
STATEMENT OF INCOME................................................................................................73
IMPAC HOTEL GROUP, L.L.C. AND PREDECESSORS AND IMPAC HOTEL
DEVELOPMENT, INC. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
EXCLUDING THE MERGER...............................................................................................75
IMPAC HOTEL GROUP, L.L.C. AND PREDECESSORS AND IMPAC HOTEL
DEVELOPMENT, INC. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997.......................................................................................76
IMPAC HOTEL GROUP, L.L.C. AND PREDECESSORS AND IMPAC HOTEL
DEVELOPMENT, INC. NOTES TO UNAUDITED PRO FORMA STATEMENT
OF OPERATIONS......................................................................................................77
DESCRIPTION OF LODGIAN.............................................................................................78
Directors And Management of Lodgian Following The Merger; Compensation....................................78
Stock Ownership of Directors, Executive Officers and Five Percent Shareholders............................80
DESCRIPTION OF SERVICO.............................................................................................85
General .................................................................................................85
Information Relating to Directors and Executive Officers of Servico.......................................85
Servico Employment Agreements and Termination of Employment...............................................90
Report of the Compensation Committee on Executive Compensation............................................91
Performance Graph.........................................................................................93
Security Ownership of Certain Beneficial Owners and Management ..........................................94
BUSINESS OF IMPAC..................................................................................................97
General .................................................................................................97
Organization..............................................................................................97
Investment Strategy.......................................................................................98
Acquisition and Development Strategy......................................................................98
Operating Strategy........................................................................................99
Properties...............................................................................................100
Hotel Operations.........................................................................................101
Franchise Affiliation....................................................................................102
Development Agreements...................................................................................104
Compensation Paid to Impac Manager.......................................................................104
Employees................................................................................................105
Legal Proceedings........................................................................................105
SELECTED HISTORICAL FINANCIAL DATA - IMPAC........................................................................106
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - IMPAC.................................................................................107
General ................................................................................................107
Results of Operations....................................................................................107
Liquidity and Capital Resources..........................................................................110
Existing Financing Arrangements..........................................................................110
Refinancing Commitment...................................................................................115
DESCRIPTION OF LODGIAN CAPITAL STOCK..............................................................................116
Authorized Capital Stock.................................................................................116
</TABLE>
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<TABLE>
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Lodgian Common Stock.....................................................................................116
Lodgian Preferred Stock..................................................................................117
Transfer Agent and Registrar.............................................................................117
COMPARISON OF CERTAIN RIGHTS OF THE HOLDERS OF SERVICO COMMON
STOCK AND IMPAC UNITS.............................................................................................117
Comparison of Current Servico Shareholder Rights and Lodgian Shareholder Rights
Following the Merger.....................................................................................117
Comparison of Current Impac Unitholder Rights and Lodgian Shareholder Rights
Following the Merger.....................................................................................122
LODGIAN PLAN PROPOSALS............................................................................................129
The Lodgian 1998 Short-Term Incentive Compensation Plan..................................................129
Federal Income Tax Consequences..........................................................................131
The Lodgian 1998 Stock Incentive Plan....................................................................131
Federal Income Tax Consequences..........................................................................134
The Lodgian Non-Employee Directors' Stock Plan...........................................................135
Federal Income Tax Consequences..........................................................................136
PROPOSAL TO AMEND THE SERVICO STOCK OPTION PLAN...................................................................137
Description of the Servico Stock Option Plan.............................................................137
Federal Income Tax Consequences..........................................................................138
Options Granted Under the Plan...........................................................................139
Amendment to the Plan....................................................................................139
LEGAL MATTERS.....................................................................................................140
EXPERTS .........................................................................................................140
SHAREHOLDER PROPOSALS.............................................................................................140
WHERE YOU CAN FIND MORE INFORMATION...............................................................................140
INDEX TO FINANCIAL STATEMENTS.....................................................................................F-1
</TABLE>
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<PAGE> 15
<TABLE>
<CAPTION>
APPENDICES PAGE
<S> <C> <C> <C>
APPENDIX A - Agreement and Plan of Merger
APPENDIX B - Opinion of Lehman Brothers
APPENDIX C - Opinion of Allen & Company
APPENDIX D - Lodgian 1998 Short-Term Incentive Compensation Plan
APPENDIX E - Lodgian 1998 Stock Incentive Plan
APPENDIX F - Lodgian Non-Employee Directors' Stock Plan
APPENDIX G - Form of Restated Certificate of Incorporation
of Lodgian
APPENDIX H - Form of Restated Bylaws of Lodgian
</TABLE>
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<PAGE> 16
QUESTIONS AND ANSWERS
ABOUT THE SERVICO/IMPAC TRANSACTION
Q. WHEN ARE THE MEETINGS?
A. The Servico meeting will take place on ___________, 1998. No meeting of
Impac unitholders will be held. If you are an Impac unitholder, you should
mail in your consent indicating your vote.
Q. WHAT DO I NEED TO DO NOW?
A. First, read the proxy statement-prospectus carefully. Then you should vote.
Q. HOW DO I VOTE?
A. IF YOU ARE A SERVICO SHAREHOLDER, please mail your signed proxy card in the
enclosed postage prepaid return envelope as soon as possible, so that your
shares may be represented and voted at the Annual Meeting, which is
scheduled to take place on _____, 1998. Since a majority of the outstanding
shares of Servico must approve the Merger, it is especially important that
Servico shareholders return their signed proxy cards. YOUR VOTE IS VERY
IMPORTANT.
IF YOU ARE AN IMPAC UNITHOLDER, please mail your signed written consent
form in the enclosed postage prepaid return envelope as soon as possible.
Q. WHAT DO I DO IF I WANT TO CHANGE MY VOTE OR REVOKE MY CONSENT AFTER I HAVE
MAILED MY PROXY CARD OR CONSENT FORM?
A. IF YOU ARE A SERVICO SHAREHOLDER, there are three ways in which you may
revoke your proxy. First, you may submit a written notification stating
that you would like to revoke your proxy. Second, you may complete and
submit a new proxy card. If you choose either of these methods, you should
send your notice of revocation or new proxy card to Charles M. Diaz,
Corporate Secretary of Servico at the address on the cover of this Joint
Proxy Statement/Prospectus. Third, you may attend the Servico Annual
Meeting and vote in person. If you hold your shares in "street name" or
through a nominee or broker, you must follow directions received from your
broker to cast or change your vote.
IF YOU ARE AN IMPAC UNITHOLDER, you may revoke your consent by submitting a
written notification stating that you would like to revoke your consent.
You should send your notice of revocation to the Secretary of Impac at the
address shown on the cover of this Joint Proxy Statement/Prospectus.
Q. SHOULD I SEND IN MY STOCK OR UNITS NOW?
A. No. If the merger is completed, you will receive written instructions for
exchanging your shares or units for certificates representing Lodgian
common stock.
Q. PLEASE EXPLAIN WHAT I WILL RECEIVE IN THE MERGER.
A. SERVICO SHAREHOLDERS:
Servico shareholders will receive one share of Lodgian common stock for
each share of Servico common stock that they own.
IMPAC UNITHOLDERS AND IMPAC AFFILIATED COMPANY SHAREHOLDERS:
Impac unitholders and Impac Affiliated Company Shareholders will receive a
number of shares of Lodgian common stock that will be determined based on
the
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<PAGE> 17
average price of Servico common stock during a specified ten-day period
prior to the merger. If the average price of Servico common stock is at
least $14.00 per share and not more than $25.00 per share, then the Impac
unitholders and the Impac Affiliated Company Shareholders will receive a
total of 6.0 million shares of Lodgian common stock. Approximately 0.519 of
a share of Lodgian common stock will be issued for each Impac Unit
outstanding prior to the Merger. If the average price of the Servico common
stock is less than $14.00 per share or more than $25.00 per share, the
number of Lodgian shares to be issued will be adjusted. An aggregate of an
additional 1.4 million shares of Lodgian common stock will be issued as
each of five Impac hotels that are currently under development is opened.
This means approximately 0.121 additional shares of Lodgian common stock
could be issued for each Impac Unit outstanding prior to the Merger
assuming the opening of all five hotels.
IMPAC AFFILIATED COMPANY SHAREHOLDERS:
For federal income tax planning purposes, the Impac Affiliated Companies,
which are all Impac unitholders, will each merge directly with newly formed
subsidiaries of Lodgian and the shareholders of the Impac Affiliated
Companies will acquire Lodgian common stock directly in the Merger based
upon the number of Impac units held by the respective Impac Affiliated
Company and each shareholder's respective holdings in the Impac Affiliated
Company.
Q. WHEN WILL THE ADDITIONAL 1.4 MILLION SHARES OF LODGIAN COMMON STOCK BE
ISSUED?
A. The additional shares will be issued to former Impac unitholders and former
Impac Affiliated Company shareholders upon receipt by Lodgian of the
certificates of occupancy and the initial opening for business of five
Impac hotels that are currently under development. The hotels are expected
to open in 1999 and the additional shares of Lodgian common stock will be
issued to former Impac unitholders and former Impac Affiliated Company
shareholders upon each hotel opening, based upon an allocated value for
each hotel, whether or not the former unitholders or shareholders still own
their Lodgian stock.
Q. WILL LODGIAN ISSUE FRACTIONAL SHARES?
A. No. Lodgian will not issue fractional shares. Instead, you will be paid
cash based on the market value of any fractional shares of Lodgian common
stock you would have otherwise received.
Q. IF MY SERVICO SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
VOTE MY SHARES FOR ME?
A. If you are a Servico shareholder, your broker is not permitted to vote your
shares of Servico common stock on the merger proposal or the proposals to
approve each of the Lodgian Plans unless you provide instructions on how to
vote.
-viii-
<PAGE> 18
All shareholders of Servico should instruct their brokers to vote their
shares following directions provided by their brokers.
Q. WHEN DO YOU EXPECT THE TRANSACTION TO BE COMPLETED?
A. We expect to complete the merger during the third quarter of 1998.
Q. WHOM SHOULD I CALL WITH QUESTIONS?
A. If you have questions about the transaction, you should call: Georgeson &
Company Inc. at 1-800-223-2064.
-ix-
<PAGE> 19
JOINT PROXY STATEMENT/PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND THE LEGAL
TERMS OF THE MERGER FULLY AND FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL TERMS
OF THE MERGER, YOU SHOULD CAREFULLY READ THIS ENTIRE DOCUMENT AND THE DOCUMENTS
TO WHICH WE HAVE REFERRED YOU. SEE "WHERE YOU CAN FIND MORE INFORMATION" (PAGE
_____).
THE COMPANIES (PAGES _______)
SERVICO, INC.
1601 Belvedere Road
West Palm Beach, Florida 33406
(561) 689-9970
Servico is one of the largest owners and operators of full-service hotels
in the United States. Servico currently owns or manages 89 hotels containing
approximately 17,937 rooms located in 24 states and Canada. Servico's hotels are
primarily mid-sized, with an average of approximately 202 rooms per hotel, and
are primarily located in secondary metropolitan markets. Servico's full-service
hotels offer food and beverage services and meeting and banquet facilities.
Servico's hotels include 76 wholly owned hotels, 11 partially owned hotels and
two managed hotels. Substantially all of Servico's hotels are affiliated with
nationally recognized hospitality franchises, including Holiday Inn, Crowne
Plaza, Hilton, Omni, Radisson, Sheraton and Westin. Servico operates 59 hotels
under franchise agreements with Holiday Inn, making Servico the second largest
Holiday Inn franchisee in the United States.
IMPAC HOTEL GROUP, L.L.C.
Two Live Oak Center
3445 Peachtree Road, N.E., Suite 700
Atlanta, Georgia 30326
(404) 364-9400
Impac is one of the largest private hotel companies in the United States.
Impac owns or manages primarily upscale or mid-market full service hotels, most
of which have been renovated or developed within the last five years. Impac
currently owns or operates 55 hotels (including five under development)
containing approximately 9,266 rooms located in 24 states. Impac's hotels
include 52 wholly owned hotels, one partially owned hotel and two managed
hotels. Impac's hotels are generally affiliated with internationally recognized
brands including Marriott, Doubletree and Holiday Inn. Impac operates 24 hotels
under franchise agreements with Holiday Inn.
LODGIAN, INC.
Lodgian, Inc. was formed by Servico in connection with the proposed Merger.
Lodgian will own Servico, Impac and the Impac Affiliated Companies after the
Merger.
WHAT YOU WILL RECEIVE IN THE MERGER (PAGES _______)
SERVICO SHAREHOLDERS:
Servico shareholders will receive one share of Lodgian common stock for
each share of Servico common stock that they own.
IMPAC UNITHOLDERS AND IMPAC AFFILIATED COMPANY SHAREHOLDERS:
Impac unitholders and Impac Affiliated Company shareholders will receive a
number of shares of Lodgian common stock that will be determined based on the
average price of Servico common stock during a specified ten-day period prior to
the merger.
o If the average price of Servico common stock is at least $14.00 per
share and not more than $25.00 per share, then the Impac unitholders
and Impac Affiliated Company shareholders will receive a total of 6.0
million shares of Lodgian common stock or approximately 0.519 of a
share of Lodgian common stock for each Impac Unit.
o If the average price of the Servico common stock is less than $14.00
per share, the number of shares of Lodgian common stock to be received
will be determined by dividing $103.6 million by the average Servico
common stock price during the specified ten-day period and then
subtracting 1.4 million shares.
o If the average price of Servico common stock is more than $25.00 per
share, the number of shares of Lodgian common stock to be received will
be determined by dividing $185 million by the average Servico common
stock price during the specified ten day period and then subtracting
1.4 million shares.
-1-
<PAGE> 20
The number of shares of Lodgian common stock Impac unitholders and Impac
Affiliated Company shareholders will receive for each Impac Unit outstanding can
be determined by dividing the total number of Lodgian shares to be delivered to
the Impac unitholders and Impac Affiliated Company shareholders by
11,559,527.20 (which is the total number of outstanding Impac Units).
o In addition, Impac unitholders and Impac Affiliated Company
shareholders will receive an incremental portion of an aggregate of an
additional 1.4 million shares of Lodgian common stock upon the opening
of each of five Impac hotels that are currently under development or
approximately 0.121 of additional shares of Lodgian common stock for
each Impac Unit outstanding prior to the Merger.
The number of shares of Lodgian common stock each Impac Affiliated Company
shareholder will receive will be based upon (i) the number of Impac units owned
by the respective Impac Affiliated Company and (ii) the shareholder's ownership
percentage in the respective Impac Affiliated Company.
REASONS FOR THE MERGER (PAGES _______)
If completed, the Merger will create one of the largest independent
multi-brand owner and operator of hotels in the United States. Here are a few of
the highlights of how Lodgian would look after the Merger:
o Lodgian will own or manage 140 hotels, including six hotels under
development, with approximately 26,698 rooms.
o Lodgian will have greater geographic diversity with hotels in 35 states
and Canada.
o Based on historical results of the combined companies at December 31,
1997, Lodgian would have had combined annual revenues of approximately
$474 million.
Servico believes that the Merger meets its criteria for a strategic
acquisition based on the following additional factors:
o Servico expects the Merger to contribute to earnings (before one-time
merger-related charges) in the first year of combined operations.
o The Merger offers possible opportunities for cost savings including
savings through the addition of Impac's development expertise, greater
purchasing power and the elimination of duplicate administrative and
accounting functions.
o The Merger will add a number of upscale hotels in major markets where
Servico currently does not hold properties.
SUMMARY OF RISK FACTORS (PAGES ______)
The following principal risks and uncertainties should be considered by
both Servico shareholders and Impac unitholders and Impac Affiliated Company
shareholders:
o the risk that the contemplated benefits of the Merger will not be
achieved;
o the challenges of integrating the two companies including potential
personnel changes and costs associated with moving Servico's offices to
Atlanta as well as the fact that no cost savings or efficiencies will
be achieved;
o the risks associated with the high amount of indebtedness of the
combined company including the increased possibility of default,
foreclosure and loss of properties;
o adverse changes in the economy generally or in the lodging industry in
particular could materially negatively impact Lodgian;
o Impac unitholders will no longer receive distributions on their Units
and Lodgian's business plan does not contemplate the disposition of the
properties;
o Unlike Impac, Lodgian will not be a limited life entity; and
o The Manager of Impac will be employed by Lodgian pursuant to a
three-year employment agreement and will receive options to buy Lodgian
stock which are benefits not enjoyed by other Impac unitholders.
RECOMMENDATIONS (PAGES _______)
SERVICO:
The Servico Board believes that the terms of the Merger are fair to,
and in the best interests of, Servico and its shareholders and unanimously
recommends that the shareholders of Servico vote to approve the Merger, each of
the Lodgian Plans and the amendment of the Servico Stock Option Plan and to
elect the nominee as a director.
IMPAC:
The Manager of Impac has determined that the terms of the Merger are
fair to, and in the best interests of, Impac and its unitholders and recommends
that the unitholders of Impac consent to the Merger and to the adoption of each
of the Lodgian Plans.
OPINIONS OF FINANCIAL ADVISORS (PAGES ______)
In deciding to approve the Merger, the Board of Directors of Servico
and the Manager of Impac considered opinions from financial advisors as to the
fairness of the consideration from a financial point of view. Servico received
the opinion of its financial advisor, Lehman Brothers, Inc., and Impac received
-2-
<PAGE> 21
the opinion of its financial advisor, Allen & Company Incorporated. Their
opinions are attached as Appendices B and C to this Joint Proxy
Statement/Prospectus. We encourage you to read and consider these opinions.
CONFLICTS OF INTERESTS OF CERTAIN PERSONS (PAGES __________)
In considering the recommendations of the Servico Board and the Impac
Manager, shareholders of Servico and unitholders of Impac should be aware that
certain officers and directors of Servico and the Manager of Impac will receive
certain benefits you will not receive. Messrs. Buddemeyer and Cole will receive
employment agreements with Lodgian pursuant to which they will receive base
compensation of $405,000 and $300,000, respectively, potential bonuses based on
future performance and, in the event of certain changes of control of Lodgian,
2.5 times their base salary plus bonus and other benefits. The Merger Agreement
also provides that Lodgian will assume an option that was previously granted by
Impac to Mr. Cole. Pursuant to the Merger Agreement, this option will be
converted into an option to purchase 185,000 shares of Lodgian Common Stock at
an exercise price of $17.75 per share.
CONDITIONS TO THE TRANSACTION (PAGES _______)
The completion of the Merger depends upon meeting a number of conditions,
including the following:
o obtaining the approval by the shareholders of Servico and unitholders
of Impac;
o there being no law, litigation or court order that prohibits the
Merger;
o clearance from U.S. antitrust agencies;
o receipt of opinions from our respective tax counsel that the Merger
will qualify as a tax-free transaction for Federal income tax
purposes;
o receipt of a commitment to restructure the indebtedness of Impac and
its subsidiaries;
o the representations and warranties of the respective parties being true
and correct in all material respects;
o there being no material adverse change in the businesses of either
Impac or Servico.
The Servico Board or the Impac Manager may, exercising its or his fiduciary
duty, respectively, choose to waive any of the last three of these conditions.
TERMINATION OF THE MERGER AGREEMENT (PAGES _____)
Servico and Impac can agree in writing to terminate the Merger Agreement at
any time without completing the transaction.
Either Servico or Impac may terminate the Merger Agreement if:
o the Merger is not completed by December 31, 1998;
o any governmental authority, such as a court, prohibits the Merger;
o the Servico shareholders do not approve the Merger;
o Servico's Board withdraws or changes its recommendation of the Merger;
o Servico chooses to pursue an alternative acquisition transaction;
o either Servico or Impac is negotiating with any third party or provides
a third party for an alternative acquisition transaction with
non-public information concerning its business;
o the other party materially breaches its representations, warranties or
obligations under the Merger Agreement.
In addition, Impac may terminate the Merger Agreement if Servico determines
to acquire more than $100 million of hotels and Impac reasonably believes that
these acquisitions would be materially adverse to Servico or materially change
the nature of Servico's business.
TERMINATION FEES (PAGES ______)
The Merger Agreement requires Servico or Impac to pay the other a
termination fee if, under certain circumstances, the Merger Agreement is
terminated. Depending on the date and circumstances of the termination, Servico
may be obligated to pay Impac a termination fee ranging from $10 million to $15
million and Impac may be obligated to pay Servico a termination fee of $10
million. Additionally, Servico or Impac may become obligated to reimburse the
other party for up to $2.5 million for costs and expenses incurred in connection
with the transaction.
REGULATORY APPROVALS (PAGE ____)
Federal law required us to furnish certain information and materials to the
Antitrust Division of the United States Department of Justice and the Federal
Trade Commission and requires that a specified waiting period expire or be
terminated before the Merger can be completed. On June 28, 1998, the waiting
period terminated. Nevertheless, the Antitrust Division of the Department of
Justice and the Federal Trade Commission will have the authority to challenge
the transaction on antitrust grounds before or after the transaction is
completed.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES (PAGES _______)
The transaction has been structured so that neither Servico, Impac nor the
Impac Affiliated Companies, nor their respective shareholders or unitholders
will recognize gain or loss for federal income tax purposes as a result of the
Merger, except for taxes payable on
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<PAGE> 22
cash received in lieu of fractional shares and gain recognized equal to the
excess of their share of Impac liabilities over their basis in their Impac
Units. THE TAX CONSEQUENCES OF THE TRANSACTION TO SHAREHOLDERS OF SERVICO,
UNITHOLDERS OF IMPAC AND SHAREHOLDERS OF ANY IMPAC AFFILIATED COMPANY WILL
DEPEND ON THE FACTS OF EACH HOLDER'S SITUATION. YOU SHOULD CONSULT YOUR TAX
ADVISOR FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES OF THE TRANSACTION TO
YOU.
NO APPRAISAL RIGHTS (PAGE _____)
Neither Servico shareholders, Impac unitholders nor Impac Affiliated
Company shareholders have any right to an appraisal of the value of their shares
or units in connection with the Merger.
PER SHARE MARKET PRICE INFORMATION (PAGES ______)
Shares of Servico common stock are listed on the New York Stock Exchange.
On March 20, 1998, the last full trading day of the New York Stock Exchange
prior to the public announcement of the proposed Merger, Servico common stock
closed at $17.75 per share. On ______, 1998, Servico common stock closed at
$______ per share. Impac Units are not reported on any national quotation system
nor is there any established public trading market for Impac Units. Assuming an
exchange ratio for Impac of 0.519, the equivalent of an Impac Unit was $_____ on
____________, 1998.
LISTING OF LODGIAN COMMON STOCK (PAGE _____)
The shares of Lodgian common stock to be issued in connection with the
Merger will be listed on the New York Stock Exchange and will trade under the
symbol LOD.
LODGIAN DIVIDEND POLICY
Lodgian currently intends to retain future earnings for use in its business
and does not intend to pay dividends on its common stock.
LODGIAN PLAN PROPOSALS (PAGES ________)
Because Lodgian is a new company, in addition to approving the Merger, the
shareholders of Servico and unitholders of Impac are being asked to approve
three incentive compensation plans for Lodgian. Servico and Impac currently have
different incentive compensation plans. These new plans will replace those plans
currently in effect with a package of incentive compensation plans for directors
and employees of Lodgian. The new plans are the following: (i) a short-term
incentive plan that provides for bonus compensation linked to performance over a
fiscal year or other relatively short period; (ii) a stock incentive plan that
provides for longer-term incentives in the form of stock options, stock
appreciation rights or other equity-based compensation awards; and (iii) a stock
plan for non-employee directors that provides for grants of stock options. For a
more complete description of each of these plans, see pages ___ through ____.
OTHER SERVICO ANNUAL MEETING MATTERS
At the Servico Annual Meeting, Servico is also asking its shareholders to
vote on the following annual meeting proposals:
o amendment of Servico's existing Stock Option Plan to increase the
number of shares of common stock issuable under the Plan;
o the election of a director to Servico's Board.
Approval by Servico shareholders of these matters is not a condition to
completion of the Merger. Likewise, approval of the Merger is not a condition to
the approval of these matters.
ELIGIBILITY TO VOTE
If you were the owner of record of shares of Servico common stock on the
close of business on ___________, 1998, you are entitled to vote at the Servico
Annual Meeting. At the Servico record date, [21,038,995] shares of Servico
common stock were outstanding which were held by approximately 3,000 holders of
record.
All holders of Impac units will be entitled to vote on the Merger and the
Lodgian benefit plans.
VOTE REQUIRED (PAGES _____)
SERVICO SHAREHOLDERS:
You will have one vote for each share of Servico common stock that you
owned on the record date. The favorable vote of the holders of at least a
majority of the outstanding shares of Servico common stock is required to
approve the Merger. ACCORDINGLY, YOUR FAILURE TO VOTE YOUR SHARES OF SERVICO
COMMON STOCK WILL HAVE THE EFFECT OF A VOTE AGAINST THE MERGER. The favorable
vote of the holders of at least a majority of the total number of eligible votes
cast at the Servico Annual Meeting is required to approve each of the Lodgian
Plans and the amendment to the Servico Stock Option Plan. A plurality of the
votes cast will be required to elect the nominee as a director of Servico.
IMPAC UNITHOLDERS:
You will have one vote for each Impac Unit that you own. The written
consent of the holders of at least a majority of the outstanding Impac Units is
required to approve the Merger and to approve each of the Lodgian Plans.
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<PAGE> 23
Robert Cole, the President and Manager of Impac, certain entities
controlled by Mr. Cole or members of his family, and other Impac unitholders who
collectively own or control more than 51% of Impac's outstanding Units,
previously agreed to vote in favor of the Merger and the Lodgian Plans, thus
assuring the approval of the Merger and the Lodgian Plans by the Impac
unitholders.
CAUTIONARY STATEMENT
This document and documents that are incorporated herein by reference
include various forward-looking statements about Servico, Impac and Lodgian that
are subject to risks and uncertainties. Forward-looking statements include the
information concerning anticipated future results of operations of Servico,
Impac and Lodgian. Also, statements including the words "expects,"
"anticipates," "intends," "plans," "believes," "estimates," or similar
expressions are forward-looking statements. Shareholders and unitholders should
note that many factors, some of which are discussed elsewhere in this document
and in the documents that are incorporated by reference, could cause the actual
results of Servico, Impac or Lodgian to differ materially from the anticipated
results set forth in or contemplated by such forward-looking statements. You are
cautioned that such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of Servico, Impac or Lodgian to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors may affect Servico's, Impac's or
Lodgian's operations, markets and services. Such factors and risks include:
adverse changes in general economic and business conditions, including changes
in local real estate markets; changes in interest rates and in the availability,
cost and terms of financing; rates of inflation and the performance of financial
markets which can impact not only operations but the availability of capital;
changes in domestic and foreign laws, regulations and taxes which can require
additional expenditures, decrease profitability, increase liability or delay or
impede property development or renovation; the significant levels of
indebtedness of Servico and Impac and Lodgian's ability to service such
indebtedness or to reference such indebtedness and to satisfy the financial
covenants required by outstanding indebtedness; integration of the operations of
Servico and Impac, including the failure to realize the benefits from the
transaction; increased competition in the hospitality industry generally or in
specific markets or overbuilding in the hotel industry as a whole; the loss of
any franchises; availability of additional capital to support growth;
construction and renovation cost overruns and delays; seasonal fluctuations; and
an adverse change in the level of tourism or business related travel; and other
factors discussed under "Risk Factors" or elsewhere herein or in the documents
that are incorporated by reference herein. Further, changes in business strategy
or development plans could impact future results and the forward-looking
statements contained herein.
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<PAGE> 24
ORGANIZATIONAL CHART
EXISTING ENTITIES
<TABLE>
<CAPTION>
<S> <C> <C>
UNITHOLDERS PUBLIC
(INCLUDING IMPAC SHAREHOLDERS
AFFILIATED COMPANIES)
IMPAC HOTEL SERVICO, INC.
GROUP, LLC
THE MERGER
LODGIAN, INC.
SHG-I Sub, LLC IMPAC AFFILIATED SUBS SHG-S Sub, Inc.
(Impac Merger Sub) (Servico Merger Sub)
merges into merge into merges into
IMPAC HOTEL IMPAC AFFILIATED SERVICO, INC.
GROUP, LLC COMPANIES
RESULTING STRUCTURE
FORMER IMPAC
UNITHOLDERS,
SHAREHOLDERS OF
IMPAC AFFILIATED
COMPANIES AND
FORMER SERVICO
SHAREHOLDERS
LODGIAN, INC.
IMPAC HOTEL IMPAC AFFILIATED SERVICO, INC.
GROUP, LLC COMPANIES
</TABLE>
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<PAGE> 25
SUMMARY SELECTED HISTORICAL AND UNAUDITED PRO FORMA
COMBINED CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following financial information is provided to assist you in the
analysis of the financial aspects of the Merger. This information was derived
from the audited consolidated financial statements of Servico for the years
ended December 31, 1993 through 1997 and the unaudited consolidated financial
statements of Servico for the three months ended March 31, 1998 and the
unaudited consolidated and combined financial statements of Impac and IHD for
the years ended December 31, 1993 and 1994, the audited consolidated and
combined financial statements of Impac for the years ended December 31, 1995
through 1997 and the unaudited consolidated and combined financial statements of
Impac and IHD for the three months ended March 31, 1998. The summary financial
information for the three months ended March 31, 1997 and 1998 is unaudited. The
information is only a summary and should be read in conjunction with the
Unaudited Pro Forma Combined Consolidated Financial Statements on pages _____
and the accompanying notes, the historical financial statements of Impac and IHD
on page F-5 and the historical financial statements of Servico contained in
Servico's annual reports and other information that Servico has filed with the
Securities and Exchange Commission, and any other financial information included
and incorporated by reference in this Joint Proxy Statement/Prospectus.
See "Where You Can Find More Information" on page _____.
SELECTED HISTORICAL FINANCIAL INFORMATION - SERVICO
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------- --------------
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $128,998 $149,683 $178,480 $239,526 $276,657 $ 62,647 $82,881
Income before extraordinary items,
net of taxes 1,777 2,781 3,909 8,548 12,570 310 2,996
Earnings per common share (a):
Income before extraordinary items, net
of taxes $ .25 $ .36 $ .45 $ .92 $ .83 $ .03 $ .14
Earnings per common share-assuming
dilution:
Income before extraordinary items, net
of taxes $ .25 $ .33 $ .42 $ .88 $ .80 $ .03 $ .14
Basic weighted average shares 7,061 7,827 8,651 9,295 15,183 9,389 20,989
Diluted weighted average shares 7,131 8,335 9,319 9,751 15,640 9,926 21,437
Cash dividends per common share - - - - - - -
End of period:
Total assets $191,270 $228,900 $ 324,202 $439,786 $627,651 $445,170 $694,854
Long-term obligations 114,841 143,830 210,242 284,880 323,320 285,237 376,793
Total stockholders' equity 35,008 46,740 62,820 74,738 239,535 75,315 243,439
</TABLE>
- ---------------------
(a) All prior-period earnings per share amounts have been restated to conform
to Financial Accounting Standards Board Statement No. 128 "Earnings per
Share".
-7-
<PAGE> 26
SELECTED HISTORICAL FINANCIAL INFORMATION - IMPAC
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------- ---------------
1993 1994 1995 1996 1997(a) 1997 1998(d)
---- ---- ---- ---- ------- ---- -------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (Unaudited)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $23,927 $41,615 $ 55,576 $ 67,813 $119,859 $ 22,306 $ 34,571
(Loss) income before extraordinary
items (b) (457) (64) 5,619 14,064 (16,089)(c) (3,762)(d) (4,707)
End of period:
Total assets $48,143 $71,875 $116,248 $191,666 $417,780 $266,142 $433,781
Long-term obligations 42,615 61,754 92,849 155,851 355,236 222,495 377,427
Total members'/partners' equity 3,284 5,375 13,408 19,760 36,970 30,006 31,356
</TABLE>
- ---------------------------
(a) On March 12, 1997, Impac was formed through the combination of 22
partnerships, 4 corporations and two operating companies (collectively,
the "Predecessors") through a reorganization. The formation of Impac
was accounted for as a reorganization of entities under common control
with the purchase of minority interest. The operations and financial
position of the Predecessors prior to the reorganization are presented
on a combined basis. The principal activity of IHD is to analyze
prospective hotel acquisitions for Impac. IHD was not acquired by Impac
in the above-described reorganization.
(b) Impac is a limited liability company and is not subject to income
taxes. The Predecessors and IHD were each either general or limited
partnerships or S-corporations and were similarly not subject to income
taxes. The results of these entities operations are included in the tax
returns of the unitholders, partners or S-corporation shareholders.
(c) Twenty-five of Impac's properties were under significant renovation
during 1997. Impac purchased 16 properties and opened three newly
constructed properties during 1997. The renovation process greatly
affects the operating performance of a hotel while it is underway.
Revenues are significantly reduced while fixed expenses remain
substantially constant. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Impac".
(d) Impac opened or acquired six hotels during the quarter ended March 31,
1997. During the quarter ended March 31, 1998, Impac had 18 hotels
under renovation. Impac also had 18 hotels under renovation during the
first quarter of 1997. Although revenues have increased substantially
during the first quarter of 1998 compared to the first quarter of 1997,
revenues have been adversely affected by the renovations which
remained ongoing during the first quarter ended March 31, 1998. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations-Impac."
-8-
<PAGE> 27
SELECTED UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following selected unaudited pro forma financial information
presents the combined condensed consolidated financial statements of Servico and
Impac as if the Merger had occurred for the periods indicated. The Merger will
be treated as a purchase for financial accounting purposes. You should read this
together with the combined and consolidated financial statements and
accompanying notes of Servico and Impac included elsewhere in this Joint Proxy
Statement/Prospectus and in the documents described under "Where You Can Find
More Information" and in the unaudited pro forma combined condensed financial
statements and accompanying discussion and notes set forth under "Unaudited Pro
Forma Combined Condensed Consolidated Financial Statements" included herein. The
pro forma amounts in the table below are presented for your information and do
not indicate what the financial position or the results of operations of Lodgian
would have been had the Merger occurred as of the dates or for the periods
presented. The pro forma amounts also do not indicate what the financial
position or future results of operations of Lodgian will be. No adjustment has
been included in the pro forma amounts for any cost savings or other synergies
anticipated as a result of the Merger or any Merger-related expenses.
-9-
<PAGE> 28
Selected Unaudited Pro Forma Combined
Condensed Consolidated Financial Information
Year Ended December 31, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA PRO FORMA PRO FORMA
SERVICO IMPAC ADJUSTMENTS COMBINED
---------- --------- ----------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues $334,340 $139,630 $ - $ 473,970
Income (loss) before extraordinary
items 17,982 (8,659) (2,591) 6,732
Earnings per common share:
Income (loss) before extraordinary
items $ .86 - $ .25
Earnings per common share
assuming dilution:
Income (loss) before extraordinary
items $ .84 - $ .25
Basic weighted average shares 20,918 - 26,918
Diluted weighted average shares 21,375 - 27,375
End of period:
Total assets $630,346 $417,780 $116,030 $1,164,156
Long-term obligations 154,845 355,236 - 510,081
Total stockholders'/members' equity 237,237 36,726 71,030 344,993
</TABLE>
Selected Unaudited Pro Forma Combined
Condensed Consolidated Financial Information
Three Months Ended March 31, 1998
<TABLE>
<CAPTION>
PRO FORMA HISTORICAL PRO FORM PRO FORMA
SERVICO IMPAC ADJUSTMENTS COMBINED
--------- ---------- ----------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues $ 82,881 $ 34,571 $ - $ 117,452
Income (loss) before extraordinary
items 3,247 (4,707) (1,282) (178)
Earnings per common share:
Income (loss) before extraordinary
items $ .15 - (.01)
Earnings per common share
assuming dilution:
Income (loss) before extraordinary
items $ .15 - (.01)
Basic weighted average shares 20,989 26,989
Diluted weighted average shares 21,437 27,437
End of period:
Total assets $697,800 $433,781 $121,644 $1,253,225
Preferred redeemable securities $175,000 - - -
Long-term obligations 208,318 377,427 - 585,745
Total stockholders'/members' equity 241,292 31,356 76,644 349,292
</TABLE>
-10-
<PAGE> 29
COMPARATIVE PER SHARE INFORMATION
Certain of the above per share or per unit information has been
summarized for the respective companies on a historical, pro forma combined and
equivalent basis. The Servico per share equivalents are equal to the Unaudited
Pro Forma Combined per share amounts because the Servico shareholders will
receive one share of Lodgian common stock for each share of Servico common
stock. The Impac per Unit equivalents are calculated by multiplying the
outstanding Impac Units by approximately .519, the Impac Exchange Ratio,
assuming the price of Servico common stock is greater than $14.00 per share and
not more than $25.00 per share during the specified ten-day period prior to the
Merger. As of the date of this Joint Proxy Statement/Prospectus, there were
11,559,527.20 Impac Units outstanding.
<TABLE>
<CAPTION>
LODGIAN IMPAC PRO
SERVICO IMPAC PRO FORMA FORMA
HISTORICAL HISTORICAL COMBINED EQUIVALENT
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Book value per common share/unit assuming dilution:
December 31, 1997....................................... $ 15.32 $ 3.71 $ 12.70 $ 7.16
March 31, 1998.......................................... 11.36 2.71 12.73 5.23
Cash dividends per common share/unit:
Year ended December 31, 1997............................ - - - -
Three months ended March 31, 1998....................... - - - -
Income (loss) per common share/unit from continuing
operations:
Primary:
Year ended December 31, 1997............................ .83 (1.64) .32 (3.11)
Three months ended March 31, 1998....................... .14 (.41) - (.78)
Diluted:
Year ended December 31, 1997........................... .80 (1.64) .31 (3.11)
Three months ended March 31, 1998...................... .14 (.41) - (.78)
</TABLE>
-11-
<PAGE> 30
RISK FACTORS
SHAREHOLDERS OF SERVICO AND UNITHOLDERS OF IMPAC SHOULD CONSIDER ALL OF
THE INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS, INCLUDING
THE FOLLOWING FACTORS:
INABILITY TO SUCCESSFULLY INTEGRATE OPERATIONS
The Merger involves the integration of two separate companies that
previously operated independently. Lodgian may encounter difficulties in
integrating the operations of Servico and Impac and the benefits and operating
synergies anticipated from the Merger may not be realized. Lodgian's growth and
profitability will be impacted by its ability to consolidate the business,
operations and personnel of the two companies including its ability to eliminate
duplicative functions and to achieve anticipated cost savings. Any delays or
unexpected costs incurred in connection with such integration could have a
material adverse effect on Lodgian's business, financial condition and results
of operations. No assurance can be given that Lodgian will be able to accomplish
the consolidation and cost savings in a timely or profitable manner or that any
savings will be realized. If the Merger is approved, Servico's operations will
be moved from West Palm Beach, Florida to Atlanta, Georgia. Additional costs
will be incurred in connection with such move including not only the cost and
disruption associated with the move but also any severance costs associated with
Servico employees who do not move to Atlanta.
RISKS ASSOCIATED WITH HIGH LEVELS OF DEBT
SIGNIFICANT AMOUNT OF DEBT. Substantially all of Servico's and Impac's
hotels and properties are subject to mortgage financing, which at March 31,
1998, totaled approximately $372.0 and $377.4 million, respectively.
Additionally, in June 1998 Servico issued $175 million of 7% Convertible Junior
Subordinated Debentures Due 2010 in connection with a private offering of
convertible trust preferred securities. "See "-Recent Convertible Trust Security
Offering." Substantially all of the indebtedness of Servico and Impac is, and
Lodgian's indebtedness will likely continue to be, secured by mortgages on all,
or substantially all, of the hotels, and by the equity of subsidiaries. Lodgian
may not in the future be able to meet its debt service obligations and if it
cannot, there is a risk of loss of some or all of its assets, including hotels,
to foreclosure. Further, adverse economic conditions could cause the terms on
which borrowings become available to be unfavorable. In such circumstances, if
additional capital is required to repay indebtedness in accordance with its
terms or otherwise, it may be necessary to liquidate one or more investments in
hotels at times which may not permit realization of the maximum return on such
investments. Servico's and Impac's leverage poses certain risks for Lodgian's
future operations, including the risk that sufficient cash flow will not be
generated to service the indebtedness; that additional financing or refinancing
may be unavailable in the future; that, to the extent Lodgian is significantly
more leveraged than its competitors, Lodgian may be placed at a competitive
disadvantage and that its ability to respond to market conditions may be
adversely affected. Lodgian's ability to service its debt will depend on its
future performance, which in turn will largely depend on prevailing economic and
competitive conditions.
NO LIMIT ON ADDITIONAL DEBT. Lodgian's Certificate of Incorporation and
Bylaws will not limit the amount of indebtedness that Lodgian may incur. Subject
to any limitations in its debt instruments, Lodgian may incur additional debt in
the future to finance acquisitions and renovations. Substantial indebtedness
could increase Lodgian's vulnerability to general economic and lodging industry
conditions (including increases in interest rates) and could limit Lodgian's
ability to obtain additional financing in the future and to take advantage of
business opportunities that may arise.
TERMS OF INDEBTEDNESS WHICH INCLUDE VARIABLE RATES AND PREPAYMENT
PENALTIES. Impac's and Servico's indebtedness bears interest at both fixed and
variable rates. To the extent that Servico or Impac has or Lodgian incurs
additional debt bearing interest at variable rates, economic conditions could
result in increased debt service requirements and could reduce the amount of
cash available for other corporate purposes. Such economic conditions could also
result in an increase of the U.S. Treasury benchmark rate at which Impac fixes a
significant portion of its
-12-
<PAGE> 31
variable rate indebtedness. To the extent Impac has not previously locked in a
lower benchmark Treasury rate, this would result in higher interest rates for
the remaining term of those loans. Further, certain of the loans prohibit or
limit prepayment during certain years, impose prepayment penalties during
certain later years, restrict the ability to utilize the cash generated by the
hotels if the hotels fail to meet certain financial covenants, and in certain
events may accelerate the repayment of the loans. Certain of the mortgages and
related loan documents evidencing Impac's indebtedness contain provisions that
would require the borrower to prepay such financing within the near future if
specified conditions are not met. With respect to the Impac indebtedness, there
can be no assurance that such conditions will be met, that prepayments will not
be required, or that any such prepayment will not have an adverse effect on
Impac's or Lodgian's business, financial condition and results of operations.
Further, Impac's indebtedness, with Nomura Asset Capital Corporation ("NACC"),
provides that in the event the NACC indebtedness is to be repaid in connection
with a merger, reorganization or sale of Impac, NACC will negotiate in good
faith an appropriate prepayment premium, making due allowance for among other
things the expected profits that NACC could reasonably have been expected to
have received if the loans had not been prepaid, including profits associated
with the securitization of the indebtedness. Servico and NACC are currently
negotiating the amount of the payment which would be due to NACC in the event of
a prepayment but it is anticipated that such prepayment penalty would be
substantial.
Finally, Impac has certain other third-party indebtedness in the
approximate principal amount of $78.5 million (which is included in the total
indebtedness of $377.4 million described above) which is subordinated to the
NACC indebtedness. The terms of such indebtedness require that Impac either
obtain the consent of the holder thereof to the Merger or that Impac prepay such
indebtedness in full on the effective date of the Merger. Depending upon certain
factors, including whether the source of proceeds used to make such prepayment
is treated as equity or debt at the Impac level (and if debt, whether it is to
be subordinated to the NACC loans), Impac may need to obtain NACC's consent to
the prepayment of such subordinated debt prior to satisfaction in full of
Impac's obligations to NACC. No assurance can be given that NACC's consent, if
required, could be obtained. If NACC's consent is required but cannot be
obtained, Impac will be unable to prepay such indebtedness and will be required
to obtain the consent of the holder of the subordinated indebtedness to the
Merger. No request for any such consents have yet been made, and no assurance
can be given as to the likelihood of receiving such consents or the terms or
conditions upon which any such consents could be obtained.
CROSS DEFAULT PROVISIONS AND CORPORATE GUARANTEES. Certain of the
mortgages and related loan documents evidencing Servico and Impac's indebtedness
contain provisions which, among other things, cross-collateralize and
cross-default each of the mortgages granted by the same borrower. Further, at
March 31, 1998, approximately $210 million and $25.1 million of the outstanding
financing is guaranteed by Servico and Impac, respectively, excluding amounts
which may be guaranteed from time to time in connection with the construction or
renovation of hotels. Each of Servico's and Impac's guarantees of mortgage
financing generally provide for direct recourse by the lender without requiring
the lender to seek recourse against either the applicable subsidiary or the
hotel property securing the mortgage financing. As a consequence, if payments
under mortgage financing guaranteed by Servico or Impac are not timely made,
Servico or Impac may be required to make payments in accordance with its
guarantees. Lodgian may be required to guarantee debt in the future in
connection with the refinancing or assumption of debt.
RECENT CONVERTIBLE TRUST SECURITY OFFERING. In June 1998, Servico
issued $175 million of 7% Convertible Junior Subordinated Debentures Due 2010 to
a newly created wholly owned trust which, in turn, sold convertible trust
preferred securities to qualified institutional buyers in a private offering.
The Debentures and the trust securities bear interest at a rate of 7% per annum,
payable quarterly in arrears, commencing September 30, 1998. The trust will
utilize the payments under the Debentures to make corresponding payments under
the trust securities. The trust securities are convertible, in whole or in part,
at any time beginning in September 1998 through June 2010, at the option of the
holders thereof, into shares of Servico Common Stock at an initial conversion
price of $21.42 per share of Servico Common Stock. In the event the Merger is
completed, Lodgian will assume all of Servico's obligations with respect to the
Debentures and the related trust
-13-
<PAGE> 32
securities, and the trust securities will become convertible into shares of
Lodgian Common Stock at the same conversion price and on the same terms.
Additionally, in the event the Merger Agreement is terminated or the
Merger has not been completed by December 31, 1998, holders of the trust
securities will have the right to require Servico to repurchase any of their
trust securities for cash at a purchase price equal to 101% of the aggregate
liquidation amount thereof plus accrued and unpaid interest. In such event,
Servico may not have sufficient financial resources, or may not be able to
arrange financing, to repay the required purchase price for all the trust
securities tendered.
INABILITY TO EXPAND
UNAVAILABILITY OF ADDITIONAL CAPITAL TO SUPPORT GROWTH. As part of
Lodgian's business strategy, Lodgian intends to seek to continue to grow through
the identification, acquisition, repositioning and renovation of additional
hotel properties. In order to pursue this strategy, Lodgian will be required to
obtain additional capital. Capital may be raised by the issuance of additional
equity or the incurrence of indebtedness. In addition, in appropriate
situations, Lodgian may seek financing from other sources or enter into joint
ventures and other collaborative arrangements in connection with the acquisition
of hotel properties. Lodgian may not be successful in obtaining additional
capital in a timely manner, on favorable terms or at all. Insufficient capital
may cause Lodgian to delay, scale back or abandon some or all of its property
acquisition plans or opportunities.
COMPETITION FOR ACQUISITIONS AND IMPACT ON PROFITABILITY. Servico and
Impac currently compete and Lodgian will compete for the acquisition of hotels
with numerous entities, some of which have greater financial resources than
Lodgian, Servico or Impac. The recent economic recovery in the lodging industry
and the resulting increase in funds available for hotel acquisitions has
attracted additional investors to enter the hotel acquisition market, which in
turn has caused the cost of hotel acquisitions to increase and the number of
attractive hotel acquisition opportunities to decrease. To successfully
implement a growth strategy, Lodgian must be able to continue to successfully
acquire hotels on attractive terms and to integrate the acquired hotels into its
existing operations. The failure of Lodgian to consolidate the management and
operations and integrate the systems and procedures of the combined operations
of Servico and Impac and of acquired hotels into Lodgian's operations in a
timely and profitable manner could have a material adverse effect on Lodgian's
business, financial condition and results of operations. There can be no
assurance that Lodgian will be in a position to grown or to achieve operating
results in its newly acquired hotels comparable to Servico's or Impac's
historical performance.
ILLIQUIDITY AND POSSIBLE DECLINES IN VALUE OF REAL ESTATE
Servico and Impac are, and Lodgian will be, subject to varying degrees
of risk generally incident to the ownership of real estate. These risks include
changes in national, regional and local economic conditions, changes in local
real estate market conditions, changes in interest rates and in the
availability, cost and terms of financing, the potential for uninsured casualty
and other losses, the impact of present or future environmental legislation and
adverse changes in zoning laws and other regulations. Many of these risks are
beyond the control of the companies. In addition, real estate investments are
relatively illiquid, resulting in a limited ability of such companies to vary
their portfolio of hotels or motels in response to changes in economic and other
conditions. The market value of any one of, or all of, the properties owned by
the companies may decrease in the future. Moreover, there can be no assurance
that Servico, Impac or Lodgian will be able to dispose of an investment when it
finds dispositions advantageous or necessary or that the sales price of any
disposition will exceed the company's investment in the property.
DELAYS IN COMPLETION OR UNANTICIPATED COSTS ASSOCIATED WITH DEVELOPMENT AND
RENOVATION OF PROPERTIES
Both Servico and Impac are, and Lodgian will be, involved in the
renovation and development of hotels as contemplated by their business plans or
as may be required by their franchisors. The development and renovation of
hotels involves all of the risks associated with the construction and renovation
of real property including cost overruns and delays associated with regulatory
compliance, inclement weather and labor and material shortages and cash flow
limitations. Such risks also include delays or the inability to obtain necessary
zoning, the need for and costs associated with the accessibility of utilities
necessary to develop the property or expand operations, the availability of and
costs associated with obtaining the permits, approvals, or licenses necessary to
develop or renovate the property, and the costs of environmental compliance. Any
unanticipated delays or expenses in connection with the development or
renovation of hotels could have a material adverse effect on Lodgian's business,
financial condition and results of operations.
-14-
<PAGE> 33
LOSS OF FLEXIBILITY OF OWNERSHIP OF REAL ESTATE WITH OTHERS
Ten of the hotels owned by Servico are owned in partnerships with other
parties. Servico does not have sole control over decisions regarding sale and
refinancing of these hotels as the partnership agreements provide certain
protective provisions or the non-Servico partners which make sale or refinancing
subject to such partners' consent although such consent may not be unreasonably
withheld. Servico's investments in these joint ventures may, under certain
circumstances, involve risks not otherwise present in property ownership,
including (i) Servico's partner in a joint venture may become bankrupt, (ii)
buy/sell rights that exist with respect to certain of such hotels may result in
the disposition of the property, (iii) Servico's partner may have economic or
other business interests or goals that are inconsistent with the business
interests or goals of Servico, and (iv) the partner(s) may be in a position to
veto actions which may be inconsistent with Servico's objectives or policies.
Impac faces similar risks as a party to a joint venture arrangement involving
one of its hotels.
LODGING INDUSTRY RISKS
Risks generally inherent in investments in hotel facilities may cause
operating results for hotels to vary more than for investments in other types of
properties. These factors include the following:
NO ASSURANCE OF PROFITABILITY. Servico and Impac are, and Lodgian will
be, subject to risks generally incident to the lodging industry. Cash flow will
vary based on seasonal fluctuations and individual property performance which in
turn is impacted by changes in both general and local economic conditions.
Further, periodic over-building in the hotel industry or over-building in a
specific market; and competition from existing hotels, motels and recreational
properties has and may in the future make it difficult to maintain hotel
occupancy levels and room rates. Additionally, changes in levels of tourism or
business-related travel and changes in travel patterns will impact hotel
performance. Labor unavailability and disruptions could increase costs and if
significant in scope could make it impossible to operate a property. Travel
disruptions could also result in a loss of a property's customer base. Further,
there is also a recurring need for renovation, refurbishment and improvement of
hotel properties (including furniture, fixtures and equipment) so as to attract
customers and maintain franchises and this results in a continuing need for
funds available for this purpose and disruption of cash flow during renovations.
The operation of hotels also involves required compliance with governmental
regulations which influence or determine wages, interest rates and construction
procedures and the application of health and beverage laws. Hotel operations
could also be negatively impacted by losses due to personal injuries, fire,
earthquake, collapse or structural defects. Many of the factors which could
impact operations are beyond the control of Servico and Impac and will be beyond
the control of Lodgian. In addition, due to the level of fixed costs required to
operate full-service hotels, certain significant expenditures necessary for the
operation of hotels generally cannot be reduced when circumstances cause a
reduction in revenue.
COMPETITION FOR CUSTOMERS. The hotel industry is highly competitive in
nature. While there is no single competitor or small group of competitors that
are dominant in the industry, competition within the industry has recently
resulted in consolidations and other ownership changes among major hotel
companies. Servico's and Impac's hotels generally operate in areas that contain
numerous other competitive lodging facilities, some of which have greater
financial resources than either Servico or Impac or those which Lodgian will
have. Each of the companies competes with and Lodgian will compete with such
companies and facilities on various bases, including room rates and quality,
brand name recognition, location and other services and amenities offered. New
or existing competitors could significantly lower rates or offer greater
conveniences, services or amenities or significantly expand, improve or
-15-
<PAGE> 34
introduce new facilities, thereby adversely affecting Servico and Impac's
operations and Lodgian's future operations.
MAINTENANCE AND REFURBISHMENT EXPENSES. For hotels to remain
competitive, they must be maintained and refurbished on an ongoing basis and
these renovations and refurbishments increase the need for funds for capital
improvements (whether from reserves, current cash flow or financing). Moreover,
operating revenues may decrease as facilities are removed from service from time
to time during such renovations. See "Risk Factors--Development and Renovation
Risks" above.
LIABILITY AND UNAVAILABILITY OR INCREASED COSTS OF INSURANCE. Hotels
have extensive assets, require more employees, rely more on suppliers and serve
more customers than many other types of real estate properties. Hotels are also
subject in certain states to dram shop statutes which may give an injured person
the right to recover damages from any establishment which wrongfully served
alcoholic beverages to the person who, while intoxicated, caused the injury. As
a result, hotels may have greater exposure to liability for, among other things,
theft of property and other casualty and property loss, labor difficulties and
personal injuries. In this respect, many businesses, including those in the
lodging industry, have experienced recent increases in the cost of, and
contraction in the availability of, insurance, resulting in cost escalation and
reductions in amounts of coverage available. The continuation of this trend
could render certain types of desired coverage unavailable with the attendant
possibility that certain claims may exceed coverage.
SEASONAL FLUCTUATIONS IN OPERATING RESULTS. The hotel industry is
seasonal in nature. Generally, hotel revenues are greater in the second and
third quarters than in the first and fourth quarters. This seasonality can be
expected to cause quarterly fluctuations in the revenues of Servico and Impac.
Quarterly earnings also may be adversely affected by events beyond Servico's or
Impac's control, such as extreme weather conditions, economic factors and other
considerations affecting travel. Poor weather conditions will generally result
in decreased revenues at the affected hotel.
INCREASING COSTS AND DECREASED PROFITABILITY ASSOCIATED WITH INFLATION.
Inflationary pressures could have the effect of increasing operating expenses,
including labor and energy costs (and, indirectly, property taxes) above
expected levels at a time when it may not be possible to increase room rates to
offset such higher operating expenses. In addition, inflation could have a
secondary effect upon occupancy rates by increasing the cost or decreasing the
availability of travel by potential guests. Although the inflation rate has been
low recently, there is no assurance that it will not increase in the future.
LIMITATIONS AND REQUIREMENTS OF FRANCHISE AGREEMENTS
Servico's and Impac's hotels are, and Lodgian's hotels will be,
operated pursuant to franchise agreements with major hotel chains. Each of the
franchise agreements contain specific standards for, and restrictions and
limitations on, the operation and maintenance of a hotel. The requirements may
be contrary to the planned expenditures and priorities set by Servico, Impac or
Lodgian. Further, such requirements are often subject to change over time, in
some cases at the discretion of the franchisor, and may restrict the ability of
Servico, Impac or Lodgian to make improvements or modifications to a hotel
without the consent of the franchisor. In addition, compliance with such
requirements could require Servico, Impac or Lodgian to incur significant
expenses or capital expenditures. Additionally, in connection with changing the
franchise affiliation of a hotel in the future, Lodgian may be required to incur
additional expenses or capital expenditures. Franchise agreements are terminable
by the franchisor upon the failure to maintain specified operating standards or
to make payments due under the applicable agreements in a timely fashion or at
the end of its term. If Servico, Impac or Lodgian lose a franchise, this may
have an adverse impact on the operations and underlying value of the affected
hotel because of the loss of name recognition, marketing support and centralized
reservation systems provided by the franchisor. Franchise
-16-
<PAGE> 35
agreements often define transactions such as the Merger as a "change of control"
that require the franchisor's approval and in some cases the payment of certain
fees. It is anticipated that approximately $1 million to $2.5 million could be
payable to franchisors in connection with the Merger under such provisions. A
majority of the hotels owned by Servico and Impac are affiliated with Holiday
Inn and any deterioration in the relationship with or the benefits associated
with being a franchisee of Holiday Inn could have a material adverse effect on
Lodgian's business, financial condition and results of operations.
COSTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS
Under federal, state, and local environmental laws, ordinances and
regulations, Servico, Impac or Lodgian as a current or previous owner or
operator of real property may be liable for the costs of removal or remediation
of hazardous or toxic substances on, under or in such property. The law often
imposes liability whether or not Servico, Impac or Lodgian knew of, or was
responsible for, the presence of such hazardous or toxic substances. The costs
of any remediation or removal of hazardous or toxic substances discovered by
Servico, Impac or Lodgian may be substantial, and the presence of any such
substance, or the failure promptly to remediate any such substance, may
adversely affect the ability of Servico, Impac or Lodgian to sell or lease the
property, to use the property for its intended purpose, or to borrow using the
property as collateral. Other federal, state and local laws, ordinances and
regulations require abatement or removal of certain asbestos-containing
materials in connection with demolition or certain renovations or remodeling,
impose certain worker protection and notification requirements, and govern
emissions of and exposure to asbestos fibers in the air. Additionally, federal,
state and local laws, ordinances and regulations and the common law impose on
Servico and Impac and will impose on Lodgian requirements regarding conditions
and activities that may affect human health or the environment, such as the
presence of lead in drinking water or lead-containing paint in occupied
structures, and the ownership or operation of underground storage tanks. Failure
to comply with requirements could, in addition to making it difficult for
Servico, Impac or Lodgian to lease, sell or finance any affected property,
result in the imposition of monetary penalties, expenditures necessary to bring
the property into compliance and potential liability to third parties. Hotels
acquired by Servico and Impac have in the past contained asbestos which was
handled as required by applicable regulations and additional hotels may be
acquired in the future which contain asbestos requiring removal or remediation.
While there are currently no material environmental issues known to Servico or
Impac, any liability resulting from non-compliance or other claims relating to
environmental matters in the future could have a material adverse effect on
Lodgian's business, financial condition and results of operations.
NO INTENTION TO PAY DIVIDENDS
Servico has not paid any dividends since its reorganization in 1992 and
has no current plans to initiate the payment of dividends. Impac has
historically paid dividends to its unitholders each year and its Operating
Agreement provides for quarterly distributions based on cash flow and
distributions upon the sale of properties. It is currently anticipated that
Lodgian will retain future earnings for business use and does not expect to
declare or pay any dividends in the foreseeable future. The Board of Directors
of Lodgian will determine future dividend policies based on Lodgian's financial
condition, profitability, cash flow and capital requirements, among other
factors, and subject to any applicable restrictions on the payment of dividends.
COST OF COMPLIANCE WITH GOVERNMENTAL REGULATIONS
A number of states regulate the licensing of hotels and restaurants,
including liquor license grants, by requiring registration, disclosure
statements and compliance with specific standards of conduct. Each of Servico
and Impac
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<PAGE> 36
believes that it is substantially in compliance with these requirements.
Managers of hotels are also subject to laws governing their relationships with
hotel employees, including minimum wage requirements, overtime, working
conditions and work permit requirements. Compliance with, or changes in, these
laws could reduce the revenue and profitability of the hotels and could
otherwise adversely affect Lodgian's business, financial condition and results
of operations.
Under the Americans with Disabilities Act (the "ADA"), all public
accommodations are required to meet certain requirements related to access and
use by disabled persons. These requirements became effective in 1992. Although
significant amounts have been and continue to be invested in ADA-required
upgrades to Servico's and Impac's hotels, a determination that Servico, Impac or
Lodgian is 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 which could increase expenses and reduce earnings.
SUBSTANTIAL RELIANCE ON KEY PERSONNEL
Lodgian will place substantial reliance on the hotel industry knowledge
and experience and the continued services of its senior management, led by Mr.
David Buddemeyer, Servico's Chairman, President and Chief Executive Officer and
Mr. Robert Cole, the Manager and President of Impac. Lodgian's future success
and its ability to manage future growth depends in large part upon the efforts
of these persons and on its ability to attract and retain other highly qualified
personnel. Competition for such personnel is intense, and there can be no
assurance that Lodgian will be successful in attracting and retaining such
personnel. The loss of the services of Mr. Buddemeyer or Mr. Cole or the
inability to attract and retain other highly qualified personnel may adversely
affect Lodgian's business, financial condition and the results of operations.
ANTI-TAKEOVER PROVISIONS
Lodgian's Certificate and Bylaws, which have been filed hereto as
Appendices G and H, respectively, contain provisions that could prevent or delay
an acquisition of Lodgian by means of a tender offer, a proxy contest or
otherwise and may adversely affect prevailing market prices for Lodgian common
stock. These provisions, among other things, provide: (i) for a classified board
of directors with each class of directors consisting of one-third of the total
number of directors of Lodgian and serving for a term of one to three years;
(ii) that the Lodgian Board may designate the terms of any new series of
preferred stock of Lodgian; (iii) that any shareholder who wishes to propose any
business or to nominate a person or persons for election as a director at any
annual meeting may only do so if advance notice is given to the Secretary of
Lodgian; (iv) that no shareholder action may be effected by written consent; (v)
that a director may be removed only for due cause and upon majority shareholder
vote; and (vi) that only a majority of the directors or the Chief Executive
Officer may call special meetings of the shareholders. In addition, Lodgian is
also subject to Section 203 of the Delaware General Corporation Law ("DGCL"),
which generally limits transactions between a publicly held company and
"interested shareholders" (generally, those shareholders who, together with
their affiliates and associates, own 15% or more of Lodgian's outstanding voting
stock) and which generally prohibits such "interested shareholders" from
engaging in certain business combinations involving Lodgian during the
three-year period after the date the person became an interested shareholder
unless the transaction or business combination is generally approved by the
board of directors or a majority of the shares entitled to vote, excluding
interested shares. See "Description of Lodgian Capital Stock" and "Comparison of
Certain Rights of the Holders of Servico Common Stock and Impac Units."
Additionally, the terms of Servico's recently issued convertible trust
securities provide for certain adjustments to the conversion price in the event
of a sale of Servico (or after completion of the Merger, a sale of Lodgian)
which could deter a possible acquisition of the company or increase the costs of
such acquisition. Such provisions may also adversely affect prevailing market
prices for Servico (or Lodgian) common stock.
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<PAGE> 37
SERVICO ANNUAL MEETING
DATE, TIME AND PLACE AND PURPOSE
The Annual Meeting of Shareholders of Servico will be held at [time],
on [day], [month and date], 1998, at the [place], [address].
At the Servico Annual Meeting, the holders of Servico common stock, par
value $.01 per share (the "Servico Common Stock"), will consider and vote upon
(1) the approval of the Merger, (2) the approval of each of the Lodgian Plans,
(3) an amendment of the Servico Stock Option Plan (the "Servico Plan") to
increase the number of shares issuable thereunder, and (4) the election of one
director to serve until 2001 or the date on which the Merger is completed. The
Lodgian Plans will replace the Servico Plan in the event the Merger is approved
and in such case, no further options will be granted under the Servico Plan.
RECORD DATE FOR ELIGIBILITY TO VOTE
The Servico Board has fixed the close of business on __________, 1998,
as the record date (the "Record Date") for the determination of shareholders
entitled to notice of and to vote at the Servico Annual Meeting. At the Servico
Record Date, there were [21,038,995] shares of Servico Common Stock outstanding
which were held by approximately 3,000 holders of record.
VOTING OF PROXIES
Shares of Servico Common Stock represented by properly executed proxies
received by Servico prior to the vote at the Servico Annual Meeting will be
voted at the Servico Annual Meeting in the manner directed on the proxy card,
unless such proxy is revoked in advance of such vote. All shares represented by
a properly executed proxy on which no choice is specified will be voted by the
persons named on the proxy, to the extent applicable, (i) FOR approval of the
Merger, (ii) FOR approval of each of the Lodgian Plans, (iii) FOR the amendment
to the Servico Plan, (iv) FOR the election of the nominee as director, and (v)
at the discretion of the proxy holder, as to any other matter which may properly
come before the Servico Annual Meeting or any adjournments or postponements
thereof. Such adjournments may be for the purpose of soliciting additional
proxies for a shareholder vote on any proposal. Shares represented by proxies
voting for the approval of the Merger will be voted for any proposal to adjourn
the Servico Annual Meeting for the purpose of soliciting additional proxies for
a shareholder vote on such proposal. Shares represented by proxies voting
against the approval of the Merger will be voted against a proposal to adjourn
the Servico Annual Meeting for the purpose of soliciting additional proxies.
Servico currently does not intend to seek an adjournment of its Annual Meeting.
Servico knows of no reason why Michael A. Leven, the nominee for
election as a director, would be unable to serve. Nevertheless, should the
nominee become unable to serve, all proxies, except where a contrary instruction
has been given, will be voted in accordance with the best judgment of the
persons named as proxies.
Under the New York Stock Exchange (the "NYSE") rules, brokers who hold
shares in "street name" for customers are precluded from exercising voting
discretion with respect to the approval of non-routine matters such as the
proposal to approve the Merger, the approval of each of the Lodgian Plans and
the amendment to the Servico Plan. Accordingly, absent specific instructions
from the beneficial owner of such shares, brokers are not empowered to vote such
shares with respect to the approval of such proposals. Since the affirmative
vote of a majority of the aggregate voting power of Servico is required for
approval of the Merger, a "broker non-vote" with respect to the Merger will have
the effect of a vote against the Merger. "Broker non-votes" will have no effect
on the proposals to approve each of the Lodgian Plans, amend the Servico Plan or
the election of a Servico director.
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<PAGE> 38
REVOCABILITY OF PROXIES
A proxy may be revoked by the record owner by delivering written notice
to the Secretary of Servico prior to the vote at the Servico Annual Meeting, or
by filing a duly executed proxy bearing a later date with the Secretary of
Servico prior to the vote at the Servico Annual Meeting. Attendance at the
Servico Annual Meeting will not in itself operate to revoke a proxy. A holder of
Servico Common Stock who attends the Servico Annual Meeting may, if he wishes,
vote by ballot and such vote will cancel any proxy previously given.
VOTES REQUIRED; SHARES HELD BY CERTAIN PERSONS
Holders of record of Servico Common Stock on the Servico Record Date
are entitled to one vote for each share held by them on any matter that may
properly come before the Servico Annual Meeting. The presence, either in person
or by proxy, at the Servico Annual Meeting of holders of a majority of the
issued and outstanding shares of Servico Common Stock on the Servico Record Date
is necessary to constitute a quorum for the transaction of business at the
Servico Annual Meeting.
The affirmative vote of the holders of a majority of the outstanding
Servico Common Stock as of the Servico Record Date is required for the approval
of the Merger. Abstentions may be specified with respect to the approval of the
Merger by properly marking the "ABSTAIN" box on the proxy for such proposal, and
will be counted as present for the purpose of determining the existence of a
quorum but will have the effect of a negative vote, due to the requirement for
the affirmative vote of the holders of a majority of the outstanding Servico
Common Stock to approve the Merger. In addition, the failure of a Servico
shareholder to return a proxy will have the effect of a vote against the Merger.
Approval of each of the Lodgian Plans and amendment of the Servico Plan
each requires the affirmative vote of a majority of the shares present in person
or by proxy at the Servico Annual Meeting and entitled to vote thereon. An
abstention from voting on any of such proposals, by properly marking the
"ABSTAIN" box on the proxy for such proposal, will have the same effect as a
vote cast against such proposal.
In the election of the nominee as a director for a three-year term in
the event the Merger is not consummated, the director will be elected by a
plurality of the shares of Servico Common Stock voting in person or by proxy at
the Servico Annual Meeting. The nominee for director receiving the highest
number of votes will be elected to Servico's Board. An abstention from voting
for the nominee by properly marking the "WITHHOLD" box on the proxy will be
tabulated as a vote withheld in the election of directors and will have no
influence on the voting results.
As of the Servico Record Date, directors and executive officers of
Servico beneficially owned (excluding currently exercisable options) an
aggregate of approximately 770,000 shares of Servico Common Stock, representing
approximately 3.6% of the issued and outstanding shares of Servico Common Stock.
The directors and executive officers of Servico have indicated their intention
to vote their shares of Servico Common Stock in favor of the approval of the
Merger, for the approval of each of the Lodgian Plans, for the amendment of the
Servico Plan and for the election of the nominee to Servico's Board.
SOLICITATION OF PROXIES
Servico will bear the costs of the solicitation of proxies from its
shareholders. In addition to soliciting proxies by mail, directors, officers and
selected other employees of Servico may solicit proxies in person, by telephone,
by telegram or by similar means of communication. Directors, officers and any
other employees of Servico who solicit proxies will not be specially compensated
for such services, but may be reimbursed for out-of-pocket expenses incurred in
connection therewith. Arrangements have also been made with brokerage firms and
other custodians, nominees and fiduciaries to forward solicitation materials to
the beneficial owners of shares of Servico Common Stock held of record by such
persons. Servico will reimburse the persons with whom these arrangements have
been made for reasonable out-of-pocket expenses incurred by them in connection
with this solicitation in accordance with
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<PAGE> 39
applicable rules. Servico has retained Georgeson & Company Inc. to aid in the
solicitation of proxies and to verify certain records relating to the
solicitation at a fee of $____________ plus expenses.
MATTERS TO BE VOTED UPON AT THE SERVICO ANNUAL MEETING
APPROVAL OF THE MERGER
The Servico Board has determined that the terms of the Merger Agreement
and the transactions contemplated thereby are fair to, and in the best interests
of, Servico and its shareholders. The Servico Board believes that the Merger,
which will create one of the largest independent, multi-brand owners and
operators of full service hotels in the United States, will result in a combined
enterprise with the financial strength, franchise base and the expertise
necessary to excel in the hotel industry. Accordingly, the Servico Board has
unanimously approved the Merger Agreement and the Merger.
THE SERVICO BOARD RECOMMENDS A VOTE FOR THE PROPOSAL
TO APPROVE THE MERGER.
APPROVAL OF EACH OF THE LODGIAN PLANS
In addition to approving the Merger, because Lodgian is a new company,
the shareholders of Servico and unitholders of Impac are being asked to approve
three incentive compensation plans for Lodgian. Servico currently has in effect
the Servico Plan. The Lodgian Plans will replace the Servico Plan in the event
the Merger is approved and, in such case, no further options will be granted
under the Servico Plan. The Lodgian Plans are intended to provide Lodgian's
directors and employees with incentives which align the interests of the Lodgian
directors and employees going forward with the interests of Lodgian
shareholders.
THE SERVICO BOARD RECOMMENDS A VOTE FOR THE PROPOSALS
TO APPROVE EACH OF THE LODGIAN PLANS.
AMENDMENT OF SERVICO STOCK OPTION PLAN
The proposed amendment would increase the number of shares of Servico
Common Stock available for issuance under the Plan from 1,675,000 shares to
3,250,000. The Servico Plan was established by Servico in 1992 to provide
Servico with an effective means to attract, retain, and motivate employees of
Servico. Currently, 1,675,000 shares of Servico Common Stock are issuable under
the Servico Plan and no shares remain available for grant under the Plan. In
August, 1997, Servico granted stock options with respect to 590,000 shares, to
certain of its officers and employees (including options granted to acquire
240,000 shares to David Buddemeyer, 70,000 shares to Peter Walz and 50,000
shares each to Karen Marasco, Warren Knight and Don Shouldice) which, because
the Servico Plan did not then have sufficient shares available for issuance,
were granted subject to approval by Servico's shareholders of an amendment to
the Servico Plan. Approval of this proposal will enable Servico to issue the
options previously awarded to employees under the Plan. The Servico Board
believes that awards made under the Servico Plan have enabled Servico to better
compete for qualified personnel, to retain such personnel in the employ of
Servico and to motivate such personnel and align their long-term interests with
those of Servico's shareholders. In the event the Merger is approved, the
Lodgian Plans are expected to replace the Servico Plan and, in such case, no
further options will be granted under the Servico Plan. Any options outstanding
under the Servico Plan will convert into options to acquire shares of Lodgian
Common Stock after the Merger.
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<PAGE> 40
THE SERVICO BOARD RECOMMENDS A VOTE FOR THE PROPOSAL
TO AMEND THE SERVICO STOCK OPTION PLAN.
ELECTION OF DIRECTORS
Servico's Bylaws provide that the number of directors of the Company
shall not be less than one nor more than eleven and shall be determined from
time to time by resolution of the Servico Board or by shareholders at an annual
meeting. The number of directors is currently set at five, divided into three
classes. The holders of Servico Common Stock elected all current directors,
other than Mr. Michael A. Leven, who was elected by the Servico Board at its
August 1997 meeting and is standing for election at the Servico Annual Meeting.
The Servico Bylaws also provide that directors elected by the holders of Servico
Common Stock shall be elected for three-year terms and that one class of such
directors shall be elected at each annual meeting of shareholders. At the
Servico Annual Meeting, Mr. Leven, as the sole member of the class of directors
whose term expires at that time, shall be elected for a term expiring at the
Annual Meeting of Servico shareholders held in 2001. In the event the Merger is
completed as expected, Mr. Leven's term as a director of Servico will end and
Mr. Leven will become a director of Lodgian.
THE SERVICO BOARD RECOMMENDS A VOTE FOR THE ELECTION
OF MR. LEVEN TO SERVICO'S BOARD.
SOLICITATION OF IMPAC UNITHOLDER CONSENTS
PURPOSE
In accordance with Section 5.5(b)(i) of Impac's Second Amended and
Restated Operating Agreement (the "Operating Agreement"), the Manager of Impac
is soliciting the consent of the holders of Impac Units to: (i) the Merger and
all other transactions contemplated by the Merger Agreement; and (ii) the
adoption of each of the Lodgian Plans.
UNITHOLDERS ENTITLED TO VOTE
All holders of Impac Units as of the date of this Joint Proxy
Statement/Prospectus will have the opportunity to consent to the matters
presented to the Impac unitholders herein.
SUBMISSION OF WRITTEN CONSENT
To consent to any of the matters described above, holders of Impac
Units must deliver their signed written consent forms to the Secretary of Impac
prior to the consummation of the Merger. All Units represented by a properly
executed written consent form will be voted as specified on such form.
REVOCABILITY OF CONSENT
Holders of Impac Units may revoke their consent to any of the matters
presented for their approval by submitting to the Secretary of Impac, prior to
consummation of the Merger, a written notification of intent to revoke their
consent.
CONSENT REQUIRED; VOTING AGREEMENTS
Holders of Impac Units as of the date of this Joint Proxy
Statement/Prospectus are entitled to one vote for each Unit held by them on the
matters presented for their approval. The consent of the holders of a majority
of the outstanding Impac Units is required for approval of the Merger and each
of the Lodgian Plans.
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<PAGE> 41
Pursuant to Voting Agreements between Servico and Robert Cole, the
President and Manager of Impac, and entities that Mr. Cole or his family control
(the "Cole Entities"), and other Impac unitholders who, together with the Cole
Entities, own approximately 55.9% of the outstanding Impac Units (the "Impac
Voting Agreements"), the parties thereto have agreed (i) subject to certain
exceptions, not to sell or transfer Impac Units held by them during the term of
the Merger Agreement and (ii) to vote such Impac Units in favor of the Merger
and against any competing transaction during the term of the Merger Agreement
and for a one-year period after termination of the Merger Agreement under
certain circumstances. Certain Impac unitholders executing the Impac Voting
Agreements have the limited right to transfer Impac Units to their partners or
equity holders during the term of the Impac Voting Agreements so long as such
transferees agree to be bound by the terms of the Impac Voting Agreements.
The vote of the Cole Entities and the other Impac unitholders bound by
the Impac Voting Agreements in favor of the Merger is sufficient to approve the
Merger without any action on the part of any other holder of Impac Units.
SOLICITATION OF CONSENTS
Impac will bear the costs of the solicitation of consents from its
unitholders. In addition to soliciting consents by mail, managers, officers and
selected other employees of Impac may solicit consents in person, by telephone,
by telegram or by similar means of communication. Manager, officers and any
other employees of Impac who solicit consents will not be specially compensated
for such services, but may be reimbursed for out-of-pocket expenses incurred in
connection therewith.
THE MERGER
GENERAL
The Merger contemplates a transaction pursuant to which the businesses
of Servico and Impac will be combined under the ownership of Lodgian. At the
Effective Time (as defined below), Lodgian will acquire all of the issued and
outstanding Servico Common Stock and Impac Units and all the issued and
outstanding capital stock of each Impac Affiliated Company (the "Impac
Affiliated Company Common Stock") through the merger of Servico Merger Sub,
Lodgian's wholly-owned subsidiary, with and into Servico (the "Servico Merger"),
the merger of Impac Merger Sub, Lodgian's wholly-owned subsidiary, with and into
Impac (the "Impac Merger") and the merger of each newly-formed acquisition
subsidiary of Lodgian (each an "Impac Affiliated Sub"), with and into the
respective Impac Affiliated Company (collectively, the "Impac Affiliated
Merger"). Therefore, as a result of the Merger, Servico, Impac and the Impac
Affiliated Companies will all be owned by Lodgian. The Effective Time means the
later of the time that the Articles or Certificate of Merger relating to the
Servico Merger, the Impac Merger or the Impac Affiliated Mergers are filed with
the Secretary of State of the applicable state of incorporation or organization
for each of the merging entities.
The discussion in this Joint Proxy Statement/Prospectus of the Merger
and the description of the principal terms of the Merger are subject to and
qualified in their entirety by reference to the Merger Agreement, a copy of
which is attached to this Joint Proxy Statement/Prospectus as Appendix A, and
which is incorporated herein by reference.
THE MERGER
INITIAL ISSUANCE OF SHARES. At the Effective Time, Lodgian will acquire
all of the issued and outstanding shares of Servico Common Stock, Impac Units
and Impac Affiliated Company Common Stock. Pursuant to the Merger, each share of
Servico Common Stock issued and outstanding immediately prior to the Effective
Time will be converted into the right to receive one share of common stock of
Lodgian, par value $.01 per share (the "Lodgian Common Stock"), and each Impac
Unit and each share of Impac Affiliated Company Common Stock
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<PAGE> 42
issued and outstanding immediately prior to the Effective Time will be converted
into the right to receive a certain number of shares of Lodgian Common Stock
equal to a formula based on the average price of Servico Common Stock during a
specified ten-day period prior to the Merger. Throughout this discussion and
throughout this Joint Proxy Statement/Prospectus, reference to Impac unitholders
will be deemed to exclude the Impac Affiliated Companies whose shareholders will
directly receive Lodgian shares based on the number of Impac Units held by each
of the Impac Affiliated Companies. If the average price of the Servico Common
Stock is at least $14.00 per share and not more than $25.00 per share, then the
Impac unitholders and Impac Affiliated Company shareholders will receive a total
of 6.0 million shares of Lodgian Common Stock. Based on the number of Impac
Units outstanding immediately prior to the Merger, approximately 0.519 of a
share of Lodgian Common Stock will be issued for each Impac Unit owned. If the
average price of the Servico Common Stock is less than $14.00 per share, the
Impac unitholders and Impac Affiliated Company shareholders will receive a total
number of shares of Lodgian Common Stock determined by dividing $103.6 million
by the average Servico Common Stock price during the specified ten-day period
and then subtracting 1.4 million. If the average price of Servico Common Stock
is more than $25.00 per share, the Impac unitholders will receive a total number
of shares of Lodgian Common Stock determined by dividing $185 million by the
average Servico Common Stock price during the specified ten-day period and then
subtracting 1.4 million.
SHARES ALLOCABLE TO IMPAC UNITHOLDERS. The number of shares of Lodgian
Common Stock each Impac unitholder will receive for each of his Impac Units can
be determined by dividing the total number of shares to be delivered based on
the Impac Units outstanding prior to the Merger by 11,559,527.20 (which is the
total number of outstanding Impac Units).
SHARES ALLOCABLE TO IMPAC AFFILIATED COMPANIES. For federal income tax
planning purposes, the Impac Affiliated Companies will each merge directly into
the Impac Affiliated Subs and, accordingly, each share of Impac Affiliated
Company Common Stock will, pursuant to the Merger, be converted into the right
to receive a number of shares of Lodgian Common Stock based upon the number of
Impac Units owned by the respective Impac Affiliated Companies. The number of
Impac Units owned by each of the Impac Affiliated Companies is set forth below:
<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF SHARES OF
LODGIAN COMMON
PERCENTAGE OF STOCK INITIALLY
NUMBER OF IMPAC OUTSTANDING IMPAC RECEIVED IN THE
IMPAC AFFILIATED COMPANY UNITS OWNED UNITS MERGER(1)
------------------------ --------------- ----------------- -------------------
<S> <C> <C> <C>
P-Burg Lodging Associates, Inc. 211,789.68 1.83% 109,929
Hazard Lodging Associates, Inc. 111,469.33 0.96% 57,858
Memphis Lodging Associates, Inc. 153,683.58 1.33% 79,769
Delk Lodging Associates, Inc. 73,414.96 0.64% 38,106
Impac Hotel Development, Inc. 1,281,957.39 11.09% 665,403
Impac Design and Construction, Inc. 74,786.85 0.65% 38,818
Impac Hotel Company, Inc. 124,644.77 1.08% 64,697
------------ ----- ---------
Total 2,031,746.56 17.58% 1,054,580
</TABLE>
- --------------------------
(1) Based upon an Impac Exchange Ratio of 0.519. The Impac Exchange Ratio
will be adjusted in the event the price of Servico Common Stock is less
than $14.00 per share or greater than $25.00 per share during the
specified 10-day period prior to the Merger. Does not include Impac
Additional Shares (as defined) and does not provide for the issuance of
cash in lieu of fractional shares.
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<PAGE> 43
ISSUANCE OF IMPAC ADDITIONAL SHARES. As five of Impac's hotels that are
currently under development are opened, holders of Impac Units and Impac
Affiliated Company Common Stock will receive up to an aggregate of 1.4 million
additional shares of Lodgian Common Stock (the "Impac Additional Shares"). The
following incremental portions of the Impac Additional Shares (which will not be
subject to change) will be issued following the opening of each of the following
development hotels:
<TABLE>
<CAPTION>
Dollar Value
Anticipated Additional Shares Attributable to
Hotel Completion Date per Impac Unit* Additional Shares**
----- --------------- ----------------- -------------------
<S> <C> <C> <C>
Marriott, Portland, Oregon First Quarter, 1999 490,000(.042) $ 8,820,000
Marriot, Denver, Colorado Fourth Quarter, 1998 350,000(.030) $ 6,300,000
Hilton Garden Inn, Lake Oswego, Fourth Quarter, 1999 238,000(.021) $ 4,284,000
Oregon
Courtyard by Marriott, Livermore, First Quarter, 1999 168,000(.95) $ 3,024,000
California
Hilton Garden Inn, Rio Ranch, First Quarter, 1999 154,000(.015) $ 2,772,000
New Mexico
TOTAL: 1,400,000(.121) $25,200,000
</TABLE>
- ----------------
* Assumes 11,559,527.20 Impac Units outstanding at the time of the Merger.
The holders of Impac Affiliated Company Common Stock will receive a number
of Impac Additional Shares based upon the number of Impac Units owned by
the respective Impac Affiliated Companies.
** Based upon the price of Servico's Common Stock on _________, 1998. The
number of Impac Additional Shares will not be adjusted in the event of any
increase or decrease in the price of Servico Common Stock. The price of
Servico Common Stock at the Effective Time (and thus the Dollar Value
Attributable to Impac Additional Shares shown in the above table) may be
higher or lower than its price at the date of this Joint Proxy
Statement/Prospectus.
Each of the hotels is currently under construction and is expected to open in
1999. The number of Impac Additional Shares attributable to each property will
be placed in escrow with the Exchange Agent when the Merger is consummated and
subsequently distributed pro rata to persons and entities that were holders of
Impac Units or Impac Affiliated Company Common Stock at the time of the Merger
based upon the number of Impac Units or shares of Impac Affiliated Company
Common Stock they held immediately prior to consummation of the Merger,
regardless of whether they continue to hold the Lodgian shares issued to them in
connection with the Merger and regardless of whether they received cash in lieu
of fractional shares in connection with the Merger. No additional action needs
to be taken by former Impac Members or former Impac Affiliated Company
shareholders to receive their pro rata share of the Impac Additional Shares
unless there is a change of address, in which case the Escrow Agent should be
advised of any such change. However, at the time the Impac Additional Shares are
issued, cash will again be paid in lieu of fractional shares.
BACKGROUND OF THE MERGER
Since its inception, Impac has raised an aggregate of $125 million in
capital which includes the appraised value of the assets acquired from Impac's
predecessor entities. Substantially all of this capital is invested in hotel
properties in accordance with Impac's investment objectives which are described
in "Business of Impac-Investment Strategy" with the balance used to fund
short-term working capital requirements.
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No representative of Impac had any significant discussions or
negotiations with any party regarding a potential change of control of Impac
until May 1997 when the first contact between representatives of Impac and
Servico occurred. At that time the parties met for the purpose of discussing the
retention of Impac in connection with the renovation of certain Servico hotel
properties. Thereafter, in June 1997, Mark Elliott of Hodges, Ward & Elliott, a
consulting firm who had previously had independent dealings with both Impac and
Servico as a hotel broker, spoke with Peter Walz, Vice President of Servico,
regarding Servico's interest in discussing a potential business combination with
representatives of Impac and called Robert Cole, the Manager of Impac, to
inquire whether Mr. Cole would be interested in meeting with representatives of
Servico to discuss a possible combination. Following Mr. Elliot's introduction,
David Buddemeyer and Peter Walz of Servico met with Mr. Cole in July 1997 to
discuss each company's strategy, portfolio and acquisition/development
activities.
In August 1997, Mr. Cole initiated the Merger discussions with Servico
on behalf of Impac by indicating that he would be interested in pursuing further
discussions with Servico and thereafter Messrs. Buddemeyer, Walz and Cole met to
discuss the possible business combination and specific valuation issues relating
to Impac.
In September 1997, Mr. Cole asked Allen & Company Incorporated ("Allen
& Company") to assist Impac in its review of a potential business combination
with Servico. On September 23, 1997, representatives of Impac and Servico, their
financial advisors (Allen & Company and Lehman Brothers, Inc. ("Lehman
Brothers"), respectively) and their counsel met to discuss the issues raised by
such a business combination and the potential advantages and synergies that
could be realized by such a combination. The parties discussed various business
points, the appropriate corporate structure for the combined entity, tax and
accounting issues including the impact of accounting for the transaction as a
purchase or pooling of interests, the terms of Impac's indebtedness, potential
refinancing options and the composition of the Board of Directors of the
combined entity.
In October, 1997, representatives of Impac and Servico and their
respective financial advisors, attorneys and independent accountants met to
discuss alternative accounting and transaction structures, refinancing
alternatives, financial results, the structure of the combined entity, the
process and schedule for the completion of Impac's audit and a possible
timetable for pursuing the transaction. Thereafter, drafts of a proposed form of
Merger Agreement were circulated and negotiation of the terms of the Agreement
commenced.
In December, 1997, representatives of Impac and Servico and their
respective financial advisors, attorneys and independent accountants met to
discuss the terms of a proposed credit facility for the combined entity and the
status of Impac's audit. The parties also discussed outstanding issues relating
to the proposed Merger Agreement, including the scope of Impac's representations
and warranties and the operation of Servico's and Impac's business during the
period after the execution of an agreement and before closing.
In January and February, 1998, the parties continued to negotiate the
terms of the transaction including, in particular, issues relating to
valuations, the accretiveness of the transaction and the stock price collar,
issues relating to the appropriate accounting treatment of the transaction, the
impact on the transaction of the inclusion of the development properties, the
responsibility for costs and break up fees in the event the transaction is not
consummated, and the positions and terms of employment of Messrs. Buddemeyer and
Cole. On January 28, 1998, Impac delivered to Servico audited financial
statements for the period ended September 30, 1997 and the parties continued to
negotiate the timing and number of Lodgian shares to be issued to Impac
unitholders in connection with the transaction.
In February 1998, Impac retained Bear Stearns & Company, Inc. as a
co-advisor to assist in the execution of the business strategy following the
signing of the Merger Agreement.
In March 1998, representatives of Impac and Servico and their
respective attorneys and financial advisors continued to negotiate the terms of
the definitive Merger Agreement. While Servico's Board of Directors reviewed the
proposed terms of the transaction and the status of negotiations at each of the
seven Board meetings commencing with their meeting in September, 1997, on March
11, 1998, Servico's directors, after reviewing the material terms of the
transaction and the proposed form of Merger Agreement and after a full
discussion of the potential benefits as
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well as risks associated with the transaction, approved the transaction and
authorized David Buddemeyer to execute the Merger Agreement on behalf of
Servico. Impac's Manager approved the Merger Agreement on March 20, 1998. The
parties executed the Merger Agreement on March 20, 1998 and issued a press
release announcing the transaction on March 23, 1998.
In July 1998, Servico and Impac amended and restated the Merger
Agreement to, among other things, extend the termination date from July 31, 1998
to December 31, 1998, and to permit the direct merger of the Impac Affiliated
Companies into newly-formed subsidiaries of Lodgian so that the shareholders of
the Impac Affiliated Companies could receive shares of Lodgian directly in a tax
free reorganization.
SERVICO--RECOMMENDATION OF SERVICO'S BOARD OF DIRECTORS. THE SERVICO
BOARD BELIEVES THAT THE TERMS OF THE MERGER ARE FAIR TO, AND IN THE BEST
INTERESTS OF, SERVICO AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF SERVICO VOTE FOR APPROVAL OF THE MERGER.
SERVICO--REASONS FOR THE MERGER. The Servico Board believes that the
Merger offers the unique opportunity to combine two successful and financially
sound companies to form Lodgian. The Servico Board considered the significant
benefits associated with combining Servico's business and Impac's business in
light of the Servico Board's belief that the Merger represents an excellent fit
of the two companies' respective strategic advantages in operating and owning
hotels, including opportunities for efficiencies and earnings growth. The Merger
adds a number of upscale properties to Servico's portfolio, including the
Marriott at the Denver Airport, the Marriott Downtown Portland and the four star
and four diamond Mayfair Hotel in the Coconut Grove section of Miami. Servico
should also benefit from the improved geographic diversity with the addition of
hotels in 11 new states, including entry into major markets such as Atlanta,
Boston, Denver, Los Angeles, Miami, Portland and San Francisco. Servico's
existing hotels will also potentially benefit from the resources offered by
Impac's "Revenue Center", which centralizes certain of Impac's reservations,
sales and marketing functions at one location in Louisiana, and Impac's
management information systems, which track guest satisfaction daily. Further,
Impac's development and construction expertise will potentially give the
combined company a significant competitive advantage in connection with the
renovation of properties and in pursuing the strategic development of upscale,
premium branded properties. The Servico Board believes that Impac's development
properties, together with both companies' substantial recent growth, represent a
built-in pipeline of substantial internal growth through 1999.
In arriving at its determination, the Servico Board considered a number
of factors, including the material factors described below:
(i) The current state of the hospitality industry and economic and
market conditions, including in particular the intensification of competition
within the hotel industry and the recent consolidation trend within the
industry;
(ii) The Merger will add scale and geographic diversification to
Servico's existing business;
(iii) The Merger will create one of the largest independent,
multi-brand owners and operators of full service hotels in the United States,
helping Servico to achieve its objective of strategic growth;
(iv) The Merger will enable Servico to add individuals to its
management from Impac's management who can help grow the combined businesses;
(v) The Merger should permit operational efficiencies by (a) providing
renovation and development expertise, (b) creating greater purchasing power, (c)
eliminating duplicate administrative and accounting functions,
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(d) integrating information systems and related personnel, and (e) utilizing
Impac's Revenue Center, which will centralize the companies' reservations and
sales and marketing functions at one location and track guest satisfaction;
(vi) That based upon the advice of its tax counsel, the Merger will be
a tax-free transaction from the perspective of Servico's shareholders;
(vii) The opinion of Lehman Brothers to the effect that, as of the date
of such opinion and based upon, and subject to, certain matters stated therein,
the consideration to be paid in the Merger was fair, from a financial point of
view, to Servico;
(viii) The financial and other information concerning Impac that was
provided to Servico and Impac's representatives as part of Servico's due
diligence investigation, including, among other things, information regarding
Impac's business, properties, operations, financial condition and future
prospects; and
(ix) The terms of the Merger Agreement.
SERVICO--NEGATIVE CONSIDERATIONS AND POTENTIAL DISADVANTAGES OF THE
MERGER. The Servico Board evaluated the advantages, opportunities and general
considerations in light of certain risks or other considerations associated with
the Merger, including, without limitation, the following:
(i) The challenges and costs inherent in combining two businesses of
the size of Servico and Impac and the resulting diversion of management's
attention for an extended period of time;
(ii) The risk that the benefits sought in the Merger would not be
obtained;
(iii) The effect of the public announcement of the Merger and the
proposed relocation of Servico's corporate headquarters from West Palm Beach,
Florida, to Atlanta, Georgia, on relationships with franchisors, operating
results and Servico's ability to retain employees, and the possible negative
effect of the announcement on the trading price of Servico Common Stock;
(iv) The possibility that certain provisions of the Merger Agreement
might have the effect of discouraging other business combinations or strategic
alternatives with other companies;
(v) The terms and amount of Impac's outstanding indebtedness and when
combined with Servico's outstanding indebtedness, the effect on the combined
company of high levels of indebtedness, including the ability to generate
sufficient cash flow from operations to service the debt, the ability to obtain
additional financing or refinancing in the future and the increased
vulnerability to adverse changes in general economic conditions; and
(vi) The risks inherent in the construction and completion of Impac's
hotels currently under development, including the possibility of construction
cost overruns and delays and the resulting impact on the combined company's
results of operations and financial condition.
CONCLUSION. In view of the wide variety of factors considered by the
Servico Board in connection with the evaluation of the Merger and the complexity
of such matters, the Servico Board did not consider it practicable to, nor did
it attempt to, quantify, rank or otherwise assign relative weight to the
specific factors it considered in reaching its decision. The Servico Board
relied on the experience and expertise of its financial advisors for
quantitative analysis of the financial terms of the Merger. See "The
Merger--Opinion of Lehman Brothers." In addition, the Servico Board did not
undertake to make any specific determination as to whether any particular factor
(or any aspect of any particular factor) was determinative in its ultimate
decision, but rather conducted a discussion of the factors described above,
including asking questions of Servico's management and legal, financial and
accounting advisors, and reached a general consensus that the Merger was
advisable and in the best interests of Servico and the Servico shareholders.
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In considering the factors described above, individual members of the Servico
Board may have given different weight to different factors.
The foregoing discussion of the information and factors considered and
given weight by Servico's Board is not intended to be exhaustive but includes
the material factors considered.
RECOMMENDATION OF IMPAC'S MANAGER. THE MANAGER OF IMPAC REASONABLY
BELIEVES THAT THE TERMS OF THE MERGER AGREEMENT, ARE FAIR TO, AND IN THE BEST
INTERESTS OF, IMPAC AND ITS UNITHOLDERS AND RECOMMENDS THAT THE HOLDERS OF IMPAC
UNITS CONSENT TO THE MERGER.
IMPAC--REASONS FOR THE MERGER. Impac's Manager believes the combination
of Servico and Impac constitutes a strategic opportunity for Impac and that the
terms of the Merger Agreement are fair and in the best interests of Impac's
unitholders. In reaching this determination, Impac's Manager considered the
following material factors:
(i) The value of the consideration to be received by the holders of
Impac Units in the Merger;
(ii) The combined operational efficiencies expected to be realized by
the entity resulting from the Merger including, but not limited to, (a) greater
purchasing power, (b) elimination of duplicate administrative and accounting
functions, (c) the integration of information systems and related personnel, and
(d) economies of scale in Impac's Revenue Center;
(iii) The increased managerial, operational and financial resources
that will be available to the combined entity, and the belief that, as a result
of its greater financial resources, the combined entity may be expected to have
enhanced access to capital on more favorable terms than were previously
available to Impac as a private company;
(iv) The size and market capitalization of the combined entity, which
is expected to: (a) increase liquidity for the holders of Impac Units, who would
otherwise have no public market for their Units; (b) increase the market
visibility of the company's combined operations; and (c) decrease the cost of
debt and equity capital;
(v) That, based upon the advice of its tax counsel, the Merger will be
a tax-free transaction from the perspective of Impac's unitholders except for
those Impac unitholders who will recognize gain equal to the excess of their
share of Impac liabilities over their basis in their Impac Units;
(vi) The opinion of Allen & Company to the effect that, as of the date
of such opinion and based upon, and subject to, certain matters stated therein,
the Impac Exchange Ratio was fair, from a financial point of view, to the
holders of Impac Units;
(vii) The financial and other information concerning Servico that was
provided to the Manager and other representatives of Impac as part of Impac's
due diligence investigation, including, among other things, information
regarding Servico's business, properties, operations, financial condition and
future prospects;
(viii) The geographic diversity of the combined hotel portfolio, which
is expected to mitigate risks relating to the geographic concentration presented
by Impac's existing portfolio; and
(ix) The terms of the Merger Agreement.
IMPAC--NEGATIVE CONSIDERATIONS AND POTENTIAL DISADVANTAGES OF THE
MERGER. Impac's Manager evaluated the advantages, opportunities and general
considerations associated with the Merger in light of certain risks or other
considerations associated with the Merger, including, without limitation, the
following:
(i) The risk that the benefits sought in the Merger will not be
obtained;
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(ii) The terms and amount of Impac's outstanding indebtedness, the risk
that the entity resulting from the Merger might not be able to generate
sufficient cash flow from operations to service the debt and the risk that such
indebtedness could not be restructured or refinanced on terms satisfactory to
Impac or the combined entity;
(iii) The management time required to integrate Servico's operations
with those of Impac and the additional costs that would be incurred in
connection with that process;
(iv) The fact that Lodgian does not intend to pay dividends on its
Common Stock and unitholders will, therefore, no longer receive distributions
with respect to their Units; and
(v) The risks inherent in the construction and completion of Impac's
hotels that are under development, including the possibility of cost overruns
and delays and the adverse consequences to Impac unitholders of the failure to
open certain of such hotels in a timely manner so as to entitle such unitholders
to receive up to an aggregate of 1.4 million additional shares of Lodgian Common
Stock.
IMPAC--ALTERNATIVES CONSIDERED BY THE MANAGER. The Manager also
considered the relative material potential risks and benefits of the Merger as
compared to those presented by: (i) Impac's continued status as a stand-alone,
private entity and (ii) a liquidation of Impac. The risks and benefits
considered relating to such alternatives are summarized below.
VALUE OF THE MERGER CONSIDERATION COMPARED TO THE VALUE OF
UNITS OF IMPAC AS A CONTINUING STAND-ALONE ENTITY. As is shown in
"Opinion of Financial Advisors-Opinion of Allen & Company," Impac's
projected 1999 implied private market equity value, based upon
projected 1999 net income ($9.1 million), the multiple of market price
to estimated 1999 earnings per share for a group of comparable public
companies and a liquidity discount of 20%, is approximately $122.3
million (or approximately $10.58 per Unit). Impac's projected 1998
implied private market equity value, based upon projected 1998 net
income ($3.5 million), the multiple of market price to estimated 1998
earnings per share for a group of comparable public companies and a
liquidity discount of 20%, is approximately $57.7 million (or
approximately $4.99 per Unit). Assuming the average price of Servico
Common Stock during a specified 10-day period prior to the Merger is
between $14.00 and $25.00 per share, the value of the Merger
Consideration to be received by Impac unitholders in the Merger
(assuming all of the Additional Shares are issued) will equal between
$103.6 million and $185 million (or $9.00 to $16.00 per Unit,
respectively). See "The Merger Agreement." However, there is no
assurance that either the foregoing value of Impac as a stand-alone
entity or the value of the Merger Consideration will ultimately be
realized.
POTENTIAL BENEFITS OF THE MERGER VS. OPERATION AS A CONTINUING
STAND-ALONE ENTITY. A significant benefit to the Impac unitholders as a
result of the Merger will be liquidity for unitholders who do not
currently have liquidity as securityholders of a privately held
company. There is no public market for the Units. Further, Lodgian will
be much larger in size and have a greater market capitalization than
Impac, thus increasing market visibility of the combined entities.
Additionally, although not certain, combined operational efficiencies
are expected to be realized by Lodgian including, but not limited to,
greater purchasing power, elimination of duplicative administrative and
accounting functions, integration of information systems and related
personnel and achievement of economies of scale through the use of
Impac's Revenue Center. Increased managerial, operational and financial
resources are expected to have enhanced access to capital on more
favorable terms than were previously available to Impac as a private
company. Finally, geographic diversity of Lodgian's hotel portfolio is
expected to mitigate risks relating to the geographic concentration
presented by Impac's existing portfolio.
POTENTIAL RISKS PRESENTED BY THE MERGER VS. CONTINUED
OPERATION AS A STAND-ALONE ENTITY. Impac's Manager also considered the
following material risks associated with the Merger as compared to
remaining a stand-alone entity. He considered that Lodgian will have
increased indebtedness and accordingly, might not be able to generate
sufficient cash flow from operations to service the combined debt of
Impac and Servico and might not be able to restructure or refinance
such indebtedness on terms satisfactory to Lodgian. Additionally,
because the Merger will involve the integration of two large companies
that have previously
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operated independently, Lodgian could encounter difficulties in
integrating the respective operations of Servico and Impac and the
operation of Impac as a smaller stand-alone company might ultimately
have proven more viable. Further, Lodgian does not intend to pay
dividends on its common stock and, as a result, Impac unitholders will
no longer receive distributions with respect to their investment upon
consummation of the Merger. Finally, there are risks inherent in the
construction and completion of Impac's hotels that are under
development, including the possibility of cost overruns and delays, all
of which could preclude or delay Impac from opening such hotels and
would preclude or delay Impac unitholders from receiving up to an
aggregate of 1.4 million additional shares of Lodgian.
VALUE OF THE MERGER CONSIDERATION COMPARED TO THE LIQUIDATION
VALUE OF IMPAC UNITS. In the event of a liquidation, Impac would be
required to sell all of its hotels and other assets in a series of
separate transactions and distribute the proceeds to its unitholders in
accordance with the terms of its Operating Agreement. Impac's Manager
noted that a liquidation analysis does not reflect that Impac (i) is
being operated as a going concern, (ii) has not obtained current
appraisals of its properties and (iii) would, as a consequence of its
outstanding debt, be restricted in the disposition of the hotels which
in the aggregate serve as collateral for the debt. However, if all of
Impac's properties were sold for management's best estimate of their
fair market value, the net proceeds of such sales would be
approximately $115 million to $140 million (or approximately $10.00 to
$12.00 per Unit) which would potentially be available for distribution
to the Impac holders upon liquidation. The Manager believes that the
amount that would ultimately be distributed to the Impac unitholders
upon liquidation would be affected by the following factors: (i) there
would likely be an increased supply of properties on the market without
a corresponding demand for such properties; (ii) a present liquidation
value would likely be less than a future liquidation value because the
present value would not reflect the stabilization of income and
expenses relating to the operation of properties in Impac's development
and renovation pipeline and (iii) Impac would be required to pay
significant prepayment penalties in the event of a liquidation.
Further, the liquidation and distribution of proceeds would be taxable
to unitholders. The approximate value of the Merger Consideration to be
received by the Impac unitholders in the Merger will range from
approximately $103.6 million to $185 million (or $9.00 to $16.00 per
Unit), assuming the average price of the Servico Common Stock during a
specified ten-day period prior to the Merger is between $14.00 and
$25.00 per share and assuming issuance of all of the Additional Shares.
POTENTIAL BENEFITS OF THE MERGER VS. LIQUIDATION. Impac's
Manager did not consider a liquidation of Impac as a viable alternative
to the Merger for the reasons set forth in the preceding paragraph.
Impac's Manager believes that the restrictions on Impac's ability to
dispose of hotels serving as collateral for Impac's debt, coupled with
the potential prepayment penalties described above, would reduce
significantly any proceeds which might otherwise be received on the
sale of Impac's properties. No assurance can be given, however, that
this would be the case, given the unpredictable nature of the real
estate market and the impossibility of predicting reliably the proceeds
or potential gain that might be realized upon the sale of Impac's
properties. The Manager also compared the tax consequences of the
Merger to those of a liquidation. The Merger was structured to be
tax-free with respect to Impac and to have no material tax consequences
to the Impac unitholders, while a liquidation would result in an
immediate payment of capital gains or ordinary income taxes on the gain
resulting from the distribution. Consequently, the Manager determined
that from a tax standpoint, the Merger would be more advantageous to
Impac and its unitholders than a liquidation.
POTENTIAL RISKS PRESENTED BY THE MERGER VS. LIQUIDATION. The
risks discussed above under "-Potential Risks Presented by the Merger
vs. Continued Operation as a Stand-Alone Entity" apply equally to a
determination of the relative risks presented by the Merger as opposed
to a liquidation of Impac. If any of these risks are realized, the
value of the Lodgian common stock that would be held by Impac
unitholders as a result of the Merger could have a value that would be
less than the value of the distribution they would otherwise have
received in the event of a liquidation of Impac. Further, in the event
that there is a significant decline in real estate values in the
future, a current liquidation might result in greater returns currently
than may be available in the future.
CONCLUSION. In view of the variety and complexity of the factors
considered in the evaluation of the Merger, the Manager of Impac did not
consider it practicable to, nor did he attempt to, quantify, rank or otherwise
assign
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relative weight to the specific factors he considered in reaching his decision.
The Manager relied on the experience and expertise of Impac's financial advisor
for quantitative analysis of the financial terms of the Merger. However, the
Manager did not retain any unaffiliated representative to act on behalf of other
unitholders for purposes of negotiating the terms of the Merger. See "The
Merger--Opinion of Allen & Company." In addition, the Manager did not undertake
to make any specific determination as to whether any particular factor (or any
aspect of any particular factor) was determinative in his ultimate decision or
assign any particular weight to any factor, but instead asked questions of other
members of Impac's management team and its legal, financial and accounting
advisors in determining that the Merger was in the best interests of Impac and
its unitholders.
The foregoing discussion of the information and factors considered and
given weight by Impac's Manager is not intended to be exhaustive but includes
the material factors considered.
OPINION OF FINANCIAL ADVISORS
OPINION OF LEHMAN BROTHERS
In connection with its role as financial advisor to Servico in
connection with the Merger, on March 11, 1998, Lehman Brothers rendered its oral
opinion, which was subsequently confirmed in a written opinion, dated March 12,
1998, that as of such dates, and based upon and subject to various
qualifications and assumptions described therein, the consideration to be paid
in the Merger was fair to the Company, from a financial point of view.
THE FULL TEXT OF THE WRITTEN OPINION OF LEHMAN BROTHERS, DATED MARCH
12, 1998, WHICH SETS FORTH THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED AND MATTERS
CONSIDERED IN, AND THE LIMITATIONS ON, THE REVIEW UNDERTAKEN IN CONNECTION WITH
SUCH OPINION, IS ATTACHED TO THIS JOINT PROXY STATEMENT/PROSPECTUS AS APPENDIX B
AND IS INCORPORATED HEREIN BY REFERENCE. THE SUMMARY OF THE OPINION SET FORTH
BELOW IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH
OPINION.
No instructions were given to Lehman Brothers by Servico and no
limitations were imposed by Servico on the scope of Lehman Brothers'
investigation or the procedures to be followed by Lehman Brothers in rendering
its opinion. Lehman Brothers was not requested to and did not make any
recommendation to the Servico Board as to the form or amount of consideration to
be received by Servico shareholders in the Merger, which was determined through
arm's-length negotiations between Servico and Impac and their legal and
financial advisors. In arriving at its opinion, Lehman Brothers did not ascribe
a range of value to Servico, but rather made its determination as to the
fairness to Servico, from a financial point of view, of the consideration to be
paid in the Merger (the "Proposed Transaction") on the basis of financial and
comparative analyses described below. Lehman Brothers' opinion is for the use
and benefit of the Servico Board in connection with its consideration of the
Proposed Transaction and does not constitute a recommendation to any shareholder
of Servico as to how such shareholder should vote with respect to the Proposed
Transaction. Lehman Brothers was not requested to opine as to, and its opinion
does not in any manner address, Servico's underlying business decision to
proceed with or effect the Proposed Transaction. Lehman Brothers' analysis did
not result in any specific factors which did not support its fairness opinion.
In arriving at its opinion, Lehman Brothers reviewed and analyzed: (i)
the Agreement and the specific terms of the Proposed Transaction; (ii) publicly
available information concerning Servico that Lehman Brothers believed to be
relevant to its analysis, including Servico's annual report on Form 10-K for the
year ended December 31, 1996 and quarterly reports on Form 10-Q for the quarters
ended March 31, June 30; (iii) financial statements for Impac and it
subsidiaries, including balance sheets as of December 31, 1995 and 1996 and the
related statements of income, cash flow and changes in members' equity for the
fiscal years ended December 31, 1994, 1995 and 1996, including any related
notes, audited and reported on, without qualification, by PricewaterhouseCoopers
LLP, Impac's independent public accountants and financial information for the
nine months ended September 30, 1997; (iv) financial and operating information
with respect to the business, operations and prospects of Servico and Impac
furnished to Lehman Brothers by Servico and Impac, respectively; (v) a
comparison of the historical financial results
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and present financial condition of Servico with those of other companies that
Lehman Brothers deemed relevant; (vi) the trading history of Servico's Common
Stock from January 1996 to March 1997 and a comparison of that trading history
with those of other companies that Lehman Brothers deemed relevant; (vii) the
potential pro forma impact of the Proposed Transaction on Servico, including the
cost savings, operating synergies and strategic benefits expected by the
management of Servico to result from a combination of the applicable businesses;
(viii) a comparison of the relative contribution of Impac to the financial
results of Lodgian following the Proposed Transaction to the Impac ownership
interest in Lodgian following the Proposed Transaction; and (ix) a comparison of
the financial terms of the Proposed Transaction with the financial terms of
certain other recent transactions that Lehman Brothers deemed relevant. In
addition, Lehman Brothers had discussions with the management of Servico and
Impac concerning their respective businesses, operations, assets, financial
condition and prospects and undertook such other studies, analyses and
investigations as Lehman Brothers deemed appropriate.
In arriving at its opinion, Lehman Brothers assumed and relied upon the
accuracy and completeness of the financial and other information used by it
without assuming any responsibility for independent verification of such
information and further relied upon the assurances of the management of Servico
and Impac that they are not aware of any facts or circumstances that would make
such information inaccurate or misleading. With respect to the financial
projections of Servico and Impac, upon advice of Servico and Impac, Lehman
Brothers assumed that such projections were reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the
management of Servico and Impac as to the future financial performance of
Servico and Impac, respectively, and that Servico and Impac will perform
substantially in accordance with such projections. In arriving at its opinion,
Lehman Brothers did not conduct a physical inspection of the properties and
facilities of Servico or Impac and did not make or obtain any evaluations or
appraisals of the assets or liabilities of Servico or Impac. In addition,
Servico did not authorize Lehman Brothers to solicit, and Lehman Brothers did
not solicit, any indications of interest from any third party with respect to
the purchase of all or a part of Servico's business. Upon advice of Servico,
Impac and their respective legal and accounting advisors, Lehman Brothers
assumed that the Proposed Transaction will qualify as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), with respect to Servico, and therefore as a tax-free transaction
to the shareholders of Servico. Lehman Brothers' opinion necessarily is based
upon market, economic and other conditions as they existed on, and can be
evaluated as of, the date of its opinion. It is not a requirement of the
transaction that Lehman Brothers update its opinion prior to the Merger.
Accordingly, it is possible that if it were redetermined based upon information
as of a later date, that an event could occur which could alter that fairness
determination. However, Servico is not aware of any significant event occurring
after the date of Lehman Brothers fairness opinion which would have altered
Lehman Brother's determination.
In the event that an amendment is made to the Merger Agreement which
the Board, after consultation with Lehman Brothers determines is material to the
opinion rendered by Lehman Brothers, the Board will seek to obtain a revised
fairness opinion in connection with such amendment.
PRO FORMA MERGER ANALYSIS. Lehman Brothers performed an accretion and
dilution analysis to shareholders of Servico under a "stand-alone" basis and
"merged company" basis using certain projections provided by Servico and Impac
management. The analysis performed under the stand-alone basis assumed that
Servico would not merge with Impac but would instead operate as a separate
company, whereas the analysis performed under the merged company basis assumed
the merger of Servico and Impac pursuant to the Merger Agreement. In evaluating
the estimated earnings per share ("EPS") of the stand-alone and combined
company, Lehman Brothers utilized certain projections provided by Servico and
Impac management. The analysis indicated that the merged company basis, when
compared to the stand-alone basis, would be accretive to Servico's EPS in both
1998 and 1999.
CONTRIBUTION ANALYSIS. Lehman Brothers analyzed the respective
contributions of EBITDA, equity market capitalization and total market
capitalization by Servico and Impac to Lodgian on a pro forma basis after taking
into account certain of the possible benefits that may be realized following the
Merger. The review was based on Servico's and Impac's current operating
characteristics and existing hotel portfolios and assumed no future acquisitions
would be made. The analysis showed that: (i) Servico would contribute 64% of
Lodgian's 1998 EBITDA and that Impac would contribute 36%; (ii) Servico would
contribute 59% of Lodgian's 1999 EBITDA and that Impac would contribute
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41%; (iii) Servico would contribute 78% of Lodgian's equity
market capitalization as of March 11, 1998 and that Impac would contribute 22%;
and (iv) Servico would contribute 57% of Lodgian's total market capitalization
(calculated with estimated net debt as of June 30, 1998 for both Servico and
Impac) as of March 11, 1998 and that Impac would contribute 43%. On a pro forma
basis, Impac unitholders will own 26% of the combined company. Estimates of
Servico's 1998 and 1999 EBITDA were derived from published research, and
estimates of Impac's 1998 and 1999 EBITDA were based on projections of Impac
management.
TARGET PRICE ANALYSIS. Using Lehman Brothers' published research and
Impac management projections for 1998 EBITDA and pro forma average net debt
outstanding in 1998, Lehman Brothers analyzed the theoretical value per share to
Servico shareholders of Servico on both a stand-alone and merged company basis
based on a target 1998 EBITDA multiple of 9.5x. The analysis indicated that on a
stand-alone and merged company basis, the per share target price of Servico was
approximately $25.50 and $26.60, respectively. Lehman Brothers made no assurance
or representation that either the shares of Servico or Lodgian at any time will
trade in the range of the above-mentioned target prices.
SELECTED TRANSACTION ANALYSIS. Lehman Brothers reviewed certain
publicly available information relating to the financial terms of certain recent
transactions in the lodging industry (the "Comparable Transactions"). The
Comparable Transactions were Promus/Doubletree, Bass PLC/Intercontinental,
Meditrust/La Quinta, Patriot American/Interstate, Starwood Lodging/ITT, Starwood
Lodging/Westin, Patriot American/Wyndham and Marriott International/Renaissance.
For each such Comparable Transaction, Lehman Brothers reviewed, among other
things, the total transaction value as a multiple of forward EBITDA and the
implied price per room. Estimates of forward EBITDA were derived from published
research and, in certain cases, from internal corporate projections of parties
to certain of the Comparable Transactions.
The analysis indicated that, for the Comparable Transactions: (i) the
forward EBITDA multiples had a range of 7.6x to 14.3x, compared to a multiple,
as of March 11, 1998, of 9.4x Impac's 1998 estimated EBITDA; and (ii) an implied
price per room of $52,000 to $211,000, compared to, as of March 11,1998, $57,300
for Impac's hotels.
Comparable Transactions were selected, in part, based upon brand
similarity, size and geographic considerations, and form of consideration.
Because the market conditions, rationale and circumstances surrounding each of
the transactions analyzed were specific to each transaction and because of the
inherent differences between the businesses, operations and prospects of Servico
and the entities comprising the Comparable Transactions analyzed, Lehman
Brothers believed that it was inappropriate to, and therefore did not, rely
solely on the quantitative results of the analysis, and accordingly, also made
qualitative judgments concerning differences between the characteristics of
these transactions and the Merger that would affect the values inherent in the
Merger and the Comparable Transactions. In particular, Lehman Brothers
considered the size and desirability of the assets and the markets of operation
relative to those of Impac, the strategic fit of the acquired assets with the
acquiring company, the form of consideration offered to the seller and the tax
characteristics of the transaction. These qualitative judgments do not lead to
specific conclusions regarding Impac's value, but rather were part of Lehman
Brothers' evaluation of the relevancy of this comparative analysis under the
particular circumstances of the Merger.
COMPARABLE COMPANY ANALYSIS. Lehman Brothers reviewed and compared
certain financial information, ratios and public market multiples relating
Servico to corresponding financial information, ratios and public market
multiples for selected publicly traded companies in the hotel and lodging
industry. The selected companies were Bristol Hotels, La Quinta Inns, Prime
Hospitality and John Q. Hammons (collectively, the "Comparable Companies"). The
Comparable Companies were chosen because they are publicly-traded companies with
operations that, for the purpose of Lehman Brothers' analysis, are similar to
those aspects of Servico to which they were compared. For the comparable company
analysis, the estimates for Servico and the Comparable Companies were based on
research published by selected investment banking firms and market valuations as
of March 4, 1998.
With respect to the Comparable Companies, Lehman Brothers considered:
(i) 1997 and 1998 EBITDA multiples (based on March 4, 1998 closing share prices
and research analysts' EBITDA estimates) that ranged from
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6.9x to 11.2x for 1997 and 6.5x to 8.8x for 1998; and (ii) net debt-to-total
market capitalization ratios that ranged from 32.5% to 92.4%. For Servico,
Lehman Brothers observed that: (i) 1997 and 1998 EBITDA multiples were 10.3x and
7.7x, respectively; and (ii) the 1998 net debt-to-total market capitalization
ratio was 49.5%.
Because of the lack of a sufficient number of independent comparable
companies and the inherent difference between the businesses, operations and
prospects of Servico and the businesses, operations and prospects of the
companies included as Comparable Companies, Lehman Brothers believed that a
purely quantitative comparable company analysis would not be particularly
meaningful in the context of the Merger. Lehman Brothers believed that an
appropriate use of a comparable company analysis in this instance would involve
qualitative judgments concerning differences between the financial and operating
characteristics of Servico and the companies included as Comparable Companies
that would affect the public trading values of Servico and such Comparable
Companies.
The preparation of a fairness opinion involves various determinations
as to the most appropriate and relevant methods of financial and comparative
analysis and the application of those methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to summary
description. Furthermore, in arriving at its opinion, Lehman Brothers did not
attribute any particular weight to any analysis or factor considered by it, but
rather made qualitative judgments as to the significance and relevance of each
analysis and factor. Accordingly, Lehman Brothers believes that is analyses must
be considered as a whole and that considering any portion of such analyses and
factors, without considering all analyses and factors, could create a misleading
or incomplete view of the process underlying its opinion. In its analyses,
Lehman Brothers made numerous assumptions with respect to industry performance,
general business and economic conditions and other matters, many of which are
beyond the control of Servico and Impac. Any estimates contained in these
analyses are not necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less favorable than as set
forth therein. In addition, analyses relating to the value of businesses do not
purport to be appraisals or to reflect the prices at which businesses actually
may be sold.
Lehman Brothers is an internationally recognized investment banking
firm. Lehman Brothers, as part of its investment banking business, is
continuously engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. The Servico Board retained
Lehman Brothers based upon Lehman Brothers' experience and expertise and its
familiarity with Servico. Lehman Brothers has performed various investment
banking services for Servico, including as a lead managing underwriter of
Servico's Common Stock Offering in June, 1997 and has acted, and is currently
acting, as a lender to Servico (with an outstanding amount owed by Servico of
approximately $200 million) and has received customary fees for such services.
In connection with such services, excluding fees relating to the Merger, during
the past two years Servico has paid Lehman Brothers fees totaling approximately
$20.1 million. In the ordinary course of its business, Lehman Brothers actively
trades in the securities of Servico for its own account and for the accounts of
its customers and, accordingly, may at any time hold a long or short position in
such securities.
Pursuant to an engagement letter between Lehman Brothers and Servico,
Lehman Brothers is entitled to a fee of $500,000 upon delivery of its opinion
and is entitled to an additional fee of $3.1 million upon consummation of the
Merger. Servico has agreed to reimburse Lehman Brothers for its reasonable
expenses in connection with its engagement and to indemnify Lehman Brothers
against certain liabilities, including certain liabilities under federal
securities laws.
OPINION OF ALLEN & COMPANY
On March 19, 1998, Allen & Company delivered to the Manager of Impac
its oral opinion (subsequently confirmed in writing) to the effect that, as of
such date, the Impac Exchange Ratio contemplated by the Merger Agreement was
fair to holders of Impac Units from a financial point of view.
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The full text of the written opinion of Allen & Company, dated March
19, 1998, is set forth as Appendix C to this Joint Proxy Statement/Prospectus
and describes the assumptions made, matters considered and limits on the review
undertaken. The holders of Impac Units are urged to read the opinion in its
entirety. Allen & Company's opinion is directed only to the fairness, from a
financial point of view, of the Impac Exchange Ratio and does not constitute a
recommendation of the Merger over other courses of action that may be available
to Impac or constitute a recommendation to any holder of Impac Units concerning
how such holder should vote with respect to the Merger. The summary of the
opinion of Allen & Company set forth in this Joint Proxy Statement/Prospectus is
qualified in its entirety by reference to the full text of such opinion.
In arriving at its opinion, Allen & Company: (i) reviewed the terms and
conditions of the Merger Agreement and related documents; (ii) analyzed
historical business and financial information relating to Impac and management's
forecasts prepared by Impac, as presented in documents provided to Allen &
Company by Impac; (iii) analyzed publicly available historical business and
financial information relating to Servico, as presented in documents filed with
the Securities and Exchange Commission (the "SEC"); (iv) reviewed Impac's and
Servico's respective operations and considered the views of professional
analysts covering Servico; (v) reviewed certain limited non-public information
relating to Servico, including financial and operating results of Servico and
management's forecasts prepared by Servico; (vi) conducted discussions with
certain members of the senior management of Impac and Servico with respect to
the financial condition, business, operations, strategic objectives and
prospects of Impac and Servico, respectively; (vii) reviewed and analyzed public
information, including certain stock market data and financial information
relating to selected public companies which Allen & Company deemed generally
comparable to Impac and Servico; (viii) reviewed the trading history of the
Servico Common Stock, including such stock's performance in comparison to market
indices and to selected companies in comparable businesses; (ix) considered
multiples paid in merger and acquisition transactions Allen & Company deemed to
be comparable to the Merger; and (x) conducted such other financial analyses and
investigations and reviewed such other materials as Allen & Company deemed
necessary or appropriate for the purposes of the opinion expressed therein.
In connection with its review, Allen & Company assumed and relied on
the accuracy and completeness of the information it reviewed for the purpose of
its opinion and did not assume any responsibility for independent verification
of such information or for any independent evaluation or appraisal of the assets
of Impac or Servico. With respect to Impac's and Servico's financial forecasts,
Allen & Company assumed that they had been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
management of Impac and Servico, respectively, and Allen & Company expressed no
opinion with respect to such forecasts or the assumptions on which they were
based. Allen & Company's opinion was necessarily based upon business, market,
economic and other conditions as they existed on, and could be evaluated as of,
the date of its opinion. Allen & Company's opinion does not imply any conclusion
as to the likely trading range of Lodgian Common Stock following the
consummation of the Merger, which may vary depending on, among other factors,
changes in interest rates, dividend rates, market conditions, general economic
conditions and other factors that generally influence the price of securities.
No limitations were imposed by Impac, nor did Allen & Company receive any
specific instructions from Impac, on the scope of Allen & Company's analyses or
the procedures to be followed by Allen & Company in rendering its opinion. Allen
& Company was not requested to and did not make any recommendation to Impac as
to the form or amount of consideration to be received by the holders of Impac
Units, which was determined by arm's-length negotiations between Impac and
Servico and their legal and financial advisors. Allen & Company's analyses did
not result in any specific factors which did not support its fairness opinion.
Allen & Company's engagement by Impac does not contemplate the issuance
by Allen & Company of an additional or supplemental fairness opinion at the
closing of the Merger. Impac's Manager has indicated that he may request an
additional or supplemental opinion at such time, if any, as consideration is
given to any amendment of the material terms of the Merger. Allen & Company's
fairness determination was made as of the date of its opinion. Accordingly, it
is possible that if it were redetermined based upon information as of a later
date, that an event could occur which could alter that fairness determination.
However, Impac is not aware of any significant events occurring since the
rendering of Allen & Company's fairness opinion on March 19, 1998 which would
have altered Allen & Company's determination.
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The following is a summary of the presentation made by Allen & Company
to the Manager of Impac in connection with the rendering of Allen & Company's
fairness opinion:
TRANSACTION OVERVIEW AND ANALYSIS. Allen & Company presented an
overview of the proposed transaction, noting the strategic fit of combining two
leading hotel companies, each of which possesses an experienced management team.
The transaction, structured as a tax free exchange of stock and accounted for as
a purchase, would permit the holders of Impac Units the ability to continue
their investment in the combined company resulting from the Merger and would
also provide such holders with the liquidity present in owning shares of a
public company. Allen & Company also noted that the combined operations of Impac
and Servico would likely benefit from the ability to capitalize on synergies
such as economies of scale in operations, information systems and purchasing
power.
Allen & Company analyzed the total enterprise value (the recent value
of all equity securities plus long-term debt less cash) of Impac (both before
and after giving effect to the issuance of the Impac Additional Shares and the
incurrence of debt associated with the five Impac hotels currently under
development, the opening of which will result in the issuance of the Impac
Additional Shares (the "Additional Hotel Debt")) and Servico based on the
closing price of Servico Common Stock ($17.75) on March 18, 1998, the day
preceding the delivery of Allen & Company's oral opinion to the Manager of
Impac. This analysis indicated an enterprise value of Impac of approximately
$445.9 million (based upon debt outstanding at December 31, 1997) without giving
effect to the Impac Additional Shares and Additional Hotel Debt, approximately
$538.6 million after giving effect to the Impac Additional Shares and Additional
Hotel Debt and approximately $580.3 million after giving effect to the Impac
Additional Shares, the Additional Hotel Debt and additional debt associated with
the renovation of certain of Impac's existing hotels. Allen & Company noted that
this analysis also indicated an enterprise value of Servico of approximately
$709.0 million. Allen & Company also noted that the enterprise value of Impac as
a multiple of total hotel rooms before and after giving effect to the Impac
Additional Shares and Additional Hotel Debt was estimated to be $56,450 and
$61,080, representing 66% and 72%, respectively, of the replacement value per
room.
Allen & Company reviewed the pro forma balance sheet for the combined
company resulting from the Merger and the projected 1998 and 1999 pro forma
financial results for the combined company after giving effect to certain
anticipated synergies resulting from the Merger. The analysis was performed
utilizing stand-alone earnings projected for calendar years 1998 and 1999 for
Impac and Servico based on certain financial projections for Impac prepared by
Impac's management and certain estimates of financial results for Servico based
upon certain industry analysts' estimates. Based on such analysis, the Merger is
expected to result in the combined company having a higher projected EPS than
Servico is projected to have on a stand-alone basis for 1998 ($1.10 for the
combined company versus $0.99 for Servico) and 1999 ($1.38 for the combined
company versus $1.16 for Servico).
Allen & Company also calculated the enterprise value of the combined
company based on the closing sale price of the Servico Common Stock on March 18,
1998 before ($1,154.8 million) and after ($1,247.5 million) giving effect to the
Impac Additional Shares and the Additional Hotel Debt. Allen & Company analyzed
the enterprise value of the combined company as multiples of various financial
performance criteria and compared such implied multiples to multiples of such
financial performance measures for a group of public companies that Allen &
Company deemed to be comparable to the combined company (the "Comparables
Group"): Bristol Hotels, Capstar, Interstate Hotels and Prime Hospitality. The
companies in the Comparables Group were chosen because they are publicly traded
companies with operations that Allen & Company deemed to be similar to those of
Servico and Impac. To calculate the trading multiples for the Comparables Group,
Allen & Company used publicly available information concerning historical and
estimated financial information for the Comparables Group. The multiple of
enterprise value to sales for the last twelve months ("LTM") for the Comparables
Group ranged from 2.6x to 4.3x with an average of 3.5x as compared to implied
multiples of enterprise value to 1997 revenue for the combined company of 2.9x
and 3.1x before and after giving effect to the Impac Additional Shares and
Additional Hotel Debt, respectively. The multiple of enterprise value to LTM
EBITDA for the Comparables Group ranged from 11.0x to 16.0x with an average of
12.4x as compared to implied multiples of enterprise value to 1997 EBITDA for
the combined company of 13.0x and 14.1x before and after giving effect to the
Impac Additional Shares and Additional Hotel Debt, respectively. The multiple of
enterprise value to LTM EBIT for the Comparables Group ranged from 14.8x to
21.4x with an average of 17.0x
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as compared to implied multiples of enterprise value to 1997 EBIT for the
combined company of 21.3x and 23.0x before and after giving effect to the Impac
Additional Shares and Additional Hotel Debt, respectively.
Allen & Company calculated the implied per share valuation of the
combined company resulting from the Merger based upon the multiple of market
price to estimated 1998 and 1999 EPS for the Comparables Group and the projected
1998 EPS ($1.10) and 1999 EPS ($1.38) for the combined company. This analysis
yielded an implied per share valuation for the combined company of $23.32 and
$23.87, representing a premium of 31.4% and 34.5%, respectively, to the $17.75
market price of Servico Common Stock on March 18, 1998. Allen & Company also
calculated the implied per share valuation of the combined company based upon
the multiple of enterprise value to estimated 1999 EBITDA for the Comparables
Group and the projected 1999 EBITDA ($189 million) for the combined company.
This analysis yielded an implied per share valuation for the combined company of
$22.73, representing a premium of 28.1% to the $17.75 market price of Servico
Common Stock on March 18, 1998. Allen & Company also noted that such $17.75
market price represented a multiple of 12.9x of projected 1999 pro forma EPS for
the combined entity as compared to the 17.3x average multiple of price to
estimated 1999 EPS at which the Comparables Group traded.
Allen & Company reviewed and analyzed certain financial, operating and
stock market information relating to selected merger transactions occurring in
the lodging industry between January 1, 1996 and March 18, 1998 (the "Lodging
Transactions"). The Lodging Transactions were Bally/Hilton, Red
Lions/Doubletree, Holiday Inns/Bristol, Studio Plus/Extended Stay,
Wyndam/Patriot American, Doubletree/Promus, Chartwell/Whitehall,
Interstate/Patriot American and LaQuinta/Meditrust, and were selected by Allen &
Company because they were recent transactions in the lodging industry involving
companies with operations that Allen & Company deemed similar to those of Impac
and Servico. Allen & Company also analyzed the enterprise value of Impac as
implied by the Merger as multiples of various financial performance criteria and
compared such implied multiples to multiples paid in such Lodging Transactions.
Allen & Company noted that the enterprise value as a multiple of LTM sales
ranged from 2.8x to 11.3x and averaged 3.9x for the Lodging Transactions as
compared to the multiple of Impac's enterprise value to LTM sales of 3.7x and
4.5x, before and after giving effect to the Impac Additional Shares and
Additional Hotel Debt, respectively. Allen & Company noted that the enterprise
value as a multiple of LTM EBITDA ranged from 7.1x to 28.4x and averaged 14.1x
for the Lodging Transactions as compared to the multiple of Impac's enterprise
value to LTM EBITDA of 23.6x and 28.5x, before and after giving effect to the
Impac Additional Shares and Additional Hotel Debt, respectively. Allen & Company
noted that the enterprise value as a multiple of LTM EBIT ranged from 9.8x to
41.5x and averaged 20.6x for the Lodging Transactions as compared to the
multiple of Impac's enterprise value to LTM EBITDA of 57.9x and 69.9x, before
and after giving effect to the Impac Additional Shares and Additional Hotel
Debt, respectively. Allen & Company also noted that the enterprise value of the
combined entity as a multiple of total hotel rooms before and after giving
effect to the Impac Additional Shares and Additional Hotel Debt was estimated to
be $46,612 and $48,552, respectively, representing 58% and 61%, respectively, of
the replacement value per room.
Allen & Company analyzed and compared the pro forma contributions made
by each of Impac and Servico to the combined company's projected 1998 operations
based upon a comparison of certain stock market and financial information and
projections for each company on a stand-alone basis. Accordingly, this analysis
does not take into account any cost savings or revenue enhancements that may
result from the Merger. This analysis indicated that on a pro forma basis Impac
and Servico would account for approximately 31.8% and 68.2%, respectively, of
the combined company's projected 1998 pro forma revenues ($554 million),
approximately 34.0% and 66.0%, respectively, of the combined company's projected
1998 pro forma EBITDA ($151 million), and approximately 14.2% and 85.8%,
respectively, of the combined company's projected 1998 pro forma net income
($24.7 million). Allen & Company considered these projected contributions in
light of the Impac Exchange Ratio which would result in the holders of the Impac
Units owning approximately 21.8% of the common stock of the combined entity
before giving effect to the Impac Additional Shares, which is expected to occur
in 1999 upon the opening of five Impac hotels currently under development.
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OVERVIEW OF IMPAC. Allen & Company presented an overview of Impac's
business operations. Allen & Company also reviewed Impac's balance sheet as of
December 31, 1997, its historical operating results for the three years ended
December 31, 1997 and its projected operating results for the six months ending
December 31, 1998 and the year ending December 31, 1999.
Allen & Company also calculated the implied private market equity value
of Impac based upon projected 1998 net income ($3.5 million) and 1999 net income
($9.1 million) for Impac and based upon the multiple of market price to
estimated 1998 and 1999 EPS for a group of public companies that Allen & Company
deemed to be comparable to Impac (the "Impac Comparables"): Servico, Bristol
Hotels, Capstar, Interstate Hotels and Prime Hospitality. This analysis yielded
an implied private market equity value for Impac of approximately $57.7 million
and $122.3 million, respectively. Allen & Company also calculated the implied
private market equity value of Impac based upon the projected 1999 EBITDA ($72.3
million) for Impac and based upon the multiple of enterprise value to estimated
1999 EBITDA for the Impac Comparables. This analysis yielded an implied private
market equity value for Impac of approximately $121.8 million. Allen & Company
calculated the implied private market equity value of Impac based upon Impac's
LTM sales, LTM EBITDA and LTM EBIT and based upon the multiple of enterprise
value to LTM sales, LTM EBITDA and LTM EBIT for the Lodging Transactions. This
analysis yielded an implied private market equity value for Impac of
approximately $128.2 million based on LTM sales, $52.3 million based on LTM
EBITDA and a negative value for Impac based on LTM EBIT. In calculating the
private market valuations above, Allen & Company utilized a 20% private market
(liquidity) discount. In addition, Allen & Company calculated the implied
private market equity value of Impac by utilizing certain common industry
percentages of enterprise value to replacement value (per room).
OVERVIEW OF SERVICO. Allen & Company presented an overview of Servico's
business operations. Allen & Company also reviewed Servico's balance sheet as of
December 31, 1997 and its historical operating results for the four years ended
December 31, 1997.
Allen & Company also reviewed stock price and trading volume data for
the Servico Common Stock and compared Servico's general trading patterns to
those of the S&P 500 Index, the S&P Lodging Index and to each of the companies
included in the Comparables Group. Allen & Company also reviewed certain
industry analysts' perspectives on the Servico Common Stock. Allen & Company
also compared selected multiples derived from the recent price of Servico Common
Stock to multiples derived from recent trading prices of the companies included
in the Comparables Group. The multiples compared included enterprise value to
estimated 1998 EBITDA (which was 7.2x for Servico compared to an average of 8.6x
for the Comparables Group) and market price to estimated 1998 EPS (which was
17.9x for Servico compared to an average of 21.2x for the Comparables Group).
Allen & Company also calculated the implied per share valuation of
Servico based upon 1998 and 1999 EPS for Servico obtained from industry
analysts' estimates and based upon the multiples of market price to estimated
1998 and 1999 EPS for the Comparables Group. This analysis yielded an implied
per share valuation for Servico of $20.99 and $20.24, respectively, representing
a premium of 18.2% and 14.0%, respectively, to the $17.75 market price of
Servico Common Stock on March 18, 1998. Allen & Company also calculated the
implied per share valuation of Servico based upon the estimated 1998 EBITDA for
Servico and based upon the multiple of enterprise value to estimated 1998 EBITDA
for the Comparables Group. This analysis yielded an implied per share valuation
for Servico of $24.61, representing a premium of 38.7% to the $17.75 market
price of Servico Common Stock on March 18, 1998. Allen & Company also noted that
the enterprise value of Servico as a multiple of total hotel rooms was estimated
to be $41,812, representing 56% of the replacement value per room.
No company used in the comparable company analyses summarized above is
identical to Impac or Servico, and no transaction used in the comparable
transaction analysis summarized above is identical to the Merger. Accordingly,
any such analysis of the value of the consideration to be received by the
holders of Impac Units pursuant to the Merger involves complex considerations
and judgments concerning differences in the potential financial and operating
characteristics of the comparable companies and transactions and other factors
in relation to the trading and acquisition values of the comparable companies.
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The preparation of a fairness opinion is not susceptible to partial
analysis or summary description. Allen & Company believes that its analyses and
the summary set forth above must be considered as a whole and that selecting
portions of its analyses and the factors considered by it, without considering
all analyses and factors, could create an incomplete view of the processes
underlying the analysis set forth in its opinion. Allen & Company has not
indicated that any of the analyses which it performed had a greater significance
than any other.
In determining the appropriate analyses to conduct and when performing
those analyses, Allen & Company made numerous assumptions with respect to
industry performance, general business, financial, market and economic
conditions and other matters, many of which are beyond the control of Impac or
Servico. The analyses which Allen & Company performed are not necessarily
indicative of actual values or actual future results, which may be significantly
more or less favorable than suggested by such analyses. Such analyses were
prepared solely as part of Allen & Company's analysis of the fairness, from a
financial point of view, of the Impac Exchange Ratio to the holders of Impac
Units. The analyses do not purport to be appraisals or to reflect the prices at
which a company might actually be sold or the prices at which any securities may
trade at the present time or at any time in the future.
Allen & Company's opinion does not constitute a recommendation with
respect to whether any unitholder of Impac should, upon the consummation of the
Merger, continue its investment in the Lodgian Common Stock received as
consideration in the Merger or sell such shares of Lodgian Common Stock
immediately or at any time. Allen & Company did not specifically analyze the
impact on any individual holder of Impac Units of continuing its investment in
the Lodgian Common Stock after the Merger because it is believed that Impac
unitholders would make such decision only after careful consideration of their
respective tax consequences affecting such decision.
Allen & Company is a nationally recognized investment banking firm that
is continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
bids, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. Impac
retained Allen & Company based on such qualifications as well as its familiarity
with Impac. In addition, as a part of its investment banking and securities
trading business, Allen & Company may hold positions in and trade in the
securities of Servico from time to time.
Impac entered into a letter agreement with Allen & Company as of March
19, 1998 (the "Engagement Letter"), pursuant to which Allen & Company agreed to
act as Impac's financial advisor in connection with the Merger and to render an
opinion as to the fairness from a financial point of view of the Impac Exchange
Ratio to the holders of the Impac Units. Pursuant to the Engagement Letter,
Impac agreed to pay Allen & Company a fee of $350,000 earned upon the delivery
of its oral fairness opinion to the Manager and payable upon the earlier to
occur of July 1, 1998 and the closing of the Merger and $1,900,000 earned and
payable upon the closing of the Merger. Whether or not the Merger is
consummated, Impac has agreed, pursuant to the Engagement Letter, to reimburse
Allen & Company for all its reasonable out-of-pocket expenses, including the
fees and disbursements of its counsel, incurred in connection with its
engagement by Impac and to indemnify Allen & Company against certain liabilities
and expenses in connection with its engagement.
Pursuant to the Engagement Letter, if the Merger is not consummated,
Impac shall pay to Allen & Company $750,000 if Impac receives a termination fee
and $500,000 if Impac receives an expense reimbursement (but not a termination
fee), subject in each case for a credit for any portion of the $350,000 which
theretofore may have been paid to Allen & Company with respect to Allen &
Company's submission of its fairness opinion. If Impac does not consummate the
Merger in contemplation of, or due to, Impac's entering into an alternative
business combination transaction with a party other than Servico (a "Third
Party"), and either (a) Impac enters, at any time, into such alternative
transaction or (b) Impac enters, within 120 days of the termination of the
Merger Agreement, into an alternative transaction with a party other than the
Third Party, then Impac shall pay to Allen & Company in cash a full investment
banking fee with respect to such alternative transaction payable upon the
closing of such transaction. Impac and Allen & Company have agreed to negotiate
a mutually agreeable fee in respect thereof.
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CAUTIONARY STATEMENT REGARDING IMPAC PROJECTED FINANCIAL INFORMATION.
Impac does not make, as a matter of course, public forecasts or projections as
to future performance or earnings. However, in connection with ongoing budgetary
and financing activities, management of Impac periodically prepares projections
for internal use. Certain of such projections relating to Impac were provided to
Allen & Company and Lehman Brothers in connection with the Merger. Such
projections were not prepared for, or with a view toward, dissemination to the
public. SUCH PROJECTIONS WERE NOT PREPARED IN ACCORDANCE WITH PUBLISHED
GUIDELINES OF THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS OR THE SEC
REGARDING PROJECTIONS AND FORECASTS, NOR HAVE SUCH PROJECTIONS BEEN AUDITED,
EXAMINED OR OTHERWISE REVIEWED BY INDEPENDENT PUBLIC AUDITORS OF IMPAC. In
addition, such projections are based upon a variety of assumptions and estimates
and are inherently subject to significant economic and competitive uncertainties
and contingencies, many of which are beyond the control of management of Impac.
Accordingly, actual results may be materially higher or lower than those
projected. The inclusion of such projections herein should not be regarded as a
representation by Impac, Servico or Lodgian or any other person that the
projections will prove to be correct. None of Lehman Brothers, Allen & Company
or any party to whom any of these projections were provided assumes any
responsibility for the accuracy of such information.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Stearns Weaver Miller Weissler Alhadeff & Sitterson,
P.A. ("Stearns Weaver"), counsel to Servico, and Powell, Goldstein, Frazer &
Murphy LLP ("Powell Goldstein"), counsel to Impac and the Impac Affiliated
Companies, the following is a discussion of the material federal income tax
consequences of the Merger and is based on the Code, the regulations promulgated
thereunder, existing administrative interpretations and court decisions. Future
legislation, regulations, administrative interpretations or court decisions
could significantly change such authorities either prospectively or
retroactively. The discussion does not address all aspects of federal income
taxation that may be important to a shareholder or unitholder in light of such
shareholder's or unitholder's particular circumstances or to shareholders or
unitholders subject to special rules, such as shareholders or unitholders who
are not citizens or residents of the United States, financial institutions,
tax-exempt organizations, insurance companies, dealers in securities or
shareholders or unitholders who acquired their shares of Servico or of one of
the Impac Affiliated Companies, or Impac Units pursuant to the exercise of
options or similar derivative securities or otherwise as compensation. This
discussion assumes that Servico or any Impac Affiliated Company shareholders and
Impac unitholders hold their respective shares of stock or units as capital
assets within the meaning of Section 1221 of the Code.
In the opinion of Stearns Weaver, the Servico Merger will (a) qualify
as a tax-free reorganization within the meaning of Section 368(a) of the Code
and (ii) Lodgian and Servico will each be a "party to a reorganization" within
the meaning of Section 368(b) of the Code with respect to the Servico Merger. In
the opinion of Powell Goldstein, each of the Impac Affiliated Companies Mergers,
except the IHD Merger, will (a) qualify as a tax-free reorganization within the
meaning of Section 368(a) of the Code and (b) Lodgian and each of the Impac
Affiliated Companies will each be a "party to a reorganization" within the
meaning of Section 368(b) of the Code with respect to the Impac Affiliated
Companies Mergers; and that the Impac Merger and the IHD Merger (x) will be
considered part of an integrated plan that includes the Servico Merger and, as
such, (y) the exchange of Impac Units by the Impac Unitholders and IHD Common
Stock by IHD shareholders for Lodgian Common Stock will be considered to be a
transfer to a controlled corporation within the meaning of Section 351(a) of the
Code. The opinions of counsel are based, in part, upon certain covenants,
assumptions, and representations contained in certificates of officers of
Servico, Impac and Impac Affiliated Companies. In addition, it is a condition to
the obligations of Servico and Impac under the Merger Agreement that the
companies receive similar opinions as of the date the Merger is consummated.
Neither Servico nor Impac intends to secure a ruling from the Internal Revenue
Service (the "IRS") with respect to the tax consequences of the Merger. Servico,
Impac and the Impac Affiliated Companies believe, based on the
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opinions of Stearns Weaver and Powell Goldstein, that the Merger will have the
federal income tax consequences discussed below. The opinions of counsel to be
delivered on the date the Merger is consummated will assume the absence of
changes in existing facts and may rely on assumptions, representations and
covenants including those contained in certificates of officers of Servico,
Impac, Impac Affiliated Companies and others. The tax opinions neither bind nor
preclude the IRS from adopting a contrary position. Rather, an opinion of
counsel only sets forth such counsel's legal judgment and has no binding effect
or official status of any kind, and no assurance can be given that contrary
positions will not be successfully asserted by the IRS or adopted by a court if
the issues are litigated. Further, it must be emphasized that Stearns Weaver's
and Powell Goldstein's opinions each will be based upon certain assumptions and
will be conditioned upon certain representations as to factual matters made by
the managements of Servico, Impac, and Impac Affiliated Companies, including
assumptions and representations regarding the operations of Lodgian and the new
ownership of Lodgian's Common Stock by Servico's and Impac Affiliated Companies'
shareholders and Impac's unitholders after the Merger. In the event that the
representations are inaccurate or the assumptions upon which the opinions are
based prove incorrect, the opinions could be rendered invalid. Copies of Stearns
Weaver's and Powell Goldstein's opinions will be transmitted promptly without
charge to Servico shareholders and Impac Members, respectively, upon written
request, to:
In the case of Servico: In the case of Impac:
Charles M. Diaz, Secretary Robert M. Cole, Manager
Servico, Inc. Two Live Oak Center
1601 Belvedere Road 3445 Peachtree Road, N.E., Suite 700
West Palm Beach, Florida 33406 Atlanta, Georgia 30326
TAX IMPLICATIONS TO SERVICO SHAREHOLDERS AND IMPAC UNITHOLDERS. In
general, (a) no gain or loss will be recognized for federal income tax purposes
by holders of Servico or Impac Affiliated Companies Common Stock or Impac Units
who exchange their Servico or Impac Affiliated Companies Common Stock or Impac
Units for Lodgian Common Stock pursuant to the Merger except, as discussed
below, to the extent that an Impac unitholder's allocable share of Impac
indebtedness exceeds such unitholder's adjusted basis in his Impac Units at the
time of the Merger and except to the extent of cash received in lieu of
fractional shares, and (b) the aggregate tax basis of Lodgian Common Stock
received by a shareholder or unitholder as a result of the Merger will be the
same as the shareholder's or unitholder's adjusted tax basis in the Servico or
Impac Affiliated Companies Common Stock or Impac Units surrendered in the Merger
(reduced by any such tax basis allocable to fractional shares for which cash is
received). The holding period of the Lodgian Common Stock held by each former
Servico or Impac Affiliated Companies shareholder or Impac unitholder as a
result of the Merger will include the period during which such shareholder or
unitholder held the Servico or Impac Affiliated Companies Common Stock or Impac
Units exchanged. If a shareholder or unitholder has differing bases and/or
holding periods in respect of its shares of Servico or Impac Affiliated
Companies Common Stock or Impac Units, he should consult his own tax advisor
prior to the Merger with regard to identifying the bases and/or holding periods
of the particular shares of Lodgian Common Stock received in the Merger. Cash
received by a holder of Impac Units or shareholders of Impac Affiliated
Companies in lieu of a fractional share interest in Lodgian Common Stock will
result in the recognition of gain or loss for federal income tax purposes,
measured by the difference between the amount of cash received and the portion
of the tax basis of a share of an Impac Unit allocable to such fractional share
interest. Such gain or loss will be capital gain or loss and will be long-term
capital gain or loss if such Impac Unit has been held for more than one year at
the Effective Time.
As stated above, an Impac unitholder will recognize gain as a result of
the Impac Merger if the unitholder's allocable share of Impac indebtedness
immediately prior to the Impac Merger exceeds such unitholder's adjusted basis
in his Impac Units at such time. Lodgian will advise Impac unitholders in
writing by mail of their allocable share of Impac indebtedness, together with
all other information required to file their tax returns within the time period
required by the Code and the regulations promulgated thereunder. The amount of
such gain will be equal to the excess of such share of allocable indebtedness
over such unitholder's basis in his Units. For example, if an Impac unitholder's
allocable share of Impac indebtedness immediately prior to the Impac Merger is
$45,000 and the unitholder's basis in his Impac Units is $30,000 at such time,
then the Impac unitholder will recognize gain equal to
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$15,000 (the excess of $45,000, the unitholder's allocable share of
indebtedness, over $30,000, the unitholder's basis in the Impac units) as a
result of the Merger.
A determination of the amount of gain that might be recognized by an
Impac unitholder as a result of the Merger cannot be made with complete accuracy
prior to the Merger because each unitholder's allocable share of Impac
indebtedness as of the time of the Merger cannot be determined currently. The
most recent determination of each unitholder's allocable share of Impac
indebtedness was made as of December 31, 1997, and was reported to the
unitholders on the 1997 IRS Schedule K-1 issued to the unitholders by Impac. In
addition, an Impac unitholder's basis is a determination that must be made by
each unitholder and cannot be made by Impac. A unitholder, most likely, would
have needed to determine his basis in his Units in connection with the
preparation of his federal 1997 income tax return. In order for a unitholder to
determine his basis in his Impac Units at the time of the Merger, the unitholder
would need to adjust his basis, if so determined as of December 31, 1997, for
his allocable share of Impac income or loss for the period January 1, 1998
through the date of the Merger, distributions made to the unitholder by Impac
during such period, and for such other items as may be taken into account in
determining a unitholder's basis in his Impac units.
The character of such gain will be capital gain, assuming that an Impac
unitholder holds his Impac Units as a capital asset, except to the extent that
the gain is attributable to unrealized receivables (including depreciation
recapture gain, if any, computed as if Impac had sold its properties at their
fair market values) and inventory items of Impac, which gain will be taxed as
ordinary income. In addition, an Impac unitholder will not need to compute the
amount of gain recognized in connection with the Merger separately with respect
to each block of Impac Units exchanged in the Merger, even if the unitholder
acquired the Impac Units in separate transactions and would have a different
basis with respect to each set of Impac Units so acquired. A member that holds
more than one interest in a limited liability company that is treated as a
partnership for federal income tax purposes is considered to have a single
interest in the entity, with a basis in the interest equal to the aggregate of
the bases of all the individual interests in the limited liability company, for
purposes of computing any gain recognized with respect to such member's
allocable share of limited liability company indebtedness that is in excess of
basis.
Any gain recognized by an Impac unitholder that is capital gain will be
considered long-term capital gain, taxed at a maximum federal rate of 28%, so
long as the Impac unitholder has held his Impac Units for more than one (1)
year. If the Impac unitholder has held his Impac units for more than 18 months,
any capital gain recognized by the Impac unitholder will be subject to the
maximum federal capital gains tax rate of 20%. Any gain recognized that is other
than long-term capital gain will be taxed at federal income tax rates of up to
39.6%.
BACKUP WITHHOLDING. Unless a holder or unitholder complies with certain
reporting and certification procedures or is an "exempt recipient" (i.e., in
general, corporations and certain other entities), the holder may be subject to
withholding tax of 31% with respect to any cash payments received pursuant to
the Merger.
TAX IMPLICATIONS TO LODGIAN, SERVICO, IMPAC, IMPAC AFFILIATED
COMPANIES, SERVICO MERGER SUB AND IMPAC MERGER SUB. No gain or loss will be
recognized for federal income tax purposes by Lodgian, Servico, Impac, Impac
Affiliated Companies, Servico Merger Sub or Impac Merger Sub as a result of the
formation of either Lodgian, Servico Merger Sub or Impac Merger Sub or as a
result of the Merger.
THE DISCUSSION SET FORTH ABOVE UNDER "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES" IS INTENDED TO PROVIDE ONLY A GENERAL SUMMARY, AND DOES NOT
PURPORT TO BE A COMPLETE ANALYSIS OR DESCRIPTION OF ALL POTENTIAL FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER. IN ADDITION, THE FOREGOING DISCUSSION DOES NOT
ADDRESS TAX CONSEQUENCES WHICH MAY VARY WITH, OR ARE CONTINGENT ON, INDIVIDUAL
CIRCUMSTANCES. MOREOVER, THIS DISCUSSION DOES NOT ADDRESS ANY NON-INCOME TAX OR
ANY FOREIGN, STATE OR LOCAL TAX CONSEQUENCES OF THE MERGER. THIS DISCUSSION DOES
NOT ADDRESS THE TAX CONSEQUENCES OF ANY TRANSACTION OTHER THAN THE MERGER.
ACCORDINGLY, EACH SHAREHOLDER OR UNITHOLDER IS STRONGLY URGED TO CONSULT WITH
SUCH SHAREHOLDER'S OR UNITHOLDER'S TAX ADVISOR TO DETERMINE THE PARTICULAR
UNITED STATES FEDERAL, STATE, LOCAL OR FOREIGN INCOME OR OTHER TAX CONSEQUENCES
OF THE MERGER TO SUCH SHAREHOLDER OR UNITHOLDER.
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ACCOUNTING TREATMENT
Lodgian will account for the Merger by the purchase method of
accounting under generally accepted accounting principles ("GAAP"). Under GAAP,
Servico is the accounting acquirer with Lodgian being the successor in interest
to Servico. Servico's values will be carried over to Lodgian and the excess of
Servico's cost of acquisition of Impac over the fair value of Impac's assets and
liabilities to be acquired in the Merger, if any, will be recorded as goodwill
and amortized over a period not to exceed 40 years. It is anticipated that upon
consummation of the Merger, the fiscal year of Lodgian will be the calendar
year.
ANTI-TRUST APPROVAL
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and the rules promulgated thereunder by the Federal
Trade Commission (the "FTC"), the Merger may not be consummated until
notifications have been given and certain information has been furnished to the
FTC and the Antitrust Division of the United States Department of Justice (the
"Antitrust Division") and specified waiting period requirements have been
satisfied. Servico and Impac filed notification and report forms under the HSR
Act with the FTC and the Antitrust Division on May 29, 1998 and on June 28, 1998
the above-referenced waiting period expired. The Antitrust Division nevertheless
has the authority to challenge the Merger on antitrust grounds before or after
the Merger is completed.
NO APPRAISAL RIGHTS
Holders of Servico Common Stock, Impac Affiliated Company Common Stock
and Impac Units are not entitled to appraisal rights in connection with the
Merger under applicable state laws.
STOCK EXCHANGE LISTING
Lodgian will file an application to list the shares of Lodgian Common
Stock to be issued in connection with the Merger on the NYSE, subject to
approval of the Merger Agreement by Servico's shareholders and Impac's
unitholders and official notice of issuance. It is anticipated that the shares
of Lodgian Common Stock will be traded on the NYSE under the ticker symbol
"LOD" or another symbol selected by Lodgian.
DELISTING AND DEREGISTRATION OF SERVICO COMMON STOCK
If the Merger is consummated, the shares of Servico Common Stock will
be delisted from the NYSE and will be deregistered under the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
SECURITIES LAW RESTRICTIONS
The shares of Lodgian Common Stock to be issued to shareholders of
Servico, shareholders of the Impac Affiliated Companies and unitholders of Impac
in connection with the Merger have been registered under the Securities Act of
1933, as amended (the "Securities Act"). All shares of Lodgian Common Stock
received by holders of Servico Common Stock, Impac Affiliated Company Common
Stock and Impac Units upon consummation of the Merger will be freely
transferable under the Securities Act, except for such shares of Lodgian Common
Stock received by persons who are deemed to be "Affiliates" of Servico, any
Impac Affiliated Company or Impac, respectively, for purposes of Rule 145 under
the Securities Act at the time of the Servico Annual Meeting and the effective
date of the consent of the Impac unitholders, as the case may be. "Affiliates"
are generally defined as persons who control, are controlled by, or are under
common control with, Servico, any Impac Affiliated Company or Impac, as the case
may be (generally, certain executive officers, directors and principal
shareholders or unitholders).
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Shares of Lodgian Common Stock acquired by Affiliates in connection
with the Merger may be resold by such Affiliates only in transactions permitted
under Rule 145 or as otherwise permitted under the Securities Act. In general,
under Rule 145, for two years following the Effective Time, an Affiliate
(together with certain related persons) would be entitled to sell shares of
Lodgian Common Stock acquired in connection with the Merger only through
unsolicited "broker transactions" or in transactions directly with a "market
maker," as such terms are defined in Rule 144 under the Securities Act.
Additionally, the number of shares to be sold by an Affiliate (together with
certain related persons and certain persons acting in concert) within any
three-month period for purposes of Rule 145 may not exceed the greater of one
percent of the outstanding shares of Lodgian Common Stock or the average weekly
trading volume of such stock during the four calendar weeks preceding such sale.
Rule 145 would only remain available, however, to Affiliates if Lodgian remained
current with its informational filings with the SEC under the Exchange Act. Two
years after the Effective Time, an Affiliate would be able to sell his shares
without any restrictions so long as such Affiliate had not been an Affiliate of
Lodgian for at least three months prior thereto.
Impac has agreed in the Merger Agreement to use its best efforts to
deliver or cause to be delivered to Servico a letter executed by each person
identified as an Affiliate of Impac and each other person, who may be deemed an
Affiliate of Impac. Lodgian will place a legend on the certificates representing
shares of its Common Stock received by such person in the Merger, to the effect
that such shares may be sold, transferred or conveyed only in accordance with
Rule 145(d), pursuant to an effective registration statement under the
Securities Act, or pursuant to an exemption from registration under the
Securities Act and such legend may be placed on the certificates regardless of
whether such person has executed and delivered a letter to Servico or Impac.
Lodgian will also be entitled to issue stop transfer instructions to its
transfer agent in accordance with the restrictions set forth on such legends.
Such restrictions will apply to all purported sales, transfers or conveyances of
shares of Lodgian Common Stock received in exchange for Servico Common Stock or
Impac Units by such persons.
In connection with the above, Lodgian will grant certain "piggy-back"
registration rights pursuant to a Registration Rights Agreement to those
unitholders of Impac and shareholders of the Impac Affiliated Companies who
receive Lodgian Common Stock in the Merger and who (i) as a result of the
Merger, become subject to the restrictions on the sale of such Lodgian Common
Stock pursuant to Rule 145 discussed above and (ii) would be prohibited from
selling, over a 12 month period, all of their respective shares of Lodgian
Common Stock received in the Merger by virtue of the volume limitations set
forth in Rule 145. See "The Merger Agreement -- Registration Rights Agreement."
THE FOLLOWING DESCRIPTION OF CERTAIN TERMS OF THE MERGER AGREEMENT IS ONLY A
SUMMARY DESCRIBING THE MATERIAL TERMS OF SUCH AGREEMENT BUT DOES NOT PURPORT TO
BE COMPLETE. THE FOLLOWING DISCUSSION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO THE COMPLETE TEXT OF THE MERGER AGREEMENT, A COPY OF WHICH IS ATTACHED TO
THIS JOINT PROXY STATEMENT/PROSPECTUS AS APPENDIX A AND INCORPORATED BY
REFERENCE HEREIN. CAPITALIZED TERMS USED IN THIS SECTION AND NOT OTHERWISE
DEFINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS SHALL HAVE THE MEANINGS
ASCRIBED TO THEM IN THE MERGER AGREEMENT.
THE MERGER AGREEMENT
GENERAL
Servico has formed Lodgian and Servico Merger Sub and Impac Merger Sub
as wholly-owned subsidiaries of Lodgian. The Merger Agreement contemplates the
merger of Servico Merger Sub with and into Servico, with Servico being the
surviving entity, and the merger of Impac Merger Sub with and into Impac, with
Impac being the surviving entity and the merger of each of the Impac Affiliated
Subs into the respective Impac Affiliated Companies, with each of the Impac
Affiliated Companies being the surviving entity. The Merger will become
effective upon the filing of Articles or Certificates of Merger relating to each
of the various mergers with the Secretary of State of the State of incorporation
or organization of the
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merger entities or at such later time as may be set forth in such documents. At
the Effective Time, Servico, Impac and each of the Impac Affiliated Companies
will become wholly-owned subsidiaries of Lodgian.
CONSIDERATION TO BE RECEIVED IN THE MERGER
At the Effective Time:
(a) each issued and outstanding share of Servico Common Stock
(excluding shares owned by Impac or any wholly-owned subsidiary of Servico or
Impac, but including any shares held by any Servico employee benefit plan) and
all rights in respect thereof, will be converted into one share of Lodgian
Common Stock;
(b) each issued and outstanding Impac Unit (excluding Impac
Units owned by Servico, Holdings, any Impac Affiliated Company or any
wholly-owned subsidiary of Servico or Impac), and all rights in respect thereof,
will be converted into a certain number of shares of Lodgian Common Stock equal
to the quotient of (i) the difference between 6,099,347.79 (the "Impac Base
Number") and 1,153,930.66 divided by (ii) the number of outstanding Impac Units
(excluding Impac Units owned by Servico, Holdings, any Impac Affiliated Company
or any wholly-owned subsidiary of Servico or Impac); provided, however, that if
the average of the closing sale prices per share of Servico Common Stock on the
NYSE over the ten consecutive trading periods preceding the date on which all
conditions precedent to the Merger have been satisfied (the "Trading Period
Average") is (i) less than $14.00 per share, the Impac Base Number will be equal
to the product of the Impac Base Number and a fraction, the numerator of which
is $14.00 and the denominator of which is the Trading Period Average, or (ii)
greater than $25.00 per share, the Impac Base Number will be equal to the
product of the Impac Base Number and a fraction, the numerator of which $25.00
and the denominator of which is the Trading Period Average (such ratio of Impac
Units to shares of Lodgian Common Stock being referred to as the "Impac Exchange
Ratio");
(c) each issued and outstanding share of P-Burg Common Stock
and all rights in respect thereof, will be converted into a certain number of
shares of Lodgian Common Stock equal to the quotient of (i) the difference
between 135,580.25 (the "P-Burg Base Number") and 25,650.32 divided by (ii) the
number of outstanding shares of P-Burg Common Stock; provided, however, that if
the Trading Period Average is (i) less than $14.00, the P-Burg Base Number shall
be equal to the product of the P-Burg Base Number and a fraction, the numerator
of which is $14.00 and the denominator of which is the Trading Period Average,
and (ii) if the Trading Period Average is greater than $25.00, the P-Burg Base
Number shall be equal to the product of the P-Burg Base Number and a fraction,
the numerator of which is $25.00 and the denominator of which is the Trading
Period Average;
(d) each issued and outstanding share of Hazard Common Stock
and all rights in respect thereof will be converted into a certain number of
shares of Lodgian Common Stock equal to the quotient of (i) the difference
between 71,358.72 (the "Hazard Base Number") and 13,500.30 divided by (ii) the
number of outstanding shares of Hazard Common Stock; provided, however, that if
the Trading Period Average is (i) less than $14.00, the Hazard Base Number shall
be equal to the product of the Hazard Base Number and a fraction, the numerator
of which is $14.00 and the denominator of which is the Trading Period Average,
and (ii) if the Trading Period Average is greater than $25.00, the Hazard Base
Number shall be equal to the product of the Hazard Base Number and a fraction,
the numerator of which is $25.00 and the denominator of which is the Trading
Period Average;
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(e) each issued and outstanding share of Memphis Common Stock
and all rights in respect thereof will be converted into a certain number of
shares of Lodgian Common Stock equal to the quotient of (i) the difference
between 98,382.79 (the "Memphis Base Number") and 18,612.96 divided by (ii) the
number of outstanding shares of Memphis Common Stock; provided, however, that if
the Trading Period Average is (i) less than $14.00, the Memphis Base Number
shall be equal to the product of the Memphis Base Number and a fraction, the
numerator of which is $14.00 and the denominator of which is the Trading Period
Average, and (ii) if the Trading Period Average is greater than $25.00, the
Memphis Base Number shall be equal to the product of the Memphis Base Number and
a fraction, the numerator of which is $25.00 and the denominator of which is the
Trading Period Average;
(f) each issued and outstanding share of Delk Common Stock and
all rights in respect thereof will be converted into a certain number of shares
of Lodgian Common Stock equal to the quotient of (i) the difference between
46,997.66 (the "Delk Base Number") and 8,891.45 divided by (ii) the number of
outstanding shares of Delk Common Stock; provided, however, that if the Trading
Period Average is (i) less than $14.00, the Delk Base Number shall be equal to
the product of the Delk Base Number and a fraction, the numerator of which is
$14.00 and the denominator of which is the Trading Period Average, and (ii) if
the Trading Period Average is greater than $25.00, the Delk Base Number shall be
equal to the product of the Delk Base Number and a fraction, the numerator of
which is $25.00 and the denominator of which is the Trading Period Average;
(g) each issued and outstanding share of IHD Common Stock and
all rights in respect thereof will be converted into a certain number of shares
of Lodgian Common Stock equal to the quotient of (i) the difference between
820,663.73 (the "IHD Base Number") and 155,260.71 divided by (ii) the number of
outstanding shares of IHD Common Stock; provided, however, that if the Trading
Period Average is (i) less than $14.00, the IHD Base Number shall be equal to
the product of the IHD Base Number and a fraction, the numerator of which is
$14.00 and the denominator of which is the Trading Period Average, and (ii) if
the Trading Period Average is greater than $25.00, the IHD Base Number shall be
equal to the product of the IHD Base Number and a fraction, the numerator of
which is $25.00 and the denominator of which is the Trading Period Average;
(h) each issued and outstanding share of IDC Common Stock and
all rights in respect thereof will be converted into a certain number of shares
of Lodgian Common Stock equal to the quotient of (i) the difference between
47,875.89 (the "IDC Base Number") and 9,057.60 divided by (ii) the number of
outstanding shares of IDC Common Stock; provided, however, that if the Trading
Period Average is (i) less than $14.00, the IDC Base Number shall be equal to
the product of the IDC Base Number and a fraction, the numerator of which is
$14.00 and the denominator of which is the Trading Period Average, and (ii) if
the Trading Period Average is greater than $25.00, the IDC Base Number shall be
equal to the product of the IDC Base Number and a fraction, the numerator of
which is $25.00 and the denominator of which is the Trading Period Average;
(i) each issued and outstanding share of IHG Common Stock and
all rights in respect thereof will be converted into a certain number of shares
of Lodgian Common Stock equal to the quotient of (i) the difference between
79,793.17 (the "IHG Base Number") and 15,096.00 divided by (ii) the number of
outstanding shares of IHG Common Stock; provided, however, that if the Trading
Period Average is (i) less than $14.00, the IHG Base Number shall be equal to
the product of the IHG Base Number and a fraction, the numerator of which is
$14.00 and the denominator of which is the Trading Period Average, and (ii) if
the Trading Period Average is greater than $25.00, the IHG Base Number shall be
equal to the product of the IHG Base Number and a fraction, the numerator of
which is $25.00 and the denominator of which is the Trading Period Average;
The sum of the Impac Base Number, the P-Burg Base Number, the Hazard
Base Number, the Memphis Base Number, the Delk Base Number, the IHD Base Number,
the IDC Base Number and the IHG Base Number shall be referred to as the "Base
Number."
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Additionally, (a) each share of Servico Common Stock owned by Impac or
any wholly-owned subsidiary of Servico or Impac and each Impac Unit owned by
Servico, Holdings, any Impac Affiliated Company or any wholly-owned subsidiary
of Servico or Impac will be canceled and retired; (b) each share of Lodgian
Common Stock held by Servico will be canceled and retired, (c) each Class B
Ordinary Membership Interest of Impac (the "Class B Interest") will be canceled
and retired, and (d) each outstanding and unexercised option or warrant granted
by Servico to purchase shares of Servico Common Stock immediately prior to the
Effective Time will be assumed by Lodgian and converted into an option or
warrant to purchase shares of Lodgian Common Stock. See "Interests of Certain
Persons in the Merger -- Arrangements with Executive Officers." Additionally,
upon the opening of five of Impac's hotels currently under development, the
Impac unitholders and the Impac Affiliated Company shareholders will receive as
an "earn-out" the Impac Additional Shares as described below. A pro rated
portion of the Impac Additional Shares will be issued following the opening of
each development hotel. Certificates representing the Impac Additional Shares
will be delivered at the closing date of the Merger to the exchange agent, which
is appointed by Lodgian to effect the exchange of Servico Common Stock, Impac
Affiliated Company Common Stock and Impac Units for Lodgian Common Stock (the
"Exchange Agent"), as escrow agent, to be held and delivered to the former
holders of Impac Units and former shareholders of the Impac Affiliated Companies
upon the opening of Impac's hotels. The escrow agreement will provide for the
Impac Additional Shares to be released from escrow from time to time upon the
opening of each hotel (the "Milestone Date") in accordance with the following
schedule: (i) Marriott, Portland, Oregon - 490,000 shares; (ii) Marriott,
Denver, Colorado - 350,000 shares; (iii) Hilton Garden Inn, Lake Oswego, Oregon
- - 238,000 shares; (iv) Courtyard by Marriott, Livermore, California - 168,000
shares; and (v) Hilton Garden Inn, Rio Rancho, New Mexico - 154,000 shares.
Assuming that there is no adjustment of the Base Number of Shares to be
issued, the following table reflects the shares of Lodgian common stock to be
issued in connection with the Merger to each holder of an Impac Unit and each
holder of one share of Servico Common Stock:
<TABLE>
<CAPTION>
UPON OPENING EACH OF THE DEVELOPMENT HOTELS
LODGIAN ANTICIPATED
SHARES UPON COMPLETION NUMBER
MERGER NAME OF HOTEL DATE OF SHARES
----------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Servico Common Stock 1 N/A N/A 0
---
Impac Unit
Total Upon Merger 0.519
Marriott, Portland, OR 1st Quarter 1999 0.042
Marriot, Denver, CO 4th Quarter 1998 0.030
Hilton Garden Inn, Lake 4th Quarter 1999 0.021
Oswego, OR
Courtyard by Marriott, 1st Quarter 1999 0.015
Livermore, CA
Hilton Garden Inn, Rio 1st Quarter 1999 0.013
Rancho, NM
Total Upon Opening of
Development Hotels 0.121
Impac Total 0.640
</TABLE>
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<PAGE> 67
If the Trading Period Average of Servico Common Stock is less than
$14.00 or more than $25.00, the Base Number of Lodgian shares will be adjusted.
If the Trading Period Average is less than $14.00 per share, the Base Number
will be determined by dividing $103.6 million by the Trading Period Average. If
the Trading Period Average is more than $25.00 per share, the Base Number will
be determined by dividing $185 million by the Trading Period Average. The
following table reflects the affect on the Impac Exchange Ratio of an adjustment
of the Base Number at selected Trading Period Averages assuming the full release
of all Impac Additional Shares (0.121 Lodgian Shares per Unit).
TRADING LODGIAN SHARES
PERIOD AVERAGE UPON MERGER
-------------- --------------
$13.00 0.689
$13.25 0.676
$13.50 0.664
$13.75 0.652
$14.00-25.00 0.640
$25.25 0.634
$25.50 0.628
$25.75 0.621
$26.00 0.615
EXCHANGE OF SHARES
Subject to the terms and conditions of the Merger Agreement, at or
prior to the Effective Time, an Exchange Agent will be appointed by Lodgian to
effect the exchange of certificates representing the Servico Common Stock, Impac
Affiliated Company Common Stock and the Impac Units for certificates
representing shares of Lodgian Common Stock. Lodgian will from time to time
deposit certificates representing shares of Lodgian Common Stock with the
Exchange Agent for the conversion of shares as described above in
"--Consideration to be Received in the Merger." Commencing immediately after the
Effective Time and until the appointment of the Exchange Agent shall be
terminated, each holder of Servico Common Stock, Impac Affiliated Company Common
Stock or Impac Units may submit his or her certificates to the Exchange Agent
(or directly to Lodgian if the appointment of the Exchange Agent has been
terminated), together with a duly signed letter of transmittal. In exchange for
such share certificates, each holder will receive certificates representing the
number of shares of Lodgian Common Stock to which such holder is entitled. All
such shares of Lodgian Common Stock will be deemed to have been issued at the
Effective Time; provided, however, that the Impac Additional Shares will not be
deemed to be issued or outstanding until issuable on the applicable Milestone
Date. Until their shares are surrendered, holders of unexchanged shares of
Servico Common Stock, Impac Affiliated Company Common Stock or Impac Units will
not be entitled to receive any dividends or other distributions payable by
Lodgian. Upon surrender, however, subject to applicable laws, such holders will
receive accumulated dividends and distributions, without interest.
No fractional shares of Lodgian Common Stock will be issued to holders
of Servico Common Stock, Impac Affiliated Company Common Stock or Impac Units.
For each fractional share that would otherwise be issued, the Exchange Agent
will pay to holders of Servico Common Stock, Impac Affiliated Company Common
Stock and Impac Units an amount equal to either (a) a pro rata portion of the
proceeds of the sale by the Exchange Agent of shares of Lodgian Common Stock
representing the aggregate of all such fractional shares, such sale to be
executed by the Exchange Agent at then prevailing prices on the NYSE, as
promptly after the Effective Time (or Milestone
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Date, as applicable) as, in the Exchange Agent's reasonable judgment, is
consistent with obtaining the best execution of such sales in light of
prevailing market conditions, or (b) at the option of Servico, an amount equal
to the product obtained by multiplying (i) the fractional share interest to
which such holder would otherwise be entitled (after taking into account all
shares of Servico Common Stock, Impac Affiliated Company Common Stock and the
Impac Units held at the Effective Time by such holder) by (ii) the closing price
for a share of Lodgian Common Stock on the NYSE Composite Transaction Tape on
the first business day immediately following the Effective Time or the
applicable Milestone Date, as the case may be.
LODGIAN FOLLOWING THE MERGER
HEADQUARTERS. The Restated Bylaws of Lodgian provide that the initial
headquarters of Lodgian will be located in Atlanta, Georgia.
BOARD. The Merger Agreement provides that, at the Effective Time, the
Lodgian Board will consist of eight members (unless otherwise agreed to in
writing by Servico and Impac), five of whom will be Servico Directors, two of
whom will be Impac Directors, and one of whom will be selected by both Impac and
Servico. The term "Servico Director" means any person who is designated by
Servico to become a director of Lodgian at the Effective Time in accordance with
the terms of the Merger Agreement, and the term "Impac Director" means any
person who is designated by Impac to become a director of Lodgian at the
Effective Time. The Lodgian Board will be divided into three classes, designated
as Class I, Class II and Class III. The initial directors of Lodgian and initial
allocations of the directors among the three classes is as follows: (a) Class I
will consist of two directors, comprised of Peter R. Tyson, a Servico Director,
and one director selected by both Servico and Impac; (b) Class II will consist
of three directors, comprised of two Servico Directors, Joseph C. Calabro and
Michael Leven, and one Impac Director, John Lang; and (c) Class III will consist
of three directors, comprised of David A. Buddemeyer and Richard H. Weiner, both
of whom are Servico Directors, and Robert S. Cole, an Impac Director. Such
directors shall serve as the directors of Lodgian from and after the Effective
Time in accordance with the Restated Certificate and Restated Bylaws of Lodgian
until their successors are elected or appointed and qualified or until their
resignation or removal. In the event that, prior to the Effective Time, any
person so selected to serve on the Board of Directors of Lodgian is unable or
unwilling to serve in such position, the company that selected such person shall
designate another person to serve in such person's stead. From and after the
Effective Time, the composition of the Board of Directors shall be determined in
accordance with the Restated Certificate and Restated Bylaws of Lodgian.
EXECUTIVE OFFICERS. At the Effective Time, subject to the Bylaws of
Lodgian and each of the Surviving Entities, (i) David A. Buddemeyer will hold
the position of Chief Executive Officer of Lodgian and each of the Surviving
Entities, (ii) Robert S. Cole will hold the position of President of Lodgian and
each of the Surviving Entities, and (iii) David Buddemeyer and Robert Cole will
hold the positions of Co-Chairmen of the Board of Directors of Lodgian and
each of the Surviving Entities. If any of such persons is unable or unwilling to
hold such offices as set forth above, his successor shall be selected by the
Board of Directors of Lodgian or the Surviving Entities in accordance with their
respective Bylaws.
FUTURE OPERATIONS. As indicated in the Pro Forma Combined Condensed
Consolidated Financial Information, it is anticipated that as a result of the
Merger each of Impac and Servico will be part of a combined company with
increased revenues, increased expenses and increased indebtedness. Assuming no
savings associated with the elimination of duplicative functions or from
operating synergies, the combined company would have recognized income before
extraordinary items of approximately $8.5 million for the year ended 1997 and
income before extraordinary items of approximately $47,000 for the quarter ended
March 31, 1998. As discussed throughout this Joint Proxy Statement/Prospectus,
Servico and Impac anticipate that their liquidity and capital resources will be
improved as a consequence of the Merger by virtue of the greater geographic
diversity of the combined company's properties and by its increased revenues and
size. See "Risk Factors-Risks Associated with High Levels of Debt," "The
Merger-Reasons for the Merger; Negative Considerations and Potential
Disadvantages of the Merger; Recommendation of Servico's Board and Impac's
Manager;" and "Lodgian, Inc. Unaudited Pro Forma Combined Consolidated Financial
Statements".
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DIVIDENDS. Pursuant to the Restated Bylaws of Lodgian, dividends will
be declared only out of any assets or funds of Lodgian legally available for the
payment of dividends at such times as the Lodgian Board directs. It is currently
anticipated that Lodgian will retain future earnings for business use and does
not expect to declare or pay any dividends in the foreseeable future.
CERTAIN REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains certain representations and warranties of
Servico, the Impac Affiliated Companies and Impac as to, among other things, due
organization and good standing, capitalization, ownership of subsidiaries,
corporate authority to enter into the contemplated transactions, the accuracy of
recent reports filed by Servico with the SEC and the financial statements
contained therein and of Impac, tax matters, regulatory matters, the absence of
contractual defaults, title to real and personal property and condition of
assets, the absence of material adverse changes or events, litigation,
compliance with laws, environmental matters, required board, manager,
shareholder and unitholder approvals, accounting matters and conflicts with
organizational documents and material agreements.
CERTAIN COVENANTS
The Merger Agreement also provides that, prior to the Effective Time,
Servico and Impac and their respective subsidiaries will, subject to specified
exceptions, each conduct their respective businesses in the ordinary course
consistent with past practices and will use all reasonable good faith efforts to
preserve intact their business organization and goodwill in all material
respects, to continuously maintain insurance coverage substantially equivalent
to the insurance coverage in existence prior to the Effective Time and to
preserve their present relationships with franchisors, licensors, distributors,
suppliers and others with whom each has business relationships. Without limiting
the foregoing, the Merger Agreement places specific restrictions on the ability
of Impac and its subsidiaries to: (i) amend or otherwise change its Articles of
Organization, Articles or Certificate of Incorporation, Operating Agreement,
Bylaws or other charter documents; (ii) issue, sell or authorize for issuance or
sale, any membership interests or shares of any class of its securities
(including, but not limited to, by way of stock split or dividend) or other
equity interests or any subscriptions, options, warrants, rights or convertible
securities or enter into any agreements or commitments obligating it to issue or
sell any such membership interests, securities or other equity interests; (iii)
redeem, purchase or otherwise acquire, directly or indirectly, any of its
membership interests or any shares of capital stock or other equity interests or
any option, warrant or other right to purchase or acquire any such shares,
membership interests or other equity interests or return all or any portion of
any capital contributions; (iv) enter into any commitment or transaction
(including, but not limited to, any capital expenditure or sale of assets),
other than in the ordinary course of business consistent with past practices;
provided, however, if the commitment or transaction involves the receipt (or
potential receipt) or payment (or potential payment) of in excess of Five
Hundred Thousand Dollars ($500,000), Servico's consent will be required; (v)
create, incur or assume any indebtedness (including purchase money financing),
except in the ordinary course of business consistent with past practices under
an existing loan availability (but in no event in an aggregate amount exceeding
Two Hundred Fifty Thousand Dollars ($250,000) more than is currently owed), and
certain other identified indebtedness, or any lien, pledge, mortgage or other
encumbrance affecting any of its assets; (vi) pay, discharge or satisfy claims,
liabilities or obligations which involve payments or commitments to make
payments which exceed normal business operating requirements, consistent with
past practice; (vii) cancel any debts or waive any claims or rights other than
immaterial debts or claims, in the ordinary course of business and consistent
with past practice, of persons who would not be deemed affiliates of Impac or
its subsidiaries; (viii) make any loans, advances or capital contributions to,
or investments in financial instruments of, any person or entity other than
capital contributions to subsidiaries of Impac consistent with past practices;
(ix) assume, guarantee, endorse or otherwise become liable or responsible for
the obligations of any other person or entity other than immaterial assumptions,
guarantees or endorsements made in the ordinary course of business consistent
with past practice in favor of persons who would not be deemed affiliates of
Impac or its subsidiaries; (x) grant any increase in the compensation payable or
pay any bonus to any of its managers, officers, employees, directors or
consultants or establish, adopt or increase any bonus, insurance or other
employee benefit plan, payment or arrangement made to or for any such persons
other than increases in the compensations or bonuses payable to such persons
other than Robert Cole or Robert
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Flanders in the ordinary course of business consistent with past practice; (xi)
enter into any employment agreement or grant any severance or termination pay
with or to any manager, officer or director or, except in the ordinary course of
business, any employee; (xii) declare or pay any dividend or other distribution
with respect to its membership interests or capital stock; (xiii) alter in any
material way the manner of keeping its books, accounts or records or its
accounting practices therein reflected; (xiv) enter into any agreement which
would be a material agreement or arrangement or terminate or materially amend
any existing material agreement or arrangement of Impac or its subsidiaries;
(xv) enter into any indemnification, contribution or similar agreement requiring
it to indemnify any other person or entity or make contributions to any other
person or entity other than immaterial indemnification, contribution or similar
agreements made in the ordinary course of business consistent with past
practices with persons who would not be deemed affiliates of Impac or its
subsidiaries; (xvi) do any act, or omit to do any act, or permit, to the extent
within Impac's control, any act or omission to act which would cause a material
violation or breach of any of the representations, warranties or covenants of
Impac set forth in the Merger Agreement; (xvii) enter into any agreement or take
any action which could have a material adverse effect on Impac (financial or
otherwise, an "Impac Material Adverse Effect"); or (xviii) agree, whether in
writing or otherwise, to do any of the foregoing.
Prior to the Effective Time, the Impac Affiliated Companies are
prohibited from conducting any business or commencing any operations other than
the passive ownership of Impac Units.
The Merger Agreement also places restrictions on the ability of Servico
and its subsidiaries to: (i) do any act, or omit to do any act, or permit, to
the extent within Servico's control, any act or omission to act which could
cause a material violation or breach of any of the representations, warranties
or covenants of Servico set forth in the Merger Agreement; (ii) enter into any
agreement or take any action which could have a material adverse effect on
Servico (financial or otherwise, a "Servico Material Adverse Effect"); (iii)
enter into any commitment or transaction which would be dilutive to Servico's
earnings per share in the fiscal year in which such transaction is consummated;
(iv) enter into any commitment or transaction outside of the ordinary course of
Servico's business requiring the payment of in excess of Two Million Dollars
($2,000,000) or create, incur or assume indebtedness in excess of Five Million
Dollars ($5,000,000) other than in connection with or related to the
acquisition, operation or renovation of hotel or hotel related properties; (v)
issue or sell any shares of Servico Common Stock or securities convertible into
Servico Common Stock other than either pursuant to or in connection with (A)
options granted to directors or employees or shares issued pursuant to currently
outstanding options or warrants and (B) transactions involving shares
representing no more than ten percent (10%) of the outstanding Servico Common
Stock; or (vi) agree, whether in writing or otherwise, to do any of the
foregoing. If prior to the Effective Time, Servico determines to acquire hotels
and related properties for an aggregate purchase price of more than One Hundred
Million Dollars ($100,000,000) (excluding any hotels currently under contract
such as the AMI Operating Partners, L.P. properties), then Servico shall
promptly notify Impac. If Impac reasonably determines that such acquisitions
will result in a material adverse effect or materially change the nature of
Servico's operations, then Impac may exercise its right to terminate the Merger
Agreement. See "The Merger Agreement -- Termination."
Servico and Impac also have agreed to cooperate and consult with each
other and will use their reasonable efforts to (i) take all reasonable action
within their control to consummate the Merger, (ii) obtain any necessary
consents, licenses, permits, waivers, approvals, authorizations or orders
required to be obtained in connection with the authorization, execution and
delivery of the Merger Agreement and consummation of the Merger, (iii) notify
the other of the occurrence or threatened occurrence of any event that would
either constitute a violation or breach of the Merger Agreement or cause any
representation or warranty made by any party in the Merger Agreement to be false
or misleading or any matter which would be required to be disclosed, (iv)
refrain from disclosing any confidential or proprietary information with respect
to the other party, (v) cause to be delivered to the other a "comfort" letter of
each of Ernst & Young L.L.P. and PricewaterhouseCoopers LLP, (vi) prepare
and file the Registration Statement on Form S-4 of Lodgian in connection with
the registration under the Securities Act of the Lodgian Common Stock to be
issued in the Merger and this Joint Proxy Statement/Prospectus and to call the
meetings to vote upon the approval of the Merger Agreement and the Merger
contemplated thereby, (vii) make all necessary filings and any additional
submissions required under the rules or regulations of the NYSE, the Securities
Act, the Exchange Act or any other applicable federal or state securities law,
the HSR Act and any other applicable law, and (viii) obtain a
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release of any individuals from liability as guarantor of Impac's or its
subsidiaries' obligations to third parties under franchise agreements and other
related documentation and indemnify each such individual guarantor from and
against any liability such guarantor may incur after the Effective Time under
such guarantees as a result of Impac's or its subsidiaries' failure to satisfy
its obligations under such franchise agreements or related documentation. Impac
will cause the termination of a certain Development Agreement between Impac and
IHD, dated March 10, 1998, prior to the closing date of the Merger so that Impac
and its subsidiaries have no further obligation to IHD or its assigns of its
rights under the agreement after such closing date, other than the payment of up
to a 4% development fee (not to exceed $2.5 million in the aggregate) in the
event and only in the event Lodgian acquires any of the twenty hotels or nine
properties identified in the Merger Agreement as in Impac's acquisition
pipeline. Impac will also cause all affiliates of Impac or its subsidiaries to
cease using any and all tradenames, trademarks, logos or other names containing
the word "Impac" or change its name to a name which does not use or include the
name "Impac."
The Merger Agreement provides that, prior to the Effective Time,
Servico and Impac will use their reasonable efforts to obtain the approval for
listing on the NYSE the shares of Lodgian Common Stock to be issued upon
consummation of the Merger.
RESTRICTIONS ON SOLICITATION OF ALTERNATIVE TRANSACTIONS
The Merger Agreement provides that unless and until the Merger
Agreement is terminated, neither Impac nor any Impac Affiliated Company will
(nor will either permit any of its managers, officers, directors, agents or
affiliates to) enter into a Competing Transaction (as defined below) and will
not, directly or indirectly: (i) from the period commencing on the date of the
Merger Agreement and ending on May 1, 1998 (unless required by law or an
appropriate confidentiality agreement), disclose any non-public information or
any other information not customarily disclosed to any person or entity
concerning the business or assets, or afford to any person or entity (other than
Servico and its designees) access to the books and records, of Impac or its
subsidiaries; and (ii) after May 1, 1998 or such later date during which Servico
is actively negotiating with any other third party with respect to any offer or
proposal regarding a Change of Control (as defined below), solicit, encourage,
initiate or participate in any negotiations or discussions with respect to any
offer or proposal to enter into a Competing Transaction, or, except as required
by law, disclose any nonpublic information or any other information not
customarily disclosed to any person or entity concerning the business and assets
of Impac and any Impac subsidiary, afford to any person or entity (other than
Servico and its designees) access to the books or records of Impac or any Impac
subsidiary or otherwise assist or encourage any person or entity in connection
with any of the foregoing. In the event Impac shall receive or become aware of
any offer or proposal of the type referred to in the foregoing sentence, Impac
shall promptly inform Servico as to any such offer or proposal. The term
"Competing Transaction" means the entering into by Impac of a binding agreement
to sell all or substantially all of the business, assets, capital stock or Units
of Impac or its subsidiaries, whether by merger, purchase of assets or
otherwise. The term "Change of Control" means either (a) a consensual merger,
consolidation, share exchange, business combination or similar consensual
transaction pursuant to which any person, or any "group" (as defined under
Section 13(d) of the Exchange Act) acquires more than 28% of the outstanding
shares of Servico Common Stock or (b) a sale, lease, exchange, transfer or other
disposition of all or substantially all of Servico's business in a single
transaction or series of related transactions.
CERTAIN BENEFITS MATTERS
Except as specifically set forth in the Merger Agreement, the employee
benefit plans of Servico and Impac covering employees or former employees in
effect as of the Effective Time will remain in effect, subject to their terms,
until Lodgian otherwise determines after the Effective Time. With respect to any
Servico Plan or benefit plan of Lodgian under which the delivery of Servico
Common Stock or Lodgian Common Stock, as the case may be, is required upon
payment of benefits, grant of awards or exercise of options (the "Stock Plans"),
Lodgian will take all corporate action necessary or appropriate to (i) obtain
shareholder approval with respect to such plan to the extent such approval is
required for purposes of the Code or other applicable law, or to enable such
plan to comply with Rule 16b- 3 of the Exchange Act, (ii) reserve for issuance
under such plan or otherwise provide a sufficient number of shares
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of Lodgian Common Stock for delivery upon payment of benefits, grant of awards
or exercise of options under such plan and (iii) as soon as practicable after
the Effective Time, file registration statements on Form S-3 or Form S-8, as
appropriate (or any successor or other appropriate forms), with respect to the
shares of Lodgian Common Stock subject to such plan to the extent such
registration statement is required under applicable law. Lodgian will also
reserve for issuance under the Lodgian 1998 Stock Incentive Plan that number of
shares of Lodgian Common Stock which equals seven and one-half percent (7 1/2%)
of the Base Number. Additionally, Mr. Cole will receive options to purchase two
and one-half percent (2 1/2%) of the Base Number pursuant to his employment
agreement with Lodgian. See "Interests of Certain Persons in the Merger." Such
options will be granted to employees of Impac or its subsidiaries effective as
of the closing date of the Merger Agreement and in the names and respective
allocations determined by the Lodgian Board after consideration of
recommendations from Robert Cole and the grants of stock options made to
employees in comparable positions at Servico and its subsidiaries. With respect
to those individuals who subsequent to the Merger will be subject to the
reporting requirements under Section 16(a) of the Exchange Act, Lodgian will
administer the Stock Plans, where applicable, in a manner that complies with
Rule 16b-3 promulgated under the Exchange Act.
INDEMNIFICATION AND INSURANCE
After the Effective Time, Lodgian will, and will cause the Surviving
Entities to, indemnify and hold harmless each present and former director,
manager, member, officer and agent of Servico and Impac (the "Indemnified
Parties"), against any costs or expenses (including attorneys' fees), judgments,
fines, losses, claims, damages, liabilities or amounts paid in settlement
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time, to the fullest extent that Servico or Impac would have been
permitted under Florida or Georgia law, as the case may be, and its articles of
incorporation, articles of organization, operating agreement or bylaws in effect
on the date hereof to indemnify such Indemnified Party (and Lodgian and the
Surviving Entities will also advance expenses as incurred to the fullest extent
permitted under applicable law, provided the Indemnified Party to whom expenses
are advanced provides an undertaking to repay such advances if it is ultimately
determined that such Indemnified Party is not entitled to indemnification).
For a period of six (6) years after the Effective Time, Lodgian will
maintain or cause the Surviving Entities to maintain (to the extent available in
the market) in effect a directors' and officers' liability insurance policy
covering those persons who are currently covered by a Servico or Impac
directors' and officers' liability insurance policy with coverage in amount and
scope at least as favorable as Servico's or Impac's existing coverage; provided,
however, in no event will Lodgian or the Surviving Entities be required to
expend in the aggregate in excess of 200% of the annual premium currently paid
by Servico or Impac for such coverage; and if such premium would at any time
exceed 200% of such amount, then Lodgian or the Surviving Entities will maintain
insurance policies which provide the maximum and best coverage available at an
annual premium equal to 200% of such amount.
CERTAIN CONDITIONS
CONDITIONS OF EACH PARTY'S OBLIGATIONS TO CONSUMMATE THE MERGER. The
obligations of each party to the Merger Agreement to consummate the Merger are
subject to the following: (a) the Registration Statement of which this Joint
Proxy Statement/Prospectus is a part shall have become effective and no stop
order suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and no proceedings therefor shall have been initiated by the
SEC and not concluded or withdrawn, (b) the Merger Agreement and the Merger
shall have been duly approved by the requisite vote of shareholders of Servico
and unitholders of Impac in accordance with applicable law, (c) no judicial or
administrative decision shall have been rendered, no law or regulation shall
have been enacted, and no litigation, arbitration or other proceeding shall be
pending or threatened, which enjoins, prohibits or materially restricts the
Merger or the transaction contemplated in the Merger Agreement, (d) any waiting
period applicable to the Merger under the HSR Act, or similar law shall have
elapsed, (e) all material governmental consents, approvals and authorizations
required to be obtained to consummate the Merger shall have been obtained, (f)
each of Ernst & Young L.L.P., Servico's independent public accountants, and
PricewaterhouseCoopers LLP, Impac's
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independent public accountants, shall have delivered their "comfort" letters to
Servico and Impac, and (g) the shares of Lodgian Common Stock to be issued
pursuant to the Merger Agreement shall have been authorized for listing on the
NYSE, subject to official notice of issuance.
ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF SERVICO. The obligations of
Servico to effect the Merger are further subject to all the following
conditions: (i) all representations and warranties of Impac and the Impac
Affiliated Companies contained in the Merger Agreement shall be true and correct
in all material respects as of the Effective Time (except for changes
contemplated or permitted by the Merger Agreement), (ii) Impac and the Impac
Affiliated Companies shall have performed or complied in all material respects
with all of the agreements, covenants and obligations required by the Merger
Agreement on or before the Effective Time, (iii) an Impac Material Adverse
Effect shall not have occurred (except as permitted by the Merger Agreement),
(iv) Servico shall have received an opinion from its counsel that the Merger
will be treated for federal income tax purposes as a reorganization qualifying
under the provisions of Section 368(a) of the Code, and that each of Servico,
Servico Merger Sub and Lodgian shall be a party to the reorganization within the
meaning of Section 368(b) of the Code, which opinion shall not have been
withdrawn or modified in any material respect, (v) Servico shall have received
from Powell Goldstein, legal counsel to Impac, an opinion letter with respect to
certain matters relating to the Merger and an opinion that no membership
interests or other securities issued by any Impac Affiliated Company, Impac or
its subsidiaries from the date of its organization to the date of the Merger
were issued in violation of the rules and regulations of the Securities Act or
any blue sky laws, (vi) each of Impac and the Impac Affiliated Companies shall
have delivered to Servico a certificate executed by its Manager and President,
certifying, among other things, that the conditions specified in (i) and (ii) of
this paragraph have been fulfilled and a Certificate of Secretary as to the
incumbency and signatures of the officers of Impac of each Impac Affiliated
Company, and a certificate of the Secretary of State of the State of Georgia and
each other state in which any Impac Affiliated Company, Impac or its
subsidiaries are qualified to do business, as to the good standing of each Impac
Affiliated Company, Impac and its subsidiaries, (vii) Impac shall have obtained
all other material authorizations, consents, waivers and approvals required to
consummate the Merger and enable the business and operations of Impac after
consummation of the Merger to continue to be conducted in the same manner
currently conducted, and (viii) Servico and Impac shall have received a
commitment, effective as of the closing date of the Merger Agreement, to
restructure the indebtedness of Impac and its subsidiaries.
ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF IMPAC AND THE IMPAC
AFFILIATED COMPANIES. The obligations of Impac and the Impac Affiliated
Companies to effect the Merger are further subject to all the following
conditions: (i) all representations and warranties of Servico contained in the
Merger Agreement shall be true and correct in all material respects as of the
Effective Time (except for changes contemplated or permitted by the Merger
Agreement), (ii) Servico shall have performed or complied in all material
respects with all of the agreements, covenants and obligations required by the
Merger Agreement on or before the Effective Time, (iii) a Servico Material
Adverse Effect shall not have occurred (except as permitted by the Merger
Agreement), (iv) Impac and the Impac Affiliated Companies shall have received an
opinion from its counsel that the Merger will be treated for federal income tax
purposes as a transfer of property described in Section 351 of the Code, with
respect to Impac and the IHD Merger, and, with respect to each of the Impac
Affiliated Companies except for IHD, as a reorganization qualifying under the
provisions of Section 368(a) of the Code, and that each of the Impac Affiliated
Companies, the Impac Affiliated Subs and Lodgian shall be a party to the
reorganization within the meaning of Section 368(b) of the Code, which opinion
shall not have been withdrawn or modified in any material respect, (v) Impac
shall have received from Stearns Weaver an opinion letter with respect to
certain matters relating to the Merger, (vi) Servico shall have delivered to
Impac a certificate executed by its Chairman and President, certifying, among
other things, that the conditions specified in clauses (i) and (ii) of this
paragraph have been fulfilled and a Certificate of Secretary as to the
incumbency and signatures of the officers of Servico, (vii) Servico shall have
obtained all other material authorizations, consents, waivers and approvals
required to consummate the Merger and enable the business and operations of
Servico after consummation of the Merger to continue to be conducted in the same
manner as currently conducted, and (viii) David A. Buddemeyer and Robert S. Cole
shall have been offered employment with Lodgian on designated terms.
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AMENDMENT AND WAIVER
The Merger Agreement may be amended in writing by the parties, by
action taken or authorized by Servico's Board of Directors or Impac's Manager,
but after approval by Servico shareholders and Impac unitholders, respectively,
no amendment shall be made which, by law, requires further approval without such
further approval.
At any time prior to the Merger, Servico (with respect to Servico and
Lodgian) or Impac by action taken or authorized by their respective Boards of
Directors or Manager may, to the extent legally allowed, (i) extend the time for
performance of any of the obligations or other acts of such party, (ii) waive
any inaccuracies in the representations and warranties contained in the Merger
Agreement or any document delivered pursuant thereto, and (iii) waive compliance
with any of the agreements or conditions contained therein, provided such waiver
or extension is set forth in a written instrument signed on behalf of such
party.
In the event that either Impac or Servico has the right to terminate
the Merger Agreement for any reason, the Servico Board or the Impac Manager, as
the case may be, may, in the exercise of its or his fiduciary duty, make a
determination whether to terminate the Merger Agreement or to waive the
condition that gives rise to such right to terminate the Merger Agreement and
proceed to the consummation of the Merger. If a determination is made to waive
the condition giving rise to such right to terminate and proceed to the
consummation of the Merger, the Servico Board or the Impac Manager, as the case
may be, will make a determination consistent with its or his legal obligations
and fiduciary duties as to whether or not to resolicit the approval of the
Servico shareholders or Impac unitholders. However, neither the Servico Board
nor the Impac Manager will waive any of the conditions included under
"Conditions of Each Party's Obligations to Consummate the Merger" or the receipt
of a tax opinion relating to the tax-free nature of the Merger.
TERMINATION
Prior to the Effective Time, the Merger Agreement may be terminated (i)
by Servico and Impac by mutual written consent, (ii) by either of Servico or
Impac, if (a) the Merger is not consummated on or before December 31, 1998 (the
"End Date") provided that the party wishing to terminate has not prevented such
consummation by failing to fulfill any of its obligations under the Merger
Agreement prior to the closing date, (b) any governmental, regulatory or
administrative authority or any court or arbitral body enters any order, decree
or ruling or takes any other action enjoining, restraining or otherwise
prohibiting the consummation of the Merger and such action is final and
nonappealable,(c) the requisite vote of the shareholders of Servico in favor of
the approval of the Merger is not obtained at the Servico Annual Meeting
(including any adjournments thereof), (d) a proposal for a Change of Control of
Servico is publicly announced and Servico's Board of Directors withdraws or
adversely modifies its recommendation to Servico's shareholders that they vote
in favor of the approval of the Merger (an "Adverse Recommendation") or Servico
chooses to enter into a definitive agreement for a Change of Control (the
"Change of Control Agreement"), or (e) after May 1, 1998, if the non-terminating
party (A) enters into active negotiations with any third party with respect to
any offer or proposal regarding a Change of Control of Servico or a Competing
Transaction with respect to Impac or (B) provides any third party with
non-public information concerning its business or assets with respect to any
offer or proposal described in (A) above, (iii) by Servico, if Impac or any
Impac Affiliated Company breaches or fails to comply in any material respect
with any of its obligations under the Merger Agreement or any representation or
warranty made by Impac or any Impac Affiliated Company in the Merger Agreement
is not true or correct in all material respects and such breach or
misrepresentation is not cured within fifteen (15) business days after notice
thereof, but in any event prior to the End Date, or (iv) by Impac, if (a)
Servico breaches or fails to comply in any material respect with any of its
obligations under the Merger Agreement or any representation or warranty made by
Servico in the Merger Agreement is not true or correct in all material respects
and such breach or misrepresentation is not cured within fifteen (15) business
days after notice thereof, but in no event prior to the End Date, or (b) from
the date of the Merger Agreement until the Effective Time, Servico notifies
Impac that it has determined to acquire hotels and related properties for an
aggregate purchase price of more than $100 million and Impac reasonably
determines that Servico's proposed acquisitions will result in a Servico
Material Adverse Effect or materially change the nature of Servico's operations
taken as a whole (provided that Impac so notifies Servico
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of its election to terminate within ten days after receipt of Servico's notice),
or (c) after May 1,1998, Servico is actively engaged in negotiating with any
person with which it has exchanged any non-public information under a
confidentiality agreement (a "Designated Person") during the period from January
1, 1998 to the date of the Merger Agreement with respect to any offer or
proposal involving a Change of Control of Servico.
TERMINATION FEES; EXPENSES
TERMINATION FEE PAYABLE BY SERVICO. The Merger Agreement obligates
Servico to pay to Impac (i) an amount equal to all reasonable costs and
out-of-pocket expenses (including reasonable attorneys' and advisors' fees) (the
"Transaction Expenses") of up to $2.5 million incurred by Impac in connection
with the Merger if the Merger Agreement is terminated pursuant to (A) an
intentional or willful breach of any representation, warranty or covenant
contained in the Merger Agreement (a "Willful Breach") by Servico, or (B) clause
(iv)(c) of the preceding paragraph; provided, however, that if, within twelve
(12) months after such termination of the Merger Agreement, Servico consummates
a Designated Change of Control (as defined below), then Servico will pay Impac
an amount equal to $15 million, in any such case, less any amounts previously
paid to Impac for Transaction Expenses described above; (ii) an amount equal to
$10 million if the Merger Agreement is terminated pursuant to clause (ii)(d) of
the preceding paragraph as a result of an Adverse Recommendation by the Servico
Board or Servico entering into a Change of Control Agreement, and within twelve
(12) months after such termination, such Change of Control is consummated; and
(iii) an amount equal to the Designated Change of Control Fee Structure if the
Merger Agreement is terminated by Servico pursuant to clauses (ii)(a) or (c) or
clause (iii) of the preceding paragraph (except for incorrect representations or
warranties or breaches which have or could reasonably result in an Impac
Material Adverse Effect, in which case no amount would be due), or by Impac
pursuant to clauses (ii)(c) or (iv)(a) (for a Willful Breach) or clause (ii)(d)
of the preceding paragraph, and, within twelve (12) months after such
termination, a Designated Change of Control is consummated. The term "Designated
Change of Control" means a Change of Control transaction involving a Designated
Person or its affiliates. A Designated Change of Control will not exist if, at
the time of termination, any event or condition has occurred which results in or
could reasonably be expected to result in an Impac Material Adverse Effect.
TERMINATION FEE PAYABLE BY IMPAC. The Merger Agreement obligates Impac
to pay to Servico an amount equal to all Transaction Expenses of up to $2.5
million incurred by Servico in connection with the Merger if the Merger
Agreement is terminated as the result of a Willful Breach by Impac; provided,
however, that if, within twelve (12) months after such termination of the Merger
Agreement, Impac or its subsidiaries consummate a Competing Transaction with any
party with or to which, prior to such termination, Impac or its subsidiaries,
directly or indirectly, (i) engaged in negotiations or discussions regarding a
potential Competing Transaction or (ii) provided (or provided access to)
non-public information concerning its business or assets, then Impac will pay
Servico an amount equal to $10 million, less any Transaction Expenses previously
paid to Servico.
TERMINATION FEE PAYABLE BY IMPAC OR SERVICO. The Merger Agreement
obligates either Servico or Impac, if the non-terminating party, to pay to the
terminating party an amount equal to the Transaction Expenses incurred by the
terminating party of up to $2.5 million, if the Merger Agreement is terminated
pursuant to clause (ii)(e) of the paragraph above under the caption
"Termination" (unless prior to such termination, the terminating party has also
provided non-public information concerning its business or assets to any third
party, in which case no reimbursement will be made); provided, however, that if,
within twelve (12) months after such termination (A) Impac or its subsidiaries
consummate a Competing Transaction with a third party, then Impac will pay to
Servico an amount equal to $10 million, and (B) if Servico consummates a Change
of Control with a third party, then Servico will pay to Impac $10 million, in
each case, less any amounts previously paid to such party for reimbursement of
Transaction Expenses as described above.
EXPENSES. Except as provided in the preceding two paragraphs, each of
Servico and Impac will bear its own costs and expenses incurred in connection
with the Merger Agreement and the transactions contemplated thereby, except that
any fee required to be paid in connection with the filing of premerger
notifications under the HSR Act will be shared equally by Servico and Impac.
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IMPAC VOTING AGREEMENTS
Pursuant to the Impac Voting Agreements among Servico and each of the
Cole Entities and other Impac unitholders, dated as of March 20, 1998, the
parties thereto, together owning approximately 55.9% of the outstanding Impac
Units, have agreed (i) subject to certain exceptions, not to sell or transfer
Impac Units held by them during the term of the Merger Agreement and (ii) to
vote such shares in favor of the Merger Agreement and the Merger and against any
Competing Transaction during the term of the Merger Agreement and for a one-year
period after termination of the Merger Agreement, if the Merger Agreement is
terminated by Servico as a result of a Willful Breach by Impac of any
representation, warranty or covenant contained in the Merger Agreement. Certain
Impac unitholders executing the Impac Voting Agreements have the limited right
to transfer Impac Units to their partners or equity holders during the term of
the Impac Voting Agreements so long as such transferees agree to be bound by the
terms of such Voting Agreements.
REGISTRATION RIGHTS AGREEMENT
Pursuant to a Registration Rights Agreement, Lodgian will grant certain
"piggy-back" registration rights to those unitholders of Impac and those
shareholders of the Impac Affiliated Companies who receive Lodgian Common Stock
in the Merger and who (i) as a result of the Merger, become subject to the
restrictions on the sale of such Lodgian Common Stock pursuant to Rule 145 of
the rules and regulations of the Securities Act and (ii) would be prohibited
from selling, over a twelve (12) month period, all of their respective shares of
Lodgian Common Stock so received in the Merger by virtue of the volume
limitations of Rule 145 (the "Affected Members"). The Registration Rights
Agreement provides that, if at any time prior to the date which is two years
from the closing date of the Merger Agreement, Lodgian proposes to register any
of its Lodgian Common Stock for its own account under the Securities Act, in
connection with an underwritten public offering, Lodgian will give prompt
written notice to the Affected Members of its intention to effect such a
registration. Upon written request of the Affected Members, given within ten
(10) days after receipt from Lodgian of such notice, Lodgian will, subject to
certain limitations, use its best efforts to cause the number of shares of
Lodgian Common Stock issued to the Affected Members in connection with the
Merger (the "Registerable Securities") referred to in the request (which may not
exceed 40% of the number of Registerable Securities then held by such Affected
Member) to be included in such registration statement. The obligations of
Lodgian to register any Registerable Securities are subject to certain
limitations, which include, among others, that Lodgian is not required to
register Registerable Securities in an amount in excess of 10% of the aggregate
number of shares of Lodgian Common Stock being offered in the registration, any
Affected Member participating in the offering must enter into an underwriting
agreement and Lodgian may withdraw or abandon any registration statement it has
filed in which Affected Members have requested to participate at any time.
Lodgian will indemnify any Affected Members from liabilities or claims against
the Affected Members as a result of any untrue statement in the registration
statement, prospectus or amendment thereof. The Affected Members have the same
indemnification obligation to Lodgian with respect to information concerning
such Members.
CONFLICTS OF INTEREST OF CERTAIN PERSONS IN THE MERGER
In considering the respective recommendations of the Servico Board and
the Impac Manager with respect to the Merger, shareholders of Servico and
unitholders of Impac should be aware that certain officers and directors of
Servico, the Manager and certain officers and unitholders of Impac have
interests in the Merger that are different from, or in addition to, the
interests of the shareholders of Servico and the unitholders of Impac generally.
CERTAIN ARRANGEMENTS REGARDING MANAGEMENT AND DIRECTORS OF LODGIAN
MANAGEMENT OF LODGIAN. The Merger Agreement provides that at the
Effective Time, subject to the Restated Bylaws of Lodgian, Mr. Buddemeyer will
hold the position of Chief Executive Officer of Lodgian and each of the
Surviving Entities, Mr. Cole will hold the position of President of Lodgian and
each of the Surviving Entities, and Mr. Buddemeyer and Mr. Cole will hold the
positions of Co-Chairmen of the Board of Directors of Lodgian and each of
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the Surviving Entities. All officers and agents appointed by the Lodgian Board
will be subject to removal, with or without cause, at any time by the Lodgian
Board or by action of the holders of a majority of the shares of Lodgian
entitled to vote thereon.
BOARD OF DIRECTORS. At the Effective Time, eight persons will serve on
the Lodgian Board, five of whom will be Servico Directors, two of whom will be
Impac Directors and one of whom will be selected by both Impac and Servico. The
Lodgian Board will be divided into three classes of directors as described above
in "The Merger Agreement--Lodgian Following the Merger."
ARRANGEMENTS WITH EXECUTIVE OFFICERS
Lodgian will enter into an employment agreement with each of Mr.
Buddemeyer, Servico's Chairman and President, and Mr. Cole, Impac's Manager, as
described below (collectively, the "Employment Agreements" and individually, the
"Employment Agreement").
EMPLOYMENT AGREEMENTS. Pursuant to Employment Agreements of Messrs.
Buddemeyer and Cole (the "Executives"), each will be required to devote his full
business time during normal business hours to the affairs of Lodgian with
exceptions made for personal, financial and legal affairs as well as
participation on corporate, civic or charitable boards or committees.
COMPENSATION. Messrs. Buddemeyer and Cole will receive annual
base salaries of $405,000 and $300,000, respectively, payable in equal bi-weekly
installments, subject to periodic increases. In addition, the Executives will be
eligible to participate in an annual bonus plan (which the parties intend to be
the Lodgian 1998 Short-Term Incentive Compensation Plan) providing each with the
opportunity to earn 100% of his base salary upon Lodgian achieving certain
financial targets. The Executives shall also be entitled to benefits provided
other executives, including (i) paid vacation, holidays and sick leave, (ii)
reimbursement of business expenses, and (iii) health, pension, welfare and other
benefits in accordance with Lodgian's policies. Lodgian will also assume an
option that was previously granted by Impac to Mr. Cole. Pursuant to the Merger
Agreement this option will be converted into an option to purchase 185,000
shares of Lodgian Common Stock to Impac Unitholders at an exercise price of
$17.75 per share (representing the market price of Servico Common Stock on the
date immediately preceding announcement of the Merger) vesting in annual
increments of 20% beginning on the first anniversary of the date of his
Employment Agreement and exercisable for a period of ten years.
TERMINATION OF EMPLOYMENT. Each of the Executives' employment
will terminate automatically upon his death. Lodgian may terminate an
Executive's employment upon his Disability (as defined below) by giving 90 days'
prior written notice. Under each Employment Agreement, Disability means (i) the
Executive's inability to perform his duties for a period of 90 days due to
accident, illness, or physical or mental incapacity; (ii) the inability to work
due to an impairment that may result in death or be of long duration; or (iii)
the Executive's entitlement to disability benefits under the Social Security Act
or Lodgian's long-term disability plan. Lodgian may also terminate an
Executive's employment either with or without "Cause". Under each Employment
Agreement, Cause means: (i) a failure or refusal by the Executive to perform his
duties under the Employment Agreement (other than a Disability), if such refusal
has lasted for at least 10 days after the delivery of a written demand by
Lodgian; (ii) the engagement by the Executive in willful misconduct or an act of
moral turpitude which is materially injurious to Lodgian; or (iii) the
conviction of the Executive or his entry of a plea of NOLO CONTENDERE with
respect to a felony.
Each Executive may terminate his employment for a "Good
Reason," which means: (i) Lodgian's diminution of his position and authority or
assignment to him of any responsibilities inconsistent with his position; (ii) a
reduction in his base salary or bonus, unless implemented across the board to
all senior executives; (iii) a relocation of the Executive's place of employment
of more than 50 miles; (iv) failure by Lodgian to pay any portion of the
Executive's compensation or provide agreed upon benefits; or (v) any termination
of the Executive's employment if not done with proper notice. The Executive may
also terminate his employment due to medical reasons which are made dangerous by
the Executive's duties, and the failure of Lodgian to comply with any material
provision of the
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Employment Agreement (which failure has not been cured within
ten (10) days after written notice of such noncompliance). The Executive may
also terminate his employment for any reason other than Good Reason by giving 60
days' written notice and cooperating with Lodgian to assure a smooth transition.
COMPENSATION UPON TERMINATION. In the event an Executive's
employment is terminated by Lodgian for Cause or by the Executive for other than
Good Reason or due to medical reasons which are made dangerous by the
Executive's duties, the Executive shall be paid only his base salary through the
date of termination. If the Executive's employment is terminated after a Change
in Control of Lodgian either by Lodgian without Cause or by the Executive for
Good Reason or as a result of Lodgian's failure to comply with a material
provision of the Employment Agreement, then Lodgian shall pay the Executive: (i)
his base salary through the date of termination; (ii) a lump sum payment of two
and one-half times the base salary; (iii) the greater of the annual bonus owed
and the average annual bonuses earned over the past three years; (iv) for a
period of one year, life insurance, medical, health and similar welfare plan
benefits, other than group disability benefits, reduced by any amount of
benefits provided by a later employer; and (v) the vesting of any outstanding
stock options. Under the Employment Agreement, a Change in Control includes: (i)
acquisition by any person of at least 40% of the total number of votes that may
be cast in an election for directors of Lodgian; (ii) shareholder approval of
certain business combinations or sales of assets; or (iii) if, within any
24-month period, the persons who were directors of Lodgian immediately prior to
the beginning of such period no longer constitute the majority of the board.
CONFIDENTIALITY AND NON-SOLICITATION COVENANTS. The Executives
will be subject to covenants with regard to maintaining confidential
information. Each Executive will also be subject to covenants prohibiting his
solicitation of Lodgian's prospective and existing business, clients or
employees for his own or competing business' benefit during his employment and
for one year following his termination.
TAX REIMBURSEMENT. Lodgian will pay each Executive an amount
to pay taxes on any amount or benefit paid to the Executive which becomes
subject to the tax imposed under Section 4999 of the Code (the "Excise Tax").
Determining which amounts or benefits shall be subject to reimbursement will be
done by Lodgian's accountants in accordance with Section 280G of the Code. This
determination shall be subject to adjustments due to subsequent events affecting
the calculation of the amount of taxes owed.
STOCK OPTIONS AND OTHER EQUITY AWARDS. The Merger Agreement provides
that, at the Effective Time, each stock option granted by Servico to purchase
shares of Servico Common Stock which is outstanding and unexercised immediately
prior to the Effective Time will be assumed by Lodgian and converted into an
option to purchase shares of Lodgian Common Stock in such amount and at such
exercise price as provided below and otherwise having the same terms and
conditions as are in effect immediately prior to the Effective Time (except to
the extent that such terms, conditions and restrictions may be altered in
accordance with their terms as a result of the Merger). No outstanding option to
purchase Servico Common Stock or other equity compensation award will accelerate
as a result of the Merger. The number of shares of Lodgian Common Stock to be
subject to the new option will be equal to the number of shares subject to the
original option. The exercise price per share of Lodgian Common Stock under the
new option will be equal to the exercise price per share of the original option.
In addition, at the Effective Time, each outstanding stock appreciation right
issued by Servico which is outstanding will be assumed by Lodgian and converted
into a stock appreciation right with respect to shares of Lodgian Common Stock
otherwise having the same terms, conditions and restrictions as are in effect
immediately prior to the Effective Time (except to the extent that such terms,
conditions and restrictions may be altered in accordance with their terms as a
result of the Merger).
The Merger Agreement provides that Lodgian will reserve for issuance,
under the Lodgian 1998 Stock Incentive Plan, options to acquire approximately
555,000 shares of Lodgian Common Stock, which will be granted to certain
employees of Impac or its subsidiaries. Such options will be granted effective
as of the closing date of the Merger based on allocations determined by the
Lodgian Board after consideration of recommendations from Mr. Cole and the stock
options held by employees in comparable positions at Servico and its
subsidiaries.
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DEVELOPMENT AGREEMENTS
Mr. Cole was one of three shareholders of IHD, which provided
acquisition and property development services to Impac for a development fee of
four percent of the total project cost of each property acquired or developed.
Impac agreed to terminate this agreement prior to the consummation of the Merger
so that Impac and its subsidiaries will have no further obligations under the
agreement after the Merger other than the payment of up to a four percent
development fee (not to exceed $2.5 million in the aggregate) in the event
Lodgian acquires any of the hotels or properties identified in the Merger
Agreement as Impac's acquisition pipeline. IHD assigned this right to a newly
formed entity controlled by its three shareholders.
IHD has contracted with Elegant Interiors, LLC ("Elegant"), an entity
wholly owned by Sheila Lang (the spouse of John Lang) to provide interior design
consulting services. Since January 1, 1997, IHD has paid approximately $642,000
to Elegant, and in the event IHD, or its assignee, receives payment of the
above-referenced development fees, Elegant will be paid accrued consulting fees
(not to exceed $250,000) with respect to any of the hotels or properties
identified in the Merger Agreement as being in Impac's acquisition pipeline.
REGISTRATION RIGHTS AGREEMENT
Pursuant to a Registration Rights Agreement, Lodgian will grant certain
"piggy-back" registration rights to those unitholders of Impac and shareholders
of the Impac Affiliated Companies who receive Lodgian Common Stock in the Merger
and who (i) as a result of the Merger, become subject to the restrictions on the
sale of such Lodgian Common Stock pursuant to Rule 145 of the rules and
regulations of the Securities Act and (ii) would be prohibited from selling,
over a 12 month period, all of their respective shares of Lodgian Common Stock
so received in the Merger by virtue of the volume limitations set forth in Rule
145. See "The Merger Agreement -- Registration Rights Agreement."
INDEMNIFICATION AND INSURANCE
Lodgian is required by the Merger Agreement to provide indemnification
and liability insurance for officers and directors of Servico and Impac. See
"The Merger Agreement -- Indemnification and Insurance."
RELEASE OF GUARANTEES
Lodgian is required by the Merger Agreement to use its reasonable
efforts (without the requirement to pay any fee or adversely modify the terms of
any agreement) to obtain a release of any individuals from liability as a
guarantor of Impac's or any Impac subsidiary's obligations to third parties
under certain franchise agreements. In any event, Lodgian has agreed to
indemnify and hold harmless each such individual guarantor from and against any
liability such guarantor may incur after the Effective Time under such
guarantees as a result of Impac's or any Impac subsidiary's failure to satisfy
its obligations under such franchise agreements or related documentation.
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MARKET PRICE AND DIVIDEND DATA
As of June 30, 1998, there were approximately 3,000 holders of record
of Servico Common Stock. As of June 30, 1998, there were approximately 121
unitholders of record of the Impac Units. There was one holder of record as of
such date of the Class B Interest of Impac, which will be canceled upon the
consummation of the Merger.
The market prices for Servico Common Stock shown below are historical
market prices for such Common Stock and are not indicative of the market value
of Lodgian or the trading prices for Lodgian Common Stock following the Merger.
Lodgian is a newly formed company with no operating history and no securities of
Lodgian have previously been publicly traded. Consequently, there has been no
trading activity with regard to Lodgian Common Stock. Application will be made
to list the shares of Lodgian Common Stock on the NYSE.
It is currently anticipated that Lodgian will retain any future
earnings for use in its business. The Board of Directors of Lodgian will
determine future dividend policies based on Lodgian's financial condition,
profitability, cash flow and capital requirements, among other factors, and
subject to any applicable restrictions on the payment of dividends.
SERVICO
Servico Common Stock is listed and principally traded on the NYSE. Its
ticker symbol is "SER". The table below sets forth, for the calendar quarters
indicated, the high and low sale prices of Servico Common Stock as reported on
the NYSE.
<TABLE>
<CAPTION>
SERVICO COMMON STOCK
---------------------
HIGH LOW
---- ---
($ PER SHARE)
1996
- ----
<S> <C> <C>
First Quarter.................................................. 13 7/8 10 1/2
Second Quarter................................................. 16 1/2 11 3/4
Third Quarter.................................................. 17 13 1/2
Fourth Quarter................................................. 17 1/4 14 1/2
1997
- ----
First Quarter.................................................. 20 1/2 16
Second Quarter................................................. 17 5/8 13 3/4
Third Quarter.................................................. 18 3/8 14 1/4
Fourth Quarter................................................. 19 14
1998
- ----
First Quarter.................................................. 21 1/4 15 1/4
Second Quarter................................................. 22 1/2 15 1/16
Third Quarter (through July __, 1998)..........................
</TABLE>
The last sale price of Servico Common Stock as reported on the NYSE on
(i) March 20, 1998, the last full trading day prior to Servico's and Impac's
public announcement of the execution of the Merger Agreement, was $17.75 per
share and (ii) July __, 1998, the last full trading day prior to the date of
this Joint Proxy Statement/Prospectus, was $___________ per share.
YOU ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SERVICO
COMMON STOCK.
Servico has not paid any dividends since its reorganization in 1992 and
has no current plans to initiate the payment of dividends.
-62-
<PAGE> 81
IMPAC
The Impac units are not reported on any national quotation system and
there is no established public trading market thereon.
The table below sets forth, for the calendar quarters indicated, the
aggregate distributions paid by the predecessors of Impac to their respective
shareholders and partners and Impac to its unitholders from available cash flow
and proceeds from the sale of properties. Distributions per Impac Unit is not
necessarily comparable to dividends/distributions to predecessors, shareholders
and partners because of changes in the composition of the predecessors from year
to year and the fact that the timing and nature of distributions were specific
to each predecessor and its respective operations.
<TABLE>
<CAPTION>
IMPAC DIVIDENDS/
DISTRIBUTIONS
(IN THOUSANDS)
---------------
<S> <C>
1995
- ----
First Quarter............................................................... $ 1,322
Second Quarter.............................................................. 6,924
Third Quarter............................................................... 1,022
Fourth Quarter.............................................................. 1,117
-------
Total.................................................................. $10,385
1996
- ----
First Quarter............................................................... $ 3,076
Second Quarter.............................................................. 13,224
Third Quarter............................................................... 11,320
Fourth Quarter.............................................................. 1,144
-------
Total.................................................................. $28,764
1997
- ----
First Quarter............................................................... $ 257
Second Quarter.............................................................. 1,994
Third Quarter............................................................... 1,580
Fourth Quarter.............................................................. 3,788
-------
Total.................................................................. $ 7,619
1998
- ----
First Quarter............................................................... $ -
Second Quarter.............................................................. $ -
</TABLE>
-63-
<PAGE> 82
LODGIAN, INC.
UNAUDITED PRO FORMA COMBINED CONSOLIDATED
FINANCIAL STATEMENTS
The following unaudited pro forma combined consolidated financial
statements of Lodgian give effect to the offering by Servico of the $175 million
of convertible trust preferred securities (the "Offering") and the Merger with
Servico acquiring Impac and IHD using the purchase method of accounting, after
giving effect to the pro forma adjustments described in the accompanying notes
and in the pro forma financial statements and accompanying notes thereto of
Servico and Impac and IHD (excluding the Merger) set forth or incorporated by
reference in this Joint Proxy Statement/Prospectus. The unaudited pro forma
combined consolidated financial statements have been prepared in accordance with
GAAP and should be read in conjunction with the historical consolidated and
combined financial statements of Servico and Impac and IHD including the notes
thereto, the pro forma financial statements of Servico and Impac and IHD
(excluding the Merger) and other financial information of Servico and Impac and
IHD included elsewhere in or incorporated by reference in this Joint Proxy
Statement/Prospectus.
The accompanying unaudited pro forma information is presented for
illustrative purposes only and is based on certain assumptions and adjustments
described in the pro forma financial statements of Servico and Impac and IHD
(excluding the Merger). Such information is not necessarily indicative of the
operating results or financial position that would have occurred had the Merger
been consummated at the dates indicated, nor is it necessarily indicative of
future operating results or financial position of the combined companies. No
effect has been given in the unaudited pro forma combined consolidated financial
statements for operating and synergistic benefits that may be realized through
the Merger. In addition, the unaudited pro forma combined consolidated financial
statements do not reflect any of the initial, non-recurring costs associated
with the Merger, which costs are not currently estimatable.
In the Merger, each issued and outstanding share of Servico Common
Stock will be converted into the right to receive one share of Lodgian Common
Stock and each issued and outstanding Impac Unit will be converted into the
right to initially receive .519 shares of Lodgian Common Stock, assuming the
average price of Servico Common Stock is at least $14.00 per share and not more
than $25.00 per share during the specified ten-day period prior to the Merger
and the same number of Units remain outstanding at the Effective Time.
Additionally, Impac unitholders and Impac Affiliated Company shareholders will
receive an incremental portion of an aggregate of 1.4 million shares of Lodgian
Common Stock which will be released from escrow upon the achievement of certain
events as described in the Merger Agreement. See "The Merger--Consideration to
be Received in the Merger."
The accompanying unaudited Pro Forma Combined Consolidated Balance
Sheet gives effect to the Offering and the Merger as if they had occurred on
March 31, 1998, combining the pro forma consolidated balance sheet of Servico
and the historical balance sheet of Impac at March 31, 1998. The accompanying
unaudited Pro Forma Combined Consolidated Statement of Operations gives effect
to the Offering and the Merger as if they had occurred on January 1, 1997.
THE UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS DO
NOT PURPORT TO REPRESENT WHAT THE FINANCIAL POSITION OR RESULTS OF OPERATIONS OF
LODGIAN, SERVICO OR IMPAC WOULD ACTUALLY HAVE BEEN IF THE OFFERING OR THE MERGER
HAD IN FACT OCCURRED ON THE DATES INDICATED OR TO PROJECT THE FINANCIAL POSITION
OR RESULTS OF OPERATIONS FOR ANY FUTURE DATE OR PERIOD.
-64-
<PAGE> 83
LODGIAN, INC.
UNAUDITED PRO FORMA COMBINING BALANCE SHEET
MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
IMPAC HOTEL
PRO FORMA GROUP, L.L.C.
SERVICO, INC. AND
AND IMPAC HOTEL PRO FORMA PRO FORMA
SUBSIDIARIES DEVELOPMENT, INC. ADJUSTMENTS(A) COMBINED
------------ ----------------- ----------------- --------------
ASSETS
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 15,167 $ 1,572 $ - $ 16,739
Cash, restricted - 3,590 - 3,590
Accounts receivable, net of allowances 15,378 10,733 - 26,111
Other receivables 1,988 - - 1,988
Inventories 4,931 607 1,960 (B) 7,498
Deferred income taxes 2,254 - - 2,254
Other current assets 9,027 3,796 - 12,823
-------- --------- --------- ----------
Total current assets 48,745 20,298 1,960 71,003
Property and equipment, net 576,175 399,348 133,284 (B) 1,108,807
Deposits for capital expenditures 38,605 - - 38,605
Investment in unconsolidated entities 1,018 - - 1,018
-------- --------- --------- ----------
Other assets, net 33,257 14,135 (13,600) (B) 33,792
-------- --------- --------- ----------
$697,800 $433,781 $ 121,644 $1,253,225
======== ========= ========= ==========
LIABILITIES AND STOCKHOLDERS'
AND MEMBERS' EQUITY
Current liabilities:
Accounts payable $ 10,640 $ 15,358 $ - $ 25,998
Accrued liabilities 32,023 9,405 - 41,428
Current portion of long-term obligations 5,530 - - 5,530
-------- --------- --------- ----------
Total current liabilities 48,193 24,763 - 72,956
Long-term obligations, less current portion 208,318 377,427 - 585,745
Deferred income taxes 11,116 - 45,000 (B) 56,116
Commitments and contingencies
Minority interests 13,881 235 - 14,116
Minority interest-preferred redeemable
securities 175,000 - - 175,000
Stockholders' and members' equity:
Common stock 210 - 60 (B) 270
Additional paid-in capital 211,906 - 107,940 (B) 319,846
Retained earnings 29,176 - - 29,176
Members' equity 31,356 (31,356) (B) -
-------- --------- --------- ----------
Total stockholders' and members' equity 241,292 31,356 76,644 349,292
-------- --------- --------- ----------
$697,800 $433,781 $ 121,644 $1,253,225
======== ========= ========= ==========
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
-65-
<PAGE> 84
LODGIAN, INC.
UNAUDITED PRO FORMA COMBINING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA PRO FORMA PRO FORMA
SERVICO IMPAC ADJUSTMENTS(A) COMBINED
--------- --------- -------------- --------
<S> <C> <C> <C> <C>
Revenues:
Rooms $220,754 $105,716 $ - $326,470
Food and beverage 94,774 26,545 - 121,319
Other 18,812 7,369 - 26,181
-------- -------- ------- --------
334,340 139,630 - 473,970
Operating expenses:
Direct:
Rooms 59,651 32,414 - 92,065
Food and beverage 72,146 22,097 - 94,243
General and administrative 8,973 12,653 - 21,626
Other 110,222 51,231 - 161,453
Depreciation and amortization 26,663 12,173 4,319 (C) 43,155
-------- -------- ------- --------
277,655 130,568 4,319 412,542
Income from operations 56,685 9,062 (4,319) 61,428
Other income (expenses):
Interest income and other 1,869 271 - 2,140
Interest expense (15,006) (24,028) - (39,034)
Minority interests-preferred
redeemable securities (12,794) - - (12,794)
Minority interests-other (779) 263 - (516)
-------- -------- ------- --------
Income (loss) before income
taxes and extraordinary item 29,975 (14,432) (4,319) 11,224
Provision for or (benefit from)
income taxes 11,993 (5,773) (1,728) (D) 4,492
Income (loss) before extraordinary item $ 17,982 $ (8,659) $(2,591) $ 6,732
-------- -------- ------- --------
Earnings per common share(E):
Income (loss) before
extraordinary item $ .86 $ .25
======== ========
Earnings per common share-
assuming dilution (E):
Income (loss) before
extraordinary item $ .84 $ .25
======== ========
Basic weighted average shares 20,918 26,918
Diluted weighted average shares 21,375 27,375
</TABLE>
-64-
<PAGE> 85
LODGIAN, INC.
UNAUDITED PRO FORMA COMBINING STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
PRO FORMA IMPAC AND PRO FORMA PRO FORMA
SERVICO IHD ADJUSTMENTS(A) COMBINED
--------- ---------- -------------- ---------
<S> <C> <C> <C> <C>
Revenues:
Rooms $55,833 $25,892 $ - $ 81,725
Food and beverage 22,146 6,861 - 29,007
Other 4,902 1,818 - 6,720
------- ------- ------- --------
82,881 34,571 - 117,452
Operating expenses:
Direct:
Rooms 15,509 6,815 - 22,324
Food and beverage 17,647 5,501 - 23,148
General and administrative 2,387 2,777 - 5,164
Other 2,760 13,848 - 41,498
Depreciation and amortization 7,207 3,681 1,001 (C) 11,889
------- ------- ------- --------
70,400 32,622 1,001 104,023
<S> <C> <C> <C> <C>
Income from operations 12,481 1,949 (1,001) 13,429
Other income (expenses):
Interest income and other 454 143 - 597
Interest expense (4,229) (6,751) - (10,980)
Minority interests-preferred
redeemable securities (3,198) - - (3,198)
Minority interests-other (94) (48) - (142)
Income (loss) before income taxes
and extraordinary item 5,414 (4,707) (1,001) (294)
Provision for or (benefit from)
income taxes 2,167 - (2,283) (D) (116)
------- ------- ------- --------
Income (loss) before extraordinary item $ 3,247 $(4,707) $ 1,282 $ (178)
======= ======= ======= ========
Earnings per common share(E):
Income (loss) before
extraordinary item $ .15 $ (.01)
======= ========
Earnings per common share-assuming
dilution (E):
Income (loss) before
extraordinary item $ .15 $ (.01)
======= ========
Basic weighted average shares 20,989 26,989
Diluted weighted average shares 21,437 27,437
</TABLE>
-67-
<PAGE> 86
LODGIAN, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(A) The unaudited pro forma balance sheet of Servico as of March 31, 1998 and
the unaudited pro forma statements of income of Servico for the year ended
December 31, 1997 and the three months ended March 31, 1998, were derived
from Servico's pro forma financial information provided herein. The
unaudited historical balance sheet of Impac as of March 31, 1998, the
unaudited pro forma statement of operations of Impac for the year ended
December 31, 1997 and the unaudited historical statement of operations of
Impac for the three months ended March 31, 1998, were derived from Impac's
financial information provided herein in this Joint Proxy
Statement/Prospectus. The pro forma adjustments to the balance sheet
assume the Offering and the Merger were completed on March 31, 1998, and
the pro forma adjustments to the statements of operations assume the
Offering and the Merger had occurred on January 1, 1997.
(B) The preliminary purchase price of Impac to be paid by Servico is estimated
to be $555,425 consisting of the issuance of 6,000,000 shares of stock at
$18 per share plus the assumption of $447,425 of existing Impac debt and
deferred income taxes. The allocation of the preliminary purchase price is
as follows (in thousands):
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
FAIR VALUE IMPAC ADJUSTMENTS
---------- ---------- -----------
<S> <C> <C> <C>
ASSETS:
Current assets $ 22,258 $ 20,298 $ 1,960
Property and equipment 532,632 399,348 133,284
Other assets 535 14,135 (13,600)*
-------- -------- --------
$555,425 $433,781 $121,644
======== ======== ========
LIABILITIES AND EQUITY:
Current liabilities $ 24,763 $ 24,763 $ -
Long-term obligations 377,427 377,427 -
Deferred income taxes 45,000 - 45,000
Minority interests 235 235 -
Common stock 60 - 60
Additional paid-in capital 107,940 - 107,940
Members' equity - 31,356 (31,356)
-------- -------- --------
$555,425 $433,781 $121,644
======== ======== ========
</TABLE>
- --------------------
* Primarily deferred loan costs.
(C) Depreciation expense is recorded to reflect the costs associated with the
acquired assets. The allocation of the cost of acquired assets between
land, buildings and furnishings and equipment is based on the assets'
estimated fair value. Depreciation expense of buildings and furnishings
and equipment is based upon an estimated life of 40 and 7 years,
respectively. Depreciation expense is calculated on a straight line basis.
(D) Benefit from income taxes in the pro forma adjustments is recorded using
Servico's effective tax rate of 40%.
(E) The following table sets forth the pro forma computation of basic and
diluted earnings per share (in thousands, except per share data):
-68-
<PAGE> 87
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -----------------
<S> <C> <C>
Numerator-basic and diluted per share:
Income before extraordinary items $ (178) $ 6,732
------- -------
Denominator:
Denominator for basic earnings per share-
weighted average shares(a) 26,989 26,918
Effect of dilutive securities:
Employee stock options 448 457
Denominator for diluted earnings per share-
adjusted weighted average shares and
assumed conversions 27,437 27,375
======= =======
Basic earnings per share $ (.01) $ .25
Diluted earnings per share $ (.01) $ .25
</TABLE>
- ------------------
(a) Includes 6,000 shares issued in connection with the Merger.
-69-
<PAGE> 88
SERVICO, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
FOR THE OFFERING, EXCLUDING THE MERGER
The accompanying unaudited pro forma balance sheet is presented as if
the Offering had occurred on March 31, 1998. The accompanying unaudited pro
forma statements of income are presented as if the Offering and the hotels
acquired by Servico in 1997 and the shares of Common Stock issued by Servico in
a public underwriting offering completed in June 1997, had occurred on January
1, 1997. All of Servico's acquisitions have been accounted for using the
purchase method of accounting. Accordingly, assets acquired and liabilities
assumed have been recorded at their estimated fair values based on their
purchase price and other analyses.
The pro forma statements of income do not purport to present the
financial position or results of operations of Servico had the transactions and
events assumed therein occurred on the dates specified, nor is it necessarily
indicative of the results of operations that may be achieved in the future. The
pro forma statements of income do not reflect cost savings and revenue
enhancements which management believes have been and may continue to be realized
following the hotel acquisitions. These cost savings and revenue enhancements
have been and are expected to be realized primarily through the restructuring of
operations. No assurances can be made as to the amount of cost savings or
revenue enhancements, if any, that actually will be realized.
The pro forma statements of income are based on certain assumptions and
adjustments described in the Notes to Unaudited Pro Forma Financial Statements
and should be read in conjunction therewith and with the consolidated financial
statements and related notes thereto of Servico incorporated by reference in
this Joint Proxy/Prospectus Statement.
-70-
<PAGE> 89
SERVICO, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
SERVICO ADJUSTMENTS(A) SERVICO
---------- -------------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 15,167 $ - $ 15,167
Accounts receivable, net of allowances 15,378 - 15,378
Other current assets 18,200 - 18,200
-------- --------- --------
Total current assets 48,745 - 48,745
Property and equipment, net 576,175 - 576,175
Deposits for capital expenditures 38,605 - 38,605
Other assets, net 31,329 2,946 34,275
-------- --------- --------
$694,854 $ 2,946 $697,800
======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,640 $ - $ 10,640
Accrued liabilities 33,455 (1,432) 32,023
Current portion of long-term obligations 5,530 - 5,530
Total current liabilities 49,625 (1,432) 48,193
Long-term obligations, less current portion 376,793 (168,475) 208,318
Deferred income taxes 11,116 - 11,116
Commitments and contingencies
Minority interests-other 13,881 - 13,881
Minority interests-preferred redeemable
securities - 175,000 175,000
Stockholders' equity:
Common stock, $.01 par value--25,000,000
shares authorized; 21,074,872 shares and
20,974,852 shares issued and outstanding
at March 31, 1998 and December 31, 1997,
respectively 210 - 210
Additional paid-in capital 211,906 - 211,906
Retained earnings 31,323 (2,147) 29,176
-------- -------- --------
Total stockholders' equity 243,439 (2,147) 241,292
-------- -------- --------
$694,854 $ 2,946 $697,800
======== ======== ========
</TABLE>
-71
<PAGE> 90
SERVICO, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
SERVICO ADJUSTMENTS(B) SERVICO
---------- -------------- ---------
<S> <C> <C> <C>
Revenues:
Rooms $179,956 $ 40,798 $220,754
Food and beverage 80,335 14,439 94,774
Other 16,366 2,446 18,812
-------- -------- --------
276,657 57,683 334,340
Operating expenses:
Direct:
Rooms 49,608 10,043 59,651
Food and beverage 60,919 11,227 72,146
General and administrative 8,973 - 8,973
Other 88,036 22,186 110,222
Depreciation and amortization 23,023 3,640 (C) 26,663
-------- -------- --------
230,559 47,096 277,655
-------- -------- --------
Income from operations 46,098 10,587 56,685
Other income (expenses):
Interest income and other 1,720 149 1,869
Interest expense (25,909) 10,903 (D) (15,006)
Minority interests-preferred
redeemable securities - (12,794) (E) (12,794)
Minority interests-other (960) 181 (779)
-------- -------- --------
Income before income taxes and
extraordinary item 20,949 9,026 29,975
Provision for income taxes 8,379 3,614 (F) 11,993
-------- -------- --------
Income before extraordinary item $ 12,570 $ 5,412 $ 17,982
======== ======== ========
Earnings per common share(G):
Income before extraordinary item $ .83 $ .86
======== ========
Earnings per common share-assuming dilution(G):
Income before extraordinary item $ .80 $ .84
======== ========
Basic weighted average shares 15,183 20,918
Diluted weighted average shares 15,640 21,375
</TABLE>
-72-
<PAGE> 91
SERVICO, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
SERVICO ADJUSTMENTS(B) SERVICO
---------- -------------- ---------
<S> <C> <C> <C>
Revenues:
Rooms $ 55,833 $ - $ 55,833
Food and beverage 22,146 - 22,146
Other 4,902 - 4,902
-------- -------- --------
82,881 - 82,881
Operating expenses:
Direct:
Rooms 15,509 - 15,509
Food and beverage 17,647 - 17,647
General and administrative 2,387 - 2,387
Other 27,650 - 27,650
Depreciation and amortization 7,207 - 7,207
-------- -------- --------
70,400 - 70,400
-------- -------- --------
Income from operations 12,481 - 12,481
Other income (expenses):
Interest income and other 454 - 454
Interest expense (7,846) 3,617 (H) (4,229)
Minority interests-preferred
redeemable securities - (3,198) (E) (3,198)
Minority interests-other (94) - (94)
-------- -------- --------
Income before income taxes 4,995 419 5,414
Provision for income taxes 1,999 168 (F) 2,167
Net income $ 2,996 $ 251 $ 3,247
======== ======== ========
Income per common share(G) $ .14 $ .15
======== ========
Income per common share-assuming
dilution (G) $ .14 $ .15
======== ========
Basic weighted average shares 20,989 20,989
Diluted weighted average shares 21,437 21,437
</TABLE>
-73-
<PAGE> 92
SERVICO, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA STATEMENT OF INCOME
(A) The Offering of $175 million of preferred redeemable securities will
generate $168.5 million of net proceeds which will be used to repay, prior
to maturity, $168.5 million of existing long-term obligations. In
connection with the early extinguishment of this debt the Company will
write off $3.5 million of deferred loan costs and record, as an
extraordinary item, a loss of $2.1 million, net of a benefit from income
taxes of $1.4 million. The discounts, commissions and estimated costs to
be paid by the Company relating to the Offering totaling $6.5 million will
be amortized over the life of the securities and recorded as additional
interest expense.
(B) The historical statement of income of Servico for the year ended
December 31, 1997 includes the operations of the various properties that
it acquired during 1997 from the date of the acquisition through December
31, 1997, and the effect of the common stock offering Servico completed in
June 1997.
The pro forma adjustments include operations of the acquired properties
from the beginning of 1997 through the date of acquisition as follows:
Holiday Inn Select, Phoenix February 28 (i)
Holiday Inn, Manhattan February 28 (i)
Holiday Inn, Lawrence February 28 (i)
Crowne Plaza, Cedar Rapids May 29
Holiday Inn, Dallas July 15
Sheraton, Concord September 24
Holiday Inn Select, Windsor October 3
Comfort Inn, Roseville October 17
Holiday Inn, Jamestown November 7
Hilton, Columbia November 7
Ramada, Houston November 21
Sheraton, West Palm Beach November 21
Holiday Inn, Silver Spring November 21
Holiday Inn, Rolling Meadows November 21
Holiday Inn, Winter Haven November 21
- ----------------------------
(i) Ownership percentage increased from 51% to 100%
(C) Depreciation expense is recorded to reflect the costs associated with the
acquired assets. The allocation of the cost of acquired assets between
land and building is based on the asset's estimated fair value.
(D) Interest expense of $5.8 million is based upon actual debt levels incurred
to purchase each property offset by $5.6 million relating to debt
extinguishment on 21 hotels using the proceeds of the common stock
offering and $8.3 million relating to the existing debt being repaid with
the proceeds of the Offering.. In addition, interest expense has been
reduced by $2.8 million representing amortized loan costs which would have
been written off at the beginning of the year.
(E) Minority interests - preferred redeemable securities represents interest
on the $175 million at 7.0% plus amortization of the Offering costs.
(F) To record the provision for income taxes relating to the pro forma
adjustments using Servico's effective tax rate of 40%.
(G) The following table sets forth the pro forma computation of basic and
diluted earnings per share (in thousands, except per share data):
-74-
<PAGE> 93
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -----------------
<S> <C> <C>
Numerator - basic and diluted per share:
Income before extraordinary items $ 3,247 $17,982
Denominator:
Denominator for basic earnings per share-
weighted average shares 20,989 20,918
Effect of dilutive securities:
Employee stock options 448 457
Denominator for diluted earnings per share-
adjusted weighted average shares and
assumed conversions 21,437 21,375
Basic earnings per share $ .15 $ .86
Diluted earnings per share $ .15 $ .84
</TABLE>
(H) Interest expense for the three months ended March 31, 1998 is reduced by
$3.3 million relating to the existing debt being repaid with the proceeds
of the Offering and $.3 million relating to amortized loan costs which
would have been written off prior to 1998.
-75-
<PAGE> 94
IMPAC HOTEL GROUP, L.L.C. AND PREDECESSORS AND
IMPAC HOTEL DEVELOPMENT, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
EXCLUDING THE MERGER
The accompanying unaudited pro forma statement of operations is
presented as if the hotels acquired by Impac during 1997 had occurred on January
1, 1997. All of Impac's acquisitions have been accounted for using the purchase
method of accounting. Accordingly, assets acquired and liabilities assumed have
been recorded at their estimated fair values based on their purchase price and
other analyses, with appropriate recognition given to the effect of current
interest rates.
The pro forma statement of operations does not purport to present the
financial position or results of operations of Impac and IHD had the
transactions and events assumed therein occurred on the dates specified, nor is
it necessarily indicative of the results of operations that may be achieved in
the future. The pro forma statement of operations does not reflect cost savings
and revenue enhancements that management believes have been and may continue to
be realized following the hotel acquisitions. These cost savings and revenue
enhancements have been and are expected to be realized primarily through the
restructuring of operations. No assurances can be made as to the amount of cost
savings or revenue enhancements, if any, that actually will be realized.
The pro forma statement of operations is based on certain assumptions
and adjustments described in the Notes to the Unaudited Pro Forma Statement of
Operations and should be read in conjunction therewith and with the consolidated
and combined financial statements and related notes thereto of Impac and IHD
appearing elsewhere in this Joint Proxy Statement/Prospectus.
-76-
<PAGE> 95
IMPAC HOTEL GROUP, L.L.C. AND PREDECESSORS AND
IMPAC HOTEL DEVELOPMENT, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
IMPAC ADJUSTMENTS(A) IMPAC
---------- -------------- ---------
<S> <C> <C> <C>
Revenues:
Rooms $ 90,139 $ 15,577 $105,716
Food and beverage 23,429 3,116 26,545
Other 6,291 1,078 7,369
-------- -------- --------
119,859 19,771 139,630
Operating expenses:
Direct:
Rooms 28,303 4,111 32,414
Food and beverage 19,322 2,775 22,097
General and administrative 11,467 1,186 12,653
Other 44,946 6,285 51,231
Depreciation and amortization 11,136 1,037 (B) 12,173
-------- -------- --------
115,174 15,394 130,568
-------- -------- --------
Income from operations 4,685 4,377 9,062
Other income (expenses):
Interest income and other 271 - 271
Interest expense (21,265) (2,763) (C) (24,028)
Minority interests 220 43 263
-------- -------- --------
(Loss) income before income taxes
and extraordinary item (16,089) 1,657 (14,432)
Benefit from income taxes - 5,773 (D) 5,773
-------- -------- --------
(Loss) income before extraordinary item $(16,089) $ 7,430 $ (8,659)
======== ======== ========
</TABLE>
-77-
<PAGE> 96
IMPAC HOTEL GROUP, L.L.C. AND PREDECESSORS
AND IMPAC HOTEL DEVELOPMENT, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(A) The historical statement of operations of Impac includes the operations of
the various properties that it acquired during 1997 from the date of the
acquisition through December 31, 1997. Impac has not presented a pro forma
balance sheet at March 31, 1998 or a pro forma statement of operations for
the three months ended March 31, 1998, as no pro forma adjustments are
needed to the historical financial statements for these periods.
The pro forma adjustments include operations of the acquired properties
from the beginning of 1997 through the date of acquisition as follows:
Holiday Inn, Anchorage September 30
Fairfield Inn, Augusta October 30
Holiday Inn, Boise January 15
Fairfield Inn, Burlington October 30
Holiday Inn, Cincinnati January 15
Holiday Inn, Ft. Mitchell January 15
Holiday Inn, Hamburg April 15
Fairfield Inn, Jackson October 30
Crowne Plaza, Macon May 20
Mayfair House, Miami June 11
Howard Johnson, Miami April 10
Holiday Inn, Memphis January 15
Fairfield Inn, Merrimack October 30
Holiday Inn, Riverside May 16
Fairfield Inn, Valdosta May 20
Holiday Inn, Wilsonville January 30
(B) Depreciation expense is recorded to reflect the costs associated with the
acquired assets. The allocation of the cost of acquired assets between
land and building is based on the asset's estimated fair value.
(C) Interest expense is based upon the debt levels that would have been
incurred to purchase each property under the terms and conditions that are
available to Impac. The interest rate is based on the rate that would have
been charged at the time of each acquisition by Impac's credit facility.
(D) Impac is a limited liability corporation and is not subject to income
taxes. IHD is an S_Corporation and is not subject to income taxes. The
results of Impac's and IHD's operations are included in the tax returns of
Impac's unitholders and IHD's shareholders. In order to conform Impac's
pro forma financial information to Servico's financial information, a pro
forma adjustment has been made to record a tax benefit to Impac based on
Servico's effective tax rate of 40%.
-78-
<PAGE> 97
DESCRIPTION OF LODGIAN
Lodgian was incorporated on February 11, 1998 as a corporation under
the laws of the State of Delaware for the purpose of facilitating the Merger.
Lodgian has not conducted any activities other than in connection with its
organization and in connection with the Merger. After the consummation of the
Merger, Servico and Impac will be wholly-owned subsidiaries of Lodgian.
Lodgian's fiscal year will end on December 31.
Following consummation of the Merger, Lodgian intends to combine and
coordinate the respective equity, management, resources and administrative
operations of Servico and Impac and their respective subsidiaries. While
management believes that the Merger will create a combined entity with the
resources to compete more effectively in the hotel industry, Lodgian will
continue to be subject to the competitive factors described under "Risk
Factors--Risks Associated with Expansion--Competition."
Management will review the operations of Impac and Servico and, upon
completion of such review, will develop plans or proposals regarding, among
other things, the integration or combination of the management, resources,
facilities and other operations of Impac and Servico.
DIRECTORS AND MANAGEMENT OF LODGIAN FOLLOWING THE MERGER; COMPENSATION
DIRECTORS. The Merger Agreement provides that, immediately following
the consummation of the Merger, the Lodgian Board will have eight members, five
of whom will be Servico Directors, two of whom will be Impac Directors and one
of whom will be selected by Impac and Servico. The Restated Bylaws of Lodgian
provide that the Lodgian Board will consist of not less than six members, the
exact number to be determined by resolution adopted by the affirmative vote of a
majority of all directors of Lodgian. Directors will be elected by a plurality
of the votes cast at annual meetings of its shareholders, except that any
vacancy created by an increase in the number of directors may be filled either
by the shareholders or by the affirmative vote of a majority of the remaining
directors. See "The Merger Agreement - Lodgian Following the Merger."
At the Effective Time, the initial directors of Lodgian will allocate
the directors among three classes as follows: (i) Class I, to initially serve
for one year, will consist of two directors, comprised of Peter R. Tyson and a
person mutually selected by both Impac and Servico, (ii) Class II, to initially
serve for two years, will consist of three directors, comprised of Joseph C.
Calabro, Michael Leven and John Lang; and (iii) Class III, to initially serve
for three years, will consist of three directors, comprised of David Buddemeyer,
Robert Cole and Richard H. Weiner. Such directors shall serve as the directors
of Lodgian from and after the Effective Time in accordance with the Restated
Certificate and Restated Bylaws of Lodgian until their successors are elected or
appointed and qualified or until their resignation or removal. In the event
that, prior to the Effective Time, any person so selected to serve on the
Lodgian Board is unable or unwilling to serve in such position, the company that
selected such person shall designate another person to serve in such person's
stead. At each annual meeting of shareholders, beginning with the 1999 annual
meeting, 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 will be apportioned among the classes so as to
maintain the number of directors in each class as nearly equal as possible. 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 shareholders 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 Lodgian
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. Any or all
of the directors of Lodgian 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 Lodgian entitled to vote generally in the election of directors.
-79-
<PAGE> 98
COMMITTEES OF THE BOARD OF DIRECTORS. Pursuant to the Restated Bylaws,
the Lodgian Board, by resolution passed by a majority of the number of directors
constituting the whole Board, may designate members of the Lodgian Board to
constitute one or more committees, which committee will consist of not fewer
than two directors. The Lodgian Board, upon approval of a majority of the
directors, will have the power to change the members of any such committee at
any time, to fill vacancies therein and to discharge any such committee, either
with or without cause, at any time.
COMPENSATION OF DIRECTORS. Directors who are employees of Lodgian will
not receive any additional compensation for service on the Lodgian Board. The
annual meeting and committee meeting fees to be paid to non-employee directors
of Lodgian have not yet been determined. In order to align more closely the
interests of non-employee directors of Lodgian and its shareholders, it is
expected that a significant portion of the total compensation to be paid to
non-employee directors of Lodgian will be based in stock. Pursuant to the terms
of the Lodgian Non- Employee Directors' Stock Plan, which is being submitted for
shareholder approval herewith, each non-employee director will receive an annual
grant of options with respect to 5,000 shares of Lodgian Common Stock on the
date of each annual meeting of Lodgian's shareholders, commencing with the
annual meeting held in 1999. Director options will vest in equal installments on
each of the three annual meetings following the date of grant. For a detailed
description of the Lodgian Non-Employee Directors' Stock Plan, see "Lodgian Plan
Proposals--The Lodgian Non- Employee Directors' Stock Plan." Each director, in
consideration of his serving as such, will be entitled to receive from Lodgian
such amount per annum, if any, or such fees, if any, for attendance at meetings
of the Lodgian Board or of any committee thereof, or both, as the Board
determines.
SENIOR EXECUTIVE OFFICERS. As of the Effective Time, David A.
Buddemeyer will be the Chief Executive Officer of Lodgian and each of the
Surviving Entities, Robert S. Cole will be President of Lodgian and each of the
Surviving Entities, and David Buddemeyer and Robert Cole will be the Co-Chairmen
of the Board of Directors of Lodgian and each of the Surviving Entities.
David Buddemeyer, 40, has been the Chairman of the Servico Board since
August 1997, its Chief Executive Officer since December 1995, a director of
Servico since April 1994 and Servico's President since May 1993. Mr. Buddemeyer
served as the Chief Operating Officer of Servico from May 1993 to December 1995
and its Executive Vice President from June 1990 to May 1993. Prior to such time,
from 1987 to June 1990, Mr. Buddemeyer served as Vice President-Operations of
Prime Motors Inns, Inc., a hotel management company.
Robert S. Cole, 36, began his career in the hospitality business in
1984 and held a variety of general manager positions in hotels throughout the
United States. He formed Impac's predecessor in 1990 and has since served as the
President of Impac, its predecessors and affiliates.
If any of such persons is unable or unwilling to hold such offices as
set forth above, his successor shall be selected by the Lodgian Board or the
Surviving Entities in accordance with their respective Bylaws.
To date, Servico and Impac have not decided who, in addition to Messrs.
Buddemeyer and Cole, will be designated to serve as executive officers of
Lodgian. It is expected that the other executive officers of Lodgian will be
appointed after the Effective Time.
EXECUTIVE COMPENSATION. The Lodgian Board will rely on its compensation
committee, which will be composed of non-employee directors, to recommend the
form and amount of compensation to be paid to Lodgian's executive officers. For
information regarding employment agreements with Messrs. Buddemeyer and Cole,
see "Interests of Certain Persons in the Merger--Arrangements with Executive
Officers."
ARRANGEMENTS REGARDING TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL.
Lodgian has adopted a severance policy which provides for payments to its
executive officers in an amount equal to two and one-half times their annual
base compensation, less any other cash severance payments contractually owed to
them by Lodgian, in the event that there is either a change in the majority of
the Board of Directors or the acquisition by any individual or group of in
excess of 40% of Lodgian's outstanding voting securities and the duties or
responsibilities of such executive officers are materially diminished within 24
months thereafter.
-80-
<PAGE> 99
STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND FIVE PERCENT SHAREHOLDERS
LODGIAN COMMON STOCK OWNERSHIP BY 5% SHAREHOLDERS. The following table
sets forth, based on the number of shares of Servico Common Stock outstanding on
the Servico Record Date and the number of Impac Units outstanding on the date of
this Joint Proxy Statement/Prospectus, the percentage ownership of Lodgian
Common Stock by the persons whom Lodgian believes will own beneficially more
than 5% of its outstanding Common Stock other than directors and executive
officers listed in the table set forth below, assuming an Impac Exchange Ratio
of 0.519:
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT
------------------------------------ ------------------ -------
<S> <C> <C>
Jeffery J. Neal (1) 1,437,955 5.3%
Bret N. Bearup (2) 1,437,955 5.3%
</TABLE>
(1) 5575 DTC Parkway, Suite 320, Englewood, CO 80111. Jeffery J. Neal is a
member and manager of ProTrust Properties, LLC which, upon consummation
of the liquidation of ProTrust Properties I, Ltd. and ProTrust
Properties III, Ltd., will hold approximately 120,431 shares of Lodgian
Common Stock; is a member and manager of ProTrust Holdings, LLC which,
upon consummation of the liquidation of ProTrust Properties IV, Ltd.,
will hold approximately 38,690 shares of Lodgian Common Stock; is an
executive officer and shareholder of ProTrust Capital, Inc., which is
the general partner of B.C.M. of Myrtle Beach, Ltd. and B.C.M. of St.
Louis, Ltd., the beneficial owner of an aggregate of 49,255 shares of
Lodgian Common Stock and accordingly, ProTrust Capital, Inc. may be
attributed beneficial ownership of the shares owned by B.C.M. of Myrtle
Beach, Ltd. and B.C.M. of St. Louis, Ltd.; is an executive officer and
shareholder of B & N Corporate Plaza, Inc., which owns 79,771 shares of
Lodgian Common Stock; is a member and manager of ProTrust Holdings II,
LLC, which is the general partner of ProTrust Properties V, Ltd., the
beneficial owner of 725,072 shares of Lodgian Common Stock and
accordingly, ProTrust Holdings II, LLC may be attributed beneficial
ownership of the shares owned by ProTrust Properties V, Ltd.; is a
member and manager of Hotel Investors, LLC, which is the general
partner of Hotel Investors, L.P., the beneficial owner of 305,949
shares of Lodgian Common Stock and accordingly, Hotel Investors, LLC
may be attributed beneficial ownership of the shares owned by Hotel
Investors, L.P.; and is a member and manager of ProTrust Equity
Partners, LLC, which is the general partner of ProTrust Equity Growth
Fund I, L.P., the beneficial owner of 108,055 shares of Lodgian Common
Stock and accordingly, ProTrust Equity Partners, LLC may be attributed
beneficial ownership of the shares owned by ProTrust Equity Growth Fund
I, L.P. The other member and manager of ProTrust Properties, LLC is
Bret N. Bearup and the other executive officer and shareholder of
ProTrust Capital, Inc. and B & N Corporate Plaza, Inc. is Bret N.
Bearup. The other members and managers of ProTrust Holdings, LLC,
ProTrust Holdings II, LLC and Hotel Investors, LLC are John M. Lang and
Bret N. Bearup and the other members and managers of ProTrust Equity
Partners, LLC are John M. Lang, Bret N. Bearup and Mark S. Cooley. Mr.
Neal disclaims beneficial ownership of such shares beyond his ownership
in ProTrust Properties, LLC, ProTrust Holdings, LLC, ProTrust Capital,
Inc., B & N Corporate Plaza, Inc., ProTrust Holdings II, LLC, Hotel
Investors, LLC and ProTrust Equity Partners, LLC.
(2) 3399 Peachtree Road, N.E., Suite 2050, Atlanta, Georgia 30326. Bret N.
Bearup is a member and manager of ProTrust Properties, LLC which, upon
consummation of the liquidation of ProTrust Properties I, Ltd. and
ProTrust Properties III, Ltd., will hold approximately 120,431 shares
of Lodgian Common Stock; is a member and manager of ProTrust Holdings,
LLC which, upon consummation of the liquidation of ProTrust Properties
IV, Ltd., will hold approximately 38,690 shares of Lodgian Common
Stock; is an executive officer and shareholder of ProTrust Capital,
Inc., which is the general partner of B.C.M. of Myrtle Beach, Ltd. and
B.C.M. of St. Louis, Ltd., the beneficial owner of an aggregate of
49,255 shares of Lodgian Common Stock and accordingly, ProTrust
Capital, Inc. may be attributed beneficial ownership of the shares
owned by B.C.M. of Myrtle Beach, Ltd. and B.C.M. of St. Louis, Ltd.; is
an executive officer and shareholder of B & N Corporate Plaza, Inc.,
which owns 79,771 shares of Lodgian Common Stock; is a member and
manager of ProTrust Holdings II, LLC, which is the general partner of
ProTrust Properties V, Ltd., the beneficial owner of 725,072 shares of
Lodgian Common Stock and accordingly, ProTrust Holdings II, LLC may be
attributed beneficial ownership of the shares owned by ProTrust
Properties V, Ltd.; is a member and manager of Hotel Investors, LLC,
which is the general partner of Hotel Investors, L.P., the beneficial
owner of 305,949 shares of Lodgian Common Stock and accordingly, Hotel
Investors, LLC may be attributed beneficial ownership of the shares
owned by Hotel Investors, L.P.; and is a member and manager of ProTrust
Equity Partners, LLC, which is the general partner of ProTrust Equity
Growth Fund I, L.P., the beneficial owner of 108,055 shares of Lodgian
Common Stock and accordingly, ProTrust Equity Partners, LLC may be
attributed beneficial ownership of the shares owned by ProTrust Equity
Growth Fund I, L.P. The other member and manager of ProTrust
Properties, LLC is Jeffery J. Neal and the other executive officer and
shareholder of ProTrust Capital, Inc. and B & N Corporate Plaza, Inc.
is Jeffery J. Neal. The other members and managers of ProTrust
Holdings, LLC, ProTrust Holdings II, LLC and Hotel Investors, LLC are
John M. Lang and Jeffery J. Neal and the other members and managers of
ProTrust Equity Partners, LLC are John M. Lang, Jeffery J. Neal and
Mark S. Cooley. Mr. Bearup disclaims beneficial ownership of such
shares beyond his ownership in ProTrust Properties, LLC, ProTrust
Holdings, LLC, ProTrust Capital, Inc., B & N Corporate Plaza, Inc.,
ProTrust Holdings II, LLC, Hotel Investors, LLC and ProTrust Equity
Partners, LLC.
-81-
<PAGE> 100
LODGIAN COMMON STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS. The
following table sets forth the expected beneficial ownership of Lodgian Common
Stock by all directors and each of the executive officers of Lodgian (and by all
directors and executive officers as a group) based on the number of shares of
Servico Common Stock or Impac Units owned by such individuals on March 25, 1998
and assuming an Impac Exchange Ratio of 0.519.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER POSITION AT LODGIAN BENEFICIALLY OWNED(1) PERCENT(2)
- ------------------------ ------------------- --------------------- ----------
<S> <C> <C> <C>
David Buddemeyer(2) Chief Executive Officer, 202,219 *
Co-Chair of the Board
Robert S. Cole(3) President, Co-Chair of the 1,205,075 4.5%
Board
Joseph C. Calabro(2)(4) Director 261,100 *
Michael A. Leven(2) Director 25,000 *
Peter R. Tyson(2) Director 55,600 *
Richard H. Weiner (2) Director 55,100 *
John Lang(5) Director 1,377,617 5.1%
All directors and executive officers 3,181,711 11.6%
as a group (7 persons)
</TABLE>
- ----------------------
* Represents less than 1%.
(1) The calculation of the number of shares and the percentage ownership of
each of the shareholders of Lodgian is based upon, as a result of the
Merger, each Servico shareholder receiving one share of Lodgian Common
Stock per share of Servico Common Stock and each Impac unitholder
receiving 0.519 of a share of Lodgian Common Stock per Impac Unit and
shares of Common Stock subject to outstanding stock options which are
exercisable by the named individual or group. Therefore, the number of
shares of Lodgian Common Stock outstanding is 27,588,795.
(2) The amounts shown include shares owned by options exercisable within 60
days of June __, 1998, as follows: David Buddemeyer - 172,400 shares;
Joseph C. Calabro - 55,000 shares; Michael A. Leven - 25,000 shares;
Peter R. Tyson - 55,000 shares; and Richard H. Weiner - 55,000 shares.
(3) Includes the following number of shares to be owned of record by the
indicated entities, which may be deemed to be controlled by Mr. Cole:
38,102 shares held by Delk Lodging Associates, Inc.; 57,852 shares held
by Hazard Lodging Associates, Inc.; 38,814 shares held by Impac Design
& Construction, Inc.; 667,918 shares held by Impac Hotel Development,
Inc.; 64,691 shares held by Impac Hotel Group, Inc.; 109,919 shares
held by P-Burg Lodging Associates, Inc.; 79,762 shares held by Memphis
Lodging Associates, Inc.; 24,644 shares held by Valdosta Lodging
Associates, Inc.; and 29,944 shares held by Buckhead Lodging
Associates, L.P.
(4) Mr. Calabro has sole voting and dispositive power with respect to
203,100 of such shares and shares voting and dispositive power with
respect to 3,000 shares with his wife.
(5) John M. Lang is a member and manager of ProTrust Holdings, LLC, which,
upon consummation of the liquidation of ProTrust Properties IV, Ltd.,
will hold approximately 38,690 shares of Lodgian Common Stock; is the
sole member and member of P.T. Partners, LLC, which owns 144,012 shares
of Lodgian Common Stock; is a member and manager of ProTrust Holdings
II, LLC, which is the general partner of ProTrust Properties V, Ltd.,
the beneficial owner of 725,072 shares of Lodgian Common Stock and
accordingly, ProTrust Holdings II, LLC may be attributed beneficial
ownership of the shares owned by ProTrust Properties V, Ltd.,; is a
member and manager of Hotel Investors, LLC, which is the general
partner of Hotel Investors, L.P., the beneficial owner of 305,949
shares of Lodgian Common Stock and accordingly, Hotel Investors, LLC
may be attributed beneficial ownership of the shares owned by Hotel
Investors, L.P.; and is a member and manager of ProTrust Equity
Partners, LLC, which is the general partner of ProTrust Equity Growth
Fund I, L.P., the beneficial owner of 108,055 shares of Lodgian Common
Stock and accordingly, ProTrust Equity Partners, LLC may be attributed
beneficial ownership of the shares owned by ProTrust Equity Growth Fund
I, L.P. The other members and managers of ProTrust Holdings, LLC,
ProTrust Holdings II, LLC and Hotel Investors, LLC are Jeffery J. Neal
and Bret N. Bearup and the other members and managers of ProTrust
Equity Partners, LLC are Jeffery J. Neal, Bret N. Bearup and Mark S.
Cooley. Mr. Lang disclaims beneficial ownership of such shares beyond
his ownership in ProTrust Holdings, LLC, P.T. Partners, LLC, ProTrust
Holdings II, LLC, Hotel Investors, LLC and ProTrust Equity Partners,
LLC.
-82-
<PAGE> 101
SUMMARY INFORMATION REGARDING PROPERTIES FOLLOWING THE MERGER
The following tables set forth certain information related to hotels
owned by Servico, Impac and Lodgian (on a pro forma basis after the Merger) by
category of hotel and by geographic region:
SERVICO
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
DECEMBER 31, 1997
------------------------------------------------------------
AVERAGE TOTAL
NUMBER NUMBER OF CAPITAL AVERAGE AVERAGE AVERAGE
GEOGRAPHIC AREA OF HOTELS ROOMS EXPENDITURES OCCUPANCY ADR REVPAR
--------------- --------- ----- ------------ --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Northeast 23 218 $19,187,765 64.1% $80.09 $51.34
Southeast 20 190 $14,115,566 69.8% $62.64 $43.72
Central 18 208 $23,480,280 67.7% $64.98 $43.99
Western 8 188 $ 4,224,960 69.4% $82.19 $57.04
=============== ================ ================== =============== ============ ==============
Total 69 204 $61,008,571 67.1% $71.74 $48.14
CATEGORY
Luxury 9 294 $11,869,770 68.4% $90.12 $61.64
Upscale 7 228 $ 7,819,900 64.5% $81.83 $52.78
Midscale with
Food and Beverage 44 194 $38,201,951 67.3% $67.05 $45.12
Midscale without
Food and Beverage 8 145 $ 3,045,120 66.1% $56.95 $37.64
Economy 1 140 $ 71,830 70.4% $49.75 $35.02
=============== ================ ================== =============== ============ ==============
Total 69 204 $61,006,571 67.1% $71.74 $48.14
</TABLE>
-83-
<PAGE> 102
IMPAC
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
DECEMBER 31, 1997
------------------------------------------------------------
AVERAGE TOTAL
NUMBER NUMBER OF CAPITAL AVERAGE AVERAGE AVERAGE
GEOGRAPHIC AREA OF HOTELS ROOMS EXPENDITURES OCCUPANCY ADR REVPAR
--------------- --------- ----- ------------ --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Northeast 17 160 $27,631,874 56.7% $ 66.00 $37.42
Southeast 15 155 $23,122,453 57.3% $ 71.72 $41.10
Central 8 191 $18,625,210 62.5% $ 65.97 $41.23
Western 5 229 $19,676,662 $ 59.60 $25.39
============= ============== ================== ======= ============== ================
42.6%
Total 45 172 $89,056,199 56.5% $ 67.15 $37.94
CATEGORY
Luxury 1 179 $ 6,691,343 43.8% $154.01 $67.46
Upscale 5 230 $10,968,670 48.5% $ 77.26 $37.47
Midscale with
Food and Beverage 29 178 $61,881,237 57.7% $ 66.98 $38.65
Midscale without
Food and Beverage 3 166 $ 4,794,465 61.7% $ 53.77 $33.18
Economy 5 113 $ 4,060,774 56.5% $ 46.60 $26.33
Budget 2 83 $ 659,710 $ 44.96 $28.64
============== =============== ================== ======= ============== ================
63.7%
Total 45 172 $89,056,199 56.5% $ 67.15 $37.94
</TABLE>
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<PAGE> 103
LODGIAN
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
DECEMBER 31, 1997
------------------------------------------------------------
AVERAGE TOTAL
NUMBER NUMBER OF CAPITAL AVERAGE AVERAGE AVERAGE
GEOGRAPHIC AREA OF HOTELS ROOMS EXPENDITURES OCCUPANCY ADR REVPAR
--------------- --------- ----- ------------ --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Northeast 40 194 $ 46,819,639 67.1% $75.15 $46.07
Southeast 35 175 $ 37,238,019 57.2% $65.82 $42.72
Central 26 203 $ 42,105,490 63.4% $65.33 $42.99
Western 13 204 $ 23,901,622 64.5% $42.99 $44.77
=============== ================ ================== ================= ============== ==========
Total 114 191 $150,064,770 63.1% $44.27 $44.27
CATEGORY
Luxury 10 283 $ 18,561,113 67.1% $92.28 $61.92
Upscale 12 229 $ 18,788,570 57.2% $80.05 $45.79
Midscale with
Food and Beverage 73 188 $100,083,188 63.4% $67.02 $42.49
Midscale without
Food and Beverage 11 151 $ 7,839,585 64.5% $55.81 $36.00
Economy 6 117 $ 4,132,604 63.1% $48.26 $30.45
Budget 2 83 659,710 63.7% $44.96 $28.64
=============== ================ ================== ================= ============== ==========
Total 114 191 $150,064,770 63.1% $70.16 $44.27
</TABLE>
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<PAGE> 104
DESCRIPTION OF SERVICO
GENERAL
Servico is one of the largest owners and operators of full-service
hotels in the United States. Servico currently owns or manages 89 hotels
containing approximately 17,937 rooms located in 24 states and Canada. Servico's
hotels are primarily mid-sized, with an average of approximately 202 rooms per
hotel, and are primarily located in secondary metropolitan markets. Servico's
full-service hotels offer food and beverage services and meeting and banquet
facilities. Servico's hotels include 76 wholly-owned hotels, 11 partially owned
hotels and 2 managed hotels. Fourteen of the hotels are subject to long-term
ground or building leases. Substantially all of Servico's hotels are affiliated
with nationally recognized hospitality franchises, including Holiday Inn, Crowne
Plaza, Hilton, Omni, Radisson, Sheraton and Westin. Servico operates 59 hotels
under franchise agreements with Holiday Inn, making Servico the second largest
Holiday Inn franchisee in the United States.
INFORMATION RELATING TO DIRECTORS AND EXECUTIVE OFFICERS OF SERVICO
The table below sets forth certain information with respect to the one
candidate for election as a director at Servico's Annual Meeting, and the
remaining four directors whose terms do not expire this year and the executive
officers of Servico.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH SERVICO
---- --- ---------------------
<S> <C> <C>
DIRECTOR WHOSE TERM EXPIRES IN 1998:
Michael A. Leven 60 Director
DIRECTORS WHOSE TERMS EXPIRE IN 1999:
David Buddemeyer 40 Chairman of the Board, President and
Chief Executive Officer
Peter R. Tyson 51 Director
Richard H. Weiner 48 Director
DIRECTOR WHOSE TERM EXPIRES IN 2000:
Joseph C. Calabro 47 Director
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS:
Karyn Marasco 40 Executive Vice President and Chief Operating
Officer
Charles M. Diaz 30 Vice President-Administration and Secretary
Warren M. Knight 51 Vice President-Finance and Chief Financial
Officer
Peter J. Walz 54 Vice President-Acquisitions
</TABLE>
DAVID BUDDEMEYER has been the Chairman of the Board of Servico since
August 1997, its Chief Executive Officer since December 1995, a director since
April 1994 and its President since May 1993. Mr. Buddemeyer served as the Chief
Operating Officer of Servico from May 1993 to December 1995 and its Executive
Vice President from June 1990 to May 1993. Prior to such time, from 1987 to June
1990, he served as Vice President- Operations of Prime Motor Inns, Inc., a hotel
management company.
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<PAGE> 105
JOSEPH C. CALABRO has been a director of Servico since August 1992. Mr.
Calabro has been a principal of Joseph C. Calabro, C.P.A., a Devon, Pennsylvania
accounting firm, since 1982. Mr. Calabro has also been an officer and director
of Bibsy Corporation, which previously owned and operated a Holiday Inn hotel in
Bensalem, Pennsylvania, since 1971.
MICHAEL A. LEVEN has been a director of Servico since August 1997. Mr.
Leven is President and Chief Executive Officer of US Franchise Systems, Inc.
Prior to joining US Franchise Systems, Inc., Mr. Leven was
President and Chief Operating Officer of Holiday Inn Worldwide.
PETER R. TYSON has been a director of Servico since August 1992. From
December 1990 to the present, Mr. Tyson has been President of Peter R. Tyson &
Associates, Inc., a firm offering consulting services to clients in the
hospitality industry. Prior to forming Peter R. Tyson & Associates, Inc., Mr.
Tyson was the partner-in-charge of the hospitality industry consulting practice
in the Philadelphia office of the accounting and consulting firm of Laventhol &
Horwath, with which he was associated for 20 years.
RICHARD H. WEINER has been a director of Servico since August 1992. Mr.
Weiner is a senior partner in the Albany, New York law firm of Cooper, Erving,
Savage, Nolan & Heller, where he has practiced law since 1975.
KARYN MARASCO has been Executive Vice President and Chief Operating
Officer since May 1997. Prior to such time, Ms. Marasco was affiliated with
Westin Hotels and Resorts for 18 years. Most recently, Ms. Marasco served Westin
as Area Managing Director, based in Chicago.
CHARLES M. DIAZ has been Vice President-Administration and Secretary of
Servico since December 1997. Mr. Diaz joined Servico in March 1993 and has held
positions in the construction and operations areas of Servico.
WARREN M. KNIGHT has been Vice President-Finance and Chief Financial
Officer of Servico since December 1991. Prior to such time, from March 1988 to
November 1991, Mr. Knight served as Director of Finance for W.A. Taylor & Co.,
an importer of distilled spirits into the United States.
PETER J. WALZ has been Vice President-Acquisitions of Servico since
February 1996. Prior to such time, from December 1994 to January 1996, he was a
consultant to Servico. From October 1993 to November 1994, Mr. Walz was an
executive officer of Hospitality Investment Trust, Inc., a development stage
lodging real estate investment trust. Prior to such time, from April 1987 to
September 1993, Mr. Walz was Executive Vice President of CMS Development, Inc.,
a developer of office buildings, condominiums and hotels.
DIRECTOR COMPENSATION. During 1997, Servico paid non-employee directors
an annual retainer of $18,000, as well as a fee per board meeting or board
committee meeting of $1,000. Mr. John Adams, who served as Chairman of the Board
until his resignation from the Board, received compensation of $58,333 for
serving as Chairman from January to August 1997, but received no retainer,
meeting or committee fees. Servico also reimbursed directors other than Mr.
Adams for expenses associated with attending Board and committee meetings. Under
the Servico Plan, each non-employee director is automatically granted, on the
date such director's term of office commences and each year thereafter on the
day following any annual meeting of shareholders (as long as such director's
term as a director is continuing for the ensuing year), an option to acquire
5,000 shares of Servico Common Stock at an exercise price equal to the fair
market value of the Servico Common Stock on the date of grant. All options
granted to non-employee directors become exercisable upon grant.
In addition, in August 1997 each non-employee director was awarded an
option to acquire 20,000 shares of Servico 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 outside of the Servico Plan.
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<PAGE> 106
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS. Servico's Board of
Directors held ten meetings during the last fiscal year. No director attended
fewer than 75% of the total aggregate number of meetings of the Board of
Directors and any committee of the Board of Directors on which such director
served during his or her tenure as a director or committee member.
The Board of Directors of Servico currently has three standing
committees -- the Audit Committee, the Compensation Committee and the Stock
Option Committee. The full Board of Directors currently serves as the Nominating
Committee.
The principal functions of the Audit Committee are to review Servico's
financial statements and management's disclosures, recommend to the Board of
Directors the appointment of independent public accountants to be employed by
Servico, confer with the independent public accountants concerning the scope of
their audit and, on completion of their audit, review the accountants' findings
and recommendations, review the adequacy of Servico's systems of internal
accounting controls, review areas of possible conflicts of interest and
sensitive payments and consider such other matters as the committee deems
appropriate. The Audit Committee held two formal meetings during the last fiscal
year. The present members of the Audit Committee are Joseph C. Calabro, Peter R.
Tyson and Richard H. Weiner.
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 Servico's directors and executive
officers, review bonus criteria and bonus recommendations and review
compensation of directors. The Compensation Committee held one formal meeting
during the last fiscal year. The present members of the Compensation Committee
are Joseph C. Calabro, Peter R. Tyson and Richard H. Weiner.
The principal function of the Stock Option Committee is to administer
the Servico Plan. The Stock Option Committee held one formal meeting during the
last fiscal year. The present members of the Stock Option Committee are Joseph
C. Calabro and Peter R. Tyson.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934.
Section 16(a) of the Exchange Act requires Servico's directors, executive
officers and 10% shareholders to file reports of ownership and reports of
changes in ownership of Servico Common Stock and other equity securities with
the SEC and the NYSE. Directors, executive officers and 10% shareholders are
required to furnish Servico with copies of all Section 16(a) forms they file.
Based on a review of the copies of such reports furnished to it, Servico
believes that during 1997 Servico's directors, executive officers and 10%
shareholders complied with all Section 16(a) filing requirements applicable to
them, except with respect to the Form 4s required to be filed with respect to
the August 1997 stock option grants to directors which were not timely filed.
EXECUTIVE COMPENSATION. The following table sets forth certain summary
information concerning compensation paid or accrued by Servico, to or on behalf
of the Chief Executive Officer and to each of Servico's four most highly
compensated executive officers other than the Chief Executive Officer during the
year ended December 31, 1997.
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<PAGE> 107
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------------- -----------------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS/SARS(5) COMPENSATION($)(6)
- --------------------------- ---- --------- -------- --------------- --------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
David Buddemeyer, 1997 385,000 120,000 - 400,000 2,948
Chairman of the Board, 1996 350,000 96,745 - 13,500 4,726
President and Chief Executive 1995 275,000 70,905 - 5,000 4,733
Officer
Karyn Marasco, 1997 137,269 60,000 - 125,000 -
Executive Vice President and
Chief Operating Officer(1)
Warren M. Knight, 1997 188,000 60,000 - 75,000 3,556
Vice President-Finance 1996 170,000 46,990 - 13,500 4,844
and Chief Financial Officer 1995 150,000 38,675 - 5,000 3,921
Robert D. Ruffin(2) 1997 168,000 - - - 3,712
1996 160,000 44,227 - 13,500 5,192
1995 150,000 38,675 - 5,000 4,279
Peter J. Walz, 1997 150,000 - 174,700(4) 100,000 3,793
Vice President-Acquisitions(2) 1996 122,596 - 139,438(4) 15,500 2,375
1995 - - 348,730(4) - -
</TABLE>
- ------------------
(1) Ms. Marasco's employment with Servico began in May 1997.
(2) Mr. Ruffin served as Vice President-Administration and Secretary until
his resignation on December 31, 1997.
(3) Mr. Walz's employment with Servico began in January 1996.
(4) Represents commission payments made to Mr. Walz.
(5) Represents the number of shares of Servico Common Stock underlying the
options/SARs.
(6) Each item included in this column represents a contribution made by
Servico under its 401(k) plan on behalf of the named executive based on
such executive's annual elective pre-tax deferred contribution
(included under Salary) to such plan.
STOCK OPTION PLAN. The Servico Plan provides for the issuance of
incentive stock options within the meaning of Section 422A of the Code and
non-qualified stock options not intended to meet the requirements of Section
422A of the Code. The Servico Plan is administered by a committee of the Board
of Directors which, subject to the terms of the Plan, determines to whom grants
are made and the vesting, timing and amounts of such grants.
The following table sets forth information concerning stock option
grants made during 1997 to the executive officers named in the "Summary
Compensation Table", including the potential realizable value of each grant
assuming that the market value of the Servico Common Stock appreciates from the
date of grant to the expiration of the option at annualized rates of 5% and 10%,
in each case compounded annually over the term of the option. These assumed
rates of appreciation have been specified by the SEC for illustration purposes
only and are not intended to predict future prices of Servico Common Stock. The
actual future value of the options will depend on the market value of the
Servico Common Stock.
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<PAGE> 108
STOCK OPTION GRANTS IN FISCAL YEAR 1997
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE AT
----------------------------------------- ASSUMED ANNUAL
NUMBER OF RATES OF STOCK
SECURITIES PERCENT OF TOTAL PRICE APRECIATION
UNDERLYING OPTIONS/SARS EXERCISE FOR OPTION
OPTIONS/SARS GRANTED TO PRICE EXPIRATION ------------------------
GRANTED(#)(1) EMPLOYEES(%) ($/Sh) DATE 5%($) 10%($)
------------- ------------ ----- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
David Buddemeyer 400,000 35.27% $16.75 8/27/2007 4,213,594 10,678,074
Karyn Marasco 50,000 4.41% $15.25 5/06/2007 479,532 1,215,229
Karyn Marasco 75,000 6.61% $16.75 8/27/2007 790,049 2,002,139
Warren M. Knight 75,000 6.61% $16.75 8/20/2007 790,049 2,002,139
Peter J. Walz 100,000 8.82% $16.75 8/20/2007 1,053,398 2,669,519
</TABLE>
- ----------------------
(1) Approximately 410,000 of such options are subject to approval by
Servico's shareholders of an increase in the number of shares available
for grant under the Servico Plan.
(2) The options were granted at fair market value at the time of the grant
and generally vest in equal portions over a five year period.
The following table sets forth certain summary information concerning
exercised and unexercised options to purchase Servico Common Stock as of
December 31, 1997, under the Servico Plan held by the executive officers named
in the "Summary Compensation Table".
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<PAGE> 109
STOCK OPTION EXERCISES IN
FISCAL YEAR 1997 AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS/SARS HELD AT OPTIONS/SARS(2)
FISCAL YEAR-END (#) AT FISCAL YEAR-END($)
NAME AND POSITION ACQUIRED ON VALUE ------------------------------ ----------------------------
DURING 1997 FISCAL YEAR EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David Buddemeyer,
Chairman of the Board,
President and Chief
Executive Officer - - 189,700 333,800 1,393,163 128,275
Karyn Marasco,
Executive Vice President
and Chief Operating
Officer(1) - - 25,000 100,000 18,125 72,500
Warren M. Knight,
Vice President-Finance
and Chief Financial
Officer - - 112,400 73,800 1,224,100 95,775
Robert D. Ruffin(1) - - 60,700 12,800 746,788 80,900
Peter J. Walz,
Vice President-
Acquisitions - - 23,000 92,000 20,875 83,500
</TABLE>
- -----------------
(1) Mr. Ruffin served as Vice President-Administration and Secretary until
his resignation on December 31, 1997.
(2) The value of unexercised in-the-money options/SARs represents the
number of options/SARs held at year-end 1997 multiplied by the
difference between the exercise price and $16.875, the closing price of
Servico Common Stock at year-end 1997.
SERVICO EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT
EMPLOYMENT AGREEMENTS. David Buddemeyer entered into an employment
agreement with Servico relating to his employment as President and Chief
Operating Officer as of May 14, 1993. Effective December 21, 1995, Mr.
Buddemeyer was elected Chief Executive Officer of Servico. The employment
agreement provides for a base salary subject to increases and bonuses, in each
case, at the discretion of the Board of Directors. The base salary paid to Mr.
Buddemeyer during 1997 was $385,000 and the base salary to be paid Mr.
Buddemeyer during 1998 is $405,000. Mr. Buddemeyer is also entitled to receive
paid health insurance, paid disability insurance and is entitled to participate,
to the extent he is eligible, under any benefit plans provided to other
executives of Servico. Mr. Buddemeyer is entitled to a minimum of four weeks
paid vacation annually. The employment agreement is terminable by either party
upon 30 days written notice. However, in the event that Mr. Buddemeyer is
terminated other than "for cause", as defined, Servico will be required to pay
him his base salary and other benefits under this agreement for a period of one
year. See "Interests of Certain Persons in the Merger- -Arrangements with
Executive Officers" for a discussion of the employment agreement to be offered
to Mr. Buddemeyer by Lodgian and which will replace Mr. Buddemeyer's employment
agreement with Servico.
Karyn Marasco entered into a three-year employment agreement with
Servico relating to her employment as Executive Vice President and Chief
Operating Officer of Servico on May 1, 1997. The employment agreement provides
for a base salary of $215,000 subject to increases and bonuses in the discretion
of the Board. Ms. Marasco is also entitled to receive the benefits offered other
executive officers. Pursuant to the terms of the Employment Agreement, Ms.
Marasco was granted options to acquire 50,000 shares of Servico Common Stock
with options with respect to 10,000 of such shares vesting immediately and
10,000 vesting annually. The Employment Agreement is terminable upon thirty days
notice but in the event Ms. Marasco is terminated other than "for cause", as
defined, she will be entitled to her base salary and benefits under the
agreement for the greater of the unexpired term or one year. Lodgian will assume
Ms. Marasco's employment agreement.
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<PAGE> 110
ARRANGEMENTS REGARDING TERMINATION OF EMPLOYMENT AND CHANGES OF
CONTROL. Servico has adopted a severance policy which provides for payments to
its executive officers in an amount equal to two and one-half times their annual
base compensation, less any other cash severance payments contractually owed to
them by Servico, in the event that there is either a change in the majority of
the Board of Directors or the acquisition by any individual or group of in
excess of 50% of Servico's outstanding Common Stock and the duties or
responsibilities of such executive officers are materially diminished within 24
months thereafter. The Merger will not result in any liability under these
provisions.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The compensation of Servico's executive officers, including its Chief
Executive Officer, is determined by the Compensation Committee of Servico's
Board of Directors (the "Compensation Committee"), except for decisions
regarding the Servico Plan, which are made by the Stock Option Committee of the
Board of Directors (the "Stock Option Committee"). During 1997, the Compensation
Committee was comprised of the three non-employee directors, Joseph C. Calabro,
Peter R. Tyson and Richard H. Weiner. The current members of the Stock Option
Committee are Mr. Calabro and Mr. Tyson.
Servico's executive compensation policies are designed to provide
competitive levels of compensation that integrate pay with Servico's short-term
and long-term performance goals, reward corporate performance and recognize
individual initiative and achievement. It is anticipated that these policies
will help Servico to continue to attract and retain quality personnel and
thereby enhance Servico's long-term profitability and share value.
Executive compensation ranges have been designed to be competitive with
amounts paid to senior executives at companies in the hospitality industry which
compete with Servico, companies which are similar in size and profitability to
Servico and companies with which Servico competes for senior executives. Within
this framework, individual executive compensation is based on personal and
corporate achievement and the individual's level of responsibility and
experience. However, in any particular year, Servico's executives may be paid
more or less than executives in peer companies depending upon Servico's
performance.
BASE COMPENSATION. The base salaries of Servico's executive officers
are based in part on comparative industry data and on various quantitative and
qualitative considerations regarding corporate and individual performance. An
executive's base salary is determined only after an assessment of his or her
sustained performance, current salary in relation to the target salary for the
job responsibilities and his or her experience and potential for advancement.
Further, in establishing base salaries for Servico's executive officers,
numerous other factors, including the following, are considered:
i. Industry compensation trends.
ii. Cost-of-living and other local and geographic considerations.
iii. Consultation with other Servico executives.
iv. Hospitality industry and job-specific skills and knowledge.
v. Historical and expected contributions to Servico's performance.
vi. Level, complexity, breadth and difficulty of duties.
In establishing the base salaries of the executive officers, the
Compensation Committee was cognizant of the roles of each executive officer in
the operations of Servico. The Compensation Committee specifically recognized
the improvements achieved in Servico's results of operations and financial
condition during the prior fiscal year and the roles and responsibilities of
each of the executive officers.
BONUS PROGRAM. An annual bonus program has been implemented at Servico.
The objective of the bonus program is to motivate and reward the accomplishment
of corporate objectives; reinforce a strong performance orientation; provide a
direct link between corporate performance and executive compensation; and
provide a fully competitive compensation package which will attract, reward and
retain individuals of the highest quality. As a performance-based plan, cash
bonus awards are required to be paid under the plan only upon the achievement of
preestablished corporate performance objectives on a quarterly and annual basis
and no bonuses are required
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<PAGE> 111
to be paid if the minimum established thresholds are not met. A maximum ceiling
is also established for awards under the bonus program which is determined after
consideration of Servico's competitive position in the industry, assessment of
long-term goals and business performance considerations. Under the 1997 bonus
awards program, Servico agreed to allocate to a bonus pool an amount equal to a
percentage of the amount by which actual and annual cash flow (as defined)
exceeded budgeted cash flow for each quarter subject to a calculation based on
the number of shares of Servico Common Stock outstanding at the time the bonus
is determined. As a consequence of Servico's successful secondary offering of
11.5 million shares of Servico Common Stock in July, 1997 no bonus was payable
under the 1997 plan notwithstanding Servico's strong results in 1997 and the
benefits to Servico of successfully consummating its Common Stock offering.
Accordingly, the Compensation Committee made a determination, in its discretion,
to award bonuses of an aggregate of $270,000 to the executive officers of
Servico including a $120,000 bonus to Mr. Buddemeyer, the Chief Executive
Officer of Servico.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS. Servico's long-term
executive compensation incentives are in the form of Stock Option awards and
Stock Appreciation Rights. The Stock Option Committee believes that Stock Option
awards and Stock Appreciation Rights are an effective means of advancing the
long-term interests of Servico's shareholders by integrating executive
compensation with the long-term value of Servico Common Stock. Awards are
granted at the prevailing market price on the date of grant and are valuable to
executives only if Servico Common Stock appreciates. During 1997, the Stock
Option Committee awarded options to purchase an aggregate of 587,500 shares of
Servico Common Stock and Stock Appreciation Rights relating to an aggregate of
150,000 shares identified in the "Stock Option Grants in Fiscal Year 1997"
table. All of such options were granted with an exercise price equal to $16.75
per share, the market price on the date of grant. The Stock Option Committee
also awarded options to purchase shares of Servico Common Stock to various
non-executive employees of Servico during 1997. All of such options and rights
were granted with an exercise or base price equal to $16.75 per share, the
market price on the date of grant. In determining whether (and to what extent)
to grant stock options or rights to executives and employees of Servico, the
Stock Option Committee considered numerous factors, including, among others,
those factors listed under "Base Compensation."
CHIEF EXECUTIVE OFFICER. Like the other executive officers listed in
the "Summary Compensation Table," compensation for 1997 for David Buddemeyer,
Servico's Chairman of the Board, President and Chief Executive Officer,
consisted primarily of a base salary and a discretionary bonus based on
corporate performance. The Compensation Committee determined Mr. Buddemeyer's
compensation for 1997 after considering many factors, including those factors
described above under Base Compensation applicable to all executives.
Additionally, the Compensation Committee focused on Mr. Buddemeyer's role in the
continuing profitability of Servico and the demand for executives with similar
successful track records in the hospitality industry. In establishing Mr.
Buddemeyer's compensation, the Compensation Committee also took particular note
of the continued improvement in Servico's financial condition, Servico's
successful secondary offering and Servico's growth during 1997. Servico reported
revenues of $276.6 million and earnings before interest, tax, depreciation and
amortization ("EBITDA") of $69.6 million for the year ended December 31, 1997,
as compared to revenues of $239.5 million and EBITDA of $57.9 million for the
year ended December 31, 1997. Based on Mr. Buddemeyer's contribution to Servico
and Servico's reliance on Mr. Buddemeyer, the Compensation and Stock Option
Committees granted to Mr. Buddemeyer options to acquire 300,000 shares of
Servico Common Stock and Stock Appreciation Rights with respect to an additional
100,000 shares based on the market price of Servico's Common Stock on the date
of grant.
SECTION 162(M) DEDUCTIBILITY. The Compensation and Stock Option
Committees continue to review the $1 million cap on tax deductible compensation
and is advised that its stock option plan meets the requirements
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<PAGE> 112
for deductibility. The Stock Appreciation Rights and bonuses payable may have
not met all requirements for deductibility under Section 162(m) of the Code.
However, unless the amounts involved become material, the Compensation and Stock
Option Committees believe that it is more important to preserve its flexibility
under the plan to craft appropriate incentive awards. The Committees continue to
believe that this is not a currently significant issue.
Submitted by,
Joseph C. Calabro Peter R. Tyson Richard H. Weiner
PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative total shareholder
return on Servico's Common Stock with the Dow Jones Equity Market Index and the
Dow Jones Lodging Index. The Servico Common Stock traded on the American Stock
Exchange under the symbol "SER" from August 18, 1992 until June 18, 1997 and
thereafter traded on the NYSE. The graph assumes an investment of $100.00 on
August 18, 1992 in (i) Servico's Common Stock, (ii) the stocks comprising the
Dow Jones Equity Market Index and (iii) the Dow Jones Lodging Index.
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<PAGE> 113
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding ownership
of Servico Common Stock as of March 25, 1998, by (i) each person known to
Servico to be the beneficial owner of more than 5% of the issued and outstanding
Servico Common Stock as of June 30, 1998, (ii) each of the members of Servico's
Board of Directors, (iii) each of Servico's current executive officers named in
the "Summary Compensation Table" under "Executive Compensation" above, and (iv)
all directors and executive officers of Servico as a group. All shares were
owned directly with sole voting and investment power unless otherwise indicated.
<TABLE>
<CAPTION>
SHARES OF PERCENT OF
NAME AND ADDRESS COMMON STOCK COMMON STOCK
OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED(1)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
BENEFICIAL OWNERS OF 5% OR MORE OF
OUTSTANDING SERVICO COMMON STOCK:
- ----------------------------------
Heitman/PRA Securities Advisors, Inc. 1,307,000(2) 6.1%
180 North LaSalle Street, Suite 3600
Chicago, IL 60601
Eagle Asset Management 1,301,815(3) 6.1%
880 Carillon Parkway
St. Petersburg, FL 33716
Prudential Insurance Company of America 1,111,000(4) 5.2%
751 Broad Street
Newark, NJ 07102-3777
DIRECTORS:
David Buddemeyer 202,219(5) *
1601 Belvedere Road
West Palm Beach, FL 33406
Joseph C. Calabro 261,100(6) 1.2%
868 Lancaster Avenue
Devon, PA 19333
Michael A. Leven 25,000(7) *
13 Corporate Square
Suite 250
Atlanta, GA 30329
Peter R. Tyson 55,600(8) *
135 E. State Street
Kennett Square, PA 19348
Richard H. Weiner 55,100(8) *
39 N. Pearl St.
Albany, NY 12207
</TABLE>
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<PAGE> 114
<TABLE>
<CAPTION>
<S> <C> <C>
NON-DIRECTOR EXECUTIVE OFFICERS:
Warren M. Knight 116,111(9) *
1601 Belvedere Road
West Palm Beach, FL 33406
Karyn Marasco 22,500(10) *
1601 Belvedere Road
West Palm Beach, FL 33406
Peter J. Walz 25,500(11) *
1601 Belvedere Road
West Palm Beach, FL 33406
All directors and executive officers as a 769,365(12) 3.6%
group (nine persons)
</TABLE>
- ----------------------
* Represents less than 1%
(1) Ownership percentages are based on 21,565,795 shares of Servico Common
Stock outstanding as of March 25, 1998 and shares of Servico Common
Stock subject to outstanding stock options which are exercisable by the
named individual or group.
(2) Heitman/PRA Securities Advisors, Inc. filed a Schedule 13G dated
February 12, 1998, with the SEC reporting ownership of 1,307,000 shares
of Servico Common Stock with sole voting power with respect to
1,231,000 shares, sole dispositive power with respect to 1,284,400 and
shared dispositive power with respect to 22,600.
(3) Eagle Asset Management, Inc. filed a Schedule 13G dated January 31,
1998, with the SEC reporting ownership of 1,301,815 shares of Servico
Common Stock with sole voting and dispositive power.
(4) The Prudential Insurance Company of America filed a Schedule 13G dated
February 10, 1998, with the SEC reporting ownership of 1,111,000 shares
of Servico Common Stock with shared voting and dispositive power with
respect to 414,600 shares.
(5) Includes currently exercisable options to purchase 172,400 shares.
(6) Includes currently exercisable options to purchase 55,000 shares. Mr.
Calabro has sole voting and dispositive power with respect to 203,100
of such shares and shares voting and dispositive power with respect to
3,000 shares with his wife.
(7) Includes currently exercisable options to purchase 25,000 shares.
(8) Includes currently exercisable options to purchase 55,000 shares.
(9) Includes currently exercisable options to purchase 112,400 shares.
(10) Includes currently exercisable options to purchase 22,500 shares.
(11) Includes currently exercisable options to purchase 23,500 shares.
(12) Includes 526,800 shares of Servico Common Stock which may be acquired
pursuant to currently exercisable options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The following parties
had a direct or indirect material interest in transactions with Servico since
the beginning of its most recently completed fiscal year and such transactions
are described below.
ENERGY MANAGEMENT CORPORATION. In April 1994, Servico issued
one million shares of its Common Stock to EMC in connection with a merger
between wholly owned subsidiaries of Servico and EMC pursuant to that certain
Stock Acquisition and Standstill Agreement, as amended, (the "EMC Acquisition
Agreement") and the related Agreement and Plan of Merger, each dated April 13,
1994. The sole asset of the EMC subsidiary acquired by Servico was $7 million in
cash, which Servico agreed would be utilized for general working capital,
capital expenditures, possible acquisitions and other general corporate purposes
and not for the redemption of any of Servico's capital stock or for the payment
of dividends by Servico. In connection with the transaction Servico agreed,
during the term of the EMC Acquisition Agreement, to cause the nomination of one
designee of EMC to Servico's Board of Directors. EMC designated Mr. John W.
Adams to be its representative. Mr. Adams was appointed to Servico's Board of
Directors on April 29, 1994, and was named Chairman of the Board on December 21,
1995. Mr. Adams resigned from the Board in August, 1997.
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<PAGE> 115
Pursuant to the EMC Acquisition Agreement, EMC also agreed to
certain standstill provisions generally prohibiting it from acquiring voting
securities of Servico with voting rights of 30% or more of the voting rights of
all outstanding voting securities of Servico and to provisions which restrict
the amount and manner by which it may transfer any Servico Common Stock owned by
it. On May 5, 1994, Servico filed with the SEC on behalf of EMC, and at EMC's
expense, a registration statement on Form S-3, relating to the proposed sale
from time to time by EMC of all or any portion of its shares of Servico Common
Stock on the NYSE.
PENGO SECURITIES CORP. In March 1995, Servico issued 800,000
shares of its Common Stock to Pengo, which is affiliated with EMC, for $8
million, or $10 a share, pursuant to that certain Stock Acquisition and
Standstill Agreement dated March 23, 1995, as amended (the "Pengo Acquisition
Agreement"). Additionally, in connection with this transaction, an affiliate of
Pengo agreed to make an additional $8 million equity investment in partnerships
or joint ventures with Servico for the purpose of acquiring hotel properties.
Pursuant to the Pengo Acquisition Agreement, Pengo also agreed to standstill
provisions substantially identical to those contained in the EMC Acquisition
Agreement. Servico also agreed to file with the SEC on behalf of Pengo, and at
Pengo's expense, a registration statement on Form S-3, relating to the proposed
sale from time to time by Pengo of all or any portion of its shares of Servico
Common Stock.
LIMITED PARTNERSHIPS WITH AFFILIATED ENTITIES. Subsidiaries of
Servico have entered into partnership agreements in connection with the
formation of partnerships for the purpose of owning hotel properties with
SOLVation Inc., Spire Realty Group, Worcester Hospitality Company, Inc. and
Wolverine Hospitality Company, Inc. (the "EMC/Pengo Affiliates"), all of which
are affiliated with either EMC or Pengo, who were then principal shareholders of
Servico and with John W. Adams, who was then Servico's Chairman of the Board.
The partnerships own the following properties with Servico owning 51% and the
EMC/Pengo Affiliates owning 49% of outstanding partnership interests:
HOTEL
-----
Holiday Inn, Augusta, Georgia
Holiday Inn, Fort Wayne, Indiana
Hilton Hotel, Sioux City, Iowa
Crowne Plaza, Worcester, Massachusetts
Crowne Plaza, Saginaw, Michigan
Holiday Inn, Richfield, Ohio
During 1997, Servico purchased all of the minority interests held by
the EMC/Pengo Affiliates in the three partnerships which owned the Holiday Inn
Select, Phoenix, AZ, the Holiday Inn, Manhattan, KS and the Holiday Inn,
Lawrence, KS for approximately $11,800,000. EMC/Pengo Affiliates also have
certain rights after May 31, 1998 to require the sale of the hotel properties
held by the six remaining partnerships, subject to certain rights of first
refusal in favor of Servico.
Subsidiaries of Servico serve as the General Partner for each of the
partnerships. Additionally, Servico receives management fees from the
partnerships with respect to each of these hotels. During 1997, such fees were
approximately $1,042,000.
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BUSINESS OF IMPAC
GENERAL
Impac is one of the largest private, fully integrated hotel companies
in the United States. Impac owns or manages primarily upscale or mid-market full
service hotels, most of which have been renovated or developed within the last
five years. Impac currently operates (or is developing) 55 hotels containing
approximately 9,266 rooms located in 24 states. Impac's hotels include 51 wholly
owned hotels, one partially owned hotel and two managed hotels. Impac's hotels
are flagged with premium brands such as Marriott, Doubletree and Holiday Inn.
Impac has successfully implemented its acquisition and development
based growth strategy by acquiring or developing 46 hotels from January 1995 to
July 1998 including five hotels which are currently under construction. Revenues
have increased from approximately $56 million to $120 million and EBITDA (as
defined) has increased from approximately $12 million to $16 million for the
period from the year ended December 1995 to the year ended December 1997. During
1997, Impac acquired or developed and opened 18 hotels and had 25 properties
under major renovation. Impac had 18 properties under major renovation during
each of the quarters ended March 31, 1997 and 1998. As a result, Impac's
management believes that the full revenue and EBITDA growth potential of these
properties had yet to be realized as of March 31, 1998. Revenue growth is
adversely affected by the renovation of newly acquired properties.
Management seeks to achieve external growth through the acquisition of
underperforming hotels in cases in which management believes it can improve
operating results through significant renovation of physical facilities and, if
appropriate, changes in franchise affiliation. Additionally, management seeks to
develop new properties in strategic locations. Impac believes that internal
growth can be realized through a focused upgrading strategy which generates
increases in RevPAR and operating efficiencies through expense control.
ORGANIZATION
Impac is a limited liability company organized in the State of Georgia
on February 26, 1997 through a reorganization of predecessor entities and the
purchase of minority interests. Impac's sole Manager is Robert S. Cole, who is
responsible for handling Impac's affairs and operating its business. Impac is
organized as set forth below:
[INSERT ORGANIZATIONAL CHART]
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INVESTMENT STRATEGY
Historically, Impac's strategy has been to invest in underperforming
properties, significantly renovate them, operate them efficiently so that they
maximize cash flow, stabilize the operations and revenue stream and then seek to
sell selected properties for prices that produce significant gains.
GAINS PRODUCED ON SALE OF HOTEL PROPERTIES. Impac sold seven hotels
during 1996 and three during 1995. The realized gains on sales in 1996 and 1995
were $19.4 million and $5.4 million, respectively. Impac did not sell any
properties during 1997. Sixteen properties were acquired in 1997.
NEW DEVELOPMENT. Impac is also involved in the development of upscale
properties. Impac believes that it is able to develop properties at costs below
those of its competitors through its in-house acquisition and construction
departments. Impac's historical objective has been to develop each property as
cost efficiently as possible, efficiently operate the property through its
in-house management team and to maximize current cash flow. Impac has developed
nine properties since 1995 that are currently operating. As of May 1998, Impac
had an additional six upscale properties under construction, including two full
service Marriotts, one Residence Inn, two Hilton Gardens and one Courtyard by
Marriott.
DIVIDENDS PAID. Impac has paid dividends to its unitholders each year.
See "Market Price and Dividend Data--Impac." In 1997, 1996 and 1995, Impac
distributed $6 million, $29.4 million and $10.4 million, respectively, to its
unitholders.
AWARD WINNING PRODUCT. Impac prides itself on the recognition it has
received from its franchisors. These awards include, among others: (i) Best New
Hotel Opening for 1997 from the Courtyard by Marriott; (ii) President's Award
for five hotels for 1998 from Marriott International; (iii) Modernization Award
for the last three consecutive years from Holiday Hospitality; and (iv)
Torchbearer Award from Holiday Hospitality. Impac was also named as the Best New
Franchisee by Marriott International in 1995.
PORTFOLIO STATUS. Twenty-five of Impac's properties were under
significant renovation during 1997. Impac purchased 16 properties and opened
three newly constructed properties during 1997. As discussed more fully below,
the renovation process greatly affects the operating performance of the hotel
while it is underway. Revenues are significantly reduced while fixed expenses
remain substantially constant. The majority of Impac's portfolio has been
completely renovated or developed leaving Impac substantially with a portfolio
of new or recently renovated hotels. Impac currently has six hotels under
development. These hotels are expected to be completed during 1998 and 1999.
Based on the foregoing, management believes that Impac's portfolio is positioned
for improved operational performance in the areas of revenue growth, revenue per
available room (RevPAR) and EBITDA.
ACQUISITION AND DEVELOPMENT STRATEGY
Impac has developed an acquisition strategy based on the hotel and
market criteria described below. Since January 1995, management has implemented
this strategy through the acquisition or development of 46 upscale or
mid-market, full service hotels (six of which are currently under construction).
Impac has attempted to position itself to absorb such rapid growth by investing
heavily in its management team and systems and infrastructure during the latter
part of 1996 and all of 1997.
HOTEL CRITERIA
FOCUS ON SINGLE HOTEL AND SMALL PORTFOLIO ACQUISITIONS. Impac has
historically targeted the acquisition of single hotels or small portfolios.
Impac believes such acquisitions generally are more conducive to the rapid
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and effective implementation of hotel-level improvements and allow Impac to be
geographically and market selective.
ACQUISITION AND RENOVATION OF SUBSTANTIALLY UNDERPERFORMING HOTELS.
Impac has historically sought to purchase substantially underperforming hotels
and to significantly renovate and efficiently operate such hotels after
acquisition in order to achieve significant operating gains. Impac has sought to
acquire properties with the potential for highly attractive returns through
significant strategic repositioning, operational improvements, renovation
enhancements and, if appropriate, changes in brand affiliations. Impac's
management believes that there has generally been less competition to purchase
these hotels than other hotel properties because of (i) the level of expertise
and amount of capital required to effectively purchase and turnaround such
hotels, (ii) construction difficulties encountered during the renovation phase,
and (iii) the negative impact on earnings and cash flows during the
repositioning period.
DEVELOPMENT OF STRATEGICALLY LOCATED HOTELS. Impac has also
historically sought growth through the development of hotels in strategically
located cities with primarily Marriott and Hilton brands. Locations chosen by
Impac have typically been in the suburbs of large metropolitan areas that are
experiencing significant demand. Hotels have generally been developed by Impac
through in-house resources rather than relying on outside construction
management firms. In certain instances, Impac has retained a third party
contractor to construct certain hotels under the supervision of Impac's
personnel. Impac believes that its development activity has the potential to
result in significant gains because the cost and expertise required of building
such assets generally limits access to the marketplace and Impac is in a
position to manage the construction process and potentially realize significant
savings through its construction efforts.
OPPORTUNISTIC USE OF MULTIPLE BRANDING STRATEGY. Because Impac is not
bound by a single franchise brand, Impac believes that it is in a position to
choose a franchise relationship that will maximize a hotel's performance in its
particular market.
OPERATING STRATEGY
EXPERIENCED AND INCENTIVIZED MANAGEMENT TEAM. The members of Impac's
senior management have an average of 15 years of experience in all segments of
the lodging industry. Impac's general and group managers participate with senior
management in Impac's bonus plans. Certain members of senior management also
have significant equity investments in Impac.
EFFECTIVE CENTRALIZED CONTROLS AND SUPPORT. Impac has implemented
centralized controls which seek to provide corporate and group support services
while promoting flexibility and encouraging employees to develop innovative
solutions. Impac's proprietary Information Technology systems seek to monitor
hotel-level performance in such areas as room yield utilization, revenue and
expense forecasting, labor and cash management, expense variances and other
items on a daily and weekly basis. Impac also provides centralized corporate
support services and other programs in accounting, payroll, data processing,
interior design, and sales, marketing, advertising and vendor purchases, but
empowers hotel general managers to make day-to-day decisions with respect to the
operation of the hotels.
CENTRALIZED RESERVATION SYSTEMS. Impac believes, through its Impac
Revenue Center, that it is the first independent owner/operator operating a
centralized reservation system. The Impac Revenue Center is adding Impac hotels
to its systems as adequate staff is available and thoroughly trained at the
Revenue Center. The Impac Revenue Center is located in Baton Rouge, Louisiana
and once fully operational, will provide the following services to each of
Impac's hotels:
INDIVIDUAL RESERVATIONS. The Impac Revenue Center is designed
to provide the transfer of customers calling to make reservations from the local
Impac hotel to a centralized Revenue Center. This allows hotel associates more
time to focus on the guests which are at the hotel rather than taking
reservations. Impac
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believes that the Impac Revenue Center has historically generated a higher
conversion ratio per call at higher rates resulting in increased revenues.
Revenue Management Specialists at the Impac Revenue Center price each room
taking into consideration market demand, inventory supply and competitor
strategies. At May 31, 1998, 23 Impac hotels were using this system.
TELE-PROSPECTING. Prospecting and Qualification Specialists at
the Impac Revenue Center seek to identify potential new business and then
provide the information developed to the marketing department at each hotel.
Impac management believes that this permits local hotel associates to spend more
time developing relationships with existing and potential clients rather than
tele-prospecting. At May 31, 1998, 26 hotels were using this system.
GROUP SALES CENTER. Personnel at the Impac Revenue Center
provide Event Sales, Event Communication and Event Planning in one central
location. Local hotel staff are charged only with executing the event. At May
31, 1998, six Impac hotels were using this system.
The Impac Revenue Center is fully operational for the functions and the
number of properties described above. Additional Impac properties will be added
as people are hired and fully trained at the Impac Revenue Center.
PROPERTIES
ACQUISITIONS.
IDENTIFICATION OF ACQUISITION CANDIDATES. Since January 1995, Impac has
successfully completed the acquisition or development of 46 upscale or
mid-market, full service hotels (five of which are currently under
construction). Information regarding potential acquisitions is sourced at every
level of Impac's management, including its general managers, group managers and
senior management. Extensive industry association contacts also feed Impac's
pipeline of potential acquisitions. Further, management believes that its
established track record for consummating acquisitions provides it with a high
degree of credibility when approaching sellers and negotiating acquisition
agreements.
ADHERENCE TO DEFINED GROWTH STRATEGY. Impac believes that its growth has
been the result of (i) focusing on upscale or mid-market full-service hotels in
secondary metropolitan markets or in suburban areas of major cities, (ii)
acquiring hotels where it believes it can make a meaningful improvement in
operating results through significant renovation and repositioning of the
acquired properties, and (iii) developing hotels in strategic locations.
SIGNIFICANT RENOVATIONS AND REPOSITIONING. Impac has significantly renovated
or developed substantially all of its hotels within the last five years.
Twenty-five of these properties were just completing renovation during 1997 and
early 1998 and their operations have yet to become stabilized. Renovations
typically disrupt a hotel's operations but once the renovation is complete, the
hotel is generally positioned for significant growth in operating performance.
CONSTRUCTION SERVICES. Through its in-house construction subsidiary, Impac
believes that it has historically been in a position to renovate and develop
properties on a more cost efficient basis than its competitors. Significant
resources have been devoted to this service and Impac has significantly reduced
its reliance on outside construction firms. By directly engaging in construction
services, Impac believes it is able to better control the construction costs and
directly monitor the quality of work being performed.
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HOTEL OPERATIONS
Impac's organizational structure emphasizes direct accountability
through vertical integration in order to maintain Impac's standards for guest
services and hotel operations throughout its hotel system. Impac has established
certain uniform productivity standards and skill requirements for hotel
employees which Impac believes increase operating efficiencies by enhancing
Impac's ability to measure performance and to interchange certain employees
within its hotel system.
HOTEL MANAGEMENT. The day-to-day operations of each hotel are managed
by a general manager who is assisted by additional on-site employees who
specialize in the areas of food and beverage, marketing, budgeting, housekeeping
and maintenance. The actual size of each hotel's on-site management personnel
varies depending on the hotel's size and business volume and the guest amenities
which are offered. Impac extensively trains each general manager through an
in-house training program to understand the financial aspects of hotel
operations, as well as quality, sales and marketing and human resource programs.
General managers and certain other on-site employees also participate in
incentive programs. Management believes that financial accountability at the
property level and performance-based compensation help to achieve the
appropriate balance between providing high quality guest services and generating
strong returns.
CENTRALIZED REVENUE CENTER. The Impac Revenue Center (once fully
operational) will provide a centralized location for reservations, yield
management, tele-prospecting, group sales and bid management. Impac management
believes the Revenue Center results in a higher conversion ratio for all calls
at a higher yield and additionally permits hotel staff to focus on the needs of
the guests in-house.
GROUP OPERATIONS. Impac's general managers each report directly to one
of three Vice Presidents of Operations who, in turn, report to Impac's Senior
Vice President of Operations. Impac divides its operations into three groups
based upon brand diversity and hotel amenities offered. These teams provide
management support and direction to the general managers and their staff,
coordinate communications between the hotels and Impac's centralized corporate
departments and assist in establishing and administering corporate policies,
procedures and standards.
CENTRALIZED CORPORATE SERVICES AND INFORMATION SYSTEMS. Impac has a
centralized corporate staff located in Atlanta, Georgia that provides a variety
of managerial and support services to its hotels. Impac's corporate management
team provides assistance in all areas of hotel operations, including accounting
and finance, payroll, data processing and Information Technology, interior
design, product renovation, purchasing, food and beverage services, human
resources, recruiting and training, corporate sales and marketing, advertising,
insurance and telecommunications. Impac's systems provide its senior management
and hotel-level employees with comprehensive hotel operations data on a daily,
weekly or monthly basis, including occupancy and rate information, yield
management data, cost and labor variance analysis, and budget tracking for both
hospitality and food and beverage operations. Each individual hotel's operating
performance is regularly reviewed by general and corporate managers.
BUDGETING PROCESS. Intensive hotel-level budgeting is undertaken by
Impac on an annual basis for all of the owned hotels. These plans are reviewed
and monitored by group managers and corporate staff. Impac's business plans seek
to customize marketing, staffing, capital investment and yield enhancement
programs on an individual property basis. Revenue and cost targets are based on
historical operating performance, planned renovations, operational efficiencies
and changing competitive trends and local market conditions. In addition,
capital budgets are developed with a view toward enhancing a hotel's guest
appeal, attracting new customers and generating increased revenue and cash flow.
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FRANCHISE AFFILIATION
In recent years, operators of hotels not owned or managed by major lodging
companies have affiliated their hotels with national hospitality franchisors as
a means of remaining competitive with hotels owned by or affiliated with
national lodging companies. Franchisors provide a number of services to hotel
operators that can generate additional occupancy and contribute to the improved
financial performance of their properties, including national reservation
systems, marketing and advertising programs and direct sales programs. Impac
believes that hotel franchisors with larger numbers of hotels enjoy greater
brand awareness among potential hotel guests than those with fewer numbers of
hotels. As an independent hotel owner and operator, Impac believes that it is in
a position to choose the franchise that will best position each hotel in its
particular market.
As of July, 1998, all of Impac's owned properties, except for the French
Quarter Suites Hotel (105 rooms) and the Mayfair House Hotel (179 rooms), were
subject to franchise agreements with nationally recognized franchisors under the
brand names set forth below:
<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF NUMBER OF
FRANCHISOR BRAND NAME HOTELS ROOMS
---------- ---------- --------- -----------
<S> <C> <C> <C>
Marriott International, Inc. Courtyard by
Marriott 7 761
Fairfield Inn 5 572
Residence Inn 2 177
Holiday Hospitality, Inc. Holiday Inn 16 3,021
Holiday Inn Select 4 1,047
Holiday Inn Suites 1 195
Holiday Inn Express 1 210
Holiday Inn
Sunspree 1 133
Crowne Plaza 1 298
Doubletree Hotel Systems, Doubletree Club 3 748
Inc.
Choice Hotels Franchising Comfort Inn/Suites 3 407
Super 8 Motels, Inc. Super 8 2 166
---- -----
Total 46 7,735
Hotels Under Construction
Marriott International, Inc. Marriott (Full
Service) 2 487
Courtyard by
Marriott 1 122
Hilton Hotels, Inc. Hilton Garden Inn 2* 310*
--- -----
Total 5 919
</TABLE>
* To be executed as construction is completed.
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<PAGE> 122
OWNED AND MANAGED PROPERTIES. The following table sets forth certain
information relating to each of Impac's owned and managed properties:
<TABLE>
<CAPTION>
HOTEL APPROXIMATE YEAR DATE OF LAST
LOCATION NAME # OF ROOMS ACQUIRED YEAR BUILT RENOVATION
-------- ---- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Anchorage, AK Holiday Inn 252 1997 1971 In Process
Birmingham, AL Holiday Inn 166 1995 1964 1996
Bentonville, AR Courtyard by Marriott 90 1996 1996 New Build
Hollywood, CA Doubletree 161 1996 mid 1960's 1998
Riverside, CA Holiday Inn Select 296 1997 1989 1998
Miami, FL Holiday Inn 98 1997 1969 1998
Miami, FL Mayfair House Hotel 179 1997 1980 1998
Augusta, GA Fairfield Inn 117 1997 1990 In Process
Atlanta, GA (Buckhead) Courtyard by Marriott 181 1996 1996 New Build
Macon, GA Holiday Inn - Crowne 298 1997 1974 1998
Plaza
Marietta, GA (Atlanta area) Holiday Inn 195 1993 1975 1996
Valdosta, GA Fairfield Inn 108 1991 1963 1997
Valdosta, GA Holiday Inn 173 1991 1963 1997
Boise, ID Holiday Inn 266 1997 1968 1998
Florence, KY (Cincinnati area) Courtyard 78 1995 1995 New Build
Florence, KY (Cincinnati area) Holiday Inn 106 1996 1967 1997
Ft. Mitchell, KY
(Cincinnati area) Holiday Inn 214 1997 1967 1998
Hazard, KY Super 8 86 1991 1990 1997
Louisville, KY Doubletree 399 1992 1969 1997
Paducah, KY Courtyard by Marriott 100 1997 1997 New Build
Prestonsburg, KY Super 8 80 1991 1991 1997
LaFayette, LA Courtyard by Marriott 90 1997 1997 New Build
Revere, MA Comfort Suites 120 1998 1989 In Progress
</TABLE>
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<PAGE> 123
<TABLE>
<CAPTION>
HOTEL APPROXIMATE YEAR DATE OF LAST
LOCATION NAME # OF ROOMS ACQUIRED YEAR BUILT RENOVATION
-------- ---- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Saint Louis, MO Holiday Inn Airport 249 1993 1967 In Process
West
St. Louis, MO Holiday Inn North 391 1995 1958 1996
Airport
Merrimack, NH Fairfield Inn 116 1997 1981 In Process
Hamburg, NY Holiday Inn 128 1997 1968 1998
Syracuse, NY Holiday Inn 153 1996 1969 1997
Cincinnati, OH (Downtown) Holiday Inn 246 1997 1968 1998
Strongsville, OH
(Cleveland area) Holiday Inn Select 299 1995 1972 1996
Tulsa, OK Courtyard by Marriott 122 1997 1997 New Build
Wilsonville, OR
(Portland area) Holiday Inn 170 1997 1974 1998
Philadelphia, PA Doubletree 188 1996 1973 1997
Greenville, SC Comfort Suites 85 1996 1996 New Build
Chattanooga, TN Radisson 238 (1) (1) (1)
Tifton, GA Courtyard by Marriott 90 (1) (1) (1)
Myrtle Beach, SC Holiday Inn Sunspree 133 1994 1978 In Process
Jackson, TN Fairfield Inn 105 1997 1990 In Process
Memphis, TN French Quarter Suites 105 1991 1984 1997
Memphis, TN Holiday Inn Express 175 1997 1976 1998
Nashville, TN Holiday Inn Express 210 1995 1959 1996
Abilene, TX Courtyard by Marriott 100 1996 1996 New Build
Dallas, TX
(DFW Airport North) Holiday Inn Select 282 1996 1976 1997
San Antonio, TX Comfort Inn 202 1992 1975 1997
Burlington, VT Fairfield Inn 117 1997 1991 In Process
Clarksburg, WV (Bridgeport area) Holiday Inn 160 1996 1974 1997
Fairmont, WV Holiday Inn 106 1996 late 1960's 1997
Morgantown, WV Holiday Inn 147 1996 1975 1997
Little Rock, AK Residence Inn 96 1998 1998 New Build
</TABLE>
- -----------------
(1) Third party owned.
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<PAGE> 124
The following properties are currently under construction.
<TABLE>
<CAPTION>
APPROXIMATE EXPECTED
LOCATION HOTEL NAME # OF ROOMS COMPLETION DATE
-------- ---------- ----------- ---------------
<S> <C> <C> <C>
Dedham, MA Residence Inn 81 1998
Denver, CO (Airport) Marriott 238 1999
Livermore, CA (San Francisco area) Courtyard by Marriott 122 1999
Portland, OR (Downtown) Marriott 249 1999
Rio Rancho, NM Hilton Garden Inn 129 1999
Lake Oswego, OR (Portland area) Hilton Garden Inn 181 1999
</TABLE>
DEVELOPMENT AGREEMENTS
IHD provided acquisition and property development services to Impac for
a development fee of 4% of the total project cost of each hotel acquired or
developed. The shareholders of IHD are Robert Cole, Charles Cole and Robert
Flanders. Impac has agreed to terminate this agreement prior to the consummation
of the Merger so that Impac and its subsidiaries have no further obligations
under the agreement after such closing date other than the payment of up to a 4%
development fee (not to exceed $2.5 million in the aggregate) in the event
Lodgian acquires any of the previously identified hotels or properties. IHD has
assigned its right to these future payments to a newly formed entity owned by
its shareholders.
COMPENSATION PAID TO IMPAC MANAGER
The following table sets forth, on a historical and pro forma basis,
the compensation and distributions made by Impac and its Predecessors to Robert
Cole, the Manager of Impac, and his affiliates over the past three years and for
the three months ended March 31, 1998 and to be made by Lodgian:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------- THREE MONTHS ENDED
1995 1996 1997 MARCH 31, 1998
TYPE OF ---------------------- ------------------------ ---------------------- -----------------------
PAYMENT HISTORICAL PROFORMA* HISTORICAL PROFORMA* HISTORICAL PROFORMA* HISTORICAL PROFORMA*
------- ---------- --------- ---------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dividends $873,482 $ 873,482 $1,787,086 $1,787,086 $209,047 $209,047 $ - $ -
Management 21,458 21,458 - - - - - -
Fees
Development 14,167 14,167 590,000 590,000 306,983 306,983 150,000 150,000
Fees
Salary - 300,000 28,600 300,000 185,339 300,000 58,846 75,000
-------- ---------- ---------- ---------- -------- -------- -------- --------
Total $909,107 $1,209,107 $2,405,686 $2,677,086 $701,369 $816,030 $208,846 $225,000
======== ============= ========== ========== ======== ======== ======== ========
</TABLE>
- --------------------------
* Reflects compensation and distributions that would have been paid had Mr.
Cole's employment agreement with Lodgian been in place during the indicated
periods and assuming that the Management Fees and Development Fees were not
reduced or eliminated based on receipt of compensation under the Employment
Agreement. The foregoing does not reflect potential bonuses payable by Lodgian
representing a maximum of 100% of Mr. Cole's annual salary, as such bonuses are
discretionary in nature, or the value of options granted to Mr. Cole, as the
value of such options depends on the market price of the Lodgian Common Stock in
the future. The options will be assumed by Lodgian in connection with the
Merger. The options, which vest over five years and are exercisable for 185,000
shares of Lodgian Common Stock, will be exercisable at a price of $17.75 per
share (assuming an Impac Exchange Ratio of 0.519). Based on the current trading
price of Servico ($15.187), the potential realizable value of these options
assuming an annual stock price appreciation of five percent and 10%,
respectively, would, in ten years be $1,292,935 and $4,003,856.
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As of the Effective Time, Mr. Cole will be the President and Co-Chairman of the
Board of Directors of Lodgian. For additional information regarding Mr. Cole's
employment agreement with Lodgian, see "Interests of Certain Persons in the
Merger--Arrangements with Executive Officers."
EMPLOYEES
As of March 31, 1998, Impac and its subsidiaries employed approximately
2,800 full-time and approximately 1,200 part-time employees. As of March 31,
1998, labor unions represented employees at the Anchorage and Philadelphia
properties. No other employees of Impac or its subsidiaries are represented by a
collective bargaining agreement.
LEGAL PROCEEDINGS
Impac is a party to legal proceedings, including employment related
claims, arising in the ordinary course of its business, the impact of which
would not, either individually or in the aggregate, in Impac management's
opinion, based upon the facts known by Impac's management and the advice of
counsel, have a material adverse effect on Impac's financial condition or
results of operations.
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SELECTED HISTORICAL FINANCIAL DATA - IMPAC
The following table presents selected consolidated financial data
derived from Impac's and IHD's historical financial statements for the years
ended December 31, 1993 through 1997 and for the three months ended March 31,
1997 and 1998. This financial data should be read in conjunction with Impac's
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated and combined financial statements, related
notes and other financial information included and incorporated by reference in
this Joint Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------- ------------------
1993 1994 1995 1996 1997(a) 1997 1998(d)
---- ---- ---- ---- ------- ---- -------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $23,927 $41,615 $ 55,576 $ 67,813 $119,859 $ 22,306 $ 34,571
(Loss) income before extraordinary
items (b) (457) (64) 5,619 14,064 (16,089)(c) (3,762)(d) (4,707)
End of period:
Total assets $48,143 $71,875 $116,248 $191,666 $417,780 $266,142 $433,781
Long-term obligations 42,615 61,754 92,849 155,851 355,236 222,495 377,427
Total members'/partners' equity 3,284 5,375 13,408 19,760 36,970 30,006 31,356
</TABLE>
- ------------------------
(a) On March 12, 1997, Impac was formed through a reorganization of the
Predecessors. The formation of Impac was accounted for as a
reorganization of entities under common control with the purchase of
minority interest. The operations and financial position of the
Predecessors prior to the reorganization are presented on a combined
basis. The principal activity of IHD is to analyze prospective hotel
acquisitions for Impac. IHD was not acquired by Impac in the
above-described reorganization.
(b) Impac is a limited liability company and is not subject to income
taxes. The Predecessors and IHD were each either general or limited
partnerships or S-corporations and were similarly not subject to income
taxes. The results of these entities operations are included in the tax
returns of the unitholders, partners or S-corporation shareholders.
(c) Twenty-five of Impac's properties were under significant renovation
during 1997. Impac purchased 16 properties and opened three newly
constructed properties during 1997. The renovation process greatly
affects the operating performance of a hotel while it is underway.
Revenues are significantly reduced while fixed expenses remain
substantially constant. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Impac".
(d) Impac opened or acquired six hotels during the quarter ended March 31,
1997. During the quarter ended March 31, 1998, Impac had 18 hotels
under renovation. Impac also had 18 hotels under renovation during the
first quarter of 1997. Although revenues have increased substantially
during the first quarter of 1998 compared to the first quarter of 1997,
revenues have been adversely affected by the renovations which remained
ongoing during the first quarter ended March 31, 1998. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations - Impac".
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - IMPAC
GENERAL
Impac owns or manages primarily upscale or mid-market full service
hotels, including 51 wholly owned hotels, one partially owned hotel and two
managed hotels. Prior to March 12, 1997, Impac consisted of 22 partnerships and
four corporations, each of which owned between one and six hotels (the "Initial
Hotels"), and two operating corporations, Impac Hotel Management, Inc. ("Impac,
Inc.") and Impac Development & Construction, Inc. ("IDC"). The principals of
Impac, Inc. and their affiliates owned an aggregate of approximately 23% of the
Initial Hotels, while various other investors owned the remaining interests. On
February 26, 1997, Impac was formed for the purpose of acquiring, either
directly or indirectly, the outstanding ownership interests in the Initial
Hotels. On March 12, 1997, Impac acquired all of the Initial Hotels through the
issuance of Impac Units in exchange for all of the limited partnership interests
or shares, as applicable, of the limited partnerships and corporations that
owned the Initial Hotels. In addition, Impac acquired, in exchange for Impac
Units, all of the assets of Impac, Inc. and IDC. See Note 1 of the Notes to the
Consolidated and Combined Financial Statements of Impac.
Beginning in late 1996, Impac began to invest significantly in
additional professional staff and corporate infrastructure and systems and
incurred significant costs in order to position itself to both acquire and
develop hotel properties. From January 1995 through July 1998, Impac acquired 31
hotels and developed 15 hotels (five of which are currently under construction).
The acquired hotels underwent significant renovations and therefore revenue
trends are not comparable to revenues which would be realized had these
properties been stabilized. Thus, the historical financial statements for the
years ended December 31, 1997, 1996 and 1995 reflect differing numbers of owned
hotels throughout the periods. In addition, during the fiscal years ended
December 31, 1996 and 1995, Impac sold seven and three hotels, respectively. Due
to the timing and magnitude of the acquisitions made during these years, it is
difficult to compare results of the periods either to each other or to prior
years.
The discussion that follows is derived from Impac's Consolidated
Financial Statements and the notes thereto contained elsewhere in this Joint
Proxy Statement/Prospectus.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 (THE "1998 QUARTER") AS COMPARED TO
THE THREE MONTHS ENDED MARCH 31, 1997 (THE "1997 QUARTER"). As of March 31,
1998, Impac owned and operated 45 hotels and managed two hotels for third-party
owners. One hotel was partially owned. This compared to 32 hotels owned and
operated at March 1997. Two hotels were managed for third-party owners. Seven
hotels were under construction at March 1998. For calendar 1997, Impac developed
and opened three hotels and acquired 16 others. Six of these properties were
opened or acquired during the 1997 Quarter. During the 1998 Quarter, 18 hotels
were under renovation.
Revenues for the 1998 Quarter were $34.6 million as compared to $22.3
million for the 1997 Quarter. The revenue increase primarily is attributable to
the inclusion of a full quarter of revenue in the 1998 Quarter for the six
hotels that were opened or purchased during the 1997 Quarter. During the 1997
Quarter, 18 properties were under renovation. The renovation of a majority of
these properties was completed in late 1997. Accordingly, revenues are
increasing as the properties return to full operating capacity. Revenue growth
in both the 1998 Quarter and the 1997 Quarter was adversely effected by the 18
properties that were under renovation during the 1998 Quarter and the 1997
Quarter.
Total operating expenses before depreciation and amortization rose to
$28.9 million for the 1998 Quarter as compared to $19.9 million for the 1997
Quarter. As a percentage of revenue, operating expenses were 84% for the 1998
Quarter and 89% for the 1997 Quarter. The percentage decrease is attributable to
properties
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coming out of renovation in late 1997 and early 1998 which had been under
renovation or recently purchased in the 1997 Quarter. Operating efficiencies
also contributed to the decrease.
Depreciation and amortization costs increased by 67% to $3.7 million
for the 1998 Quarter versus $2.2 million in the 1997 Quarter. The increase is
attributable to Impac's increased investment in hotel properties.
Income from operations increased to $1.9 million in the 1998 Quarter
versus $182,000 in the 1997 Quarter. The increase is attributable to the factors
discussed above.
Interest expense rose to $6.8 million in the 1998 Quarter as compared
to $4.0 million in the 1997 Quarter. The increase is attributable to increased
debt levels associated with the addition of the hotels described above.
Extraordinary losses related to costs incurred in the early
extinguishment of indebtedness of $13.3 million were incurred during the 1997
Quarter. As described in Note 1 to Impac's and IHD's Consolidated and Combined
Financial Statements, Impac completed a reorganization of its partnerships and
corporations into one entity during March 1997. Individual partnership debt from
numerous lenders was replaced with a facility from one lender. Accordingly, the
debt previously existing was retired at a cost of $8.6 million. Approximately
$4.7 million in assets previously capitalized to obtain the former debt were
written off.
A net loss of $4.7 million was recorded for the 1998 Quarter as
compared to a net loss of $17.1 million for the 1997 Quarter. EBITDA increased
to $5.6 million for the 1998 Quarter compared to $2.4 million for the 1997
Quarter.
YEAR ENDED DECEMBER 31, 1997 ("1997") COMPARED TO THE YEAR ENDED
DECEMBER 31, 1996 ("1996"). As of December 31, 1997, Impac owned 45 hotels and
managed two hotels for third-party owners. One hotel was partially owned. This
compares with 26 hotels and two managed for third parties at December 31, 1996.
Additionally, six hotels were under construction at December 31, 1997. Impac
developed 3 hotels during 1997 and acquired 16 others. Impac significantly
renovated 25 hotels during 1997 and early 1998. Nine of these properties were
purchased in 1996 and significant renovations were completed during 1997.
Revenues for 1997 were $119.9 million as compared to $67.8 million for
1996. The revenue increase was a result of the acquisition and development of 19
hotels as well as the inclusion of a full year of revenues in 1997 for the 14
properties added in 1996. Revenue growth is adversely affected by the renovation
of properties which were newly acquired. Typically, a significant renovation
lasts over six months and approximately one-third of each property's rooms are
taken out of service during this period. Upon completion of the renovation, the
revenue stream generally does not stabilize for 18 to 24 months. The renovation
process adversely affects net income and EBITDA as a consequence of decreased
revenue.
Total operating expenses before depreciation and amortization were
$104.0 million in 1997. This compares to $55.8 million in 1996. As a percentage
of revenues, operating expenses were 87% for 1997 and 82% for 1996. This
percentage increase is also the result of significant renovations. Revenue
levels during renovation are lower than would normally be expected during a
period of stabilization. However, fixed operating costs for properties under
renovation remain constant. Expenses also increased as a result of the addition
of the new properties described above and the inclusion of expenses for a full
year for properties acquired in 1996. Finally, Impac has been investing
significant amounts in staffing and corporate infrastructure since 1996. Impac
made significant investments in staffing for Impac's in-house construction
department, Revenue Center, accounting, hotel operations and information
technology functions. Accordingly, overhead costs increased during a time period
when numerous rooms were taken out of service for renovation. These additional
costs will not be offset until renovation and development activity is complete
and property revenues stabilize.
Depreciation and amortization costs increased by 92% to $11.1 million
as compared to $5.8 million for 1996. The increase is attributable to the
increased investment in hotel properties described above and to the step-up of
the
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asset basis resulting from the reorganization completed in 1997. See Note 2 of
the Notes to the Consolidated and Combined Financial Statements of Impac for
further discussion.
As a result of the factors described above, income from operations
decreased to $4.7 million as compared to $6.2 million for 1996.
Interest expense rose to $21.3 million for 1997 from $11.8 million in
1996. The increase is attributable to increased debt levels associated with
additional investments in hotel properties.
Other income for 1997 decreased to $300,000 as compared to $19.7
million in 1996. Seven properties were sold in 1996, resulting in the
substantial gain. No properties were sold in 1997. See "Business of
Impac--Investment Strategy" for further discussion.
Extraordinary losses related to costs incurred in the early
extinguishment of indebtedness of $13.3 million were incurred during 1997. As
described in Note 1 to Impac's Consolidated and Combined Financial Statements,
Impac completed a reorganization of its partnerships and corporations into one
entity during March 1997. Individual partnership-level debt from numerous
lenders was replaced with a facility from one lender. Accordingly, the debt
previously existing was retired early at a cost of $8.6 million. Approximately
$4.7 million in assets previously capitalized to obtain the former debt was
written off.
A net loss of $29.4 million was recorded for 1997 as compared to income
of $14.1 million for 1996. EBITDA increased to $15.8 million as compared to
$12.0 million for 1996.
YEAR ENDED DECEMBER 31, 1996 ("1996") COMPARED TO THE YEAR ENDED
DECEMBER 31, 1995 ("1995"). As of December 31, 1996, Impac owned 26 hotels. This
compares with 19 hotels which were owned as of December 1995. Five (5) of the
hotels owned as of December 1995 were sold during 1996. Two hotels acquired
during 1996 were sold in 1996. Impac acquired or developed 14 hotels during
1996. Significant renovations were underway for each newly acquired property as
of December 1996.
Revenues for 1996 totaled $67.8 million versus $55.6 million for 1995.
The increase resulted from the acquisition and development of the hotels
described above and the inclusion of a full year of revenue for five properties
which became a part of the portfolio during 1995. Although the increase in
revenues is significant, it is offset by the costs associated with the
renovation of the newly acquired hotels. Renovations significantly affect the
revenues generated at a property as approximately one third of each property's
rooms are taken out of service for a period of approximately six months while
the renovation process is underway. The revenue stream for a newly renovated
property generally does not stabilize until approximately 18 to 24 months after
the renovation is complete.
Operating expenses before depreciation and amortization were $55.8
million in 1996 (82% of revenue) compared with $43.8 million (79% of revenue)
for 1995. The increase in operating expenses as a percentage of revenues is a
result of the effect of lower revenues than would normally be realized for 14
hotels which were under renovation during 1996. Fixed operating costs for
properties under renovation typically are not reduced. Additionally, Impac began
a substantial investment in staffing and corporate infrastructure and systems in
1996. Examples include (i) the staffing of an in-house construction department
to oversee the renovation and development of new properties and (ii) the
staffing of the corporate office in areas that needed additional investment to
support the expected growth of the company, including accounting, hotel
operations and information technology. Significant costs were added to Impac's
overhead while numerous rooms were taken out of service during the renovation
process.
Depreciation and amortization expense in 1996 was $5.8 million, an
increase over 1995 depreciation and amortization expense of $4 million. This
increase is a result of the acquisition and development of additional hotel
properties during 1996 and the inclusion of a full year of expense for
properties added during 1995.
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As a result of the above, income from operations for 1996 was $6.2
million, a decrease of 21% over 1995 income from operations of $7.8 million.
Interest expense (net of interest income) was $11.8 million for 1996, a
$4.6 million increase over the $7.2 million of interest expense for 1995. During
1996, Impac's borrowings increased $83 million as a result of the newly acquired
and developed properties.
Other income of $19.7 million in 1996 resulted from the gain on the
sale of seven hotels. Three hotels were sold in 1995 for a gain of $5 million.
See "Business of Impac--Investment Strategy" for further discussion.
Impac had net income of $14.1 million for 1996 and $5.6 million for
1995. EBITDA was $12.0 million in 1996 versus $11.8 million in 1995 despite the
negative effects the properties under renovation caused to revenues and
expenses.
LIQUIDITY AND CAPITAL RESOURCES
Impac's principal sources of liquidity historically have been existing
cash balances, cash flow from operations and credit facilities and equity
raises. Impac had EBITDA for 1997 of $15.8 million. This represents a 32%
increase over the $12.0 million for 1996 and a 34% increase over the $11.8
million for 1995. The increase of EBITDA for 1997 compared to 1996 was a result
of the acquisition of 16 hotels and the opening of 3 newly developed properties.
EBITDA is a widely regarded industry measure of lodging performance used in the
assessment of hotel property values, although EBITDA is not indicative of and
should not be used as an alternative to net income or net cash provided by
operations as specified by generally accepted accounting principles.
As of March 31, 1998, Impac's working capital deficit was $4.5 million.
Impac had a slightly positive working capital balance at December, 1997. Impac's
ratio of current assets to current liabilities at March 31, 1998 and December
31, 1997, was 0.8-to-1 and 1-to-1, respectively. This compares to a working
capital deficit of $7.6 million and a ratio of current assets to current
liabilities of 0.5 to 1 at December 31, 1996.
Impac added 19 hotels to its portfolio during 1997. Sixteen properties
were purchased while three were developed. The aggregate purchase price was $107
million for the properties acquired. The development costs for the new
properties were $50 million. Impac distributed $6.0 million to its investors in
1997.
During 1996, Impac purchased or developed 14 hotels. The aggregate
purchase price and development costs were approximately $64 million.
During 1996 and 1995, Impac distributed $29.4 million and $10.4
million, respectively, to its unitholders.
Management believes that cash on hand and cash generated from
operations will be sufficient to support Impac's capital improvement program and
satisfy working capital requirements for the foreseeable future. However, Impac
will be required to obtain additional debt or equity financing to pursue its
planned acquisition strategy. Impac has obtained the credit facilities and
refinancing commitments described below. There is no assurance that additional
debt or equity financing will be available.
EXISTING FINANCING ARRANGEMENTS
Impac has entered into a series of financing arrangements with BancOne
Capital Partners III, Ltd. ("Banc One") and NACC in order to finance its
operations and capital improvement program. The principal terms of these
arrangements are described below.
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BANC ONE FINANCING. Banc One agreed to make an unsecured loan to Impac
in an amount not to exceed $78.5 million (the "Banc One Loan") pursuant to an
Amended and Restated Loan Agreement (as amended, the "Banc One Loan Agreement")
between Impac and Banc One. As of March 31, 1998, approximately $74.5 million of
the Banc One Loan had been funded. Since the Merger would not be permitted under
the terms of the Banc One Loan, it is anticipated that the Banc One Loan will be
prepaid in full contemporaneously with the Merger. The Banc One Loan is freely
prepayable without penalty or premium. In addition to having to prepay the
outstanding principal of the Banc One Loan, Impac will have to pay accrued and
unpaid fixed return since the most recent monthly interest payment date at the
rate of 10% per annum, plus a variable return based upon a percentage of net
cash flow of certain Impac properties, certain percentages of any net proceeds
resulting from the Merger, and additional amounts (to the extent available from
net cash flow) required to ensure that Banc One receives a minimum cumulative
internal rate of return of 15% per annum. Based on the foregoing, if the Banc
One indebtedness was repaid as of the date of this Joint Proxy
Statement/Prospectus, approximately an additional $4 million would be due Banc
One. It is expected that the cash required to prepay the Banc One Loan as
described above will come from the proceeds of a refinancing commitment to be
obtained prior to the consummation of the Merger.
IMPAC I FINANCING. In connection with the March 1997 roll-up
transaction described in Note 1 to Impac's Consolidated and Combined Financial
Statements (the "Roll-up"), NACC made a $132.459 million term loan (the "Impac I
Loan") to an affiliate of Impac's, Impac Hotels I, L.L.C. ("Impac I"), to
refinance existing debt on the 21 hotel properties acquired by Impac I in the
Roll-up (the "Impac I Properties") and to pay certain costs of the Roll-Up and
the Impac I Loan. The Impac I Loan was made pursuant to a Loan Agreement dated
as of March 12, 1997 (as amended, the "Impac I Loan Agreement") between Impac I
and NACC.
INTEREST. Prior to the Impac I Adjustment Date (as defined
below), the Impac I Loan bears interest at a floating interest rate that
fluctuates monthly, equal to 30-day LIBOR plus 2.25%. From and after the Impac I
Adjustment Date, interest converts to a fixed rate equal to the sum of (a) the
implied yield on a 10-year U.S. Treasury note determined as of the earlier of
(i) the date on which the benchmark Treasury rate is locked pursuant to an
interest rate management agreement among Impac, Impac I and NACC (the "Impac I
Interest Rate Agreement"), and (ii) the third business day prior to the Impac I
Adjustment Date (the "Impac I Benchmark Treasury Rate"), plus (b) a spread based
on the debt service coverage ratio ("DSCR") of the Impac I Properties (which
spread ranges from a low of 1.925% to a high of 3.025%), plus (c), until the
Impac I Optional Prepayment Date (as defined below), the Additional Impac I
Spread (as defined below), plus (d) from and after the Impac I Optional
Prepayment Date, the Additional Impac I Hyperamortization Spread (as defined
below). The "Additional Impac I Hyperamortization Spread" is 2.00% for the first
monthly debt service period after the Impac I Optional Prepayment Date, and
5.00% thereafter.
The Impac I Adjustment Date will be the earlier of (y) March
11, 1999, and (z) with respect to any portion of the Impac I Loan that becomes a
Split Impac I Loan (as defined below), the date on which such portion of the
Impac I Loan becomes a Split Impac I Loan. Impac I has the right to extend the
March 11, 1999 adjustment date for six months by giving 30 days' notice to NACC
and paying NACC an extension fee equal to 0.5% of the principal amount of the
Impac I Loan then outstanding.
INTEREST RATE PROTECTION. Impac I may from time to time lock
the Impac I Benchmark Treasury Rate to be used in calculating the base rate on
all or a portion of the Impac I Loan. In addition, if prior to the Impac I
Adjustment Date the implied yield of the 10-year Treasury note two years forward
exceeds certain pre-determined levels, Impac I must elect either to lock the
Impac I Benchmark Treasury Rate on a portion of the Impac I Loan or prepay a
portion of the Impac I Loan. NACC also can lock the Impac I Benchmark Treasury
Rate if it exceeds 7.80%, or at any time following the occurrence and during the
continuation of an "event of default" under the Impac I Loan. If NACC determines
prior to the Impac I Adjustment Date that it will incur or has incurred losses
on its interest rate hedge positions relating to the rate-locked portion of the
Impac I Loan in excess of 25% of the net equity of Impac I in the Impac I
Properties, Impac I or Impac are required to pay to NACC an amount of cash
collateral sufficient to reduce NACC's losses to no more than 20% of the net
equity of Impac I in the Impac I Properties. Such collateral is returned to
Impac I if it converts the rate-locked portion of the Impac I Loan to a fixed
rate loan, or to the extent
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such collateral exceeds actual hedging losses. Impac I is required to pay a
monthly maintenance fee equal to eight basis points on the principal amount of
the Impac I Loan on which the Impac I Benchmark Treasury Rate is locked. Of that
fee, two basis points are due and payable on a current basis, and the remainder
(together with accrued interest thereon) will be recovered by NACC by adding an
additional spread (the "Additional Impac I Spread") to the base rate from and
after the Impac I Adjustment Date and prior to the Impac I Optional Prepayment
Date. In addition to the other collateral described herein, the obligations of
Impac and Impac I under the Impac I Interest Rate Agreement are secured by a
pledge of Impac's 99% membership interest in Impac I.
REPAYMENT OF PRINCIPAL. Interest-only payments on the Impac I
Loan are due and payable monthly prior to the Impac I Adjustment Date. After the
Impac I Adjustment Date, the Impac I Loan is repayable in equal, monthly
installments of principal and interest based on a 20-year amortization schedule.
If the Impac I Loan or any Split Impac I Loan has not been prepaid in full by
the tenth anniversary of the applicable Impac I Adjustment Date (the "Impac I
Optional Prepayment Date"), excess cash flow from the Impac I Properties
financed by the Impac I Loan or the applicable Split Impac I Loan will be
applied monthly to reduce outstanding principal, in addition to the scheduled
installments of principal and interest. The final maturity date of the Impac I
Loan is March 11, 2019.
PREPAYMENT. The Impac I Loan may be prepaid in whole or in
part without penalty or premium on or after the Impac I Optional Prepayment
Date. Prior to the Impac I Adjustment Date, up to 40% of the Impac I Loan may be
prepaid from the proceeds of the issuance of additional equity by Impac or from
the proceeds of sale of one or more Impac I Properties, subject to a scale of
increasing premiums ranging from 0% to 3% of the principal so prepaid. If the
DSCR of the remaining Impac I Properties as of the Impac I Adjustment Date is
less than 1.40, the Impac I Loan must be prepaid in the amount necessary to
bring the DSCR up to 1.40. No prepayment of the Impac I Loan or any Split Impac
I Loans is permitted after the Impac I Adjustment Date and prior to the Optional
Impac I Prepayment Date; however, Impac I may obtain the release of one or more
Impac I Properties from the applicable mortgage(s) securing the Impac I Loan or
the applicable Split Impac I Loan by defeasing the portion of such loan
allocated to each such Impac I Property. Defeasance is achieved by using equity
proceeds or proceeds from the sale of each such Impac I Property to acquire U.S.
Treasury securities in an amount equal to 125% of the allocated loan amount (or,
upon the release of the last Impac I Property, 100% of the allocated loan
amount), which securities are delivered to the servicer of the Impac I Loan or
such Split Impac I Loan as replacement collateral for the released Impac I
Properties.
SPLIT LOANS. The term "Split Impac I Loans" refers to any
refinancing loan made by NACC pursuant to the Impac I Loan Agreement to a
bankruptcy-remote affiliate of Impac to which Impac I has transferred a
segregated pool of Impac I Properties for the purposes of effectively fixing the
interest rate on a portion of the Impac I Loan and facilitating the
securitization thereof by NACC.
COLLATERAL. The Impac I Loan is secured by first-priority
mortgages on each Impac I Property (the "Impac I Mortgages") and by a general
security interest in all personal property and fixtures of Impac I. The Impac I
Mortgages are cross-collateralized and cross-defaulted with each other and with
Banc One.
IMPAC II FINANCING. Also in connection with the Roll-up, NACC entered
into a loan facility (the "Impac II Loan") with another affiliate of Impac's,
Impac Hotels II, L.L.C. ("Impac II"), to refinance existing debt on 11 hotel
properties acquired by Impac II prior to March 12, 1997, to finance a portion of
the cost of acquiring, constructing and rehabilitating 18 additional hotel
properties throughout the continental United States (the "Impac II Properties"),
and to pay certain costs incurred in connection with the Impac II Loan. The
Impac II Loan was made pursuant to a Loan Agreement dated as of March 12, 1997
(as amended, the "Impac II Loan Agreement") between Impac II and NACC. The
original $150.0 million maximum amount of the Impac II Loan was later increased
to $163.5 million to accommodate additional hotel acquisitions. The entire Impac
II Loan has been committed to identified Impac II Properties, though portions of
the Impac II Loan have not yet been disbursed for on-going rehabilitation and
construction costs. All advances under the Impac II Loan Agreement must be made
and all construction and rehabilitation of the Impac II Hotels completed by
October 18, 1999.
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INTEREST. Prior to the Impac II Adjustment Date (as defined
below), the Impac II Loan bears interest at a floating interest rate that
fluctuates monthly, equal to 30-day LIBOR plus 2.75%. From and after the Impac
II Adjustment Date, interest converts to a fixed rate as described above in
"Impac I Financing--Interest", except that (i) the date on which the benchmark
Treasury rate is locked is pursuant to a separate interest rate management
agreement among Impac, Impac II and NACC (the "Impac II Interest Rate
Agreement"), and (ii) the spread based on the DSCR of the Impac II Properties
ranges from a low of 1.925% to a high of 3.250%.
The Impac II Adjustment Date will be the earlier of (y)
October 18, 2000, and (z) with respect to any portion of the Impac II Loan that
becomes a Split Impac II Loan (as defined below), the date on which such portion
of the Impac II Loan becomes a Split Impac II Loan. It is anticipated that NACC
will securitize the Impac II Loan and any Split Impac II Loan after the
applicable Impac II Adjustment Date.
INTEREST RATE PROTECTION. The Impac II Interest Rate Agreement
contains substantially similar terms as those set forth under "Impac I
Financing--Interest Rate Protection" above except that the Impac II Benchmark
Treasury Rate is based on a four-year forward rate rather than a two-year
forward rate, and the prepayment amounts differ in the event the Impac II
Benchmark Treasury Rate exceeds the pre-determined thresholds. Pursuant to the
terms of the Impac II Interest Rate Agreement, Impac II locked the Impac II
Benchmark Treasury Rate on $54 million of the Impac II Loan at 7.235% during
April, 1997. In the event that Lodgian determines that it is in its best
interest to "break" that interest rate lock, it would be required to pay a
significant fee to the lender.
REPAYMENT OF PRINCIPAL. Principal and interest payments are to
be made on the same terms as are described above under "Impac I
Financing--Repayment of Principal," except that the schedule refers to the Impac
II Adjustment Date and the Impac II Optional Prepayment Date (which is the tenth
anniversary of the Impac II Adjustment Date). The final maturity date of the
Impac II Loan is October 11, 2020.
PREPAYMENT. The Impac II Loan may be prepaid on the same terms
and under the same conditions as are described under "Impac I
Financing--Prepayment" above, except that all references to Impac I refer
instead to Impac II.
SPLIT LOANS. Prior to the scheduled Impac II Adjustment Date,
the Impac II Loan can be split at the option of Impac II in order effectively to
fix the interest rate thereon, similar to the concept of Split Impac I Loans
discussed under the heading "Impac I Financing--Split Loans" above (each portion
so split, a "Split Impac II Loan").
COLLATERAL. The Impac II Loan is secured by first-priority
mortgages on each Impac II Property (the "Impac II Mortgages") and by a general
security interest in all personal property and fixtures of Impac II. The Impac
II Mortgages are cross-collateralized and cross-defaulted with each other and
with Banc One.
GUARANTIES. Impac has guaranteed the repayment of the portion
of the Impac II Loan funding rehabilitation and construction costs (but not the
acquisition costs) of the Impac II Properties. Such guaranties expire upon
completion of rehabilitation or construction (as applicable). In addition, where
Impac II elected to increase the Impac II Loan for any particular Impac II
Property above 65% of the approved project costs (but not higher than 80%),
Impac has guaranteed repayment of such excess until the Impac II Properties in
question have achieved a trailing 12-month DSCR of not less than 1.20. Finally,
Impac has guaranteed payment of the entire Impac II Loans for the Mayfair House
Hotel in Coconut Grove, Florida, and the Marriott Hotel being constructed in
Portland, Oregon, pending satisfaction of certain conditions. After such
conditions are satisfied, Impac's guaranties on those projects will be limited
to the extent described in the first three sentences of this paragraph.
IMPAC III FINANCING. NACC entered into an additional $100 million loan
facility (the "Impac III Loan") to another affiliate of Impac's, Impac Hotels
III, L.L.C. ("Impac III"), to finance a portion of the cost of acquiring,
constructing and rehabilitating additional hotel properties throughout the
continental United States and Alaska (the "Impac III Properties") and to pay
certain costs incurred in connection with the Impac III Loan. The Impac III Loan
was made pursuant to a Loan Agreement dated as of October 29, 1997 (as amended,
the "Impac III Loan Agreement")
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between Impac III and NACC. As of March 31, 1998, approximately $68 million of
the Impac III Loan has been disbursed or committed to pay for certain
acquisition, rehabilitation and construction costs of eleven Impac III
Properties.
The terms and conditions of the Impac III Loan are in all material
respects essentially the same as those for the Impac II Loan, except as follows:
(a) the outside Impac III Adjustment Date is October 11, 2001, (b) all advances
under the Impac III Loan for the acquisition of an Impac III Property must be
made by October 31, 1998, (c) the rehabilitation and construction of the Impac
III Properties must be completed by October 31, 2000, (d) the Impac III Loan has
a final maturity date of November 11, 2021, (e) the maximum loan amount of the
Impac III Loan relating to any particular Impac III Property is 70% of
NACC-approved project costs, (f) there are no Impac payment guaranties, (g) the
entire Impac III Loan is subject to optional prepayment in whole or in part
prior to the Impac III Adjustment Date at premiums increasing from 0% to 4% of
the principal prepaid, and (h) the Impac III Loan is secured by mortgages and
security interests on the Impac III Properties. In addition, a portion of the
Impac III Loan is evidenced by a working capital note in the original principal
amount of approximately $1.65 million (the "Working Capital Note"), which does
not relate to any particular Impac III Property, but is cross-collateralized
with the project notes under the Impac III mortgages. Upon the acquisition of
each new Impac III Property, a ratable portion of the loan evidenced by the
Working Capital Note is prepaid with an advance under the applicable project
note. If not sooner paid, the Working Capital Note matures on the Impac III
Adjustment Date. In addition, the Working Capital Note must be prepaid in full
prior to making any new advance under the Impac III Loan relating to the
Courtyard by Marriott to be constructed on land owned by Impac III in Livermore,
California.
NACC MEZZANINE FINANCING. To the extent the DSCR of the remaining Impac
I Properties, the Impac II Properties or the Impac III Properties is less than
1.40 on the applicable Impac I Adjustment Date, Impac II Adjustment Date or
Impac III Adjustment Date, respectively (the "Applicable Adjustment Date"), and
the relevant Impac affiliate (the "Applicable Borrower") is obligated to prepay
a portion of the Impac I Loan, the Impac II Loan or the Impac III Loan as
hereinabove described (the "Applicable Loan"), to bring the applicable DSCR up
to 1.40. NACC has agreed to provide mezzanine financing to provide the proceeds
necessary to make such prepayments. NACC would be entitled to a fee equal to one
percent (1%) of such financing.
SENIOR NACC MEZZANINE FINANCING. In the absence of a default
under the Applicable Loan, and provided that the Applicable Borrower does not
repay the amount outstanding on the Applicable Loan by an amount equal to the
shortfall (the "Shortfall") from some other source, NACC has agreed to purchase
senior mezzanine financing (the "Senior NACC Mezzanine Financing") from the
Applicable Borrower in an amount equal to the lesser of (i) the Shortfall or
(ii) the amount based upon NACC's determination of the adjusted net operating
income such that 75% of excess cash flow from the remaining hotel properties of
the Applicable Borrower will (a) result in a DSCR of not less than 1.15, based
on a debt service coverage constant equal to the constant used in determining
the interest rate on the Applicable Loan, and (b) be sufficient to fully repay
the Senior NACC Mezzanine Financing within a five-year period, using 75% of
excess cash flow of the relevant properties.
SENIOR PREFERRED YIELD. The yield on all Senior NACC Mezzanine
Financing will accrue and be payable monthly at one-month U.S. Dollar
denominated LIBOR plus 6.00%, reset two business days prior to each payment
date. In the event that 50% of excess cash flow will be sufficient to fully
repay the Senior NACC Mezzanine Financing within a five-year period, the yield
on the Senior NACC Mezzanine Financing will accrue and be payable monthly at
one-month U.S. Dollar denominated LIBOR plus 4.00%.
JUNIOR NACC MEZZANINE FINANCING. At the Applicable Adjustment
Date, if the Senior NACC Mezzanine Financing is less than the Shortfall, NACC
will purchase Junior NACC Mezzanine Financing from the Applicable Borrower in an
amount equal to (i) the Shortfall minus (ii) the amount of Senior NACC Mezzanine
Financing.
JUNIOR PREFERRED YIELD. The yield on all Junior NACC Mezzanine
Financing will accrue and be payable at one-month U.S. Dollar denominated LIBOR
plus 7.50%.
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WARRANTS. As consideration for NACC making a Junior NACC
Mezzanine Financing, NACC would be entitled to receive warrants (the "Mezzanine
Warrants") exercisable into a percentage interest of the membership interests of
Impac. The equity percentage represented by each Warrant will equal the products
of (a) the Equity Value (as defined below) of the Applicable Borrower and (b)
the percentage derived by dividing the amount of the Junior NACC Mezzanine
Financing by the sum of (i) the Equity Value of the Applicable Borrower and (ii)
the amount of the Junior NACC Mezzanine Financing, and multiplying the result by
80%. The "Equity Value" of the Applicable Borrower will be determined by
dividing the net operating income of the subject properties (as determined by
NACC) by .10, subtracting the amount of the Applicable Loan and any related
Senior NACC Mezzanine Financing and Junior NACC Mezzanine Financing, and adding
the market value of any non-income producing assets of the Applicable Borrower.
It is currently not anticipated that the Junior NACC Mezzanine Financing will be
put in place and accordingly, it is not expected that the Mezzanine Warrants
will be issued.
ACCELERATED RETIREMENT. The Senior NACC Mezzanine Financing
and the Junior NACC Mezzanine Financing (collective, the "NACC Mezzanine
Financing") may be retired, at the election of the Applicable Borrower, at any
time, in whole or in part, without premium, provided, however, that until such
financing is fully redeemed, the holders of NACC Mezzanine Financing shall have
received (after applicable payments to the holder of the Applicable Loan) 100%
of (i) the net proceeds of any sale of any hotel property securing the
Applicable Loan, (ii) any proceeds resulting from a refinancing of the
Applicable Loan, (iii) any proceeds from a liquidation of the Applicable Loan,
and (iv) excess condemnation or casualty proceeds ("Minimum Redemption
Amounts"). The holder of the NACC Mezzanine Financing will have approval rights
with respect to any of the events described in (i) - (iii) of this paragraph.
SECURITY. The NACC Mezzanine Financing will be secured by an
assignment of excess cash flow, subordinate to any similar assignment to the
holder of the Applicable Loan. Depending on final sizing of the NACC Mezzanine
Financing and final determination of excess cash flow, NACC may require
additional collateral for the NACC Mezzanine Financing.
DEFAULT IN MONTHLY PAYMENTS. If the Applicable Borrower fails
to pay the Senior Preferred Yield, the Junior Preferred Yield or the required
Minimum Redemption Amount in full on any due date, for each succeeding due date,
100% of excess cash flow will be applied first to any unpaid Senior Preferred
Yield and Junior Preferred Yield (including any interest thereon) and then to
the NACC Mezzanine Financing amount, until all prior unpaid Minimum Redemption
Amounts have been paid, and Minimum Redemption Amounts have been paid on a
current basis for an additional three consecutive months.
REFINANCING COMMITMENT
As a condition to Servico's obligation to consummate the Merger, Impac
and Servico must receive a commitment, effective as of the Effective Time, to
restructure Impac's existing indebtedness. The restructuring contemplates the
prepayment of the $78.5 million Banc One Loan described above and a secured
refinancing loan, the proceeds of which will be used to repay Impac's other
existing indebtedness. Impac and Servico are in the process of negotiating the
terms of the refinancing commitment with prospective lenders and anticipate that
a commitment will be in place prior to the consummation of the Merger. Although
the definitive terms of the debt arrangements to be entered into in connection
with the refinancing have not been finalized as of the date of this Joint Proxy
Statement/Prospectus, Servico and Impac expect that such terms will include
significant operating and financial restrictions, such as limits on Lodgian's
ability to incur additional indebtedness or make capital expenditures,
restrictions on payment of dividends, negative pledge covenants and financial
ratio covenants. There can be no assurance that a commitment for such
refinancing can be obtained on terms acceptable to Servico and Impac.
FINANCINGS FOR MACON HOTEL. Impac owns a 60% joint venture interest in
Macon Hotel Associates, L.L.C., a Massachusetts limited liability company
("Macon Associates"), in which the other 40% equity interest is owned by an
unaffiliated entity, PCG/Macon Investment Corp. ("PCG"). Macon Associates owns a
Crowne Plaza hotel located in Macon, Georgia (the "Macon Hotel"). In connection
with the purchase of the Macon Hotel, Macon Associates
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obtained an eight million dollar purchase money loan from the Seller which is
secured by first mortgage on the Macon Hotel. The purchase money loan bears
interest at rates ranging from 2% per annum to 6.5% per annum and thereafter
subject to either a fixed rate or a prime-based rate which is adjusted annually.
Monthly payments of interest only are due until October 1, 1998, at which point
amortization commences based upon a 25-year amortization schedule, with a
balloon payment due on September 30, 2003, the final maturity date. In addition,
Macon Associates issued $4.375 million of its promissory notes (the "Macon
Mezzanine Notes") pursuant to a Securities Purchase Agreement dated as of May
21, 1997. The Macon Mezzanine Notes bear interest at a base rate of 14% per
annum, of which 7% per annum is due and payable monthly and the balance of such
base interest is payable on a current basis to the extent of available cash
flow. The holders of the Macon Mezzanine Notes are also entitled to receive
contingent interest from certain excess cash flow from the Macon Hotel to the
extent necessary to provide the holders with a monthly compounded return of 25%
per annum, and under some circumstances, to reduce the outstanding principal of
the Macon Mezzanine Notes. The holders of the Macon Mezzanine Notes are also
entitled to receive, as additional interest, a portion of the appreciation of
the Macon Hotel. The Macon Mezzanine Notes mature in May 2001. The Macon
Mezzanine Notes are nonrecourse to Macon Associates, subject to certain
exceptions for fraud, material misrepresentation, intentional misappropriation,
breaches of certain covenants in the documents and attempting to hinder the
holders in the exercise of their rights under the documents. Impac, PCG and the
principals of the PCG have guaranteed the recourse obligations, if any, of Macon
Associates to the holders of the Macon Mezzanine Notes, and such guarantees are
secured by a pledge of the equity interests that Impac and PCG respectively own
in Macon Associates.
DESCRIPTION OF LODGIAN CAPITAL STOCK
The terms of the capital stock of Lodgian will be governed by Lodgian's
Restated Certificate and Restated Bylaws. The summary of the terms of the
capital stock of Lodgian set forth below does not purport to be complete and is
subject to and qualified in its entirety by reference to the forms of Restated
Certificate and Restated Bylaws of Lodgian, to be adopted immediately prior to
the Effective Time, which are attached as Appendices G and H, respectively.
AUTHORIZED CAPITAL STOCK
Under the Restated Certificate, Lodgian has authority to issue
100,000,000 shares, of which 75,000,000 will be shares of Lodgian Common Stock,
and 25,000,000 will be shares of preferred stock, $.01 per share, of
Lodgian("Lodgian Preferred Stock").
The additional shares of authorized stock available for issuance may be
issued at any time and from time to time by the Lodgian Board, in most cases
without shareholder approval. The issuance in the future of additional shares of
Lodgian Common Stock and Lodgian Preferred Stock convertible into Lodgian Common
Stock could occur under circumstances which would have a dilutive effect on
earnings per share and on the equity ownership of the holders of Lodgian Common
Stock. The ability of the Lodgian Board to issue additional shares of stock
could make a change in control more difficult, and as a result deny shareholders
the potential to sell their shares at a premium over then existing market prices
and entrenching current management. See "Risk Factors --Anti-Takeover
Provisions."
LODGIAN COMMON STOCK
Subject to any preferential rights of series of Lodgian Preferred
Stock, holders of Lodgian Common Stock have equal, ratable rights to dividends
from funds legally available therefor, when, as and if declared by the Lodgian
Board and are entitled to share ratably in all of the assets of Lodgian
available for distribution to holders of Lodgian Common Stock upon the
liquidation, dissolution or winding-up of the affairs of Lodgian.
Holders of Lodgian Common Stock will be entitled to one vote per share
on all matters submitted to a vote of Lodgian's shareholders, and except as
otherwise required by law or except as provided under the terms of a series
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of Lodgian Preferred Stock, if any, the holders of Lodgian Common Stock will
possess all voting power. The Restated Certificate does not provide for
cumulative voting by shareholders.
Holders of Lodgian Common Stock do not have preemptive, subscription or
conversion rights. There are no redemption or sinking fund provisions in the
Restated Certificate of Lodgian.
The shares of Lodgian Common Stock, when issued to holders of Servico
Common Stock and Impac Units in connection with the Merger, will be validly
issued, fully paid and non-assessable.
LODGIAN PREFERRED STOCK
The Lodgian Board is authorized at any time and from time to time to
provide for the issuance of all or any shares of Lodgian Preferred Stock in one
or more classes or series, and to fix for each such class or series such voting
powers, full or limited, or no voting powers, and such distinctive designations,
preferences and relative, participating, optional or other special rights and
such qualifications, limitations or restrictions thereof as are permitted by the
DGCL, including but not limited to, the determination of restrictions, if any,
on the issue or reissue of any additional shares of Lodgian Preferred Stock. The
Lodgian Board could, without first obtaining shareholder approval, authorize and
issue shares of Lodgian Preferred Stock with terms and conditions, and under
circumstances, which could discourage a takeover or render a contested merger,
the assumption of control by a third party or the removal of incumbent
management more difficult. See "Risk Factors -- Anti-Takeover Provisions."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for Lodgian Common Stock after the
Merger will be First Union National Bank, Charlotte, North Carolina.
COMPARISON OF CERTAIN RIGHTS OF THE HOLDERS
OF SERVICO COMMON STOCK AND IMPAC UNITS
COMPARISON OF CURRENT SERVICO SHAREHOLDER RIGHTS AND LODGIAN SHAREHOLDER RIGHTS
FOLLOWING THE MERGER
As a result of the Merger, holders of shares of Servico Common Stock
will own shares of Lodgian Common Stock. Servico is a Florida corporation and
the rights of its shareholders are governed by the FBCA and Servico's Articles
of Incorporation and Restated Bylaws. Lodgian is a Delaware corporation and the
rights of its shareholders, including all former Servico shareholders, will be
governed by the DGCL and the Restated Certificate and Restated Bylaws of
Lodgian. The following summaries are not intended to be complete and are
qualified in their entirety by reference to the forms of the Restated
Certificate and Restated Bylaws attached hereto as Appendices G and H,
respectively.
AUTHORIZED CAPITAL. The total number of authorized shares of Servico
capital stock is 25,000,000, consisting of 25,000,000 shares of common stock,
par value $.01 per share. The authorized capital of Lodgian consists of
100,000,000 shares, consisting of 75,000,000 shares of common stock, par value
$.01 per share, and 25,000,000 shares of preferred stock, par value $.01 per
share. Lodgian's Restated Certificate grants Lodgian's Board the power to
provide for the issuance of one or more series of preferred stock and to
establish the number of shares of each series, as well as the voting rights,
dividend rights, redemption rights, conversion rights, exchange rights and
participation rights, and other preferences, qualifications, limitations and
restrictions, of such preferred stock.
SHAREHOLDER VOTING REQUIREMENTS; ACTION BY CONSENT. Under the FBCA and
the DGCL, directors are generally elected by a plurality of the votes cast by
the shareholders entitled to vote at a shareholders' meeting at which a quorum
is present. With respect to matters other than the election of directors, unless
a greater number of affirmative votes is required by the FBCA or a Florida
corporation's articles of incorporation (but not its bylaws), if
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a quorum exists, action on any matter generally is approved by the shareholders
if the votes cast by the holders of the shares represented at the meeting and
entitled to vote on the matter favoring the action exceed the votes cast
opposing the action. In the case of a merger, consolidation, or a sale, lease or
exchange of all or substantially all of the assets of a Florida corporation,
except in limited circumstances in which no shareholder vote is required, the
affirmative vote of the holders of a majority of the issued and outstanding
shares entitled to vote is required under the FBCA. Servico's Articles of
Incorporation require a greater vote on certain matters than required by the
FBCA. The affirmative vote of the holders of not less than eighty percent (80%)
of the outstanding voting stock of Servico is required for the approval or
authorization of any (i) plan of merger or share exchange which effects the
merger or consolidation of Servico with or into any other corporation or (ii)
sale, lease, exchange or other disposition of all or substantially all of the
assets of Servico; provided, however, that such eighty percent (80%) voting
requirement will not apply if the Servico Board approves the transaction by a
resolution adopted by not less than a majority of the Servico Board. In
addition, Servico's Articles and Restated Bylaws contain provisions requiring a
greater vote for amendments or alterations to such Articles or Bylaws as
discussed below.
Under the DGCL, unless otherwise provided by the DGCL or a Delaware
corporation's certificate of incorporation or bylaws, if a quorum exists, action
on a matter is approved by the affirmative vote of a majority of the shares
represented at a meeting and entitled to vote on the matter. In the case of a
merger, the affirmative vote of the holders of a majority of the issued and
outstanding shares entitled to vote is required by the DGCL. Lodgian's Restated
Certificate and Restated Bylaws do not contain a provision requiring a greater
vote on any matter than required by the DGCL, except upon amendments or
alterations to Lodgian's Restated Certificate and Restated Bylaws, as discussed
below.
Unless otherwise provided in a corporation's articles or certificate of
incorporation, the FBCA and DGCL generally permit shareholder action to be taken
without a meeting if written consents signed by holders having the requisite
number of votes necessary to take such action are delivered to the corporation.
Lodgian's Restated Certificate and Servico's Articles of Incorporation provide
that any action required or permitted to be taken by the shareholders of Lodgian
or Servico must be effected at a duly called annual meeting or special meeting
of such shareholders and may not be effected by any consent in writing by such
shareholders.
QUORUM FOR SHAREHOLDERS' MEETINGS. Under the FBCA, unless otherwise
provided in a corporation's articles of incorporation (but not its bylaws), a
majority of shares entitled to vote on a matter constitutes a quorum at a
meeting of shareholders, but in no event may a quorum consist of less than
one-third of the shares entitled to vote on such matter.
The DGCL is similar to the FBCA, except that under the DGCL a
corporation's certificate or bylaws may specify the percentage of votes which
constitutes a quorum at a meeting of shareholders, but in no event may a quorum,
as under the FBCA, consist of less than one-third of the shares entitled to vote
on such matter. Lodgian's Restated Certificate and Restated Bylaws do not
include a provision altering the shareholder quorum requirement.
SPECIAL MEETINGS OF THE SHAREHOLDERS. Under Servico's Articles, special
meetings may be called by the Chairman of the Board, the President or a majority
of directors acting with or without a meeting or the holders of at least 50% of
all votes entitled to be cast on any matter at the special meeting. Lodgian's
Restated Certificate and Restated Bylaws provide that a special meeting of the
shareholders may only be called by either the Chief Executive Officer or by a
majority of the board of directors. The shareholders of Lodgian will not (nor
will any other persons) have the right to call special meetings of the
shareholders.
SIZE AND CLASSIFICATION OF BOARD OF DIRECTORS; VACANCIES. Servico's
Restated Bylaws provide that the Servico Board shall be comprised of not less
than eleven members, with the exact number determined from time to time by the
Servico Board. Servico currently has five directors, all of which are elected
for a three-year term in staggered years. Lodgian will initially have eight
directors which number, pursuant to Lodgian's Restated Bylaws, may be increased
or reduced by a resolution of the board of directors but will not be less than
six. The Lodgian Board, like the Servico Board, will be classified into three
classes. Lodgian's Restated Bylaws and Servico's Restated Bylaws
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provide that if the number of directors is changed, any increase or decrease
will 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 directors.
Servico's Restated Bylaws provide that any vacancy occurring on the
board of directors, whether because of the resignation or removal of a director,
an increase in the number of directors or otherwise, may be filled by a majority
of the remaining directors, even though less than a quorum. A director elected
to fill a vacancy shall hold office until such director's successor is elected.
Lodgian's Restated Bylaws provide that any vacancy occurring on the Lodgian
Board, including a vacancy created by an increase in the number of directors,
may be filled by the shareholders or by the affirmative vote of a majority of
the remaining directors though less than a quorum of the Lodgian Board. A
director elected to fill a vacancy shall hold office only until the next
election of directors by the shareholders.
REMOVAL OF DIRECTORS. The FBCA provides that shareholders may remove
one or more directors with or without cause unless the articles of incorporation
provide otherwise. Servico's Articles and Restated Bylaws provide that a
director may not be removed by the shareholders without cause. Under the FBCA, a
director generally may be removed only if the number of votes cast to remove him
exceeds the number of votes cast not to remove him.
Consistent with the provisions of the DGCL concerning removal of
directors where the corporation's board is classified, Lodgian's Restated
Certificate provides that a director may be removed only for due cause, by the
holders of a majority of the shares entitled to vote thereon at a meeting of the
shareholders; PROVIDED, HOWEVER, that no such removal can be made unless the
notice thereof specifies such removal and the reasons therefor as one of the
matters to be considered at such meeting.
CONTROL SHARE ACQUISITIONS. The FBCA contains a control share
acquisition statute which provides that a person who acquires shares in an
issuing public corporation in excess of certain specified thresholds will
generally not have any voting rights with respect to such shares unless the
voting rights are approved by a majority of the shares entitled to vote,
excluding interested shares. The thresholds specified in the FBCA are the
acquisition of a number of shares representing: (i) 20% or more, but less than
33% of all voting power of the corporation, (ii) 33% or more but less than a
majority of all voting power of the corporation or (iii) a majority or more of
all voting power of the corporation. This statute does not apply to acquisitions
of shares of a corporation if, prior to the pertinent acquisition of shares, the
corporation's articles of incorporation or bylaws provide that the corporation
shall not be governed by the statute. This statute also permits a corporation to
adopt a provision in its articles of incorporation or bylaws providing for the
redemption by the corporation of such acquired shares in certain circumstances.
Unless otherwise provided in the corporation's articles of incorporation or
bylaws prior to the pertinent acquisition of shares, in the event that such
shares are accorded full voting rights by the shareholders of the corporation
and the acquiring shareholder acquires a majority of the voting power of the
corporation, all shareholders who did not vote in favor of according voting
rights to such acquired shares are entitled to dissenters' rights. Servico's
Articles of Incorporation and Restated Bylaws do not contain any provisions with
respect to this statute.
Delaware does not have a comparable statutory provision.
SUPERMAJORITY VOTE REQUIREMENT. Unless a specific section of the FBCA
or a Florida corporation's articles of incorporation require a greater vote, an
amendment to a Florida corporation's articles of incorporation generally must be
approved by a majority of the votes entitled to be cast on the amendment.
Servico's Articles of Incorporation provide that such Articles may be amended or
repealed only by an affirmative vote of holders of at least eighty percent (80%)
of the outstanding voting stock of Servico. Servico's Restated Bylaws provide
that such Bylaws may be amended or repealed, or new Bylaws may be adopted, by
action of either Servico's shareholders or its board of directors; provided,
however, that the section in Servico's Restated Bylaws concerning the
classification of its board of directors (which also includes provisions
concerning election of directors and the number of directors constituting the
Servico Board) may not be amended or repealed except by a unanimous vote of the
directors then in office or by the affirmative vote of the holders of not less
than 80% of the outstanding voting stock of Servico. The shareholders
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of Servico may from time to time specify certain provisions of the Bylaws which
may not be altered or repealed by the Servico Board. Also see "--Shareholder
Voting Requirements; Action by Consent" above.
Lodgian's Restated Certificate provides that certain amendments to the
Restated Certificate (including those sections relating to removal of directors,
amendments to Lodgian's Restated Bylaws, the classification of the board of
directors and the calling of special meetings of shareholders or the voting
requirements for amending the Restated Certificate) will require the affirmative
vote of the holders of at least 80% of the outstanding shares of stock entitled
to vote thereon. Lodgian's Restated Certificate and Restated Bylaws provide that
the Restated Bylaws may be amended, altered 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 Servico's Articles) either by the number of directors
constituting a majority of the board of directors or by the shareholders of
Lodgian upon the affirmative vote of the holders of at least 80% of the
outstanding stock entitled to vote thereon.
AFFILIATED TRANSACTIONS. The FBCA contains an affiliated transactions
statute which provides that certain transactions involving a corporation and a
shareholder owning 10% or more of the corporation's outstanding voting shares
(an "affiliated shareholder") must generally be approved by the affirmative vote
of the holders of two-thirds of the voting shares other than those owned by the
affiliated shareholder. The transactions covered by the statute include, with
certain exceptions, (i) mergers and consolidations to which the corporation and
the affiliated shareholder are parties, (ii) sales or other dispositions of
substantial amounts of the corporation's assets to the affiliated shareholder,
(iii) issuances by the corporation of substantial amounts of its securities to
the affiliated shareholder, (iv) the adoption of any plan for the liquidation or
dissolution of the corporation proposed by or pursuant to an arrangement with
the affiliated shareholder, (v) any reclassification of the corporation's
securities which has the effect of substantially increasing the percentage of
the outstanding voting shares of the corporation beneficially owned by the
affiliated shareholder and (vi) the receipt by the affiliated shareholder of
certain loans or other financial assistance from the corporation. These special
voting requirements do not apply (i) if the transaction was approved by a
majority of the corporation's disinterested directors, (ii) if the corporation
did not have more than 300 shareholders of record at any time during the
preceding three years, (iii) if the affiliated shareholder has been the
beneficial owner of at least 80% of the corporation's outstanding voting shares
for the past five years, (iv) if the affiliated shareholder is the beneficial
owner of at least 90% of the corporation's outstanding voting shares, exclusive
of those acquired in a transaction not approved by a majority of disinterested
directors or (v) if the consideration received by each shareholder in connection
with the transaction satisfies the "fair price" provisions of the statute. This
statute applies to any Florida corporation unless the original articles of
incorporation or an amendment to the articles of incorporation or bylaws contain
a provision expressly electing not to be governed by this statute. Such an
amendment to the articles of incorporation or bylaws must be approved by the
affirmative vote of a majority of disinterested shareholders and is not
effective until 18 months after approval. Servico's Articles of Incorporation
and Restated Bylaws do not contain a provision electing not to be governed by
this statute.
The DGCL generally prohibits a shareholder owning 15% or more of a
Delaware corporation's outstanding voting stock (an "interested shareholder")
from engaging in certain business combinations involving the corporation during
the three years after the date the person became an interested shareholder
unless (i) prior to such date, the board of directors approved either the
business combination or the transaction which resulted in the shareholder
becoming an interested shareholder, (ii) upon the consummation of the
transaction which resulted in the shareholder becoming an interested
shareholder, the shareholder owned at least 85% of the voting stock outstanding
at the time the transaction commenced, (iii) on or subsequent to such date, the
transaction is approved by the board of directors and by the shareholders by a
vote of two-thirds of the disinterested outstanding voting stock, (iv) the
corporation's original certificate of incorporation provides that the
corporation shall not be governed by the statute or (v) a majority of shares
entitled to vote approve an amendment to the corporation's certificate of
incorporation or bylaws expressly electing not to be governed by the statute
(but such amendment may not be effective until one year after it was adopted and
may not apply to any business combination between the corporation and any person
who became an interested shareholder on or prior to such adoption). These
business combinations include, with certain exceptions, mergers, consolidations,
sales of assets and transactions benefitting the interested shareholder.
Lodgian's Restated Certificate and Restated Bylaws do not contain a provision
electing not to be governed by this statute.
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CONSIDERATION OF RELEVANT FACTORS. The FBCA provides that directors of
a Florida corporation, in discharging their duties to the corporation and in
determining what they believe to be in the best interests of the corporation,
may, in addition to considering the effects of any corporate action on the
shareholders and the corporation, consider the effects of the corporate action
on employees, suppliers and customers of the corporation or its subsidiaries and
the communities in which the corporation and its subsidiaries operate.
Delaware does not have a comparable statutory provision.
DISSENTERS' RIGHTS. A shareholder of a Florida corporation, with
certain exceptions, has the right to dissent from and obtain payment of the fair
value of his shares in the event of (i) a merger or consolidation to which the
corporation is a party, (ii) a sale or exchange of all or substantially all of
the corporation's property other than in the usual and regular course of
business, (iii) the approval of a control share acquisition, (iv) a statutory
share exchange to which the corporation is a party as the corporation whose
shares will be acquired, (v) an amendment to the articles of incorporation if
the shareholder is entitled to vote on the amendment and the amendment would
adversely affect the shareholder and (vi) any corporate action taken to the
extent that the articles of incorporation provide for dissenters' rights with
respect to such action. The FBCA provides that unless a corporation's articles
of incorporation provide otherwise, which Servico's Articles of Incorporation do
not, a shareholder does not have dissenters' rights with respect to a plan of
merger, share exchange or proposed sale or exchange of property if the shares
held by the shareholder are either registered on a national securities exchange
or held of record by 2,000 or more shareholders.
A shareholder of a Delaware corporation generally is entitled to
dissenters' rights in the event that the corporation is a party to certain
mergers or consolidations to which the shareholder neither voted in favor of nor
consented thereto in writing. Lodgian's Restated Certificate does not contain
such a provision. Similar to the FBCA, dissenters' rights do not apply to a
shareholder of a Delaware corporation if his shares are (i) listed on a national
securities exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Security Dealers,
Inc. or (ii) held of record by more than 2,000 shareholders. Notwithstanding the
foregoing, however, under the DCGL, a shareholder does have dissenters' rights
with respect to such shares if the shareholder is required by the terms of the
agreement of merger or consolidation to accept anything for his shares other
than (i) shares of stock of the corporation surviving or resulting from the
merger or consolidation, (ii) shares of stock of any other corporation which is
also listed or designated or held of record by more than 2,000 shareholders,
(iii) cash in lieu of fractional shares or (iv) any combination of the
foregoing.
DIVIDENDS AND REPURCHASES. Under the FBCA, a corporation may make
distributions to shareholders (subject to any restrictions contained in the
corporation's articles of incorporation) as long as, after giving effect to the
distribution, (a) the corporation will be able to pay its debts as they become
due in the usual course of business and (b) the corporation's total assets will
not be less than the sum of its total liabilities plus (unless the articles of
incorporation permit otherwise) the amount that would be needed, if the
corporation were to be dissolved at the time of the distribution, to satisfy the
preferential rights upon dissolution of shareholders whose preferential rights
are superior to those receiving the distribution. A Florida corporation may
purchase its own shares and, unless otherwise provided in the articles of
incorporation, shares repurchased remain authorized but unissued. However,
pursuant to the FBCA, a corporation's redemption of its own capital stock is
deemed to be a distribution. Servico's Articles do not alter these provisions.
A Delaware corporation may pay dividends out of "surplus" or, if there
is no surplus, out of net profits for the fiscal year in which the dividend is
declared or for the preceding fiscal year. Surplus is defined as the net assets
of the corporation over the corporation's capital. Under the DGCL, a corporation
may repurchase or redeem its shares only if the capital of the corporation is
not impaired and such repurchase does not impair the corporation's capital.
Lodgian's Restated Certificate does not alter these provisions.
LIABILITY OF DIRECTORS. Under the FBCA, a director is not personally
liable for monetary damages to the corporation or any other person for any
statement, vote, decision or failure to act, regarding corporate management or
policy, by a director unless the director breached or
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failed to perform his duties as a director and such breach or failure
constitutes: (a) a violation of criminal law unless the director had reasonable
cause to believe his conduct was lawful or had no reasonable cause to believe
his conduct was unlawful; (b) a transaction from which the director derived an
improper personal benefit; (c) a circumstance resulting in an unlawful
distribution; (d) in a proceeding by or in the right of the corporation to
procure a judgment in its favor or by or in the right of a shareholder,
conscious disregard for the best interests of the corporation or willful
misconduct; or (e) in a proceeding by or in the right of one other than the
corporation or a shareholder, recklessness or an act or omission which was
committed in bad faith or with malicious purpose or in a manner exhibiting
wanton and willful disregard of human rights, safety, or property.
The DGCL permits a Delaware corporation to include in its certificate
of incorporation a provision eliminating or limiting the personal liability of a
director to the corporation or its shareholders for monetary damages for
breaches of fiduciary duty, including conduct which could be characterized as
negligence or gross negligence. The DGCL expressly provides, however, that the
liability for (a) breaches of the director's duty of loyalty; (b) acts or
omissions not in good faith or involving intentional misconduct or knowing
violation of the law; (c) an unlawful distribution; or (d) the receipt of
improper personal benefits cannot be eliminated or limited in this manner. The
DGCL further provides that no such provision will eliminate or limit the
liability of a director for any act or omission occurring prior to the date when
such provision becomes effective. Lodgian's Restated Certificate includes a
provision eliminating or limiting director liability for monetary damages for
breaches of fiduciary duty to the extent permitted by the DGCL.
SHAREHOLDER INSPECTION OF BOOKS AND RECORDS. Under the FBCA a
shareholder is entitled to inspect and copy the articles of incorporation,
bylaws, certain board and shareholder resolutions, certain written
communications to shareholders, a list of the names and business addresses of
the corporation's directors and officers, and the corporation's most recent
annual report during regular business hours if the shareholder gives at least
five business days' prior written notice to the corporation. In addition, a
shareholder of a Florida corporation is entitled to inspect and copy other books
and records of the corporation during regular business hours if the shareholder
gives at least five business days' prior written notice to the corporation and
(1) the shareholder's demand is made in good faith and for a proper purpose, (2)
the demand describes with particularity its purpose and the records to be
inspected or copied and (3) the requested records are directly connected with
such purpose. The FBCA also provides that a corporation may deny any demand for
inspection if the demand was made for an improper purpose or if the demanding
shareholder has, within two years preceding such demand, sold or offered for
sale any list of shareholders of the corporation or any other corporation, has
aided or abetted any person in procuring a list of shareholders for such purpose
or has improperly used any information secured through any prior examination of
the records of the corporation or any other corporation.
The provisions of the DGCL governing the inspection and copying of a
corporation's books and records are generally less restrictive than those of the
FBCA. Specifically, the DGCL permits any shareholder the right, during usual
business hours, to inspect and copy the corporation's stock ledger, shareholders
list and other books and records for any proper purpose upon written demand
under oath stating the purpose thereof.
COMPARISON OF CURRENT IMPAC UNITHOLDER RIGHTS AND LODGIAN SHAREHOLDER RIGHTS
FOLLOWING THE MERGER
As a result of the Merger, holders of Impac Units will own shares of
Lodgian Common Stock. Impac is a Georgia limited liability company ("LLC") and
the rights of its unitholders are governed by the GLLCA and the Articles of
Organization and the Operating Agreement of Impac. Lodgian is a Delaware
corporation and the rights of its shareholders, including all former holders of
Impac Units, will be governed by the DGCL and the Restated Certificate and
Restated Bylaws of Lodgian. A summary of the principal differences between the
current rights of Impac unitholders and their prospective rights as Lodgian
shareholders is set forth below.
AUTHORIZED CAPITAL. Impac is authorized to issue an unlimited number of
Units, which will be exchanged for shares of Lodgian Common Stock in the Merger
as described above, and one Class B Interest, which will be canceled in the
Merger. The Class B Interest was issued to BancOne in connection with the
BancOne financing described in "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Existing Financing Arrangements."
No other Class B Interest or any other class of interest with rights or benefits
senior thereto may be
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issued without the consent of the holder of the Class B Interest. The Class B
Interest will be retired upon the repayment of all amounts due and the
performance of all obligations under the note issued to BancOne (the "Note").
The authorized capital of Lodgian consists of 100,000,000 shares,
consisting of 75,000,000 shares of common stock, par value $.01 per share, and
25,000,000 shares of preferred stock, par value $.01 per share. Lodgian's
Restated Certificate grants Lodgian's Board the power to provide for the
issuance of one or more series of preferred stock and to establish the number of
shares of each series, as well as the voting rights, dividend rights, redemption
rights, conversion rights, exchange rights and participation rights, and other
preferences, qualifications, limitations and restrictions of such preferred
stock.
MANAGEMENT. Under the GLLCA, unless the articles of organization or
operating agreement (collectively, the "organizational documents") vests
management of the LLC in a manager or managers, management of the LLC will be
vested in the members. Impac's Operating Agreement provides that Impac will be
managed by a Manager and by officers appointed in the Operating Agreement.
Robert S. Cole serves as Impac's Manager and President, and Robert M. Flanders
serves as its Vice President, Secretary and Treasurer. As Manager and President,
Mr. Cole has complete authority over Impac's business and affairs and may take
any action on behalf of Impac without member approval except as indicated below
under "- Member and Shareholder Voting Requirements; Action by Written Consent."
Lodgian is managed by a Board of Directors and officers in accordance
with its Restated Certificate, Restated Bylaws and the provisions of the DGCL.
Lodgian will initially have eight directors, which number, pursuant to Lodgian's
Restated Bylaws, may be increased or reduced by a resolution of the Board of
Directors but will not be less than six. The Lodgian Board will be classified
into three classes. Lodgian's Restated Bylaws provide that if the number of
directors has changed, any increase or decrease will 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.
MEMBER AND SHAREHOLDER VOTING REQUIREMENTS; ACTION BY WRITTEN CONSENT.
Under the GLLCA, unless otherwise provided in the organizational documents, if
management is vested in a manager or managers, each manager will have one vote
with respect to, and the affirmative vote of a majority of managers will be
required to decide, any matter, except that the unanimous vote of the members
will be required to approve the dissolution or merger of the LLC, the
disposition of all or substantially all assets of the LLC, the admission of any
new member, amendments to the organizational documents, the redemption or
elimination of an obligation to make a capital contribution, distributions to
members or continuance of the LLC beyond its term. At a meeting of members,
unless otherwise provided in the organizational documents or as set forth above,
a quorum will consist of a majority of the members and approval of any matter
will require the vote of a majority of the members present at a meeting at which
a quorum is present. Unless otherwise provided, action may be taken by written
consent without a meeting by all (or a majority, if the organizational documents
so permit) of the votes entitled to be cast on the matter. If less than all of
the members approve a matter without a meeting, written notice of the action
must be served on the members who did not participate in taking the action no
more than 10 days after the action is taken.
Impac's Operating Agreement permits the Manager to take any action on
behalf of Impac without obtaining the approval of any of the members except in
the following cases:
ACTIONS REQUIRING UNANIMOUS WRITTEN CONSENT OF THE MEMBERS:
(i) Any action in contravention of the Operating Agreement or the
Articles of Organization.
(ii) Any action that would make it impossible to carry on the
ordinary business of Impac, except as contemplated by the
Operating Agreement.
(iii) The filing of a voluntary bankruptcy petition or consent to
the appointment of a receiver or similar action for the
benefit of the creditors of Impac.
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(iv) The possession of Impac's property or assignment of its rights
in specific property for other than a company purpose.
(v) The admission of a member except as is otherwise provided in
the Operating Agreement.
ACTIONS REQUIRING THE WRITTEN CONSENT OF A MAJORITY OF THE UNITS:
(i) Participation in a merger or similar transaction with any
other legal entity.
(ii) The sale or other disposition of substantially all of Impac's
assets and property.
(iii) The offering of any membership interest (or successor security
thereto) for sale to the public in an underwritten offering.
(iv) The offer of additional membership interests or admission of
additional members except as is otherwise permitted in the
Operating Agreement.
ACTIONS REQUIRING THE WRITTEN CONSENT OF THE HOLDER OF THE CLASS B
INTEREST:
(i) The incurrence of any indebtedness, guaranty, indemnity or
surety other than (A) guaranties required under the terms of
the NACC Loan Agreements (as defined in the Operating
Agreement), (B) guaranties of any Transaction Affiliate with
respect to any Identified Property or Project (as such terms
are defined in the Operating Agreement), (C) guaranties of any
Affiliate's indebtedness, provided that such indebtedness
shall not exceed 30% of any cash raised through the issuance
of additional membership interests and is invested in such
Affiliate and that all of such guarantied indebtedness of the
Affiliate shall not exceed $7 million, (D) the indemnification
arrangements with Messrs. Robert S. Cole, Charles Cole and
Robert M. Flanders described in the Operating Agreement, and
(E) the indemnification of Impac's managers and officers as
described in the Operating Agreement.
(ii) Distributions to members contrary to the terms of the Note or
the Operating Agreement.
(iii) The transfer by Impac or permitted transfer by any Transaction
Affiliate of an Identified Property or Project to any entity
other than a Transaction Affiliate or an entity contemplated
and permitted under the terms of NACC Loan Agreements.
(iv) The amendment or refinancing of any loan agreement, including
the NACC Loan Agreements, if such amendment or refinancing has
a material adverse affect on BancOne's rights, benefits or
obligations.
In all other cases, members of Impac are not permitted to vote on or
consent to any action that may be taken by Impac through its Manager(s) or
officers.
Under the DGCL and Lodgian's Restated Certificate and Restated Bylaws,
Lodgian's directors manage the corporation's overall business affairs and have
appointed officers to manage its day-to-day affairs, with a shareholder vote
being required to elect directors; approve certain mergers, dispositions of
assets or other change of control transactions; and approve certain amendments
to the Restated Certificate. Unless otherwise provided in a corporation's
articles of incorporation or bylaws, a majority of shares entitled to vote on a
matter constitutes a quorum at a meeting of shareholders, but in no event may a
quorum consist of least than one-third of the shares entitled to vote on such
matters. Lodgian's Restated Certificate and Restated Bylaws do not include a
provision altering the shareholder quorum requirement. Under the DGCL, directors
are generally elected by a plurality of the votes cast by the shareholders
entitled to vote at a shareholders' meeting at which a quorum is present. With
respect to matters other
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than the election of directors, unless otherwise provided by the DGCL or the
certificate of incorporation or bylaws, if a quorum is present, action on a
matter is approved by the affirmative vote of a majority of the shares
represented at a meeting and entitled to vote on the matter. In the case of a
merger, the affirmative vote of the holders of a majority of the issued and
outstanding shares entitled to vote is required by the DGCL. Lodgian's Restated
Certificate and Restated Bylaws do not contain a provision requiring a greater
vote on any matter than is required by the DGCL, except upon amendments or
alterations to Lodgian's Restated Certificate and Restated Bylaws as discussed
below.
Lodgian's Restated Certificate provides that certain amendments to the
Restated Certificate (including those sections relating to removal of directors,
amendments to Lodgian's Restated Bylaws, the classification of the Board of
Directors, the calling of special meetings of shareholders or the voting
requirements for amending the Restated Certificate) will require the affirmative
vote of the holders of at least 80% of the outstanding shares of stock entitled
to vote thereon. Lodgian's Restated Certificate and Restated Bylaws provide that
the Restated Bylaws may be amended, altered 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 the Restated Certificate) either by the number of
directors constituting a majority of the Board of Directors or by the
shareholders of Lodgian upon the affirmative vote of the holders of at least 80%
of the outstanding stock entitled to vote thereon.
Unless otherwise provided in a corporation's certificate of
incorporation, the DGCL generally permits shareholder action to be taken without
a meeting if written consents signed by holders having the requisite number of
votes necessary to take such action are delivered to the corporation. Lodgian's
Restated Certificate provides that any action required or permitted to be taken
by shareholders must be effected at a duly called annual meeting or special
meeting of shareholders and may not be effected by any consent in writing by
such shareholders.
MEETINGS OF MEMBERS AND SHAREHOLDERS. Under the GLLCA, unless the
organizational documents provide otherwise, meetings of members may be called by
at least 25% of the members with two days' notice. Impac's Operating Agreement
does not authorize meetings of its member. If member consent to a particular
action is required, the consent must be obtained in writing.
Under the DGCL, special meetings of shareholders may be called by the
Board of Directors or by such person(s) as are authorized by the certificate of
incorporation or the bylaws. Lodgian's Restated Certificate and Restated Bylaws
provide that a special meeting of shareholders may only be called by either the
Chief Executive Officer or by a majority of the Board of Directors. Lodgian's
shareholders will not (nor will any other persons) have the right to call
special meetings of shareholders.
WITHDRAWAL AND REMOVAL OF MANAGER AND DIRECTORS. The GLLCA does not
address the removal of managers. Under Impac's Operating Agreement, Mr. Cole may
voluntarily withdraw as Manager only with the consent of the holder of the Class
B Interest. Other managers, if appointed, may voluntarily withdraw with 30 days'
prior written notice. If no other managers have been appointed, the holders of a
majority of the Units shall elect one or more new managers.
Mr. Cole can be removed for cause by the collective vote of the holders
of a majority of the Units and of the Class B Interest. Other managers, if any,
may be removed without cause by Mr. Cole upon 10 days' prior written notice or
for cause with the consent of the holders of a majority of the Units. If that
manager was elected by the holder of the Class B Interest as described below,
however, the consent of the holder of the Class B Interest will be required as
well. Notwithstanding the foregoing, the holder of the Class B Interest may, by
providing written notice to Impac's Manager(s), remove any Manager, including
Mr. Cole, and appoint one or more replacement managers if: (i) any action
requiring the consent of the holder of the Class B Interest was taken without
such consent; (ii) there is a breach of any material obligation of the
Manager(s) under the Operating Agreement that is not cured within 30 days after
written notice setting forth such breach is provided by the holder of the Class
B Interest (or within such additional period of time as may be reasonably
necessary to cure such breach up to 120 days after such written notice); (iii)
there is an event of default beyond applicable notice and cure periods under the
Note; or (iv) there is a default under any
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NACC loan that is not cured within the applicable cure or acceleration period
and prohibits the payment by Impac or requires the retention by NACC or its
agent of any amounts due under the Note.
Consistent with the provisions of the DGCL concerning removal of
directors where the corporation's board is classified, Lodgian's Restated
Certificate provides that a director may be removed only for due cause, by the
holders of a majority of the shares entitled to vote thereon at a meeting of the
shareholders; PROVIDED, HOWEVER, that no such removal can be made unless the
notice thereof specifies such removal and the reasons therefor as one of the
matters to be considered at such meeting.
CONFLICTING INTERESTS TRANSACTIONS. The GLLCA states that unless
otherwise provided in the organizational documents, a member's or manager's
conflicting interest transaction may not be set aside, enjoined or sanctioned on
such grounds if: (i) a majority of disinterested members approve the transaction
after disclosure of its terms in accordance with the provisions of the GLLCA; or
(ii) the transaction, judged in the circumstances at the time of commitment, is
established to have been fair to the LLC. Impac's Operating Agreement states
that the provisions discussed above will not apply to any member, manager,
officer or affiliate of Impac, and that such persons may engage in or possess an
interest in any other business or venture, regardless of whether it competes
with Impac, without having any obligation to offer any interest in such
activities to Impac or any of its members. The Operating Agreement requires
transactions with affiliates to be at arms length and requires the payment of
consideration at fair value for any property exchanged or services provided.
Under the DGCL, no transaction between a corporation and any of its
directors or officers or their affiliates will be void or voidable solely for
this reason if:
(i) the material facts as to the relationship or interest and as
to the transaction are disclosed or known to the Board of
Directors or committee acting upon the transaction, and the
Board or committee in good faith authorizes the contract or
transaction by the vote of a majority of the disinterested
directors, even if the disinterested directors constitute less
than a quorum;
(ii) the material facts as to the relationship or interest and as
to the contract or transaction are disclosed or known to the
shareholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of
the shareholders; or
(iii) the contract or transaction is fair to the corporation at the
time it is authorized, approved or ratified by the Board of
Directors, a committee or the shareholders.
Lodgian's Restated Certificate and Restated Bylaws do not contain any
provisions addressing this issue.
BUSINESS COMBINATIONS WITH INTERESTED SHAREHOLDERS. Except as discussed
under "--Conflicting Interests Transactions" above, neither the GLLCA nor
Impac's Operating Agreement contain any provisions restricting Impac's ability
to engage in business combinations or transactions with its members.
The DGCL generally prohibits a shareholder owning 15% or more of a
Delaware corporation's outstanding voting stock (an "interested shareholder")
from engaging in certain business combinations involving the corporation during
the three years after the date the person became an interested shareholder
unless (i) prior to such date, the board of directors approved either the
business combination or the transaction that resulted in the shareholder
becoming an interested shareholder, (ii) upon the consummation of the
transaction that resulted in the shareholder becoming an interested shareholder,
the shareholder owned at least 85% of the voting stock outstanding at the time
the transaction commenced, (iii) on or subsequent to such date, the transaction
is approved by the board of directors and by the shareholders by a vote of
two-thirds of the disinterested outstanding voting stock, (iv) the corporation's
original certificate of incorporation provides that the corporation shall not be
governed by the statute or (v) a majority of shares entitled to vote approve an
amendment to the corporation's certificate of incorporation or bylaws expressly
electing not to be governed by the statute (but such amendment may not be
effective until one year after it was adopted and
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may not apply to any business combination between the corporation and any person
who became an interested shareholder on or prior to such adoption). These
business combinations include, with certain exceptions, mergers, consolidations,
sales of assets and transactions benefiting the interested shareholder.
Lodgian's Restated Certificate and Restated Bylaws do not contain a provision
electing not to be governed by this statute.
DISSENTERS' RIGHTS. The GLLCA provides that unless otherwise provided
in the organizational documents, members of an LLC are entitled to dissent from,
and obtain payment of the fair value of their membership interests, in the event
of: (i) consummation of a plan of merger to which the LLC is a party if approval
of less than all of the members is required and the member is entitled to vote
on the merger; (ii) consummation of a sale, lease, exchange or other disposition
of all or substantially all of the LLC's property if approval of less than all
of the members is required and the member is entitled to vote on the
transaction; (iii) amendments to the articles of organization that materially
and adversely affect rights in respect of a dissenters' membership interests in
the LLC; or (iv) any action taken for which the organizational documents provide
for dissenters' rights. In Impac's Operating Agreement, however, the members
specifically waive the dissenters' rights provided above unless the action taken
is described either in clause (i) or (ii) above and is taken without the consent
of the members owning a majority of the Units as required under the Operating
Agreement.
A shareholder of a Delaware corporation generally is entitled to
dissenters' rights in the event that the corporation is a party to certain
mergers or consolidations to which the shareholder neither voted in favor of nor
consented thereto in writing. Dissenters' rights do not apply to a shareholder
of a Delaware corporation if his or her shares are (i) listed on a national
securities exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Security Dealers,
Inc. or (ii) held of record by more than 2,000 shareholders. Notwithstanding the
foregoing, however, under the DGCL, a shareholders not have dissenters' rights
with respect to such shares if the shareholder is required by the terms of the
agreement of merger or consolidation to accept anything for his or her shares
other than (i) shares of stock of the corporation surviving or resulting from
the merger or consolidation, (ii) shares of stock of any other corporation that
is also listed or designated or held of record by more than 2,000 shareholders,
(iii) cash in lieu of fractional shares or (iv) any combination of the
foregoing.
DISTRIBUTIONS AND DIVIDENDS. The GLLCA provides that members will be
entitled to distributions from an LLC before its dissolution and winding up only
to the extent, and upon the occurrence of the events, specified in the
organizational documents or as otherwise approved by all of the members.
Distributions are to be shared in the manner provided in the organizational
documents, or if no provision is made, equally among the members. Members are
also entitled to receive the fair value of their interests in certain events of
dissociation from the LLC. A distribution will be prohibited if, giving effect
to the distribution, the LLC would not be able to pay its debts as they become
due in the usual course of business or its total assets would be less than its
total liabilities plus, unless the organizational documents provide otherwise,
the amount that would be needed to satisfy any preferential rights of members to
receive distributions upon dissolution.
Impac's Operating Agreement states that Impac intends to have the
Manager distribute to members on a quarterly basis Impac's Net Cash Flow (as
defined in the Operating Agreement) and within 30 days after any disposition of
its property, the Net Proceeds (as defined in the Operating Agreement) realized
by Impac as a result of such disposition, after reduction for any applicable
debt service and/or reserves that the Manager may reasonably determine to be
necessary for Impac's operations. Accordingly, the Manager may, in his
discretion as to timing, amount and source of funds, make distributions to
members holding Units pro rata based upon the number of Units owned by each
Member. No distribution may be made, however, if it is prohibited under the
terms of the NACC Loan Agreement or the Note.
A Delaware corporation may pay dividends out of "surplus" or, if there
is no surplus, out of net profits for the fiscal year in which the dividend is
declared or for the preceding fiscal year. Surplus is defined as the net assets
of the corporation over the corporation's capital. Lodgian's Restated
Certificate does not alter these provisions.
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REPURCHASES. Neither the GLLCA nor Impac's Operating Agreement
restricts the repurchase of membership interests. Under the DGCL, a corporation
may repurchase or redeem its shares only if the capital of the corporation is
not impaired and such repurchase does not impair the corporation's capital.
Lodgian's Restated Certificate does not alter these provisions.
LIMITATION OF LIABILITY OF MANAGERS AND DIRECTORS. The GLLCA allows an
LLC's organizational documents to expand, restrict or eliminate a member's or
manager's liabilities for actions taken in such capacity, except that no such
provision will eliminate or limit liability for intentional misconduct or a
knowing violation of law or for any transaction in which the person received a
personal benefit in violation of any provision of the operating agreement.
Impac's Operating Agreement states that neither the Manager nor any officer
shall be liable for any act or omission committed in good faith on behalf of
Impac and in a manner reasonably believed by such person to be within the scope
of his or her authority granted under the Operating Agreement. No limitation of
liability applies, however, to actions involving fraud, gross negligence or
willful misfeasance.
The DGCL permits a Delaware corporation to include in its certificate
of incorporation a provision eliminating or limiting the personal liability of a
director to the corporation or its shareholders for monetary damages for
breaches of fiduciary duty, including conduct that could be characterized as
negligence or gross negligence. The DGCL expressly provides, however, that the
liability for (a) breaches of the director's duty of loyalty; (b) acts or
omissions not in good faith or involving intentional misconduct or knowing
violation of the law; (c) an unlawful distribution; or (d) the receipt of
improper personal benefits cannot be eliminated or limited in this manner. The
DGCL further provides that no such provision will eliminate or limit the
liability of a director for any act or omission occurring prior to the date when
such provision becomes effective. Lodgian's Restated Certificate includes a
provision eliminating or limiting director liability for monetary damages for
breaches of fiduciary duty to the extent permitted by the DGCL.
RESTRICTIONS ON TRANSFER OF SECURITIES. The GLLCA states that LLC
interests are freely assignable unless the organizational documents provide
otherwise. The Impac Operating Agreement states that membership interests may be
transferred if: (i) the transferee, if an individual, is at least 21 years of
age; (ii) the transferee agrees in writing to be bound by the Operating
Agreement; and (iii) the Manager consents to the transfer. Such consent may be
withheld if the transfer would impair Impac's ability to be taxed as partnership
or would violate federal or state securities laws. Notwithstanding the
foregoing, the Class B Interest may be transferred only to a subsequent
purchaser of the Note in its entirety. The consent and approval provisions
described above will not be required in order to transfer the Class B Interest.
Impac also has a right of first refusal with respect to the disposition of
Units. If a member receives an offer to purchase any or all of his or her Units,
the member must offer Impac the opportunity to repurchase any or all of such
Units on the same terms and conditions as are contained in the offer. Impac has
three business days after its receipt of the offer to purchase any or all of
such Units. If Impac does not exercise its right of first refusal, the Units may
be sold to any person.
The DGCL permits a corporation to place restrictions on the transfer of
its securities. Members of Impac who are not affiliates of Impac, Servico or
Lodgian will receive freely tradeable Lodgian Common Stock as a result of the
Merger. Affiliates of Impac, Servico and Lodgian will be bound by certain
provisions of federal securities laws with respect to the transfer of their
Lodgian Common Stock. See "The Merger--Securities Law Restrictions."
INSPECTION OF BOOKS AND RECORDS. The GLLCA permits members to inspect
and copy, at their own expense, any LLC records upon reasonable request during
ordinary business hours and to obtain from time to time upon reasonable demand
business and financial information about the LLC, copies of tax returns and
other reasonable information about the LLC and its affairs. Impac's Operating
Agreement allows members to inspect and copy, at their own expense during normal
business hours at Impac's principal office: (i) the names and addresses of all
members; (ii) copies of the Articles of Organization and any amendments thereto;
(iii) copies of tax returns for the four most recent fiscal years; (iv) copies
of the Operating Agreement; (v) any merger agreement in which Impac is the
surviving entity; and (vi) financial statements for the four most recent fiscal
years.
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The DGCL permits any shareholder the right, during usual business
hours, to inspect and copy the corporation's stock ledger, shareholder lists and
other books and records for any proper purpose upon written demand
under oath stating the purpose thereof. Lodgian's Restated Certificate and
Restated Bylaws contain no provisions regarding shareholder inspection rights.
LODGIAN PLAN PROPOSALS
In addition to approving the Merger, because Lodgian is a new company,
the shareholders of Servico and the unitholders of Impac are being asked to
approve three incentive plans for Lodgian. Servico currently has in effect the
Servico Plan. These new plans will replace the Servico Plan currently in effect
with a unified package of incentive compensation plans applicable to directors
and employees of Lodgian. The new plans are the following: (i) a short-term
incentive plan that provides for bonus compensation linked to performance over a
fiscal year or other relatively short period, (ii) a stock incentive plan that
provides for longer-term incentives in the form of stock options, stock
appreciation rights or other equity-based compensation awards and (iii) a stock
plan for non-employee directors that provides for grants of both stock and stock
options and allows directors to voluntarily defer payment of a portion of their
director fees.
THE LODGIAN 1998 SHORT-TERM INCENTIVE COMPENSATION PLAN
The Lodgian Board and Impac Manager have recommended the Lodgian 1998
Short-Term Incentive Compensation Plan for approval by their respective
shareholders and unitholders.
The Lodgian 1998 Short-Term Incentive Compensation Plan was authorized
by the Servico Board on [date], and by the Impac Manager on [date] and is
subject to approval by their respective shareholders. A copy of the Lodgian 1998
Short-Term Incentive Compensation Plan is attached hereto as Appendix D and the
following summary is qualified in its entirety by reference hereto.
PURPOSES AND ELIGIBILITY. The purposes of the Lodgian 1998 Short-Term
Incentive Compensation Plan are to increase the profitability of Lodgian and its
subsidiaries by providing the opportunity for key executives to earn incentive
payments for outstanding achievement and company performance and to fulfill
Lodgian's objective of offering a fully competitive total compensation package
to its key employees, thus enabling Lodgian to attract and retain executives of
the highest caliber and ability. The Lodgian 1998 Short-Term Incentive
Compensation Plan authorizes the payment of certain bonus awards (the "Bonus
Awards") to key executives of Lodgian whose decisions and actions have a
significant effect on Lodgian's growth and profitability (the "Participants").
As of [date], 1998, Lodgian estimates that there will be approximately [___]
Participants.
Section 162(m) of the Code limits the deductibility of compensation in
excess of $1,000,000 paid to the chief executive officer and the four other most
highly compensated officers of a public company as determined pursuant to the
rules of the SEC (the "Covered Employees") unless the payments are made under
qualifying performance-based plans and upon the attainment of certain
performance goals. The Lodgian 1998 Short-Term Incentive Compensation Plan
contains special provisions governing compensation paid to Covered Employees
that are intended to ensure that such compensation will be considered
performance-based and hence fully deductible. In order for the requirements of
Section 162(m) to be met for compensation paid under the Lodgian 1998 Short-Term
Incentive Compensation Plan, the Plan must be approved by the shareholders of
Servico and the unitholders of Impac.
SHARES AVAILABLE AND BONUS AWARD LIMITS UNDER THE LODGIAN 1998
SHORT-TERM INCENTIVE COMPENSATION PLAN. An aggregate of 1,000,000 shares of
Lodgian Common Stock are authorized for issuance under the Lodgian 1998
Short-Term Incentive Compensation Plan, which amount will be proportionately
adjusted in the event of certain changes in Lodgian's capitalization, a merger,
or a similar transaction. Such shares may be either treasury shares or newly
issued shares or a combination thereof. In addition to this overall limit, the
Lodgian 1998 Short-Term Incentive
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Compensation Plan contains limits on the amount of the Bonus Award that may be
paid in respect of any performance period to any Participant to $1,000,000.
ADMINISTRATION. The Compensation Committee of the Lodgian Board (the
"Committee") will administer the Lodgian 1998 Short-Term Incentive Compensation
Plan. The Committee will interpret the Lodgian 1998 Short-Term Incentive
Compensation Plan and establish the rules and regulations governing its
administration; select the Participants; approve the performance objectives upon
which the percentage of payment of Bonus Awards is based; determine the degree
of the attainment of the performance objectives; and determine the size of
individual Bonus Awards and payments to Participants.
PERFORMANCE OBJECTIVES AND TARGETS. Performance objectives under the
Lodgian 1998 Short-Term Incentive Compensation Plan will be established by the
Committee for each applicable performance period, which performance period may
be a calendar year or a multi-year cycle. Performance objectives for each
Participant may consist of financial objectives, individual objectives, or a
combination thereof, except that with respect to Covered Employees, the
performance objectives will consist of financial objectives only. Financial
objectives will be established by the Committee each performance period based
upon one or more of the following performance measures: (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. At the same time, a "range" of achievements for
financial objectives ranging from zero to target to maximum levels will be
established by the Committee. The Committee may alter or adjust financial
objectives during the course of a performance period, or alter or adjust the
financial results otherwise reported or achieved by Lodgian during such
performance period, except with respect to the Covered Employees, for whom the
Committee shall have no discretion to increase, but may decrease, the amount of
a Bonus Award payable based upon the range of achievement of the financial
objectives.
OTHER AWARD CRITERIA. Except with respect to Covered Employees, the
Committee may also, as to a Participant, make a portion of the award opportunity
subject to qualitative or quantitative individual goals to be achieved.
Individual objectives may be altered or amended during any performance period to
properly reflect changed business conditions and priorities, subject to approval
by the President and Chief Executive Officer or his delegate.
PAYMENT OF BONUS AWARDS. Payment of earned Bonus Awards is made as soon
as practicable after the end of the performance period in which such Bonus Award
is earned. Bonus Award payments will be paid in cash, shares of Lodgian Common
Stock, or in a combination of cash and shares as determined by the Committee. If
a Bonus Award is paid in Lodgian Common Stock, such stock will be valued at its
fair market value on the date of payment. No Bonus Award is earned with respect
to a financial objective at or below the zero level of achievement; achievement
between the zero and the target levels and the target and maximum levels will
result in a Bonus Award payment in accordance with the established range of the
achievement payment schedule. An amount larger than the target Bonus Award
opportunity for each financial objective can be earned by a Participant (other
than a Covered Employee) for exceeding that target.
If a Participant's employment is terminated because of death,
disability or retirement, or if employment is otherwise terminated and the
Committee approves, the Participant will receive a pro rata Bonus Award payment
based on the portion of the year the Participant was employed by Lodgian in an
eligible position while the Bonus Award was outstanding and the degree to which
during such year the performance objectives were achieved. No Bonus Award will
be payable to any Participant who voluntarily resigns his or her employment
prior to the payment date for such Bonus Award.
CHANGE IN CONTROL. In the event of a Change in Control of Lodgian,
except as the Committee otherwise determines, Lodgian will pay to each
Participant the pro rata amount of the Participant's target Bonus Award for the
then-current year. A Change in Control will generally be deemed to occur if: (i)
any person becomes the owner of
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40% or more of Lodgian's voting securities; (ii) directors who constitute the
Lodgian Board at the beginning of any two-year period, and any new directors
whose election or nomination for election was approved by a vote of at least a
majority of the directors then in office who either were directors at the
beginning of such period or whose election or nomination for election was
previously so approved, cease to constitute at least a majority of the Lodgian
Board; (iii) the shareholders of Lodgian approve a merger or consolidation in
which Lodgian's voting securities do not continue to represent at least a
majority of the surviving entity; or (iv) the shareholders approve a
reorganization, liquidation, or sale of all or substantially all of Lodgian's
assets.
AMENDMENT. The Lodgian 1998 Short-Term Incentive Compensation Plan may
be amended by the Lodgian Board upon a recommendation of the Committee, except
that, without approval of the shareholders, the Board or Committee may not
change (i) the performance measures with respect to Bonus Awards to Covered
Employees, (ii) the individuals or class of individuals eligible to participate
or (iii) the maximum amount payable to a Covered Employee under the Plan.
EFFECTIVENESS. If the Plan is approved by the shareholders, it will be
effective in the form approved with respect to Bonus Awards to be earned during
1998 and thereafter.
NEW PLAN BENEFITS. With the exception of Bonus Awards to Covered
Employees, Bonus Awards under the Lodgian 1998 Short-Term Incentive Compensation
Plan will be authorized by the Committee in its sole discretion. For this
reason, it is not possible to determine the benefits or amounts that will be
received by any particular employee or group of employees in the future. In
addition, because Bonus Awards made under the Lodgian 1998 Short-Term Incentive
Compensation Plan to Covered Employees for any particular fiscal year will be
determined using performance targets that are determined by the Committee at the
beginning of that fiscal year, and the amount, if any, payable to any Covered
Employee will depend on the extent to which such performance targets are
satisfied, it is not possible to determine the benefits or amounts that will be
received by any particular Covered Employee for the current fiscal year or any
fiscal year in the future.
FEDERAL INCOME TAX CONSEQUENCES
BONUS AWARDS. The payment of a Bonus Award, whether such Bonus Award is
paid in cash or shares of Lodgian Common Stock, will result in immediate
recognition of ordinary income by an employee in an amount equal to the amount
of such Award, and Lodgian will receive a tax deduction equal to the amount of
such income. If a Bonus Award is paid in Lodgian Common Stock, such stock will
be valued at its fair market value on the date of payment. Gain or loss upon a
subsequent sale of any shares of Lodgian Common Stock that are paid as a Bonus
Award will be taxed as capital gain or loss (long-term or short-term, depending
upon the holding period of the stock sold).
THE BOARD OF SERVICO AND THE IMPAC MANAGER RECOMMEND THAT THEIR
RESPECTIVE SHAREHOLDERS AND UNITHOLDERS VOTE FOR APPROVAL
OF THE LODGIAN 1998 SHORT-TERM INCENTIVE COMPENSATION PLAN
THE LODGIAN 1998 STOCK INCENTIVE PLAN
The Servico Board and Impac Manager have recommended the Lodgian 1998
Stock Incentive Plan for approval by their respective shareholders.
The Lodgian 1998 Stock Incentive Plan was authorized by the Servico
Board on May 8, 1998 and by the Impac Manager on July 16, 1998, 1998 and is
subject to approval by their respective shareholders and unitholders. A copy of
the Lodgian 1998 Stock Incentive Plan is attached hereto as Appendix E and the
following summary is qualified in its entirety by reference thereto.
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PURPOSES AND ELIGIBILITY. The purposes of the Lodgian 1998 Stock
Incentive Plan are to attract, retain and motivate officers and other key
employees and consultants of Lodgian and its subsidiaries, to compensate them
for their contributions to the growth and profits of Lodgian and to encourage
ownership by them of stock of Lodgian. The Lodgian 1998 Stock Incentive Plan
authorizes the issuance of certain awards ("Awards") to such individuals
(referred to in the Lodgian 1998 Stock Incentive Plan as "Eligible
Individuals"). As of [_________]. 1998, Lodgian estimates that there will be
approximately [______] Eligible Individuals.
SHARES AVAILABLE UNDER THE LODGIAN 1998 STOCK INCENTIVE PLAN. An
aggregate of 3,000,000 shares of Lodgian Common Stock are authorized for
issuance under the Lodgian 1998 Stock Incentive Plan, which amount will be
proportionately adjusted in the event of certain changes in Lodgian's
capitalization, a merger, or a similar transaction. Such shares may be treasury
shares or newly issued shares or a combination thereof.
In addition to this overall limit, in accordance with the requirements
of Section 422 of the Code, the Lodgian 1998 Stock Incentive Plan limits the
number of shares that may be subject to incentive stock options to 3,000,000
shares. In accordance with the requirements of the regulations under Section
162(m) of the Code, the Lodgian 1998 Stock Incentive Plan limits the number of
shares that may be granted to an individual participant in any fiscal year of
Lodgian to 250,000 shares.
ADMINISTRATION. The Committee or other committee appointed by the
Lodgian Board will administer the Lodgian 1998 Stock Incentive Plan, approve the
Eligible Individuals who will receive Awards, determine the form and terms of
the Awards and have the power to fix and accelerate vesting periods. Subject to
certain limitations, the Committee may from time to time delegate some or all of
its authority to an administrator consisting of one or more members of the
Committee or one or more officers of Lodgian.
AWARDS - GENERAL. The Lodgian 1998 Stock Incentive Plan authorizes a
broad array of Awards based on Lodgian's Common Stock, including (i) stock
awards consisting of one or more shares of Lodgian Common Stock granted or
offered for sale to Eligible Individuals ("Stock Awards"), (ii) stock options
("Stock Options"), (iii) stock appreciation rights ("SARs"), which may be
granted in tandem with or independently of Stock Options, (iv) conditional
awards which may be earned upon the satisfaction of certain specified
performance criteria ("Performance Share Awards") and (v) other forms of
equity-based or equity-related awards which the Committee determines to be
consistent with the purposes of the Lodgian 1998 Stock Incentive Plan and the
interests of Lodgian ("Other Awards"). Such Other Awards may also include cash
payments which may be based on one or more criteria determined by the Committee
which are unrelated to the value of Lodgian's Common Stock.
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 Lodgian) shall be
determined by the Committee. 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 SAR first becomes exercisable. The Committee
shall also have a full authority to determine the effect, if any, that a
participant's termination of employment will have on the vesting,
exercisability, payment or lapse of restrictions applicable to an outstanding
Award.
Lodgian may require a participant to pay a sum to Lodgian as may be
necessary to cover any taxes or other charges imposed on Lodgian with respect to
property or income received by a participant pursuant to the Lodgian 1998 Stock
Incentive Plan. Lodgian may offer loans to participants to satisfy withholding
requirements on such terms as the Committee may determine.
No Awards shall be made under the Lodgian 1998 Stock Incentive Plan
after the tenth anniversary of the date on which the Lodgian 1998 Stock
Incentive Plan is approved by the shareholders of Servico and unitholders of
Impac.
AWARDS - STOCK AWARDS. Recipients of Stock Awards are entitled to
exercise voting rights and receive dividends with respect to the shares of
Lodgian Common Stock underlying such Awards upon receipt of such Awards.
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AWARDS - STOCK OPTIONS. An award of Stock Options may consist of either
nonqualified stock options or incentive stock options. A Stock Option entitles
the participant to acquire a specified number of shares of Lodgian Common Stock
at an exercise price determined by the Committee, which generally may not be
less than the fair market value of the shares on the date of award of the Stock
Option. The exercise price may be paid in cash or previously owned stock or a
combination thereof. In addition, Lodgian intends to establish a "cashless
exercise" procedure that will afford participants the opportunity to sell
immediately some or all of the shares underlying the exercised portion of a
Stock Option in order to generate sufficient cash to pay the exercise price
and/or to satisfy withholding tax obligations related to the Stock Option. Stock
Options expire no later than ten years from the date of grant.
AWARDS - STOCK APPRECIATION RIGHTS. Recipients of SARs are entitled to
receive an amount, if any, equal to the fair market value of a share of Lodgian
Common Stock on the date of exercise over the SAR exercise price specified in
the applicable award agreement. At the discretion of the Committee, payments to
a participant upon exercise of an SAR may be made in shares, cash or a
combination thereof. An SAR may be granted alone or in addition to other Awards,
or in tandem with a Stock Option.
AWARDS - PERFORMANCE SHARE AWARDS. A Performance Share Award will
entitle a participant to receive a specified number of shares, an equivalent
amount of cash or a combination thereof upon satisfaction of certain specified
performance criteria. 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 another time determined by the Committee.
AWARDS TO SECTION 162(M) OFFICERS. Section 162(m) of the Code limits
the deductibility of compensation in excess of $1,000,000 paid to the chief
executive officer and the four other most highly compensated officers of a
public company, as determined pursuant to the rules of the SEC, unless the
payments are made under qualifying performance-based plans and upon the
attainment of certain performance goals. The Lodgian 1998 Stock Incentive Plan
contains special provisions that are intended to enable the Committee, if it so
chooses, to make Awards to Lodgian officers who are subject to Section 162(m) of
the Code ("Section 162(m) Officers") that will qualify as "qualified
performance-based compensation" for purposes of Section 162(m) of the Code.
Section 162(m) Awards may consist of Stock Options, SARs, 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. Performance goals
will be selected from among the following performance criteria: (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.
In addition to the foregoing, the Committee may also grant Section
162(m) Officers Stock Options or SARs which may, pursuant to the regulations
promulgated under Section 162(m), be qualified as performance-based compensation
for Section 162(m) purposes without regard to the foregoing.
CHANGE IN CONTROL. In the event of a Change in Control of Lodgian,
except as the Committee otherwise determines, all outstanding Stock Options and
SARs will become fully exercisable, all restrictions and conditions of all
outstanding Stock Awards will lapse, all Performance Share Awards will be deemed
to have been fully earned, and, in the case of a Change in Control in which
Lodgian does not survive or becomes a wholly owned subsidiary of another entity,
outstanding Stock Options that are not exercised as of the date of the Change in
Control will be converted into options to purchase common stock or similar
equity interests of the acquiror. A Change in Control under the Lodgian 1998
Stock Incentive Plan is defined as it is defined for purposes of the Lodgian
1998 Short-Term Incentive Compensation Plan.
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AMENDMENT. The Lodgian Board or the Committee may amend or terminate
the Lodgian 1998 Stock Incentive Plan at any time, except that shareholder
approval is required to increase the maximum number of shares issuable under the
Plan. No amendment or termination may adversely affect a participant's rights
with respect to previously granted Awards without his or her consent.
NEW PLAN BENEFITS. Awards under the Lodgian 1998 Stock Incentive Plan
will be authorized by the Committee in its sole discretion. For this reason it
is not possible to determine the benefits or amounts that will be received by
any particular employees or group of employees in the future.
FEDERAL INCOME TAX CONSEQUENCES
NONQUALIFIED STOCK OPTIONS. The grant of a nonqualified stock option
will not result in the recognition of taxable income by the participant or in a
deduction to Lodgian. Upon exercise, a participant will recognize ordinary
income in an amount equal to the excess of the fair market value of the Lodgian
Common Stock on the date of exercise over the exercise price. Lodgian is
required to withhold tax on the amount of income so recognized, and a tax
deduction is allowable equal to the amount of such income (subject to the
satisfaction of certain conditions in the case of Stock Options exercised by
Section 162(m) Officers). Gain or loss upon a subsequent sale of any Lodgian
Common Stock received upon the exercise of a nonqualified stock option generally
would be taxed as capital gain or loss (long-term or short-term, depending upon
the holding period of the stock sold). Certain additional rules apply if the
exercise price for an option is paid in shares previously owned by the
participant.
INCENTIVE STOCK OPTIONS. Upon the grant or exercise of an incentive
stock option within the meaning of Section 422 of the Code, no income will be
realized by the participant for federal income tax purposes and Lodgian will not
be entitled to any deduction. However, the excess of the fair market value of
the Lodgian Common Stock as of the date of exercise over the exercise price will
constitute an adjustment to taxable income for purposes of the alternative
minimum tax. If the shares of Lodgian Common Stock are not disposed of within
the one-year period beginning on the date of the transfer of such shares to the
participant, nor within the two-year period beginning on the date of grant of
the Stock Option, any profit realized by the participant upon the disposition of
such shares will be taxed as long-term capital gain and no deduction will be
allowed to Lodgian. If the shares of Lodgian Common Stock are disposed of within
the one-year period from the date of transfer of such shares to the participant
or within the two-year period from the date of grant of the Stock Option, the
excess of the fair market value of the shares upon the date of exercise or, if
less, the fair market value on the date of disposition over the exercise price
will be taxable as ordinary income of the participant at the time of
disposition, and a corresponding deduction will be allowable. Certain additional
rules apply if the exercise price for an option is paid in shares previously
owned by the participant. If a Stock Option intended to qualify as an incentive
stock option is exercised by a person who was not continually employed by
Lodgian or certain of its affiliates from the date of grant of such Stock Option
to a date not more than three months prior to such exercise (or one year if such
person is disabled), then such Stock Option will not qualify as an incentive
stock option and will instead be taxed as a nonqualified stock option, as
described above.
STOCK AWARDS. A participant who is awarded a Stock Award will not be
taxed at the time of award unless the participant makes a special election with
the IRS pursuant to Section 83(b) of the Code as discussed below. Upon lapse of
the risk of forfeiture or restrictions on transferability applicable to the
Lodgian Common Stock comprising the Stock Award, the participant will be taxed
at ordinary income tax rates on the then fair market value of the Lodgian Common
Stock and a corresponding deduction will be allowable (subject to the
satisfaction of certain conditions in the case of Stock Awards granted to
Section 162(m) Officers). In such case, the participant's basis in the Lodgian
Common Stock will be equal to the ordinary income so recognized. Upon subsequent
disposition of such Lodgian Common Stock, the participant will realize capital
gain or loss (long-term or short-term, depending upon the holding period of the
stock sold).
Pursuant to Section 83(b) of the Code, the participant may elect within
30 days of receipt of the Stock Award to be taxed at ordinary income tax rates
on the fair market value of the Lodgian Common Stock comprising such Stock Award
at the time of award (determined without regard to any restrictions which may
lapse). In that case, the
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participant will acquire a basis in such Lodgian Common Stock equal to the
ordinary income recognized by the participant at the time of award. No tax will
be payable upon lapse or release of the restrictions or at the time the Lodgian
Common Stock first becomes transferable, and any gain or loss upon subsequent
disposition will be a capital gain or loss. In the event of a forfeiture of
Lodgian Common Stock with respect to which a participant previously made a
Section 83(b) election, the participant will not be entitled to a loss
deduction.
PERFORMANCE SHARE AWARDS. A participant who receives a Performance
Share Award will be taxed at ordinary income tax rates on the then fair market
value of the shares of Lodgian Common Stock distributed at the time of payment
in settlement of such Performance Share Award and a corresponding deduction will
be allowable to Lodgian at that time (subject to the satisfaction of certain
conditions in the case of Performance Share Awards granted to Section 162(m)
Officers). The participant's basis in the shares of Lodgian Common Stock will be
equal to the amount taxed as ordinary income, and on subsequent disposition the
participant will realize capital gain or loss (long-term or short-term,
depending upon the holding period of the stock sold).
THE SERVICO BOARD AND THE IMPAC MANAGER RECOMMEND THAT THEIR
RESPECTIVE SHAREHOLDERS AND UNITHOLDERS VOTE FOR APPROVAL
OF THE LODGIAN 1998 STOCK INCENTIVE PLAN
THE LODGIAN NON-EMPLOYEE DIRECTORS' STOCK PLAN
The Servico Board and Impac Manager have recommended the Lodgian
Non-Employee Directors' Stock Plan for approval by their respective shareholders
and unitholders.
The Lodgian Non-Employee Directors' Stock Plan was authorized by the
Servico Board on May 8, 1998 and by the Impac Manager on July 16, 1998 and is
subject to approval by their respective shareholders and unitholders. A copy of
the Lodgian Non-Employee Directors' Stock Plan is attached hereto as Appendix F
and the following summary is qualified in its entirety by reference thereto.
PURPOSES AND ELIGIBILITY. The purposes of the Lodgian Non-Employee
Directors' Stock Plan are to help Lodgian retain as directors qualified persons
who are not employees of Lodgian or its subsidiaries and to secure for Lodgian
the inherent benefit of increased stock ownership by such directors. Only
directors who are not employees of Lodgian or any of its subsidiaries may
participate in the Lodgian Non-Employee Directors' Stock Plan.
SHARES AVAILABLE UNDER THE NON-EMPLOYEE DIRECTORS' STOCK PLAN. A total
of 300,000 shares of Lodgian Common Stock will be reserved for issuance under
the Non-Employee Directors' Stock Plan, which amount will be proportionately
adjusted in the event of certain changes in Lodgian's capitalization, a merger,
or a similar transaction. Shares issued pursuant to the Lodgian Non-Employee
Directors' Stock Plan may be either authorized but unissued shares, treasury
shares or a combination thereof.
ADMINISTRATION. The Lodgian Non-Employee Directors' Stock Plan will be
administered by a committee consisting exclusively of members of the Lodgian
Board who are not non-employee directors. The committee will have authority to
adopt such rules as it deems necessary to carry out the purposes of the Lodgian
Non-Employee Directors' Stock Plan and to construe and interpret the Plan.
DIRECTOR OPTION GRANTS. The Lodgian Non-Employee Directors' Stock Plan
provides for automatic, non- discretionary grants of nonqualified stock options
("Director Options") to non-employee directors. Each non-employee director will
receive, at each annual meeting of Lodgian stockholders commencing with the
annual meeting held in 1999, an option to purchase 5,000 shares of Lodgian
Common Stock. All Director Options will have a per share exercise price equal to
the fair market value of the shares on the date of award. Such exercise price
may be paid in cash or previously owned stock or a combination thereof. No
discretionary grants of stock options are permitted under the Lodgian
Non-Employee Directors' Stock Plan.
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<PAGE> 156
All options granted pursuant to the Lodgian Non-Employee Directors'
Stock Plan will vest in equal installments on each of the first three annual
meetings following the date of grant. Notwithstanding this vesting schedule, a
Director Option will become fully vested and exercisable upon a non-employee
director's termination of service due to death, disability or retirement in
accordance with the retirement policy for non-employee directors then in effect.
All Director Options expire ten years from the date of grant. If a
non-employee director's service as a member of the board of directors terminates
due to death, disability or retirement, all Director Options must be exercised
within one year following such termination. If a non-employee director's service
as a member of the board of directors terminates for any other reason, such
non-employee director must exercise any Director Options that have vested as of
the date of such termination within the six month period following such
termination and all Director Options that have not vested as of the date of such
termination will immediately expire.
DIRECTOR SHARES. A non-employee director may elect to receive all or a
specific percentage of his or her cash fees payable for service on the Board or
any committee thereof in shares of Lodgian Common Stock (the "Director Shares"),
in lieu of cash compensation. The number of shares of Lodgian Common Stock so
awarded to each non-employee director will be determined by dividing the portion
of such non-employee director's fees to be paid in Lodgian Common Stock by the
fair market value of a share of Lodgian Common Stock on the date of award.
AMENDMENT. The Lodgian Board may amend or terminate the Lodgian
Non-Employee Directors' Stock Plan at any time, except that shareholder approval
is required to increase the maximum number of shares issuable under the Lodgian
Non-Employee Directors' Stock Plan. The consent of a non-employee director is
required to the extent that any amendment or termination would adversely affect
such non-employee director's rights with respect to any previously granted
Director Option or would result in the distribution of amounts credited to such
non-employee director's deferred compensation account or could reasonably be
expected to result in the immediate taxation of amounts deferred in a
non-employee director's deferred compensation account.
NEW PLAN BENEFITS. The Lodgian Non-Employee Directors' Stock Plan
provides for automatic option grants to each non-employee director with respect
to 5,000 shares of Lodgian Common Stock on the date of each annual meeting of
Lodgian shareholders commencing with the annual meeting held in 1999.
FEDERAL INCOME TAX CONSEQUENCES
DIRECTOR SHARES. A grant of Director Shares will result in the
recognition of taxable income by a non-employee director and in a deduction to
Lodgian. Gain or loss upon a subsequent sale of Director Shares will be taxed as
capital gain or loss (long-term or short-term, depending upon the holding period
of the stock sold).
DIRECTOR OPTION GRANTS. The grant of a stock option to a non-employee
director will not result in the recognition of taxable income by the
non-employee director or in a deduction to Lodgian. Upon exercise, a
non-employee director will recognize ordinary income in an amount equal to the
excess of the fair market value of the Lodgian Common Stock purchased over the
exercise price, and a tax deduction is allowable to Lodgian equal to the amount
of such income. Gain or loss upon a subsequent sale of any Lodgian Common Stock
received upon the exercise of a stock option generally would be taxed as capital
gain or loss (long-term or short-term, depending upon the holding period of the
stock sold). Certain additional rules apply if the exercise price for an option
is paid in shares previously owned by the non-employee director.
THE SERVICO BOARD AND THE IMPAC MANAGER RECOMMEND THAT THEIR
RESPECTIVE SHAREHOLDERS AND UNITHOLDERS VOTE FOR APPROVAL
OF THE LODGIAN NON-EMPLOYEE DIRECTORS' STOCK PLAN.
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<PAGE> 157
PROPOSAL TO AMEND THE SERVICO STOCK OPTION PLAN
DESCRIPTION OF THE SERVICO STOCK OPTION PLAN
The Servico Plan was established by Servico in 1992 to provide Servico
with an effective means to attract, retain, and motivate employees of Servico.
Amendments to the Servico Plan were adopted by the Board of Directors in April
1994, February 1995 and April 1997 and approved by the shareholders of Servico
in June 1994, May 1995 and May 1997, respectively. Such amendments increased the
number of shares issuable pursuant to the Servico Plan from 1,000,000 to
1,675,000 shares, revised the Servico Plan in an attempt to meet the
requirements for deductibility under the Code, eliminated the automatic vesting
of options upon the occurrence of certain events and modified the provision
which provides for the automatic grant of options to non-employee directors of
Servico.
A maximum of 1,675,000 shares of Servico Common Stock were issuable
under the Servico Plan, and no shares currently remain available for issuance
under the Servico Plan. In August, 1997, Servico granted stock options with
respect to 590,000 shares to certain of its officers and directors which,
because the Servico Plan did not have enough shares available for issuance, were
granted subject to approval of an amendment to the Servico Plan. In the event
the Merger is approved, the Lodgian Plans are expected to replace the Servico
Plan and, in such case, no further options will be granted under the Servico
Plan. The outstanding options granted under the Servico Plan, including those
granted in August, 1997, if this Amendment is adopted, will automatically
convert into options to acquire Lodgian stock upon effectiveness of the Merger.
As described below, Servico shareholders are being asked to amend the Servico
Plan to increase the number of shares available for issuance under the Servico
Plan to 3,250,000. In the event the Merger is consummated, no further options
will be granted pursuant to the Servico Plan. The Board of Directors recommends
a vote "for" the amendment of the Servico Plan.
The Servico Plan is administered by the Stock Option Committee of
Servico's Board of Directors within the meaning of Section 162(m) of the Code.
The Stock Option Committee has the authority to interpret the provisions of the
Servico Plan and to make all determinations deemed necessary or advisable for
its administration.
The Servico Plan provides for the issuance of incentive stock options
within the meaning of Section 422 of the Code and nonqualified stock options not
intended to meet the requirements of Section 422 of the Code. Incentive stock
options may be granted to employees of Servico and its subsidiaries, and
non-qualified options may be granted to employees, directors, independent
contractors and agents of Servico and its subsidiaries. Subject to the terms of
the Servico Plan, the Stock Option Committee determines the employees to whom
grants are made and the vesting, timing, amounts and other terms of such grants.
Stock options exercisable in one calendar year for shares with a fair market
value on the date of grant in excess of $100,000 will not be treated as
incentive stock options. Additionally, the Servico Plan limits the number of
stock options (whether incentive stock options or non-qualified aggregate
option) which may be granted to any individual employee in any given year to
options covering not more than 125,000 shares of Servico Common Stock.
Pursuant to the terms of the Servico Plan, the exercise price of
options may not be less than the fair market value of the Servico Common Stock
on the date of grant, except that the exercise price of any incentive stock
option granted to the holder of more than 10% of the outstanding Servico Common
Stock may not be less than 110% of the fair market value of the Servico Common
Stock on the date of grant. The term of each option may not exceed ten years,
except the term of any incentive stock option granted to the holder of more than
10% of the outstanding Servico Common Stock may not exceed five years. The
option price may be paid in cash, promissory note, shares of Servico Common
Stock or any other consideration acceptable to the Stock Option Committee. The
Servico Plan sets forth additional provisions with respect to the exercise of
options by an optionee upon the termination of employment and upon death or
disability.
The Servico Plan provides for an automatic grant of non-qualified
options to acquire 5,000 shares of Servico Common Stock to non-employee
directors on the date such director's term of office commences and each year
thereafter on the day following any annual meeting of shareholders, so long as
such person's term as a director is
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<PAGE> 158
continuing for the ensuing year. The exercise price of such options is equal to
the fair market value of the Servico Common Stock on the date of the grant, and
the number of options granted is subject to adjustment upon certain changes in
Servico's capitalization.
The number of shares of Servico Common Stock covered by outstanding
options, the number of shares of Servico Common Stock available for issuance
under the Servico Plan, and the exercise price per share of outstanding options,
will be proportionately adjusted for any increase or decrease in the number of
issued shares of Servico Common Stock resulting from a stock split or stock
dividend. Unless otherwise provided by the Stock Option Committee or the Board
of Directors, all outstanding options terminate immediately prior to the
consummation of a dissolution or liquidation of Servico, or sale of all or
substantially all of the assets of Servico, or the merger of Servico with or
into another corporation. Upon the occurrence of any of the events described in
the preceding sentence, the Stock Option Committee or the Board of Directors of
Servico may, in their discretion, grant optionees the right to exercise options
as to all or any part of the optioned stock, including shares which the option
would not otherwise be exercisable. The Merger Agreement provides that each
unexercised option outstanding under the Servico Plan will be assumed by Lodgian
in the Merger and converted into an option to purchase shares of Lodgian Common
Stock.
The Stock Option Committee may amend or terminate the Servico Plan,
except that shareholder approval is required to increase the number of shares of
Servico Common Stock subject to the Servico Plan, to change the class of persons
eligible to participate in the Servico Plan, or to materially increase the
benefits accruing to participants under the Servico Plan.
All employees, directors, independent contractors and agents of Servico
are eligible to receive stock options under the Servico Plan. As of March 31,
1998, Servico had four non-employee directors and approximately 4,860 full-time
employees.
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. The grant of an incentive stock option has no
immediate tax consequences to the optionee or to Servico. The exercise of an
incentive stock option generally has no immediate tax consequences to the
optionee (except to the extent it is an adjustment in computing alternative
minimum taxable income) or to Servico. If an optionee holds the shares acquired
pursuant to the exercise of an incentive stock option for the required holding
period, the optionee generally recognizes long-term capital gain or loss upon a
subsequent sale of the shares in the amount of the difference between the amount
realized upon the sale and the exercise price of the shares. In such a case,
Servico is not entitled to a deduction in connection with the grant or exercise
of the incentive stock option or the sale of shares acquired pursuant to such
exercise. If, however, an optionee disposes of the shares prior to the
expiration of the required holding period, the optionee recognizes ordinary
income equal to the excess of the fair market value of the shares on the date of
exercise (or the proceeds of disposition, if less) over the exercise price, and
Servico is entitled to a corresponding deduction if applicable withholding
requirements are satisfied. The required holding period is two years from the
date of grant and one year after the date the shares are issued.
NONQUALIFIED OPTIONS. The grant of a non-qualified stock option has no
immediate tax consequences to the optionee or Servico. Upon the exercise of a
non-qualified stock option, the optionee recognizes ordinary income in an amount
equal to the excess of the fair market value of the shares on the date of
exercise over the exercise price, and Servico is entitled to a corresponding
deduction if applicable withholding requirements are satisfied. The optionee's
tax basis in the shares is the exercise price plus the amount of ordinary income
recognized by the optionee, and the optionee's holding period will commence on
the date the shares are received. Upon a subsequent sale of the shares, any
difference between the optionee's tax basis in the shares and the amount
realized on the sale is treated as long-term or short-term capital gain or loss,
depending on the holding period of the shares and assuming the shares are held
as capital assets.
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<PAGE> 159
OPTIONS GRANTED UNDER THE PLAN
As of March 31, 1998, options to purchase 1,512,700 shares of Servico
Common Stock were outstanding and exercisable at exercise prices ranging from
$4.00 per share to $16.81 per share (in each case equal to or in excess of the
fair market value of the Servico Common Stock as of the dates of grant). No
shares of Servico Common Stock are presently available for grant under the
Servico Plan. As of ________, 1998, the last reported sales price of the Servico
Common Stock on the NYSE composite tape was $_______.
The table below indicates, as of March 31, 1998, the aggregate number
of options granted under the Servico Plan since its inception to the persons and
groups indicated, and the number of outstanding options held by such persons and
groups as of such date.
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL OR GROUP POSITION WITH SERVICO GRANTED OUTSTANDING
--------------------------- --------------------- ------- -----------
<S> <C> <C> <C>
David Buddemeyer President and Chief Executive 468,500 423,500
Officer
Karyn Marasco Executive Vice President and 112,500 112,500
Chief Operating Officer
Charles M. Diaz Vice President - Administration 30,000 29,000
and Secretary
Warren M. Knight Vice President-Finance and Chief 173,500 173,500
Financial Officer
Peter J. Walz Vice President-Acquisitions 102,500 102,500
Robert D. Ruffin Former Vice President - 111,000 18,500
Administration and Secretary
Joseph C. Calabro Director 35,000 35,000
Michael A. Leven Director 5,000 5,000
Peter R. Tyson Director 35,000 35,000
Richard H. Weiner Director 35,000 35,000
All Current Executive Officers 887,000 841,000
All Current Directors who are not 110,000 110,000
Executive Officers
All Current Employees, other than 522,200 495,600
Current Executive Officers
</TABLE>
AMENDMENT TO THE PLAN
On August 27, 1997, the Servico Board unanimously approved, subject to
the approval of Servico's shareholders, to amend the Servico Plan to increase
the number of shares issuable pursuant to the Servico Plan from 1,675,000 shares
to 3,250,000 shares. The purpose of increasing the number of shares available
for issuance under the Servico Plan is to authorize the issuance of 590,000
options previously granted and to ensure that Servico will continue to be able
to grant options as incentives to those individuals upon whose efforts Servico
relies for the continued success and development of its business.
-141-
<PAGE> 160
LEGAL MATTERS
The validity of the shares of Lodgian Common Stock to be issued in
connection with the Merger and the tax consequences of the Merger to Servico and
its shareholders will be passed upon by Stearns Weaver Miller Weissler Alhadeff
& Sitterson, P.A., Miami, Florida. The tax consequences of the Merger to Impac
and its unitholders will be passed upon by Powell Goldstein Frazer & Murphy,
LLP, Atlanta, Georgia.
EXPERTS
The consolidated financial statements of Servico, Inc. appearing in
Servico, Inc.'s Annual Report (Form 10-K) for the year ended December 31, 1997,
incorporated by reference in the Joint Proxy Statement/Prospectus of Servico,
Inc. and Impac Hotel Group., L.L.C., have been audited by Ernst & Young LLP,
independent certified public accountants, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
Additionally, the balance sheet of Lodgian, Inc. at April 17, 1998,
included in the Joint Proxy Statement/Prospectus of Servico, Inc. and Impac
Hotel Group, L.L.C., has been audited by Ernst & Young LLP, independent
certified public accountants, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The consolidated and combined financial statements of Impac Hotel
Group, L.L.C. and its Predecessors and Impac Hotel Development, Inc. as of
December 31, 1997 and 1996 and for the three years ended December 31, 1997
included in this Joint Proxy Statement/Prospectus have been included herein in
reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
SHAREHOLDER PROPOSALS
Management of Servico knows of no other matters that may properly be,
or which are likely to be, brought before the Servico Annual Meeting. However,
if any other matters are properly brought before such Meeting, the persons named
in the enclosed proxy or their substitutes will vote the proxies in accordance
with the recommendations of management, unless such authority is withheld.
If the Merger is consummated as expected, Servico will not hold an
annual meeting in 1999. If the Merger is not approved by the holders of Servico
Common Stock or is not consummated for any other reason, proposals submitted by
shareholders for presentation at the 1999 annual meeting must be received by
Servico no later than _______, 1999 for inclusion, if appropriate, in Servico's
proxy statement and form of proxy relating to that annual meeting.
WHERE YOU CAN FIND MORE INFORMATION
Servico files annual, quarterly and special reports, proxy statements
and other information with the SEC. You may read and copy any reports,
statements or other information Servico files at the SEC's public reference
rooms in Washington, DC, New York, New York and Chicago, Illinois. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference rooms.
Servico's SEC filings are also available to the public from commercial document
retrieval services and at the web site maintained by the SEC at
"http://www.sec.gov."
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<PAGE> 161
Lodgian has filed a Registration Statement on Form S-4 (the
"Registration Statement") to register with the SEC the Lodgian Common Stock to
be issued to Servico shareholders and Impac unitholders in the Merger. This
Joint Proxy Statement/Prospectus is a part of the Registration Statement and
constitutes a prospectus of Lodgian in addition to being a proxy statement of
Servico for the Servico Annual Meeting and Impac for the solicitation of Impac
unitholder consents. As allowed by SEC rules, this Joint Proxy
Statement/Prospectus does not contain all the information you can find in the
Registration Statement or the exhibits to the Registration Statement, which are
incorporated herein by reference.
The SEC allows Servico to "incorporate by reference" information into
this Joint Proxy Statement/Prospectus, which means that Servico can disclose
important information to you by referring to another document filed separately
with the SEC. The information incorporated by reference is deemed to be part of
this Joint Proxy Statement/Prospectus, except for any information superseded by
information in this Joint Proxy Statement/Prospectus. This Joint Proxy
Statement/Prospectus incorporates by reference the documents set forth below
that Servico has previously filed with the SEC. These documents contain
important information about Servico and its finances.
<TABLE>
<CAPTION>
SERVICO SEC FILING (FILE NO. 1-11342) PERIOD OR DATE FILED
- ------------------------------------- --------------------
<S> <C>
Annual Report on Form 10-K, as amended Year ended December 31, 1997/
on Form 10-K/A 10-K/A filed on March 31, 1998
Quarterly Report on Form 10-Q Quarter ended March 31, 1998
Current Report on Form 8-K, dated
March 20, 1998 Filed on March 26, 1998
Current Report on Form 8-K, dated
June 8, 1998 Filed on June 9, 1998
</TABLE>
Servico also incorporates by reference additional documents that it
files with the SEC between the date of this Joint Proxy Statement/Prospectus and
the date of the Servico Annual Meeting.
Servico has supplied all information contained or incorporated by
reference in this Joint Proxy Statement/Prospectus relating to Servico and Impac
has supplied all information contained in this Joint Proxy Statement/Prospectus
relating to Impac.
If you are a shareholder of Servico, Servico may have sent you some of
the documents incorporated by reference, but you can obtain any of them through
Servico or the SEC. Documents incorporated by reference are available from
Servico without charge, excluding all exhibits unless such exhibits have been
specifically incorporated by reference in this Joint Proxy Statement/Prospectus.
Shareholders of Servico and unitholders of Impac may obtain documents
incorporated by reference in this Joint Proxy Statement/Prospectus by requesting
them in writing or by telephone from Mr. Warren M. Knight, Vice
President-Finance, Servico, Inc., 1601 Belvedere Road, West Palm Beach, Florida,
33406; telephone (561) 689-9970.
If you would like to request documents from Servico, please do so by
[ ], 1998 to receive them before the meeting.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS TO VOTE ON THE PROPOSALS SET
FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS. NEITHER SERVICO NOR IMPAC HAS
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS
CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS. THIS JOINT PROXY
STATEMENT/PROSPECTUS IS DATED ________, 1998. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF
ANY DATE OTHER THAN SUCH DATE, AND NEITHER THE MAILING OF THIS JOINT PROXY
STATEMENT/PROSPECTUS NOR THE ISSUANCE OF LODGIAN COMMON STOCK IN THE MERGER
SHALL BE DEEMED TO CREATE ANY IMPLICATION TO THE CONTRARY.
-143-
<PAGE> 162
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Lodgian, Inc.
Report of Independent Certified Public Accountants........................................F-2
Balance Sheet as of April 17, 1998........................................................F-3
Note to Balance Sheet.....................................................................F-4
Impac Hotel Group, L.L.C.
Report of Independent Accountants.........................................................F-5
Consolidated and Combined Balance Sheets as of December 31, 1997 and 1996.................F-6
Consolidated and Combined Statements of Operations for the years ended
December 31, 1997, 1996 and 1995..........................................................F-7
Consolidated and Combined Statements of Equity for the years ended
December 31, 1997, 1996 and 1995..........................................................F-8
Consolidated and Combined Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995..........................................................F-9
Notes to Consolidated and Combined Financial Statements..................................F-10
Report of Independent Accountants........................................................F-18
Consolidated and Combined Balance Sheets as of March 31, 1998
and December 31, 1997....................................................................F-19
Consolidated and Combined Condensed Statements of Operations
for the three months ended March 31, 1998 and 1997.......................................F-20
Consolidated and Combined Condensed Statements of Equity for the years
ended December 31, 1997, 1996 and the three months ended March 31, 1998 and 1997.........F-21
Consolidated and Combined Condensed Statements of Cash Flows for the
three months ended March 31, 1998 and 1997...............................................F-22
Notes to Consolidated and Combined Condensed Financial Statements........................F-23
</TABLE>
F-1
<PAGE> 163
Report of Independent Certified Public Accountants
The Stockholder
Lodgian, Inc.
We have audited the accompanying balance sheet of Lodgian, Inc. (the
Company) as of April 17, 1998. This balance sheet is the responsibility of the
Company's management. Our responsibility is to express an opinion on the balance
sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in
all material respects, the financial position of Lodgian, Inc. at April 17,
1998, in conformity with generally accepted accounting principles.
West Palm Beach, Florida /s/ ERNST & YOUNG, LLP
April 20, 1998
F-2
<PAGE> 164
LODGIAN, INC.
BALANCE SHEET
APRIL 17, 1998
Assets:
Cash....................................................... $ 1,000
=========
Stockholder's equity:
Preferred stock, $.01 par value 25,000,000
shares authorized, 0 issued and outstanding.............. $ --
Common stock, $.01 par value, 75,000,000
shares authorized, 1,000 issued and outstanding.......... 10
Additional paid-in capital................................. 990
---------
$ 1,000
=========
See accompanying note.
F-3
<PAGE> 165
LODGIAN, INC.
NOTE TO BALANCE SHEET
APRIL 17, 1998
1. ORGANIZATION AND BUSINESS
Lodgian, Inc. ("Lodgian" or the "Company") was incorporated under the laws of
the State of Delaware on February 11, 1998. The authorized capital stock of the
Company consists of 25,000,000 shares of preferred stock $.01 par value and
75,000,000 shares of common stock $.01 par value. There are 1,000 shares of
common stock issued and outstanding that are 100% owned by Servico, Inc.
("Servico").
On March 20, 1998, Servico signed a definitive agreement with Impac Hotel Group,
L.L.C.("Impac"), a privately owned hotel company, for both Servico and Impac to
merge into the Company. Under the terms of the agreement, Servico's existing
shareholders will receive one share of Lodgian common stock for each share of
Servico common stock held by them (approximately 21,000,000 shares). The owners
of Impac, will initially receive 6,000,000 shares of Lodgian common stock and
receive an additional 1,400,000 shares upon the completion of construction of
six hotels during 1999. Lodgian will initially own and manage 140 hotels (136 of
which will be owned) with more than 26,000 rooms and operate in 35 states and
one Canadian province. The merger will be accounted for under the purchase
method of accounting and is expected to close in June 1998 subject to customary
conditions, including regulatory approvals and approval by Servico's
shareholders and Impac's unitholders.
F-4
<PAGE> 166
REPORT OF INDEPENDENT ACCOUNTANTS
To the Members of
Impac Hotel Group, L.L.C.
We have audited the accompanying consolidated and combined balance sheets of
Impac Hotel Group, L.L.C. and its Predecessors and Impac Hotel Development,
Inc., as defined in Note 1, as of December 31, 1997 and 1996, and the related
consolidated and combined statements of operations, equity and cash flows for
each of the three years in the period ended December 31, 1997. These
consolidated and combined financial statements are the responsibility of
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated and combined financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
and combined financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated and combined financial statements referred to
above present fairly, in all material respects, the consolidated and combined
financial position of Impac Hotel Group L.L.C. and its Predecessors and Impac
Hotel Development, Inc. as of December 31, 1997 and 1996 and the consolidated
and combined results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles.
/s/ PricewaterhouseCoopers, LLP
Atlanta, Georgia
April 10, 1998, except
for Note 9 as to which
the date is July 7, 1998.
F-5
<PAGE> 167
IMPAC HOTEL GROUP, L.L.C. AND PREDECESSORS
AND IMPAC HOTEL DEVELOPMENT, INC. (NOTE 1)
CONSOLIDATED AND COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
----------- ------------------------
1998 1997 1996
----------- ----------- -----------
(UNAUDITED)
ASSETS
Current assets:
<S> <C> <C> <C>
Cash and cash equivalents $ 1,572 $ 10,877 $ 5,199
Cash, restricted 3,590 5,271
Accounts receivable, net 10,733 5,886 2,583
Inventories 607 585 335
Other current assets 3,796 2,807 310
-------- -------- --------
Total current assets 20,298 25,426 8,427
Property and equipment, net 399,348 378,204 175,910
Other assets, net 14,135 14,150 7,329
-------- -------- --------
$433,781 $417,780 $191,666
======== ======== ========
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 15,358 $ 16,356 $ 8,463
Accrued liabilities 9,405 9,031 6,429
Current portion of long-term obligations 1,163
-------- -------- --------
Total current liabilities 24,763 25,387 16,055
Long-term obligations, less current portion 377,427 355,236 155,851
Commitments and contingencies
Minority interests 235 187
Equity:
Impac Hotel Group, L.L.C. and predecessors:
Partners' and stockholders' equity 21,220
Members' equity 37,324 41,559
Impac Hotel Development, Inc. -
Stockholders' deficit (5,968) (4,589) (1,460)
-------- -------- --------
Total equity 31,356 36,970 19,760
-------- -------- --------
$433,781 $417,780 $191,666
======== ======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS.
F-6
<PAGE> 168
IMPAC HOTEL GROUP, L.L.C. AND PREDECESSORS
AND IMPAC HOTEL DEVELOPMENT, INC. (NOTE 1)
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
---------------------- ---------------------------------------
1998 1997 1997 1996 1995
--------- ----------- ------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Rooms $ 25,892 $ 16,760 $ 90,139 $ 52,043 $ 42,442
Food and beverage 6,861 4,565 23,429 11,813 9,800
Other 1,818 981 6,291 3,957 3,334
--------- --------- --------- --------- ---------
Total revenue 34,571 22,306 119,859 67,813 55,576
--------- --------- --------- --------- ---------
Operating expenses:
Direct:
Rooms 6,815 4,328 28,303 16,840 12,965
Food and beverage 5,501 3,686 19,322 9,734 7,365
Other:
Administrative and general 2,777 1,702 11,467 4,306 2,439
Property management 4,022 2,305 13,273 7,642 5,517
Advertising and promotion 3,080 1,854 9,064 3,415 2,880
Utilities 2,022 1,613 7,143 4,140 3,286
Repairs and maintenance 1,857 1,349 6,573 3,455 3,289
Depreciation and amortization 3,681 2,205 11,136 5,814 3,978
Property taxes and insurance 1,690 1,073 4,779 2,957 2,214
Other 1,177 2,009 4,114 3,338 3,836
--------- --------- --------- --------- ---------
Total operating expenses 32,622 22,124 115,174 61,641 47,769
--------- --------- --------- --------- ---------
Income from operations 1,949 182 4,685 6,172 7,807
--------- --------- --------- --------- ---------
Other income (expenses):
Other income, primarily gain
on sale of hotels 143 7 271 19,701 5,049
Minority interests (48) 220 -- --
Interest expense (6,751) (3,951) (21,265) (11,809) (7,237)
--------- --------- --------- --------- ---------
Total other income (expenses) (6,656) (3,944) (20,774) 7,892 (2,188)
--------- --------- --------- --------- ---------
Income (loss) before extraordinary
item (4,707) (3,762) (16,089) 14,064 5,619
Extraordinary item -
Loss on extinguishment of
indebtedness (13,332) (13,332)
--------- --------- --------- --------- ---------
Net income (loss) $ (4,707) $ (17,094) $ (29,421) $ 14,064 $ 5,619
========= ========= ========= ========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS.
F-7
<PAGE> 169
IMPAC HOTEL GROUP, L.L.C. AND PREDECESSORS
AND IMPAC HOTEL DEVELOPMENT, INC. (NOTE 1)
CONSOLIDATED AND COMBINED STATEMENTS OF EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
IMPAC HOTEL GROUP, L.L.C. IMPAC HOTEL
AND PREDECESSORs DEVELOPMENT, INC.
--------------------------- -----------------
PARTNERS' AND
STOCKHOLDERS' MEMBERS' STOCKHOLDERS'
EQUITY EQUITY EQUITY TOTAL
------------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
Balance At December 31, 1994 $ 5,282 $ 95 $ 5,377
Net Income (loss) 6,088 (469) 5,619
Contributions, net 12,724 300 13,024
Distributions (10,385) (10,385)
Loans To Partners (227) (227)
-------- -------- ------- --------
Balance At December 31, 1995 13,709 (301) 13,408
Net Income (loss) 15,055 (991) 14,064
Contributions, Net 19,464 2,561 22,025
Distributions (29,430) 666 (28,764)
Loans To Partners (973) (973)
-------- -------- ------- --------
Balance At December 31, 1996 18,798 962 19,760
Transfer Of Equity Into Impac Hotel Group, L.L.C. (18,798) $ 18,798
Purchase Of Limited Partners' Interest 22,700 22,700
Net Loss (26,410) (3,011) (29,421)
Issuance Of Membership Units, Net 37,810 37,810
Distributions To Members (6,039) (1,580) (7,619)
Membership Units Retired (5,300) (5,300)
Loans To Members (960) (960)
-------- -------- ------- --------
Balance At December 31, 1997 41,559 (4,589) 36,970
Net Loss (4,328) (379) (4,707)
Issuance Of Membership Units, Net 93 93
Distributions To Members (1,000) (1,000)
-------- -------- ------- --------
Balance At March 31, 1998 (Unaudited) $ $ 37,324 $(5,968) $ 31,356
======== ======== ======= ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS.
F-8
<PAGE> 170
IMPAC HOTEL GROUP, L.L.C. AND PREDECESSORS
AND IMPAC HOTEL DEVELOPMENT, INC. (NOTE 1)
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------------- -------------------------------------
1998 1997 1997 1996 1995
------------ ------------ ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income (loss) $ (4,707) $ (17,094) $ (29,421) $ 14,064 $ 5,619
Adjustments to reconcile net income (loss) to net
cash from operating activities:
Depreciation and amortization 3,681 2,205 11,136 5,814 3,978
Minority interest 48 (220)
Gain on sales of hotel properties (19,369) (5,354)
Loss on extinguishment of indebtedness 13,332 13,332
Changes in operating assets and liabilities,
net of effect of acquisitions:
Accounts receivable (4,847) (4,260) (3,303) (109) 713
Inventories (22) (72) (250) (66) (45)
Other assets (989) (105) (1,853) (441) (2,543)
Accounts payable and accrued expenses (623) (1,251) 11,255 4,151 5,280
--------- --------- --------- --------- ---------
Net cash provided by (used in)
operating activities (7,459) (7,245) 676 4,044 7,648
--------- --------- --------- --------- ---------
Investing activities:
Acquisition and development of hotel properties (8,345) (30,584) (148,094) (60,860) (29,708)
Capital improvements (16,291) (16,413) (41,949) (50,463) (27,610)
Proceeds from sales of hotel properties 55,494 18,972
Cash, restricted 1,681 (5,271)
Loans to members (960)
Loans to partners (973) (227)
--------- --------- --------- --------- ---------
Net cash used in investing activities (22,955) (46,997) (196,274) (56,802) (38,573)
--------- --------- --------- --------- ---------
Financing activities:
Proceeds from issuance of long-term obligations 22,191 222,496 354,957 83,151 45,084
Payments of deferred loan costs (8,400) (12,391) (2,366) (1,451)
Payments of franchise fees and other deferred costs (175) (453) (688) (197)
Capital contributions, net 93 9,305 37,810 22,025 13,024
Equity distributions (1,000) (246) (7,619) (28,764) (10,385)
Repayment of long-term obligations (156,214) (156,695) (19,815) (13,245)
Retirement of membership units (4,535) (5,300)
Prepayment penalties (8,640) (8,640)
Contribution by joint venture partner 407
Loan from member 115
Repayment of related party loans (800) (800)
Proceeds from issuance of related party notes 400 400
--------- --------- --------- --------- ---------
Net cash provided by financing activities 21,109 53,081 201,276 53,943 33,230
--------- --------- --------- --------- ---------
Net change in cash and cash equivalents (9,305) (1,161) 5,678 1,185 2,305
Cash and cash equivalents at beginning of period 10,877 5,199 5,199 4,014 1,709
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of period $ 1,572 $ 4,038 $ 10,877 $ 5,199 $ 4,014
========= ========= ========= ========= =========
Supplemental disclosures of cash flow information -
Cash payments for interest $ 6,905 $ 4,055 $ 21,370 $ 12,633 $ 6,938
========= ========= ========= ========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS.
F-9
<PAGE> 171
IMPAC HOTEL GROUP, L.L.C. AND PREDECESSORS
AND IMPAC HOTEL DEVELOPMENT, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
The principal activity of Impac Hotel Group, L.L.C. ("Impac") is to
either acquire and renovate or develop, and operate hotels. The
Predecessors of Impac ("Predecessors"), prior to the formation of Impac
Hotel Group, L.L.C., consisted of 22 limited partnerships and four
corporations which each owned between one and six hotels, ("Initial
Hotels") and two operating corporations, Impac Hotel Management, Inc.
("Impac, Inc.") and Impac Development and Construction, Inc. ("IDC")
(collectively, the "Predecessors"). Impac and IDC are engaged in the
hotel management business and the hotel design and construction business,
respectively. Impac, Inc., which managed all of the Initial Hotels, was
owned by Charles Cole, 25%; Robert Cole, 32.5% and Nancy Wolff (a member
of the immediate Cole Family), 10% and an employee, 32.5%. IDC, a
construction company was also controlled by the Cole Family by virtue of
its ownership of 50.4% of IDC's outstanding stock. The four hotel
companies were controlled by the Cole Family by virtue of its ownership
of between 52% and 65% of each hotel corporation's outstanding stock. The
Cole Family also controlled each of the 22 corporate general partners of
each of the 22 limited partnerships through the ownership of in excess of
66% of the outstanding stock of each general partner. Under the terms of
each limited partnership agreement, the general partner of each
partnership had control over the decisions of the limited partnerships
including the operation, sale or financing of the partnerships' assets
and the general partner could not be replaced by the limited partners. By
virtue of such ownership and the management of the hotels, the Cole
Family controlled each of the Predecessors. On February 26, 1997 Impac
Hotel Group, L.L.C. was formed by the Cole Family, with Robert Cole as
manager, as a limited liability company under the laws of the state of
Georgia. As Manager, Mr. Cole had and continues to have authority over
Impac's business and affairs. All of the Initial Hotels were acquired by
Impac through the issuance of membership units in Impac in exchange for
either all of the interests in limited partnerships or all of the assets
(subject to all of the liabilities) of the corporations. In addition,
Impac acquired, in exchange for membership interests, all of the assets
of Impac, Inc. and IDC. This reorganization, which was accounted for as a
reorganization of entities under common control, was completed on March
12, 1997. The acquisition of the 22 Partnerships was recorded as a
purchase by the Cole Family of the minority interest of the Predecessors.
The acquisition of the assets (subject to all of the liabilities) of the
four corporations which owned Initial Hotels, Impac, Inc. and IDC has
been recorded as a reorganization at historical cost.
In accordance with Impac's Operating Agreement, profits and losses, as
defined, are allocated among the members in proportion to their ownership
interests.
Impac and its predecessors owned 45, 26 and 19 hotels as of December 31,
1997, 1996 and 1995, respectively. During the years ended December 31,
1996 and 1995 the Predecessors of Impac sold seven and three hotels,
respectively.
The principal activity of Impac Hotel Development, Inc. ("IHD") is to
analyze prospective hotel acquisitions for Impac Hotel Group, L.L.C. and
Predecessors. The principals of Impac, Inc. own a majority of the
outstanding stock of IHD. IHD was not acquired by Impac in the
reorganization previously described.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS.
F-10
<PAGE> 172
IMPAC HOTEL GROUP, L.L.C. AND PREDECESSORS
AND IMPAC HOTEL DEVELOPMENT, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS, CONTINUED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
BASIS OF PRESENTATION
The accompanying consolidated and combined financial statements of Impac
and its subsidiaries and IHD ("Companies") are prepared on the basis of
generally accepted accounting principles. The accounts and activities of
Impac and IHD are presented on a combined basis due to their common
control and because the entities are subject to a merger as described in
Note 9. All material intercompany balances are eliminated in the
consolidation and combination.
The accompanying combined financial statements of the Predecessors are
presented on a combined basis due to the common control that existed
during those periods and because the entities were the subject of a
business combination with Impac. The combined financial statements
include the partnerships and corporations that were acquired by Impac as
well as the financial position and results of operations of Hotel
properties that were sold prior to the reorganization but were under the
common control of Impac, Inc. during the periods presented. All material
intercompany balances are eliminated in the combination.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Companies consider
highly liquid investments purchased with a maturity of three months or
less to be cash equivalents.
CASH, RESTRICTED
Cash, restricted consists of amounts reserved for capital improvements,
debt service, taxes, and insurance.
INVENTORIES
Inventories consist primarily of food and beverage, linens, china,
tableware, and glassware and are stated at the lower of cost (computed on
the first-in, first-out basis) or market.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets.
Impac capitalizes interest costs incurred during the construction of
property and during major renovations upon the acquisition of hotels.
During the years ended December 31, 1997, 1996 and 1995, Impac
capitalized interest of approximately $1,100,000, $1,200,000 and
$300,000, respectively.
F-11
<PAGE> 173
IMPAC HOTEL GROUP, L.L.C. AND PREDECESSORS
AND IMPAC HOTEL DEVELOPMENT, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS, CONTINUED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
Management monitors the operating results of Impac's property and
equipment and periodically reviews the carrying value of each property to
determine if circumstances exist indicating an impairment other than
temporary in the carrying value of the assets or that depreciation
periods should be modified. If facts or circumstances indicate a
potential impairment exists, Impac compares projected cash flows
(undiscounted, without interest charges) of the specific hotel property
to its carrying amount. Should a shortfall result, Impac would adjust the
carrying amount of the property to the present value of such projected
cash flows with a corresponding charge to earnings. Impac does not
believe there are any factors or circumstances indicating impairment of
any of its investments in property and equipment.
Maintenance and repairs are charged to operations as incurred; major
renewals and betterments are capitalized. Upon the sale or disposition of
property and equipment, the asset and related depreciation are removed
from the accounts and the gain or loss is included in operations.
DEFERRED COSTS
Deferred costs of $13.5 million and $6.4 million at December 31, 1997 and
1996, which are included in other assets, primarily consist of deferred
loan costs, franchise fees and other deferred costs, net of accumulated
amortization of approximately $660,000 and $290,000 at December 31, 1997
and 1996, respectively. Amortization of deferred costs is computed using
the straight-line method over the terms of the related loan, franchise,
or other agreement. The straight line method of amortizing deferred
financing costs approximates the effective interest method. Impac wrote
off approximately $4.7 million of deferred loan costs in connection with
the refinancing of its long-term obligations, which is included in loss
on extinguishment of indebtedness.
INCOME TAXES
Impac Hotel Group, L.L.C. is a limited liability company and is not
subject to income taxes. The Predecessors were each either general or
limited partnerships or S corporations and IHD is an S corporation and
similarly not subject to income taxes. The results of these entities
operations are included in the tax returns of the members, partners or S
corporation shareholders.
CONCENTRATION OF CREDIT RISK
Concentration of credit risk associated with cash and cash equivalents is
considered low due to the credit quality of the issuers of the financial
instruments held by Impac and due to their short duration to maturity.
Accounts receivable are primarily from major credit card companies,
airlines and other travel related companies. Impac performs ongoing
evaluations of its significant customers and generally does not require
collateral. Impac maintains an allowance for doubtful accounts at a level
which management believes is sufficient to cover potential credit losses.
At December 31, 1997 and 1996, these allowances were $548,000 and
$405,000, respectively.
F-12
<PAGE> 174
IMPAC HOTEL GROUP, L.L.C. AND PREDECESSORS
AND IMPAC HOTEL DEVELOPMENT, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS, CONTINUED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
ADVERTISING EXPENSE
The cost of advertising is expensed as incurred.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses 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.
2. PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
Useful Lives March 31, DECEMBER 31,
(years) ------------- -------------------------------
1998 1997 1996
------------- ------------- ------------
(Unaudited)
<S> <C> <C> <C>
Land $ 60,012 $ 60,012 $ 30,981
Buildings and improvements 35 - 39 248,756 231,710 112,079
Furnishings and equipment 5 - 15 57,121 55,709 28,490
------------- ------------- ------------
365,889 347,431 171,550
Less accumulated depreciation (25,354) (21,860) (11,410)
------------- ------------- ------------
340,535 325,571 160,140
Construction in progress 58,813 52,633 15,770
------------- ------------- ------------
$ 399,348 $ 378,204 $ 175,910
============= ============= ============
</TABLE>
At December 31, 1997, Impac had 6 hotels under development and 18 hotels
which had been recently acquired and were under renovation. Construction
in progress consists of amounts expended to develop and renovate these
hotels. Impac developed and opened or began development on a total of 9
hotels during 1997 for an approximate cost of approximately $50 million.
F-13
<PAGE> 175
IMPAC HOTEL GROUP, L.L.C. AND PREDECESSORS
AND IMPAC HOTEL DEVELOPMENT, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS, CONTINUED
2. PROPERTY AND EQUIPMENT, CONTINUED:
During the year ended December 31, 1997, Impac acquired and opened 18
hotels in various transactions and acquired one additional hotel through
a joint venture in which Impac acquired a 60% interest. The activities of
the joint venture were consolidated with Impac for the period commencing
on the date the joint venture interests were acquired through December
31, 1997. Such acquisitions were each made for cash using newly
contributed equity and debt. The aggregate purchase price for these
hotels and the partnership interest was approximately $107 million.
In connection with the reorganization on March 12, 1997, Impac recorded a
step-up of land and building, reflecting an increase in their basis of
approximately $4.8 million and $17.9 million, respectively.
During the year ended December 31, 1996, the Predecessors acquired or
developed and opened 14 hotels in various transactions. Each of the
acquisitions were made for cash using newly contributed equity and debt.
The aggregate purchase price for these hotels was approximately $64
million.
Unaudited pro forma results of operations assuming the 1997 and 1996
acquisitions were completed on January 1, 1996 are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Revenues $ 139,630 $ 114,096
Income (loss) before extraordinary item (14,432) 12,088
Net income (loss) (27,764) 12,088
</TABLE>
F-14
<PAGE> 176
IMPAC HOTEL GROUP, L.L.C. AND PREDECESSORS
AND IMPAC HOTEL DEVELOPMENT, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS, CONTINUED
3. ACCRUED LIABILITIES:
Accrued liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
--------------- ---------------------------------
1998 1997 1996
--------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
Salaries and related costs $2922,902 $ 2,750 $ 1,960
Real estate taxes 1,089 1,486 468
Interest 1,888 2,042 1,090
Advanced deposits 557 263 246
Sales taxes 1,707 1,813 1,751
Other 1,262 677 914
--------------- --------------- ---------------
$ 9,405 $ 9,031 $ 6,429
=============== =============== ===============
</TABLE>
4. LONG-TERM OBLIGATIONS:
Long-term obligations consisted of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
--------------- ---------------------------------
1998 1997 1996
--------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
Credit facility with a financial institution $ 280,833 $ 265,262 $ -
Subordinated promissory note payable to a bank 74,540 71,018 -
Other mortgages and notes 22,054 18,956 156,214
Loans to a related party - - 800
--------------- --------------- ---------------
- 355,236 157,014
Less: current portion of long-term obligations - - 1,163
--------------- --------------- ---------------
$ 377,427 $ 355,236 $ 155,851
=============== =============== ===============
</TABLE>
F-15
<PAGE> 177
IMPAC HOTEL GROUP, L.L.C. AND PREDECESSORS
AND IMPAC HOTEL DEVELOPMENT, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS, CONTINUED
4. LONG-TERM OBLIGATIONS, CONTINUED:
CREDIT FACILITY
At March 31, 1998 and December 31, 1997, Impac had a credit facility
("Facility") with a financial institution that consisted of the following
loans which are collateralized by substantially all of the Company's
hotel properties (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
---------------
1998 1997
--------------- -----------------
(UNAUDITED)
<S> <C> <C>
Loan, totaling $132.5 million, with interest at LIBOR (6.00% at
December 31, 1997) plus 2.25%, maturing in
1999, and requiring interest only payments to maturity $ 132,459 $ 132,459
Loan, totaling $163.5 million, with interest at LIBOR plus 2.75%,
maturing in 2000, and requiring interest
only payments to maturity 123,298 107,727
Loan, totaling $100 million, with interest at LIBOR plus 2.75%,
maturing in 2001 and requiring interest
only payments to maturity 25,076 25,076
--------------- -----------------
$ 280,833 $ 265,262
=============== =================
</TABLE>
Loan advances, not to exceed the maximum loan amounts, are to be made to
Impac for approved construction projects and acquisitions. Impac is
required to pay a fee equal to 1% of funds advanced at the time of
advance. Each of the loans, upon maturity, converts to a term loan that
requires payments of interest and principal sufficient to amortize the
loan over a 20 year period. These loans will bear interest at a
predetermined fixed rate and will be collateralized by the hotel
properties securing the respective loans. Upon conversion of the loans to
term loans, Impac is required to pay a securitization fee of 1% of the
balance of the loans. Impac is required to fund 2% of its gross revenues
in restricted cash balances to be used for capital improvements.
The Facility contains certain covenants, including maintenance of certain
financial ratios, certain reporting requirements and other customary
restrictions, the violation of which could cause the amounts of
outstanding principal, interest and fees to be immediately due and
payable. In addition, the Facility does not allow distributions to be
made to the unitholders until after the payment of debt service payments
and the funding of certain reserve accounts including tax, insurance and
capital reserves. On December 31, 1997, management believes that Impac
was in compliance with all debt covenants.
The loans require payment of penalties and yield maintenance amounts when
certain payments of principal are made prior to specified dates.
F-16
<PAGE> 178
IMPAC HOTEL GROUP, L.L.C. AND PREDECESSORS
AND IMPAC HOTEL DEVELOPMENT, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS, CONTINUED
4. LONG-TERM OBLIGATIONS, CONTINUED:
SUBORDINATED PROMISSORY NOTE
Impac has a subordinated promissory note ("Note") with a bank totaling
$76.5 million which is subordinated to the Facility agreement. Advances
on the Note, totaling $71 million at December 31, 1997, are used for the
acquisition and development of hotel properties. The Note is unsecured,
matures in March 2000, and bears interest at a fixed interest rate of
10%. Interest only payments are required to maturity. In addition,
variable interest payments are required to be made upon the achievement
of certain performance measures related to the cash flow of substantially
all of Impac's hotel properties, and upon the occurrence of certain
events (defined as "Participation Events" in the Note agreement,
including the sale or refinancing of properties, an equity offering by
Impac or the merger or reorganization of Impac).
Fixed and variable interest on the Note included in interest expense is
$4.3 million for the year ended December 31, 1997. Impac prepaid
approximately $660,000 in participation interest which is included in
other current assets.
Upon the occurrence of a Participation Event, if the fixed interest and
the variable interest are not sufficient to provide the holder of the
Note with a cumulative internal rate of return with respect to their
investment in the Note equal to 15% per annum, then additional payment of
interest shall be paid with respect to the Note in an amount sufficient
to provide the holder with a cumulative internal rate of return equal to
15%, provided that such additional payment of interest shall not exceed
100% of net cash flow from the operations of the Hotel properties, plus
100% of net proceeds from Participation Events. The members are not
required to make contributions in order for the holder to obtain a 15%
internal rate of return.
The Note contains certain covenants, including maintenance of certain
financial ratios, certain reporting requirements and other customary
restrictions. In addition, the Note does not allow distributions to
unitholders at any time that there is an event of default, as defined in
the Note Agreement, or if Impac fails to maintain a debt service coverage
ratio of at least 1.20. Any event of default under the terms of the
Facility constitute an event of default under the Note. On December 31,
1997, management believes that Impac was in compliance with all debt
covenants.
OTHER DEBT
Impac and Predecessors had mortgage loans totaling $17.7 million
(unaudited), $14.6 million and $156.2 million at March 31, 1998 and
December 31, 1997 and 1996, respectively. The mortgage loans outstanding
at December 31, 1997 require interest only payments and are due during
1998 and 1999. The mortgage loans will convert to amortizing term loans
which mature in 2020 through 2024. All mortgage loans outstanding at
December 31, 1996 were paid out with proceeds from the Facility and the
Note. Interest rates on Impac's mortgage loans vary and are either fixed
or variable. At December 31, 1997, mortgage loan interest rates ranged
from 2% to 8.5%.
F-17
<PAGE> 179
IMPAC HOTEL GROUP, L.L.C. AND PREDECESSORS
AND IMPAC HOTEL DEVELOPMENT, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS, CONTINUED
4. LONG-TERM OBLIGATIONS, CONTINUED:
OTHER DEBT, CONTINUED
Impac also has two promissory notes totaling $4.4 million at March 31,
1998 and December 31, 1997 that bear interest at 14%. These notes require
interest only payments and mature in 2001.
Impac refinanced its long-term obligations in March, 1997. Prior to the
refinancing with the Facility and the Note, the Predecessors generally
financed each hotel with separate mortgage debt. Such debt was
collateralized by a single hotel without recourse to other entities or
the property owners. Interest rates on mortgage notes varied by lender
and were either fixed or variable. In connection with the previously
described refinancing, all separate mortgage debt was satisfied.
Prepayment penalties paid upon the retirement of the mortgages and the
write-off of remaining deferred loan costs associated with the satisfied
mortgage notes of approximately $13.3 million are included as an
extraordinary item in the accompanying statement of operations for the
year ended December 31, 1997.
5. EQUITY:
Equity consisted of the following (in thousands except share amounts):
<TABLE>
<CAPTION>
MARCH 31,
----------------- DECEMBER 31,
1998 1997 1996
----------------- ------------------ -----------------
(UNAUDITED)
<S> <C> <C> <C>
Impac Hotel Group, L.L.C. and
Predecessors:
Member units, 11,559,527 issued
and outstanding $ 37,324 $ 41,559
Partners' and Stockholders' equity $ 18,798
----------------- ------------------ -----------------
37,324 41,559 18,798
----------------- ------------------ -----------------
Impac Hotel Development, Inc.:
Common stock, no par value;
2,000 shares authorized, issued
and outstanding 299 299 299
Additional paid-in capital 153 1,153 3,323
Retained deficit (4,850) (4,471) (1,460)
Loans to members (1,570) (1,570)
Loans to partners (1,200)
----------------- ------------------ -----------------
(5,968) (4,589) 962
----------------- ------------------ -----------------
Total $ 31,356 $ 36,970 $ 19,760
================= ================== =================
</TABLE>
F-18
<PAGE> 180
IMPAC HOTEL GROUP, L.L.C. AND PREDECESSORS
AND IMPAC HOTEL DEVELOPMENT, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS, CONTINUED
6. COMMITMENTS AND CONTINGENCIES:
Impac has franchise and license agreements with various hotel chains
which require monthly payments for license fees, reservation services and
advertising fees. Such agreements are generally for periods from 10 to 20
years. A licensor may require Impac to upgrade its facilities at any time
to comply with the licensor's then current standards. Upon the expiration
of the term of a license, Impac may apply for a license renewal. In
connection with a renewal of a license, a licensor may require payment of
a renewal fee, increased license, reservation and advertising fees, as
well as substantial renovation of the hotel. Impac is required under its
franchise agreements to remit varying percentages of gross room revenue
generally ranging from 6% to 7.5% to the various franchisors for
franchising, royalties, reservations, sales and advertising services.
Additional sales and advertising costs are incurred at the local property
level.
The license agreements are subject to cancellation in the event of a
default, including the failure to operate the hotel in accordance with
the quality standards and specifications of the licensor. Impac believes
that the loss of a license for any individual hotel would not have a
material adverse effect on the Impac's financial condition and results of
operations. Impac believes it will be able to renew its current licenses
or obtain replacements of a comparable quality.
Impac's hotels have noncancelable operating leases, mainly for operating
equipment, and Impac leases certain office space. Lease expense for the
years ended December 31, 1997, 1996 and 1995 was approximately $625,000,
$350,000 and $600,000.
The Companies are a party to legal proceedings, including employment
related claims, arising in the ordinary course of its business, the
impact of which would not, either individually or in the aggregate, in
management's opinion, based upon the facts known by management and the
advice of counsel, have a material adverse effect on the Company's
financial condition or results of operations. The Companies, prior to
December 10, 1997, did not have insurance coverage, except for directors
and officers' insurance, in connection with the employment related
claims.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The fair value of accounts receivable and payable and accrued expenses
are assumed to be equal to their reported carrying amounts due to their
short maturity. The carrying amount of long-term obligations approximates
their fair value based on the rate of interest charged and Impac's
incremental borrowing rate.
F-19
<PAGE> 181
IMPAC HOTEL GROUP, L.L.C. AND PREDECESSORS
AND IMPAC HOTEL DEVELOPMENT, INC.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS, CONTINUED
8. RELATED PARTY TRANSACTIONS:
IHD loaned certain employees funds to purchase units in Impac. Such loans
are included as a component of stockholder's equity in the consolidated
and combined financial statements.
Certain of these loans to members of approximately $590,000 were
satisfied through a charge to incentive administrative and general
expenses during 1997.
IHD incurred fees of approximately $580,000, $160,000 and $575,000 during
the years ended December 31, 1997, 1996, and 1995 to a related party for
interior design consulting services and for equity placement fees in
connection with the acquisition of hotels. All fees are recorded as
operating expenses in the statement of operations.
9. SUBSEQUENT EVENT:
On March 20, 1998, Impac signed a definitive agreement with Servico,
Inc., a publicly owned hotel company, to merge and form a new publicly
owned company. During July, 1998, IHD verbally agreed to merge with
Servico although a definite agreement has not been executed. Under the
terms of the agreement, the Company's members will initially receive
6,000,000 shares of common stock of the merged company and an additional
1,400,000 shares upon the completion of construction of five hotels
during 1999. The existing shareholders of Servico, Inc. will receive one
share of the merged company's common stock for each share of Servico,
Inc. stock held by them (approximately 21,000,000 shares). The merged
company will own and manage 140 hotels, of which 136 will be owned, with
more than 26,000 rooms and operate in 35 states and Canada. The merger
will be accounted for under the purchase method of accounting and is
expected to close prior to December 31, 1998 subject to customary
conditions, including regulatory approvals and approval by Impac's
unitholders, IHD's shareholders and Servico, Inc.'s shareholders. The
merger may be terminated by either party, with the terminating party
obligated to pay certain termination fees as defined by the merger
agreement.
F-20
<PAGE> 182
APPENDIX A
================================================================================
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMONG
LODGIAN, INC.,
SERVICO, INC.,
IMPAC HOTEL GROUP, L.L.C.,
SHG-S SUB, INC.,
SHG-I SUB, L.L.C.,
P-BURG LODGING ASSOCIATES, INC.,
SHG-II SUB, INC.,
HAZARD LODGING ASSOCIATES, INC.,
SHG-III SUB, INC.,
MEMPHIS LODGING ASSOCIATES, INC.,
SHG-IV SUB, INC.,
DELK LODGING ASSOCIATES, INC.,
SHG-V SUB, INC.,
IMPAC HOTEL DEVELOPMENT, INC.,
SHG-VI SUB, INC.,
IMPAC DESIGN AND CONSTRUCTIONS, INC.,
SHG-VII SUB, INC.,
IMPAC HOTEL GROUP, INC.
AND
SHG-VIII SUB, INC.
DATED AS OF JULY ___, 1998
===============================================================================
<PAGE> 183
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I The Mergers.....................................................................................3
1.1 Formation of Merger Subsidiaries................................................................3
1.2 The Mergers.....................................................................................3
1.3 Closing.........................................................................................4
1.4 Effective Time..................................................................................4
1.5 Effect of the Mergers...........................................................................5
1.6 Articles of Incorporation; Articles of Organization; Bylaws;
Operating Agreement; Directors and Officers of the Surviving Corporations.......................5
1.7 Restated Certificate of Incorporation and Restated Bylaws of SHG................................6
ARTICLE II Conversion of Securities; Exchange of Certificates..............................................6
2.1 Conversion of Securities........................................................................6
2.2 Conversion of Shares............................................................................7
2.3 Cancellation of Certain Shares and of Outstanding SHG Common Stock.............................10
2.4 Conversion of Common Stock and Membership Interests of
Servico Merger Sub, Impac Merger Sub and
Impac Affiliated Merger Sub into Common Stock
or Membership Interests of the Surviving Corporations..........................................11
2.5 Exchange of Shares Other than Treasury Shares..................................................13
2.6 Stock Transfer Books...........................................................................13
2.7 No Fractional Share Certificates...............................................................14
2.8 Options to Purchase Servico Common Stock.......................................................16
2.9 Options to Purchase Impac Units................................................................16
2.10 Certain Adjustments............................................................................16
ARTICLE III Representations and Warranties of Servico......................................................17
3.1 Organization, Standing and Power...............................................................17
3.2 Legal, Valid and Binding Agreement.............................................................17
3.3 Authority to do Business.......................................................................17
3.4 No Violation or Conflict.......................................................................18
3.5 Governmental Consents..........................................................................18
3.6 Exchange Act Reports; Financial Statements.....................................................18
3.7 Compliance with Laws...........................................................................19
3.8 Legal Proceedings..............................................................................20
3.9 Brokers........................................................................................20
3.10 Absence of Material Adverse Changes............................................................20
3.11 Capitalization.................................................................................21
3.12 Tax Matters....................................................................................21
3.13 Title to Personal Property and Condition of Assets.............................................21
3.14 Real Property..................................................................................21
3.15 Opinion of Financial Advisor...................................................................22
3.16 Disclosure.....................................................................................22
</TABLE>
-i-
<PAGE> 184
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE IV Representations and Warranties of Impac and the Impac Affiliated Companies.....................22
4.1 Organization, Standing and Power...............................................................22
4.2 Members' Interest..............................................................................22
4.3 Legal, Valid and Binding Agreement.............................................................23
4.4 Authority to do Business.......................................................................23
4.5 Articles of Organization and Operating Agreement...............................................23
4.6 Subsidiaries; Impac Affiliated Companies.......................................................24
4.7 No Violation or Conflict.......................................................................24
4.8 Governmental Consents..........................................................................24
4.9 Impac Statements...............................................................................25
4.10 Compliance with Laws...........................................................................25
4.11 Legal Proceedings..............................................................................26
4.12 Brokers........................................................................................26
4.13 Absence of Material Adverse Changes............................................................27
4.14 Capitalization.................................................................................27
4.15 Rights, Warrants, Options......................................................................27
4.16 Title to Personal Property and Condition of Assets.............................................28
4.17 Real Property..................................................................................28
4.18 Intangible Property............................................................................29
4.19 Governmental Authorizations....................................................................30
4.20 Insurance......................................................................................30
4.21 Employment Matters.............................................................................30
4.22 Material Agreements............................................................................32
4.23 List of Accounts...............................................................................33
4.24 Related Party Transactions.....................................................................33
4.25 Tax Matters....................................................................................34
4.26 Qualifying Transaction.........................................................................34
4.27 Affiliates.....................................................................................34
4.28 Opinion of Financial Advisor...................................................................35
4.29 Disclosure.....................................................................................35
ARTICLE V Covenants......................................................................................35
5.1 Interim Operations of Impac an the Impac Affiliated Companies..................................35
5.2 Interim Operations of Servico..................................................................36
5.3 Access.........................................................................................37
5.4 Consents.......................................................................................38
5.5 Reasonable Efforts.............................................................................38
5.6 Notification...................................................................................38
5.7 No Solicitation................................................................................38
5.8 Confidentiality................................................................................39
5.9 Publicity......................................................................................39
5.10 Letters of Accountants.........................................................................39
5.11 Plan of Reorganization.........................................................................40
5.12 Registration Statement; Joint Proxy Statement..................................................40
</TABLE>
-ii-
<PAGE> 185
<TABLE>
<CAPTION>
<S> <C> <C>
5.13 Special Meetings...............................................................................42
5.14 Employee Benefits Matters......................................................................42
5.15 Executive Officers.............................................................................43
5.16 Affiliates.....................................................................................43
5.17 Headquarters...................................................................................43
5.18 Post-Merger SHG Board of Directors.............................................................43
5.19 Stock Exchange Listings........................................................................44
5.20 Indemnification................................................................................44
5.21 Guarantees.....................................................................................45
5.22 Registration Rights............................................................................45
5.23 Termination of Development Agreement; Use of Affiliated Names..................................45
ARTICLE VI Additional Agreements..........................................................................46
6.1 Survival of the Representations and Warranties.................................................46
6.2 Investigation..................................................................................46
ARTICLE VII Conditions Precedent.................................................................................46
7.1 Mutual Conditions Precedent....................................................................46
7.2 Conditions Precedent to the Obligations of Servico.............................................47
7.3 Conditions Precedent to the Obligations of Impac and the
Impac Affiliated Companies.....................................................................49
7.4 Termination....................................................................................50
ARTICLE VIII Miscellaneous.......................................................................................51
8.1 Further Assurances.............................................................................51
8.2 Notices........................................................................................51
8.3 Entire Agreement...............................................................................52
8.4 Assignment.....................................................................................52
8.5 Waiver.........................................................................................52
8.6 No Third Party Beneficiary.....................................................................52
8.7 Severability...................................................................................52
8.8 Fees and Expenses..............................................................................52
8.9 Section Headings...............................................................................55
8.10 Counterparts...................................................................................55
8.11 Time of Essence................................................................................55
8.12 Litigation; Prevailing Party...................................................................55
8.13 Remedies Cumulative............................................................................55
8.14 Injunctive Relief..............................................................................55
8.15 Governing Law..................................................................................55
8.16 Jurisdiction and Venue.........................................................................55
8.17 Certain Definitions............................................................................56
</TABLE>
-iii-
<PAGE> 186
EXHIBITS
EXHIBIT 1.7(a) Restated Certificate of Incorporation
EXHIBIT 1.7(b) Restated Bylaws of SHG
EXHIBIT 2.2(c) Escrow Agreement
EXHIBIT 5.16 Impac Affiliate Letter
EXHIBIT 5.22 Registration Rights Agreement
EXHIBIT 7.2(e) Opinion of Counsel (Powell, Goldstein, Frazer &
Murphy, LLP)
EXHIBIT 7.3(e) Opinion of Counsel (Stearns Weaver Miller Weissler
Alhadeff & Sitterson, P.A.)
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<PAGE> 187
SCHEDULES
---------
<TABLE>
<CAPTION>
<S> <C>
Schedule 2.2(c) Additional Share Conditions and Calculations
Schedule 3.4 No Violation or Conflict (Servico)
Schedule 3.5 Governmental Contracts (Servico)
Schedule 3.6 Exchange Act Reports; Financial Statements
Schedule 3.7 Environmental Audits and Reports
Schedule 3.7(a) Compliance with Laws (Servico)
Schedule 3.8 Legal Proceedings
Schedule 3.10 Absence of Material Adverse Changes
Schedule 3.13 Title to Personal Property and Condition of Assets
Schedule 3.14 Real Property Owned or Leased by Servico
Schedule 3.14(a) Servico Improvements
Schedule 4.2 Members' Interest
Schedule 4.4 Authority to do Business
Schedule 4.6 Impac Subsidiaries
Schedule 4.7 No Violation or Conflict (Impac)
Schedule 4.8 Governmental Consents (Impac)
Schedule 4.9 Impac Statements
Schedule 4.10 Compliance with Laws (Impac)
Schedule 4.11 Legal Proceedings
Schedule 4.13 Absence of Material Adverse Changes
Schedule 4.15 Rights, Warrants, Options
Schedule 4.16 Title to Personal Property and Condition of Assets
Schedule 4.17(a) Real Property Owned or Leased by Impac or any Impac Subsidiary
Schedule 4.17(b) Construction Projects
Schedule 4.19 Governmental Authorizations
Schedule 4.20 Insurance Policies
Schedule 4.21(a) Labor Relations
Schedule 4.21(b) Environmental Policies
Schedule 4.21(c) Employment Agreements
Schedule 4.21(d) Employee Benefit Plans
Schedule 4.21(e) Names of all Managers and Officers of Impac, each Impac Affiliated
Company and each Impac Subsidiary
Schedule 4.22 Material Agreements
Schedule 4.23 List of Accounts
Schedule 4.24 Related Party Transactions
Schedule 4.24(a) Tax Matters
Schedule 4.25(c) Tax Liability
Schedule 4.27 Impac Affiliates
Schedule 5.1 Interim Operations of Impac
Schedule 5.2 Interim Operations of Servico
Schedule 5.23 Development Properties
Schedule 7.2(g) Debt Restructuring
Schedule 7.3(g) Employment Agreements
</TABLE>
-v-
<PAGE> 188
GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERM SECTION
- ------------ -------
<S> <C>
Additional Shareholders.................................................................ss.2.2
Additional Shares....................................................................ss.2.2(c)
affiliate...........................................................................ss.8.17(a)
Agreement...........................................................................Preamble
Allen & Company........................................................................ss.4.12
Base Number..........................................................................ss.2.2(b)
Blue Sky Laws...........................................................................ss.3.5
business day........................................................................ss.8.17(b)
Change of Control....................................................................ss.8.8(d)
Closing.................................................................................ss.1.3
Code................................................................................Preamble
Competing Transaction...................................................................ss.5.7
Construction Projects...............................................................ss.4.17(b)
Delk................................................................................Preamble
Delk Base Number.....................................................................ss.2.2(e)
Delk Certificate of Merger..............................................................ss.1.4
Delk Common Shares Trust.............................................................ss.2.7(c)
Delk Common Stock....................................................................ss.2.2(e)
Delk Exchange Ratio..................................................................ss.2.2(e)
Delk Merger.........................................................................Preamble
Delk Merger Sub.....................................................................Preamble
Delk Shares..........................................................................ss.2.2(l)
Delk Surviving Corporation...........................................................ss.1.2(e)
Designated Date.....................................................................ss.5.7(ii)
Designated Person....................................................................ss.7.4(g)
Designated Change of Control.....................................................ss.8.8(e)(ii)
DGCL................................................................................Preamble
Effective Time..........................................................................ss.1.4
employee pension benefit plan.......................................................ss.4.21(d)
employee welfare benefit plan.......................................................ss.4.21(d)
End Date.............................................................................ss.7.4(c)
Environmental Law....................................................................ss.3.7(b)
Environmental Permit.................................................................ss.3.7(b)
ERISA...............................................................................ss.4.21(d)
Escrowed Consideration...............................................................ss.2.2(c)
Excess Shares........................................................................ss.2.7(b)
Exchange Agent..........................................................................ss.2.5
Exchange Act............................................................................ss.3.5
Exchange Fund...........................................................................ss.2.5
FBCA................................................................................Preamble
GAAP.................................................................................ss.3.6(b)
GLLCA...............................................................................Preamble
Governmental Entity.....................................................................ss.3.5
group................................................................................ss.8.8(c)
group health plan......................................................................ss.4.21
Hazard..............................................................................Preamble
Hazard Articles of Merger...............................................................ss.1.4
Hazard Base Number...................................................................ss.2.2(c)
Hazard Common Shares Trust...........................................................ss.2.7(c)
Hazard Common Stock..................................................................ss.2.2(c)
Hazard Exchange Ratio................................................................ss.2.2(c)
Hazard Merger.......................................................................Preamble
Hazard Merger Sub...................................................................Preamble
Hazard Shares........................................................................ss.2.2(l)
Hazard Surviving Corporation.........................................................ss.1.2(c)
Hazardous Material...................................................................ss.3.7(b)
HSR Act.................................................................................ss.3.5
HW&E....................................................................................ss.3.9
IDC.................................................................................Preamble
IDC Base Number......................................................................ss.2.2(g)
IDC Certificate of Merger...............................................................ss.1.4
IDC Common Shares Trust..............................................................ss.2.7(c)
IDC Common Stock.....................................................................ss.2.2(g)
IDC Exchange Ratio...................................................................ss.2.2(g)
IDC Merger..........................................................................Preamble
IDC Merger Sub......................................................................Preamble
IDC Shares...........................................................................ss.2.2(l)
IDC Surviving Corporation............................................................ss.1.2(g)
IHD.................................................................................Preamble
IHD Assignee...........................................................................ss.5.23
IHD Base Number......................................................................ss.2.2(f)
IHD Certificate of Merger...............................................................ss.1.4
IHD Common Shares Trust.....................................................................
IHD Common Stock.....................................................................ss.2.2(f)
IHD Exchange Ratio...................................................................ss.2.2(f)
IHD Merger..........................................................................Preamble
IHD Merger Sub......................................................................Preamble
IHD Shares...........................................................................ss.2.2(l)
IHD Surviving Corporation............................................................ss.1.2(f)
IHG.................................................................................Preamble
IHG Articles of Merger..................................................................ss.1.4
IHG Base Number......................................................................ss.2.2(h)
</TABLE>
-vi-
<PAGE> 189
<TABLE>
<CAPTION>
<S> <C>
IHG Common Shares Trust..............................................................ss.2.7(c)
IHG Common Stock.....................................................................ss.2.2(h)
IHG Exchange Ratio...................................................................ss.2.2(h)
IHG Merger..........................................................................Preamble
IHG Merger Sub......................................................................Preamble
IHG Shares...........................................................................ss.2.2(l)
IHG Surviving Corporation............................................................ss.1.2(f)
Impac...............................................................................Preamble
Impac Affiliate........................................................................ss.4.27
Impac Affiliate Letter.................................................................ss.5.17
Impac Affiliated Companies..........................................................Preamble
Impac Affiliated Merger Subs........................................................Preamble
Impac Affiliated Mergers............................................................Preamble
Impac Articles of Merger................................................................ss.1.4
Impac Base Number....................................................................ss.2.2(i)
Impac Director.........................................................................ss.5.19
Impac Exchange Ratio.................................................................ss.2.2(i)
Impac Financial Statements..............................................................ss.4.9
Impac Material Adverse Effect.......................................................ss.8.17(c)
Impac Material Agreements...........................................................ss.4.22(a)
Impac Merger........................................................................Preamble
Impac Merger Sub....................................................................Preamble
Impac Pension Plan..................................................................ss.4.21(d)
Impac Plans.........................................................................ss.4.21(d)
Impac Related Parties..................................................................ss.4.24
Impac Related Party....................................................................ss.4.24
Impac Special Meeting...............................................................ss.5.13(a)
Impac Subsidiaries......................................................................ss.4.1
Impac Surviving Corporation..........................................................ss.1.2(i)
Impac Unit...........................................................................ss.2.2(i)
Impac Unit Trust.....................................................................ss.2.7(c)
Impac Voting Agreement..............................................................Preamble
Impac Welfare Plan..................................................................ss.4.21(d)
Improvements........................................................................ss.4.17(a)
incentive stock options.................................................................ss.2.8
Indemnified Parties....................................................................ss.5.21
Joint Proxy Statement...............................................................ss.5.13(a)
KBCA........................................................................................
knowledge...........................................................................ss.8.17(d)
Law.................................................................................ss.8.17(e)
Lehman Brothers.........................................................................ss.3.9
Licenses...............................................................................ss.4.19
Member..................................................................................ss.4.2
membership interest.................................................................ss.8.17(f)
Memphis.............................................................................Preamble
Memphis Articles of Merger..............................................................ss.1.4
Memphis Base Number..................................................................ss.2.2(d)
Memphis Common Shares Trust..........................................................ss.2.7(c)
Memphis Common Stock.................................................................ss.2.2(d)
Memphis Exchange Ratio...............................................................ss.2.2(d)
Memphis Merger......................................................................Preamble
Memphis Merger Sub..................................................................Preamble
Memphis Shares.......................................................................ss.2.2(l)
Memphis Surviving Corporation........................................................ss.1.2(d)
Merger Subsidiaries.....................................................................ss.1.1
Mergers.............................................................................Preamble
Milestone Date.......................................................................ss.2.2(c)
multiemployer plan..................................................................ss.4.21(d)
New Delk Common Stock................................................................ss.2.4(e)
New Hazard Common Stock..............................................................ss.2.4(c)
New IDC Common Stock.................................................................ss.2.4(g)
New IHD Common Stock.................................................................ss.2.4(f)
New IHG Common Stock.................................................................ss.2.4(h)
New Impac Units......................................................................ss.2.4(i)
New Memphis Common Stock.............................................................ss.2.4(d)
New P-Burg Common Stock..............................................................ss.2.4(b)
New Servico Common Stock.............................................................ss.2.4(a)
Nomura...............................................................................ss.8.8(a)
NYSE.................................................................................ss.2.7(b)
P-Burg..............................................................................Preamble
P-Burg Articles of Merger...............................................................ss.1.4
P-Burg Base Number...................................................................ss.2.2(b)
P-Burg Common Shares Trust...........................................................ss.2.7(c)
P-Burg Common Stock..................................................................ss.2.2(b)
P-Burg Exchange Ratio................................................................ss.2.2(b)
P-Burg Merger.......................................................................Preamble
P-Burg Merger Sub...................................................................Preamble
P-Burg Shares........................................................................ss.2.2(l)
P-Burg Surviving Corporation .........................................ss.1.2(b)
Permitted Exceptions...................................................................ss.4.17
Personal Property......................................................................ss.4.16
person..............................................................................ss.8.17(g)
Presurrender Dividends..................................................................ss.2.5
Real Property.......................................................................ss.4.17(a)
Registration Statement..............................................................ss.5.13(a)
Regulations.........................................................................Preamble
Satisfaction Date.......................................................................ss.1.3
SEC.....................................................................................ss.3.6
Securities Act..........................................................................ss.3.5
Servico............................................................................ Preamble
</TABLE>
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<PAGE> 190
<TABLE>
<CAPTION>
<S> <C>
Servico Articles of Merger..............................................................ss.1.4
Servico Common Shares Trust..........................................................ss.2.7(c)
Servico Common Stock............................................................... Preamble
Servico Constituents....................................................................ss.3.2
Servico Director.......................................................................ss.5.19
Servico Exchange Ratio...............................................................ss.2.2(a)
Servico Financial Statements.........................................................ss.3.6(b)
Servico Material Adverse Effect.....................................................ss.8.17(h)
Servico Merger......................................................................Preamble
Servico Merger Sub..................................................................Preamble
Servico Plans.......................................................................ss.5.15(a)
Servico SEC Reports..................................................................ss.3.6(a)
Servico Shares.......................................................................ss.2.2(e)
Servico Special Meeting.............................................................ss.5.13(a)
Servico Subsidiaries....................................................................ss.3.1
Servico Surviving Corporation........................................................ss.1.2(a)
Shares...............................................................................ss.2.2(e)
SHG................................................................................ Preamble
SHG Common Stock....................................................................Preamble
Special Meetings....................................................................ss.5.13(a)
Stock Plans.........................................................................ss.5.15(b)
subsidiaries........................................................................ss.8.17(i)
subsidiary..........................................................................ss.8.17(i)
Surviving Corporation................................................................ss.1.2(b)
Surviving Corporations...............................................................ss.1.2(b)
Tax.................................................................................ss.8.17(j)
Third Party..........................................................................ss.7.4(j)
Trading Period Average...............................................................ss.2.2(b)
Transaction.........................................................................Preamble
</TABLE>
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (the
"Agreement") is made and entered into as of the ____ day of July, 1998, by and
among SERVICO, INC., a Florida corporation ("Servico"), LODGIAN, INC., a
Delaware corporation and a wholly-owned subsidiary of Servico ("SHG"), SHG-S
SUB, INC., a Florida corporation and a wholly-owned subsidiary of SHG ("Servico
Merger Sub"), IMPAC HOTEL GROUP, L.L.C., a Georgia limited liability company
("Impac"), SHG-I SUB, L.L.C., a Georgia limited liability company and a
wholly-owned subsidiary of SHG ("Impac Merger Sub"), P-BURG LODGING ASSOCIATES,
INC., a Kentucky corporation ("P-Burg"), SHG-II SUB, INC., a Kentucky
corporation and a wholly-owned subsidiary of SHG ("P-Burg Merger Sub"), HAZARD
LODGING ASSOCIATES, INC., a Kentucky corporation ("Hazard"), SHG-III SUB, INC.,
a Kentucky corporation and a wholly-owned subsidiary of SHG ("Hazard Merger
Sub"), MEMPHIS LODGING ASSOCIATES, INC., a Florida corporation ("Memphis"),
SHG-IV SUB, INC., a Florida corporation and a wholly-owned subsidiary of SHG
("Memphis Merger Sub"), DELK LODGING ASSOCIATES, INC., a Delaware corporation
("Delk"), SHG-V SUB, INC., a Delaware corporation and a wholly-owned subsidiary
of SHG ("Delk Merger Sub"), IMPAC HOTEL DEVELOPMENT, INC., a Delaware
corporation ("IHD"), SHG-VI SUB, INC., a Delaware corporation and a wholly-owned
subsidiary of SHG ("IHD Merger Sub"), IMPAC DESIGN AND CONSTRUCTION, INC., a
Delaware corporation ("IDC"), SHG-VII SUB, INC., a Delaware corporation and a
wholly-owned subsidiary of SHG ("IDC Merger Sub"), IMPAC HOTEL GROUP, INC., a
Florida corporation ("IHG"), SHG-VIII SUB, INC., a Florida corporation and a
wholly-owned subsidiary of SHG ("IHG Merger Sub"), IHG, P-Burg, Hazard, Memphis,
Delk, IHD and IDC are sometimes collectively referred to as the "Impac
Affiliated Companies", P-Burg Merger Sub, Hazard Merger Sub, Memphis Merger Sub,
Delk Merger Sub, IHD Merger Sub, IDC Merger Sub and IHG Merger Sub, are
sometimes collectively referred to as the "Impac Affiliated Merger Subs".
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Servico and the Impac Affiliated
Companies and the Manager of Impac have determined that it is in the best
interests of their respective companies, shareholders and members to combine
their respective businesses in a merger transaction to be effected as set forth
in this Agreement (the "Transaction");
WHEREAS, upon the terms and subject to the conditions of this Agreement
and in accordance with the Business Corporation Act of the State of Florida (the
"FBCA") , the Delaware General Corporation Law ("DGCL"), the Kentucky Business
Corporation Act ("KBCA"), and the Georgia Limited Liability Company Act (the
"GLLCA"), SHG will acquire all of the common stock of Servico and each of the
Impac Affiliated Companies and all of the membership interests of Impac through
the merger of Servico Merger Sub with and into Servico (the "Servico Merger"),
the merger of P-Burg Merger Sub with and into P-Burg (the "P-Burg Merger"), the
merger of Hazard Merger Sub with and into Hazard (the "Hazard Merger"), the
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merger of Memphis Merger Sub with and into Memphis (the "Memphis Merger"), the
merger of Delk Merger Sub with and into Delk (the "Delk Merger"), the merger of
IHD Merger Sub with and into IHD (the "IHD Merger"), the merger of IDC Merger
Sub with and into IDC (the "IDC Merger") and the merger of IHG Merger Sub with
and into IHG (the "IHG Merger", and, collectively with the P-Burg Merger, the
Hazard Merger, the Memphis Merger, the Delk Merger, the IHD Merger and the IDC
Merger, the "Impac Affiliated Mergers"), and the merger of Impac Merger Sub with
and into Impac (the "Impac Merger") and the shareholders and members of Servico
and Impac, respectively, will receive shares of common stock, par value $.01 per
share, of SHG ("SHG Common Stock") as set forth herein;
WHEREAS, as a result of the Servico Merger, the Impac Affiliated
Mergers and the Impac Merger (collectively, the "Mergers"), (i) Servico, each of
the Impac Affiliated Companies and Impac will each be a wholly-owned subsidiary
of SHG, (ii) the shareholders of Servico and each of the Impac Affiliated
Companies, will become shareholders of SHG and (iii) the members of Impac will
become shareholders of SHG;
WHEREAS, in furtherance of the Transaction, the Board of Directors of
Servico has adopted this Agreement and the Mergers as contemplated by this
Agreement and has recommended that the holders of common stock, par value $.01
per share, of Servico ("Servico Common Stock") vote to approve this Agreement
and the terms of the Mergers as contemplated by this Agreement;
WHEREAS, in furtherance of the Transaction, the Board of Directors and
shareholders of each of the Impac Affiliated Companies has adopted and approved
this Agreement and the Mergers as contemplated by this Agreement;
WHEREAS, in furtherance of the Transaction, the Manager of Impac has
approved this Agreement and the Mergers as contemplated by this Agreement and
has recommended that the members of Impac vote to approve this Agreement and the
terms of the Mergers as contemplated by this Agreement;
WHEREAS, prior to the execution of this Agreement and as an inducement
to Servico to enter into this Agreement, certain members of Impac, representing
in excess of fifty-one percent (51%) of the outstanding Class A Ordinary
Membership Interests of Impac have entered into a voting agreement (the "Impac
Voting Agreement") pursuant to which the Members, among other things, have
agreed to vote in favor of the approval of this Agreement and the Mergers
contemplated hereby, upon the terms and subject to the conditions set forth
therein; and
WHEREAS, for United States federal income tax purposes, it is intended
that the Servico Merger and each of the Impac Affiliated Mergers (except the IHD
Merger) each qualify as a reorganization under the provisions of Sections 368(a)
of the United States Internal Revenue Code of 1986, as amended (the "Code"), and
the Treasury Regulations thereunder (the "Regulations"), and it is further
intended that the Impac Merger and the IHD Merger each qualify as a transfer of
property described in Section 351 of the Code and the Regulations thereunder.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
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ARTICLE I
THE MERGERS
1.1 FORMATION OF MERGER SUBSIDIARIES. SHG has formed Servico Merger
Sub, each of the Impac Affiliated Merger Subs and Impac Merger Sub
(collectively, the "Merger Subsidiaries") under the FBCA, the DGCL, the KBCA or
the GLLCA, as the case may be, as wholly-owned subsidiaries of SHG. Each of the
Merger Subsidiaries has been formed solely to facilitate the Mergers and shall
conduct no business or activity other than in connection with the Mergers. SHG
shall, and Servico shall cause SHG to, execute formal written consents under
Section 607.0704 of the FBCA, Section 228 of the DGCL, Section 271B.7- 040 of
the KBCA, or Section 14-11-309 of the GLLCA, as the case may be, as the sole
shareholder and/or member of each of the Merger Subsidiaries, approving the
execution, delivery and performance of this Agreement by each of the Merger
Subsidiaries.
1.2 THE MERGERS.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the FBCA, at the Effective Time (as
defined herein), Servico Merger Sub shall be merged with and into Servico. As a
result of the Servico Merger, the separate corporate existence of Servico Merger
Sub shall cease and Servico shall continue as the surviving corporation of the
Servico Merger as a wholly-owned subsidiary of SHG (the "Servico Surviving
Corporation").
(b) Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the KBCA, at the Effective Time, P-Burg
Merger Sub shall be merged with and into P- Burg. As a result of the P-Burg
Merger, the separate corporate existence of P-Burg Merger Sub shall cease and
P-Burg shall continue as the surviving corporation of the P-Burg Merger as a
wholly-owned subsidiary of SHG (the "P-Burg Surviving Corporation").
(c) Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the KBCA, at the Effective Time, Hazard
Merger Sub shall be merged with and into Hazard. As a result of the Hazard
Merger, the separate corporate existence of Hazard Merger Sub shall cease and
Hazard shall continue as the surviving corporation of the Hazard Merger as a
wholly-owned subsidiary of SHG (the "Hazard Surviving Corporation").
(d) Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the FBCA, at the Effective Time, Memphis
Merger Sub shall be merged with and into Memphis. As a result of the Memphis
Merger, the separate corporate existence of Memphis Merger Sub shall cease and
Memphis shall continue as the surviving corporation of the Memphis Merger as a
wholly-owned subsidiary of SHG (the "Memphis Surviving Corporation").
(e) Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the DGCL, at the Effective Time, Delk
Merger Sub shall be merged with and into Delk. As a result of the Delk Merger,
the separate corporate existence of Delk Merger Sub shall cease and Delk shall
continue as the surviving corporation of the Delk Merger as a wholly-owned
subsidiary of SHG (the "Delk Surviving Corporation").
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(f) Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the DGCL, at the Effective Time, IHD
Merger Sub shall be merged with and into IHD. As a result of the IHD Merger, the
separate corporate existence of IHD Merger Sub shall cease and IHD shall
continue as the surviving corporation of the IHD Merger as a wholly-owned
subsidiary of SHG (the "IHD Surviving Corporation").
(g) Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the DGCL, at the Effective Time, IDC
Merger Sub shall be merged with and into IDC. As a result of the IDC Merger, the
separate corporate existence of IDC Merger Sub shall cease and IDC shall
continue as the surviving corporation of the IDC Merger as a wholly-owned
subsidiary of SHG (the "IDC Surviving Corporation").
(h) Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the DGCL, at the Effective Time, IHG
Merger Sub shall be merged with and into IHG. As a result of the IHG Merger, the
separate corporate existence of IHG Merger Sub shall cease and IHG shall
continue as the surviving corporation of the IHG Merger as a wholly-owned
subsidiary of SHG (the "IHG Surviving Corporation").
(i) Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the GLLCA, at the Effective Time, Impac
Merger Sub shall be merged with and into Impac. As a result of the Impac Merger,
the separate corporate existence of Impac Merger Sub shall cease and Impac shall
continue as the surviving corporation of the Impac Merger as a wholly owned
subsidiary of SHG (the "Impac Surviving Corporation"; any of Servico Surviving
Corporation, P-Burg Surviving Corporation, Hazard Surviving Corporation, Memphis
Surviving Corporation, Delk Surviving Corporation, IHD Surviving Corporation,
IDC Surviving Corporation, IHG Surviving Corporation, or Impac Surviving
Corporation being separately referred to as a "Surviving Corporation" and
collectively referred to as the "Surviving Corporations").
1.3 CLOSING. Unless this Agreement shall have been terminated and the
Mergers shall have been abandoned pursuant to Section 7.4 and subject to the
satisfaction or waiver of the conditions set forth in Article VII, the
consummation of the Transaction shall take place as promptly as practicable (and
in any event within three business days) after satisfaction or waiver of the
conditions set forth in Article VII, at a closing (the "Closing") to be held at
the offices of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A., 150
West Flagler Street, Suite 2200, Miami, Florida, 33130, unless another date,
time or place is agreed to by Servico and Impac. The date on which all
conditions set forth in Article VII have been satisfied or waived shall be
referred to as the "Satisfaction Date."
1.4 EFFECTIVE TIME. At the time of the Closing, the parties shall cause
the Mergers to be consummated concurrently, (a) in the case of the Servico
Merger, the Memphis Merger and the IHG Merger, by filing articles of merger
(respectively, the "Servico Articles of Merger," the "Memphis Articles of
Merger" and the "IHG Articles of Merger") with the Florida Department of State
in such form as required by, and executed in accordance with the relevant
provisions of, the FBCA, (b) in the case of the P-Burg Merger and the Hazard
Merger, by filing articles of merger (respectively, the "P-Burg Articles of
Merger" and the "Hazard Articles of Merger") with the Kentucky Department of
State in such form as required by, and executed in accordance with the relevant
provisions of, the KBCA, (c) in the case of the
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Delk Merger, the IHD Merger and the IDC Merger, by filing a certificate of
merger (respectively, the "Delk Certificate of Merger," the "IHD Certificate of
Merger" and the "IDC Certificate of Merger"), with the Secretary of State of the
State of Delaware in such form as required by, and executed in accordance with
the relevant provisions of, the DGCL, and (d) in the case of the Impac Merger,
by filing articles of merger (the "Impac Articles of Merger") with the Secretary
of State of the State of Georgia in such form as required by, and executed in
accordance with the relevant provisions of, the GLLCA (the date and time of such
filings, or such later date or time as set forth therein, being the "Effective
Time").
1.5 EFFECT OF THE MERGERS. At the Effective Time, the effect of the
Servico Merger, the Memphis Merger and the IHG Merger shall be as provided in
the applicable provisions of the FBCA, the effect of the P-Burg Merger and the
Hazard Merger shall be as provided in the applicable provisions of the KBCA, the
effect of the Delk Merger, the IHD Merger and the IDC Merger shall be as
provided in the applicable provisions of the DGCL, and the effect of the Impac
Merger shall be as provided in the applicable provisions of the GLLCA. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, except as otherwise provided herein, (a) all the property, rights,
privileges, powers and franchises of Servico and Servico Merger Sub shall vest
in Servico as the Servico Surviving Corporation, and all debts, liabilities and
duties of Servico and Servico Merger Sub shall become the debts, liabilities and
duties of Servico as the Servico Surviving Corporation, (b) all the property,
rights, privileges, powers and franchises of P-Burg and P-Burg Merger Sub shall
vest in P-Burg as the P-Burg Surviving Corporation, and all debts, liabilities
and duties of P-Burg and P-Burg Merger Sub shall become the debts, liabilities
and duties of P-Burg as the P-Burg Surviving Corporation, (c) all the property,
rights, privileges, powers and franchises of Hazard and Hazard Merger Sub shall
vest in Hazard as the Hazard Surviving Corporation, and all debts, liabilities
and duties of Hazard and Hazard Surviving Corporation shall become the debts,
liabilities and duties of Hazard as the Hazard Surviving Corporation, (d) all
the property, rights, privileges, powers and franchises of Memphis and Memphis
Merger Sub shall vest in Memphis as the Memphis Surviving Corporation, and all
debts, liabilities and duties of Memphis and Memphis Merger Sub shall become the
debts, liabilities and duties of Memphis as the Memphis Surviving Corporation,
(e) all the property, rights, privileges, powers and franchises of Delk and Delk
Merger Sub shall vest in Delk as the Delk Surviving Corporation, and all debts,
liabilities and duties of Delk and Delk Merger Sub shall become the debts,
liabilities and duties of Delk as the Delk Surviving Corporation, (f) all the
property, rights, privileges, powers and franchises of IHD and IHD Merger Sub
shall vest in IHD as the IHD Surviving Corporation, and all debts, liabilities
and duties of IHD and IHD Merger Sub shall become the debts, liabilities and
duties of IHD as the IHD Surviving Corporation, (g) all the property, rights,
privileges, powers and franchises of IHG and IHG Merger Sub shall vest in IHG as
the IHG Surviving Corporation, and all debts, liabilities and duties of IHD and
IHD Merger Sub shall become the debts, liabilities and duties of IHD as the IHD
Surviving Corporation, and (h) all the property, rights, privileges, powers and
franchises of Impac and Impac Merger Sub shall vest in Impac as the Impac
Surviving Corporation, and all debts, liabilities and duties of Impac and Impac
Merger Sub shall become the debts, liabilities and duties of Impac as the Impac
Surviving Corporation. As of the Effective Time, each of the Surviving
Corporations shall be a wholly-owned subsidiary of SHG.
1.6 ARTICLES OF INCORPORATION; ARTICLES OF ORGANIZATION; BYLAWS;
OPERATING AGREEMENT; DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATIONS.
Unless otherwise agreed by Servico and Impac before the Effective Time, at the
Effective Time:
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(a) the Articles of Incorporation and the Bylaws of Servico as
the Servico Surviving Corporation shall be the Articles of Incorporation and the
Bylaws of Servico Merger Sub, as in effect immediately prior to the Effective
Time, until thereafter amended as provided by such Articles of Incorporation or
Bylaws;
(b) the Articles of Organization and the Operating Agreement
of Impac as the Impac Surviving Corporation shall be the Articles of
Organization and the Operating Agreement of Impac Merger Sub, as in effect
immediately prior to the Effective Time, until thereafter amended as provided by
such Articles of Organization or Operating Agreement (the Operating Agreement of
Impac in effect prior to the Effective Time being amended and restated in
connection with and by virtue of the Impac Merger);
(c) the Articles or Certificate of Incorporation and Bylaws of
each of the Impac Affiliated Companies as the respective Surviving Corporations
in the Impac Affiliated Mergers shall be the Articles or Certificate of
Incorporation of each respective Impac Affiliated Merger Sub, as in effect
immediately prior to the Effective Time, until thereafter amended as provided by
such Articles or Certificate of Incorporation or Bylaws;
(d) subject to the provisions of Section 5.15, the officers of
each of the Surviving Corporations shall be (i) David Buddemeyer, Chief
Executive Officer, (ii) Robert Cole, President and (iii) David Buddemeyer and
Robert Cole shall hold the positions of Co-Chairmen of the Board of Directors,
each of whom shall serve in their respective offices of each of the respective
Surviving Corporations from and after the Effective Time, together with such
additional officers as may be elected from time to time, in each case until
their successors are elected or appointed and qualified or until their
resignation or removal in accordance with each Surviving Corporation's Articles
or Certificate of Incorporation and Bylaws or Articles of Organization and
Operating Agreement, as the case may be; and
(e) the directors of each of Servico Merger Sub, P-Burg Merger
Sub, Hazard Merger Sub, Delk Merger Sub, Memphis Merger Sub, IHD Merger Sub, IDC
Merger Sub and IHG Merger Sub, and the managers of Impac Merger Sub immediately
prior to the Effective Time shall continue to serve as the directors and
managers of their respective Surviving Corporations from and after the Effective
Time, in each case until their successors are elected or appointed and qualified
or until their resignation or removal in accordance with the Surviving
Corporation's Articles or Certificate of Incorporation and Bylaws or Articles of
Organization and Operating Agreement, as the case may be.
1.7 RESTATED CERTIFICATE OF INCORPORATION AND RESTATED BYLAWS OF SHG.
Immediately prior to the Effective Time, SHG and Servico shall cause the
Certificate of Incorporation and Bylaws of SHG to be amended and restated to
read substantially in the form attached hereto as Exhibits 1.7(a) and (b),
respectively.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
2.1 CONVERSION OF SECURITIES. The manner and basis of converting the
securities of Servico, P- Burg, Hazard, Memphis, Delk, IHD, IDC, IHG, and Impac
and each of Servico Merger Sub, P-Burg
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Merger Sub, Hazard Merger Sub, Delk Merger Sub, Memphis Merger Sub, IHD Merger
Sub, IDC Merger Sub, IHG Merger Sub, and Impac Merger Sub, respectively, at the
Effective Time, by virtue of the Mergers, shall be as hereinafter set forth in
this Article II.
2.2 CONVERSION OF SHARES.
(a) Each share of Servico Common Stock issued and outstanding
immediately before the Effective Time (excluding those owned by Impac or any
wholly owned subsidiary of Servico or Impac) and all rights in respect thereof,
shall, at the Effective Time, without any action on the part of any holder
thereof, forthwith cease to exist and be converted into and become exchangeable
for 1.000 shares of SHG Common Stock; such ratio of shares of Servico Common
Stock to shares of SHG Common Stock being referred to as the "Servico Exchange
Ratio").
(b) Each share of P-Burg Common Stock, no par value per share
(the "P-Burg Common Stock"), issued and outstanding immediately before the
Effective Time and all rights in respect thereof, shall, at the Effective Time,
without any action on the part of any holder thereof, forthwith cease to exist
and be converted into and become exchangeable for a number of shares of SHG
Common Stock as determined below (such ratio of shares of P-Burg Common Stock to
shares of SHG Common Stock being referred to as the "P-Burg Exchange Ratio").
For purposes hereof, the P-Burg Exchange Ratio shall be equal to the quotient of
(i) the difference between 135,580.25 (the "P-Burg Base Number") and 25,650.32
divided by (ii) the number of outstanding shares of P-Burg Common Stock;
provided, however, that if the average of the closing sale prices of Servico
Common Stock on the NYSE over the ten consecutive trading periods preceding the
Satisfaction Date (the "Trading Period Average") is (i) less than $14.00, the
P-Burg Base Number shall be equal to the product of the P-Burg Base Number and a
fraction, the numerator of which is $14.00 and the denominator of which is the
Trading Period Average, and (ii) if the Trading Period Average is greater than
$25.00, the P-Burg Base Number shall be equal to the product of the P-Burg Base
Number and a fraction, the numerator of which is $25.00 and the denominator of
which is the Trading Period Average.
(c) Each share of Hazard Common Stock, no par value per share
(the "Hazard Common Stock"), issued and outstanding immediately before the
Effective Time and all rights in respect thereof, shall, at the Effective Time,
without any action on the part of any holder thereof, forthwith cease to exist
and be converted into and become exchangeable for a number of shares of SHG
Common Stock as determined below (such ratio of shares of Hazard Common Stock to
shares of SHG Common Stock being referred to as the "Hazard Exchange Ratio").
For purposes hereof, the Hazard Exchange Ratio shall be equal to the quotient of
(i) the difference between 71,358.72 (the "Hazard Base Number") and 13,500.30
divided by (ii) the number of outstanding shares of Hazard Common Stock;
provided, however, that if the Trading Period Average is (i) less than $14.00,
the Hazard Base Number shall be equal to the product of the Hazard Base Number
and a fraction, the numerator of which is $14.00 and the denominator of which is
the Trading Period Average, and (ii) if the Trading Period Average is greater
than $25.00, the Hazard Base Number shall be equal to the product of the Hazard
Base Number and a fraction, the numerator of which is $25.00 and the denominator
of which is the Trading Period Average.
(d) Each share of Memphis Common Stock, par value $.01 per
share (the "Memphis Common Stock"), issued and outstanding immediately before
the Effective Time and all rights in respect
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thereof, shall, at the Effective Time, without any action on the part of any
holder thereof, forthwith cease to exist and be converted into and become
exchangeable for a number of shares of SHG Common Stock as determined below
(such ratio of shares of Memphis Common Stock to shares of SHG Common Stock
being referred to as the "Memphis Exchange Ratio"). For purposes hereof, the
Memphis Exchange Ratio shall be equal to the quotient of (i) the difference
between 98,382.79 (the "Memphis Base Number") and 18,612.96 divided by (ii) the
number of outstanding shares of Memphis Common Stock; provided, however, that if
the Trading Period Average is (i) less than $14.00, the Memphis Base Number
shall be equal to the product of the Memphis Base Number and a fraction, the
numerator of which is $14.00 and the denominator of which is the Trading Period
Average, and (ii) if the Trading Period Average is greater than $25.00, the
Memphis Base Number shall be equal to the product of the Memphis Base Number and
a fraction, the numerator of which is $25.00 and the denominator of which is the
Trading Period Average.
(e) Each share of Delk Common Stock, no par value per share
(the "Delk Common Stock"), issued and outstanding immediately before the
Effective Time and all rights in respect thereof, shall, at the Effective Time,
without any action on the part of any holder thereof, forthwith cease to exist
and be converted into and become exchangeable for a number of shares of SHG
Common Stock as determined below (such ratio of shares of Delk Common Stock to
shares of SHG Common Stock being referred to as the "Delk Exchange Ratio"). For
purposes hereof, the Delk Exchange Ratio shall be equal to the quotient of (i)
the difference between 46,997.66 (the "Delk Base Number") and 8,891.45 divided
by (ii) the number of outstanding shares of Delk Common Stock; provided,
however, that if the Trading Period Average is (i) less than $14.00, the Delk
Base Number shall be equal to the product of the Delk Base Number and a
fraction, the numerator of which is $14.00 and the denominator of which is the
Trading Period Average, and (ii) if the Trading Period Average is greater than
$25.00, the Delk Base Number shall be equal to the product of the Delk Base
Number and a fraction, the numerator of which is $25.00 and the denominator of
which is the Trading Period Average.
(f) Each share of IHD Common Stock, no par value per share
(the "IHD Common Stock"), issued and outstanding immediately before the
Effective Time and all rights in respect thereof, shall, at the Effective Time,
without any action on the part of any holder thereof, forthwith cease to exist
and be converted into and become exchangeable for a number of shares of SHG
Common Stock as determined below (such ratio of shares of IHD Common Stock to
shares of SHG Common Stock being referred to as the "IHD Exchange Ratio"). For
purposes hereof, the IHD Exchange Ratio shall be equal to the quotient of (i)
the difference between 820,663.73 (the "IHD Base Number") and 155,260.71 divided
by (ii) the number of outstanding shares of IHD Common Stock; provided, however,
that if the Trading Period Average is (i) less than $14.00, the IHD Base Number
shall be equal to the product of the IHD Base Number and a fraction, the
numerator of which is $14.00 and the denominator of which is the Trading Period
Average, and (ii) if the Trading Period Average is greater than $25.00, the IHD
Base Number shall be equal to the product of the IHD Base Number and a fraction,
the numerator of which is $25.00 and the denominator of which is the Trading
Period Average.
(g) Each share of IDC Common Stock, no par value per share
(the "IDC Common Stock"), issued and outstanding immediately before the
Effective Time and all rights in respect thereof, shall, at the Effective Time,
without any action on the part of any holder thereof, forthwith cease to exist
and be converted into and become exchangeable for a number of shares of SHG
Common Stock as determined below (such ratio of shares of IDC Common Stock to
shares of SHG Common Stock being
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referred to as the "IDC Exchange Ratio"). For purposes hereof, the IDC Exchange
Ratio shall be equal to the quotient of (i) the difference between 47,875.89
(the "IDC Base Number") and 9,057.60 divided by (ii) the number of outstanding
shares of IDC Common Stock; provided, however, that if the Trading Period
Average is (i) less than $14.00, the IDC Base Number shall be equal to the
product of the IDC Base Number and a fraction, the numerator of which is $14.00
and the denominator of which is the Trading Period Average, and (ii) if the
Trading Period Average is greater than $25.00, the IDC Base Number shall be
equal to the product of the IDC Base Number and a fraction, the numerator of
which is $25.00 and the denominator of which is the Trading Period Average.
(h) Each share of IHG Common Stock, par value $1.00 per share
(the "IHG Common Stock"), issued and outstanding immediately before the
Effective Time and all rights in respect thereof, shall, at the Effective Time,
without any action on the part of any holder thereof, forthwith cease to exist
and be converted into and become exchangeable for a number of shares of SHG
Common Stock as determined below (such ratio of shares of IHG Common Stock to
shares of SHG Common Stock being referred to as the "IHG Exchange Ratio"). For
purposes hereof, the IHG Exchange Ratio shall be equal to the quotient of (i)
the difference between 79,793.17 (the "IHG Base Number") and 15,096.00 divided
by (ii) the number of outstanding shares of IHG Common Stock; provided, however,
that if the Trading Period Average is (i) less than $14.00, the IHG Base Number
shall be equal to the product of the IHG Base Number and a fraction, the
numerator of which is $14.00 and the denominator of which is the Trading Period
Average, and (ii) if the Trading Period Average is greater than $25.00, the IHG
Base Number shall be equal to the product of the IHG Base Number and a fraction,
the numerator of which is $25.00 and the denominator of which is the Trading
Period Average.
(i) Except as provided in Section 2.3(c) below, each Class A
Ordinary Membership Interest of Impac (an "Impac Unit") issued and outstanding
immediately before the Effective Time and all rights in respect thereof, shall,
at the Effective Time, without any action on the part of any holder thereof,
forthwith cease to exist and be converted into and become exchangeable for a
number of shares of SHG Common Stock as determined below (such ratio of shares
of Impac Units to shares of SHG Common Stock being referred to as the "Impac
Exchange Ratio"). For purposes hereof, the Impac Exchange Ratio shall be equal
to the quotient of (i) the difference between 6,099,347.79 (the "Impac Base
Number") and 1,153,930.66, divided by (ii) the number of outstanding Impac Units
minus the number of Impac Units owned by P-Burg, Hazard, Delk, Memphis, IHD, IDC
and IHG; provided, however, that if the Trading Period Average is (i) less than
$14.00, the Impac Base Number shall be equal to the product of the Impac Base
Number and a fraction, the numerator of which is $14.00 and the denominator of
which is the Trading Period Average, and (ii) if the Trading Period Average is
greater than $25.00, the Impac Base Number shall be equal to the product of the
Impac Base Number and a fraction, the numerator of which is $25.00 and the
denominator of which is the Trading Period Average.
(j) Upon satisfaction of the conditions and milestones set
forth on SCHEDULE 2.2(C), an aggregate of an additional 1,400,000 shares of SHG
Common Stock (the "Additional Shares") shall be issuable to the holders of
P-Burg Common Stock, Hazard Common Stock, Memphis Common Stock, Delk Common
Stock, IHD Common Stock, IDC Common Stock, IHG Common Stock and Impac Units
(collectively, the "Additional Shareholders") in accordance with the methodology
set forth on SCHEDULE 2.2(C). Certificates representing the Additional Shares
shall be delivered at the Closing to the Exchange Agent (as hereinafter
defined), as Escrow Agent, to be held and delivered to the Additional
Shareholders
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upon satisfaction of the conditions and milestones set forth on SCHEDULE 2.2(C)
in accordance with an Escrow Agreement substantially in the form attached hereto
as Exhibit 2.2(c). The Escrow Agreement will provide for the Additional Shares
to be released from escrow from time to time upon satisfaction of such
conditions and milestones (each of such milestone dates being hereafter referred
to as a "Milestone Date"). The parties agree and acknowledge that the Additional
Shares will be held in escrow pending solely the satisfaction of the milestones
and conditions set forth on SCHEDULE 2.2(C) and any breach of any
representation, warranty or covenant by Impac contained in this Agreement will
have no effect on SHG's obligation to issue the Additional Shares to the
Additional Shareholders. The parties hereto hereby agree and acknowledge that
the parties have been advised that the Additional Shares will not be treated as
outstanding for purposes of calculating earnings per share under applicable
accounting rules and guidelines as applied by the SEC or otherwise.
(k) At the Effective Time, each Class B Ordinary Membership
Interest of Impac shall be canceled and retired and no shares of stock or other
securities of SHG or either of the Surviving Corporations or any other person
shall be issuable, and no payment or other calculation shall be made with
respect thereto.
(l) Commencing immediately after the Effective Time, each
certificate which, immediately prior to the Effective Time, represented issued
and outstanding shares of Servico Common Stock ("Servico Shares"), P-Burg Common
Stock ("P-Burg Shares"), Hazard Common Stock ("Hazard Shares"), Memphis Common
Stock ("Memphis Shares"), Delk Common Stock ("Delk Shares"), IHD Common Stock
("IHD Shares"), IDC Common Stock ("IDC Shares"), IHG Common Stock, ("IHG
Shares"), Impac Units (Impac Units, together with P-Burg Shares, Hazard Shares,
Memphis Shares, Delk Shares, IHD Shares, IDC Shares, IHG Shares, and Servico
Shares, the "Shares"), shall evidence ownership of SHG Common Stock on the basis
hereinbefore set forth, but subject to the limitations set forth in Sections
2.3, 2.5, 2.7, 2.8 and 2.9 hereof.
(m) For all purposes of this Agreement, unless otherwise
specified, all shares held by employee benefit plans of Servico (i) shall be
deemed to be issued and outstanding, (ii) shall not be deemed to be held in the
treasury of Servico, and (iii) shall be converted into shares of SHG Common
Stock in accordance with the Servico Exchange Ratio.
2.3 CANCELLATION OF CERTAIN SHARES AND OF OUTSTANDING SHG COMMON
STOCK.
(a) At the Effective Time, each share of Servico Common Stock
owned by Impac or any wholly-owned subsidiary of Impac immediately prior to the
Effective Time, shall be canceled and retired and no shares of stock or other
securities of SHG or either of the Surviving Corporations or any other person
shall be issuable, and no payment or other consideration shall be made, with
respect thereto.
(b) At the Effective Time, the shares of SHG Common Stock held
by Servico shall be canceled and retired and no shares of stock or other
securities of SHG or either of the Surviving Corporations or any other person
shall be issuable, and no payment or other consideration shall be made, with
respect thereto.
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(c) At the Effective Time, all Impac Units held by P-Burg,
Hazard, Memphis, Delk, IHD, IDC and IHG shall be cancelled and retired and no
shares of stock or other securities of SHG (including any Additional Shares) or
any of the Surviving Corporations or any other person shall be issuable, and no
payment or other consideration shall be made, with respect thereto.
2.4 CONVERSION OF COMMON STOCK AND MEMBERSHIP INTERESTS OF SERVICO
MERGER SUB, IMPAC MERGER SUB AND IMPAC AFFILIATED MERGER SUB INTO COMMON STOCK
OR MEMBERSHIP INTERESTS OF THE SURVIVING CORPORATIONS.
(a) At the Effective Time, each share of common stock, par
value $0.01 per share, of Servico Merger Sub issued and outstanding immediately
prior to the Effective Time, and all rights in respect thereof, shall, without
any action on the part of SHG, forthwith cease to exist and be converted into
one validly issued, fully paid and nonassessable share of common stock, par
value $0.01 per share, of Servico Surviving Corporation (the "New Servico Common
Stock"). Immediately after the Effective Time and upon surrender by SHG of the
certificate representing the shares of the common stock of Servico Merger Sub,
Servico Surviving Corporation shall deliver to SHG an appropriate certificate or
certificates representing the New Servico Common Stock created by conversion of
the common stock of Servico Merger Sub owned by SHG.
(b) At the Effective Time, each share of common stock, par
value $0.01 per share, of P-Burg Merger Sub issued and outstanding immediately
prior to the Effective Time, and all rights in respect thereof, shall, without
any action on the part of SHG, forthwith cease to exist and be converted into
one validly issued, fully paid and nonassessable share of common stock, par
value $0.01 per share, of P-Burg Surviving Corporation (the "New P-Burg Common
Stock"). Immediately after the Effective Time and upon surrender by SHG of the
certificate representing the shares of the common stock of P-Burg Merger Sub,
P-Burg Surviving Corporation shall deliver to SHG an appropriate certificate or
certificates representing the New P-Burg Common Stock created by conversion of
the common stock of P-Burg Merger Sub owned by SHG.
(c) At the Effective Time, each share of common stock, par
value $0.01 per share, of Hazard Merger Sub issued and outstanding immediately
prior to the Effective Time, and all rights in respect thereof, shall, without
any action on the part of SHG, forthwith cease to exist and be converted into
one validly issued, fully paid and nonassessable share of common stock, par
value $0.01 per share, of Hazard Surviving Corporation (the "New Hazard Common
Stock"). Immediately after the Effective Time and upon surrender by SHG of the
certificate representing the shares of the common stock of Hazard Merger Sub,
Hazard Surviving Corporation shall deliver to SHG an appropriate certificate or
certificates representing the New Hazard Common Stock created by conversion of
the common stock of Hazard Merger Sub owned by SHG.
(d) At the Effective Time, each share of common stock, par
value $0.01 per share, of Memphis Merger Sub issued and outstanding immediately
prior to the Effective Time, and all rights in respect thereof, shall, without
any action on the part of SHG, forthwith cease to exist and be converted into
one validly issued, fully paid and nonassessable share of common stock, par
value $0.01 per share, of Memphis Surviving Corporation (the "New Memphis Common
Stock"). Immediately after the Effective Time and upon surrender by SHG of the
certificate representing the shares of the common stock of
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Memphis Merger Sub, Memphis Surviving Corporation shall deliver to SHG an
appropriate certificate or certificates representing the New Memphis Common
Stock created by conversion of the common stock of Memphis Merger Sub owned by
SHG.
(e) At the Effective Time, each share of common stock, par
value $0.01 per share, of Delk Merger Sub issued and outstanding immediately
prior to the Effective Time, and all rights in respect thereof, shall, without
any action on the part of SHG, forthwith cease to exist and be converted into
one validly issued, fully paid and nonassessable share of common stock, par
value $0.01 per share, of Delk Surviving Corporation (the "New Delk Common
Stock"). Immediately after the Effective Time and upon surrender by SHG of the
certificate representing the shares of the common stock of Delk Merger Sub, Delk
Surviving Corporation shall deliver to SHG an appropriate certificate or
certificates representing the New Delk Common Stock created by conversion of the
common stock of Delk Merger Sub owned by SHG.
(f) At the Effective Time, each share of common stock, par
value $0.01 per share, of IHD Merger Sub issued and outstanding immediately
prior to the Effective Time, and all rights in respect thereof, shall, without
any action on the part of SHG, forthwith cease to exist and be converted into
one validly issued, fully paid and nonassessable share of common stock, par
value $0.01 per share, of IHD Surviving Corporation (the "New IHD Common
Stock"). Immediately after the Effective Time and upon surrender by SHG of the
certificate representing the shares of the common stock of IHD Merger Sub, IHD
Surviving Corporation shall deliver to SHG an appropriate certificate or
certificates representing the New IHD Common Stock created by conversion of the
common stock of IHD Merger Sub owned by SHG.
(g) At the Effective Time, each share of common stock, par
value $0.01 per share, of IDC Merger Sub issued and outstanding immediately
prior to the Effective Time, and all rights in respect thereof, shall, without
any action on the part of SHG, forthwith cease to exist and be converted into
one validly issued, fully paid and nonassessable share of common stock, par
value $0.01 per share, of IDC Surviving Corporation (the "New IDC Common
Stock"). Immediately after the Effective Time and upon surrender by SHG of the
certificate representing the shares of the common stock of IDC Merger Sub, IDC
Surviving Corporation shall deliver to SHG an appropriate certificate or
certificates representing the New IDC Common Stock created by conversion of the
common stock of IDC Merger Sub owned by SHG.
(h) At the Effective Time, each share of common stock, par
value $0.01 per share, of IHG Merger Sub issued and outstanding immediately
prior to the Effective Time, and all rights in respect thereof, shall, without
any action on the part of SHG, forthwith cease to exist and be converted into
one validly issued, fully paid and nonassessable share of common stock, par
value $0.01 per share, of IHG Surviving Corporation (the "New IHG Common
Stock"). Immediately after the Effective Time and upon surrender by SHG of the
certificate representing the shares of the common stock of IHG Merger Sub, IHG
Surviving Corporation shall deliver to SHG an appropriate certificate or
certificates representing the New IHG Common Stock created by conversion of the
common stock of IHG Merger Sub owned by SHG.
(i) At the Effective Time, all membership interests of Impac
Merger Sub issued and outstanding immediately prior to the Effective Time, and
all rights in respect thereof, shall, without any action on the part of SHG,
forthwith cease to exist and be converted into equivalent membership interests
of Impac Surviving Corporation (the "New Impac Units"). Immediately after the
Effective Time and upon surrender by SHG of the certificate representing the
membership interests of Impac Merger Sub, Impac
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Surviving Corporation shall deliver to SHG an appropriate certificate or
certificates representing the New Impac Units.
2.5 EXCHANGE OF SHARES OTHER THAN TREASURY SHARES. Subject to the terms
and conditions hereof, at or prior to the Effective Time, SHG shall appoint an
exchange agent to effect the exchange of Shares for SHG Common Stock in
accordance with the provisions of this Article II (the "Exchange Agent"). From
time to time after the Effective Time, SHG shall deposit, or cause to be
deposited, certificates representing SHG Common Stock for conversion of Shares
in accordance with the provisions of Section 2.2 hereof (such certificates,
together with any dividends or distributions with respect thereto, being herein
referred to as the "Exchange Fund"). Commencing immediately after the Effective
Time and until the appointment of the Exchange Agent shall be terminated, each
holder of a certificate or certificates theretofore representing Shares may
surrender the same to the Exchange Agent, and, after the appointment of the
Exchange Agent shall be terminated, any such holder may surrender any such
certificate to SHG. Such holder shall be entitled upon such surrender to receive
in exchange therefor a certificate or certificates representing the number of
full shares of SHG Common Stock into which the Shares theretofore represented by
the certificate or certificates so surrendered shall have been converted in
accordance with the provisions of Section 2.2 hereof, together with a cash
payment in lieu of fractional shares, if any, in accordance with Section 2.7
hereof, and all such shares of SHG Common Stock shall be deemed to have been
issued at the Effective Time, it being agreed and acknowledged, however, that
the Additional Shares shall not be deemed to be issued or outstanding until
issuable on the applicable Milestone Date in accordance with the provisions of
SCHEDULE 2.2(C). Until so surrendered and exchanged, each outstanding
certificate which, prior to the Effective Time, represented issued and
outstanding Shares shall be deemed for all corporate purposes of SHG, other than
the payment of dividends and other distributions, if any, to evidence ownership
of the number of full shares of SHG Common Stock into which the Shares
theretofore represented thereby shall have been converted at the Effective Time.
Unless and until any such certificate theretofore representing Shares is so
surrendered, no dividend or other distribution, if any, payable to the holders
of record of SHG Common Stock as of any date subsequent to the Effective Time
shall be paid to the holder of such certificate in respect thereof. Upon the
surrender of any such certificate theretofore representing Shares, however, the
record holder of the certificate or certificates representing shares of SHG
Common Stock issued in exchange therefor shall receive from the Exchange Agent
or from SHG, as the case may be, payment of the amount of dividends and other
distributions, if any, which as of any date subsequent to the Effective Time
(or, with respect to the Additional Shares, subsequent to the Milestone Date)
and until such surrender shall have become payable with respect to such number
of shares of SHG Common Stock ("Presurrender Dividends"). No interest shall be
payable with respect to the payment of Presurrender Dividends upon the surrender
of certificates theretofore representing Shares. After the appointment of the
Exchange Agent shall have been terminated, such holders of SHG Common Stock who
have not received payment of Presurrender Dividends shall look only to SHG for
payment thereof. Notwithstanding the foregoing provisions of this Section 2.5,
risk of loss and title to such certificates representing Shares shall pass only
upon proper delivery of such certificates to the Exchange Agent, and neither the
Exchange Agent nor any party hereto shall be liable to a holder of Shares for
any SHG Common Stock or dividends or distributions thereon delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law
or to a transferee pursuant to Section 2.6 hereof.
2.6 STOCK TRANSFER BOOKS. At the Effective Time, the stock transfer
books of Servico with respect to Servico Shares, the stock transfer books of
P-Burg with respect to P-Burg Shares, the stock
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transfer books of Hazard with respect to Hazard Shares, the stock transfer books
of Memphis with respect to Memphis Shares, the stock transfer books of Delk with
respect to Delk Shares, the stock transfer books of IHD with respect to IHD
Shares, the stock transfer books of IDC with respect to IDC Shares, the stock
transfer books of IHG with respect to IHG Shares and the transfer books of Impac
with respect to Impac Units shall each be closed, and there shall be no further
registration of transfers of Shares thereafter on the records of any such
transfer books. In the event of a transfer of ownership of Shares that is not
registered in the transfer records of Servico, P-Burg, Hazard, Memphis, Delk,
IHD, IDC, IHG or Impac, as the case may be, at the Effective Time, a certificate
or certificates representing the number of full shares of SHG Common Stock into
which such Shares shall have been converted shall be issued to the transferee
together with a cash payment in lieu of fractional shares, if any, in accordance
with Section 2.7 hereof, and a cash payment in the amount of Presurrender
Dividends, if any, in accordance with Section 2.5 hereof, if the certificate or
certificates representing such Shares is or are surrendered as provided in
Section 2.5 hereof, accompanied by all documents required to evidence and effect
such transfer and by evidence of payment of any applicable transfer tax.
2.7 NO FRACTIONAL SHARE CERTIFICATES.
(a) No scrip or fractional share certificate for SHG Common
Stock shall be issued upon the surrender for exchange of certificates evidencing
Shares, and an outstanding fractional share interest shall not entitle the owner
thereof to vote, to receive dividends or to any rights of a shareholder of SHG
or a shareholder or member of any of the Surviving Corporations with respect to
such fractional share interest.
(b) As promptly as practicable following the Effective Time
and following the applicable Milestone Date, the Exchange Agent shall determine
the excess of (i) the number of full shares of SHG Common Stock to be issued and
delivered to the Exchange Agent pursuant to Section 2.5 hereof over (ii) the
aggregate number of full shares of SHG Common Stock to be distributed to holders
of Servico Common Stock, P-Burg Common Stock, Hazard Common Stock, Memphis
Common Stock, Delk Common Stock, IHD Common Stock, IDC Common Stock, IHG Common
Stock and Impac Units pursuant to Section 2.5 hereof (such excess being herein
called the "Excess Shares"). Following the Effective Time and following the
applicable Milestone Date, the Exchange Agent, as agent for the holders of
Servico Common Stock, P-Burg Common Stock, Hazard Common Stock, Memphis Common
Stock, Delk Common Stock, IHD Common Stock, IDC Common Stock, IHG Common Stock
and Impac Units , shall sell the Excess Shares at then prevailing prices on the
New York Stock Exchange, Inc. (the "NYSE"), all in the manner provided in
subsection (c) of this Section 2.7.
(c) The sale of the Excess Shares by the Exchange Agent shall
be executed on the NYSE through one or more member firms of such exchange and
shall be executed in round lots to the extent practicable. The Exchange Agent
shall use all reasonable efforts to complete the sale of the Excess Shares as
promptly following the Effective Time or the applicable Milestone Date, as the
case may be, as, in the Exchange Agent's reasonable judgment, is practicable
consistent with obtaining the best execution of such sales in light of
prevailing market conditions. Until the net proceeds of such sale or sales have
been distributed to the holders of each of Servico Common Stock, P-Burg Common
Stock, Hazard Common Stock, Memphis Common Stock, Delk Common Stock, IHD Common
Stock, IDC Common Stock, IHG Common Stock and Impac Units, the Exchange Agent
shall hold such proceeds in trust for the
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holders of Servico Common Stock (the "Servico Common Shares Trust"), P-Burg
Common Stock (the "P-Burg Common Shares Trust"), Hazard Common Stock (the
"Hazard Common Shares Trust"), Memphis Common Stock (the "Memphis Common Shares
Trust"), Delk Common Stock (the "Delk Common Shares Trust"), IHD Common Stock
(the "IHD Common Shares Trust"), IDC Common Stock (the "IDC Common Shares
Trust"), IHG Common Stock (the "IHG Common Shares Trust") and Impac Units (the
"Impac Unit Trust"). SHG shall pay all commissions, transfer taxes and other
out-of-pocket transaction costs, including the expenses and compensation of the
Exchange Agent, incurred in connection with such sale of Excess Shares. The
Exchange Agent shall determine the portion of the Servico Common Shares Trust,
the P-Burg Common Shares Trust, the Hazard Common Shares Trust, the Memphis
Common Shares Trust, the Delk Common Shares Trust, the IHD Common Shares Trust,
the IDC Common Shares Trust, the IHG Common Shares Trust or the Impac Unit
Trust, as the case may be, to which each holder of Servico Common Stock, P-Burg
Common Stock, Hazard Common Stock, Memphis Common Stock, Delk Common Stock, IHD
Common Stock, IDC Common Stock, IHG Common Stock or Impac Units shall be
entitled, if any, by multiplying the amount of the aggregate net proceeds
comprising the Servico Common Shares Trust, the P-Burg Common Shares Trust, the
Hazard Common Shares Trust, the Memphis Common Shares Trust, the Delk Common
Shares Trust, the IHD Common Shares Trust, the IDC Common Shares Trust, the IHG
Common Shares Trust or the Impac Unit Trust, respectively, by a fraction the
numerator of which is the amount of fractional share interests to which such
holder of Servico Common Stock, P-Burg Common Stock, Hazard Common Stock,
Memphis Common Stock, Delk Common Stock, IHD Common Stock, IDC Common Stock, IHG
Common Stock or Impac Units, as the case may be, is entitled (after taking into
account all shares of Servico Common Stock, P-Burg Common Stock, Hazard Common
Stock, Memphis Common Stock, Delk Common Stock, IHD Common Stock, IDC Common
Stock, IHG Common Stock or Impac Units, respectively, held at the Effective Time
by such holder) and the denominator of which is the aggregate amount of
fractional share interests to which all holders of Servico Common Stock, P-Burg
Common Stock, Hazard Common Stock, Memphis Common Stock, Delk Common Stock, IHD
Common Stock, IDC Common Stock, IHG Common Stock or Impac Units, respectively,
are entitled.
(d) Notwithstanding the provisions of subsections (b) and (c)
of this Section 2.7, Servico may, in lieu of the issuance and sale of Excess
Shares and the making of the payments contemplated in such subsections, cause
SHG to pay to the Exchange Agent an amount in cash sufficient for the Exchange
Agent to pay each holder of Servico Common Stock, P-Burg Common Stock, Hazard
Common Stock, Memphis Common Stock, Delk Common Stock, IHD Common Stock, IDC
Common Stock, IHG Common Stock and/or Impac Units an amount in cash equal to the
product obtained by multiplying (i) the fractional share interest to which such
holder would otherwise be entitled (after taking into account all shares of
Servico Common Stock, P-Burg Common Stock, Hazard Common Stock, Memphis Common
Stock, Delk Common Stock, IHD Common Stock, IDC Common Stock, IHG Common Stock
and/or Impac Units , as the case may be, held at the Effective Time by such
holder) by (ii) the closing price for a share of SHG Common Stock on the NYSE
Composite Transaction Tape on the first business day immediately following the
Effective Time or the applicable Milestone Date, as the case may be, and, in
such case, all references herein to the cash proceeds of the sale of the Excess
Shares and similar references shall be deemed to mean and refer to the payments
calculated as set forth in this subsection (d). In such event, Excess Shares
shall not be issued or otherwise transferred to the Exchange Agent pursuant to
Section 2.5 hereof.
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(e) As soon as practicable after the determination of the
amount of cash, if any, to be paid to holders of Servico Common Stock, P-Burg
Common Stock, Hazard Common Stock, Memphis Common Stock, Delk Common Stock, IHD
Common Stock, IDC Common Stock, IHG Common Stock or Impac Units with respect to
any fractional share interests, the Exchange Agent shall make available such
amounts, net of any required withholding, to such holders of Servico Common
Stock, P-Burg Common Stock, Hazard Common Stock, Memphis Common Stock, Delk
Common Stock, IHD Common Stock, IDC Common Stock, IHG Common Stock or Impac
Units, subject to and in accordance with the terms of Section 2.5 hereof.
(f) Any portion of the Exchange Fund, the Servico Common
Shares Trust, the P-Burg Common Shares Trust, the Hazard Common Shares Trust,
the Memphis Common Shares Trust, the Delk Common Shares Trust, the IHD Common
Shares Trust, the IDC Common Shares Trust, the IHG Common Shares Trust or the
Impac Unit Trust which remains undistributed for six months after the latest
Milestone Date shall be delivered to SHG, and any holder of Servico Common
Stock, P-Burg Common Stock, Hazard Common Stock, Memphis Common Stock, Delk
Common Stock, IHD Common Stock, IDC Common Stock, IHG Common Stock or Impac
Units who has not theretofore complied with the provisions of this Article II
shall thereafter look only to SHG for satisfaction of their claims for SHG
Common Stock or any cash in lieu of fractional shares of SHG Common Stock and
any Presurrender Dividends.
2.8 OPTIONS TO PURCHASE SERVICO COMMON STOCK. At the Effective Time,
each option or warrant granted by Servico to purchase shares of Servico Common
Stock which is outstanding and unexercised immediately prior to the Effective
Time, shall be assumed by SHG and converted into an option or warrant to
purchase shares of SHG Common Stock in such number and at such exercise price as
provided below and otherwise having the same terms and conditions as in effect
immediately prior to the Effective Time (except to the extent that such terms,
conditions and restrictions may be altered in accordance with their terms as a
result of the Mergers contemplated hereby):
(a) the number of shares of SHG Common Stock to be subject to
the new option or warrant shall be equal to the product of (x) the number of
shares of Servico Common Stock subject to the original option or warrant and (y)
the Servico Exchange Ratio;
(b) the exercise price per share of SHG Common Stock under the
new option or warrant shall be equal to (x) the exercise price per share of the
Servico Common Stock under the original option or warrant divided by (y) the
Servico Exchange Ratio; and
(c) upon each exercise of options or warrants by a holder
thereof, the aggregate number of shares of SHG Common Stock deliverable upon
such exercise shall be rounded down, if necessary, to the nearest whole share
and the aggregate exercise price shall be rounded up, if necessary, to the
nearest cent.
The adjustments provided herein with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Code) shall be effected in a
manner consistent with the requirements of Section 424(a) of the Code.
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2.9 OPTIONS TO PURCHASE IMPAC UNITS. At the Effective Time, the option
granted by Impac to Robert Cole to purchase Impac Units, which option is set
forth on Schedule 2.9, shall be assumed by SHG and converted into an option to
purchase shares of SHG Common Stock in such number and at such exercise price as
provided below, and as otherwise having the same terms and conditions as in
effect immediately prior to the Effective Time (except to the extent that such
terms, conditions, and restrictions may be altered in accordance with their
terms as a result of the Mergers contemplated hereby):
(a) the number of shares of SHG Common Stock to be subject to the
new option shall be equal to the product of (x) the number of shares of Servico
Common Stock subject to the original option and (y) .64;
(b) the exercise price per share of SHG Common Stock under the new
option shall be equal to (x) the exercise price per unit of the Impac Unit
under the original option divided by (y) .64; and
(c) upon exercise of the option by Cole, the aggregate number of
shares of SHG Common Stock deliverable upon such exercise shall be rounded down,
if necessary, to the nearest whole share and the aggregate exercise price shall
be rounded up, if necessary, to the nearest cent.
2.10 CERTAIN ADJUSTMENTS. If between the date of this Agreement and the
Effective Time, the outstanding shares of Servico Common Stock shall be changed
into a different number of shares by reason of any reclassification,
recapitalization, split-up, combination or exchange of shares, or any dividend
payable in stock, or other securities shall be declared thereon with a record
date within such period, the Impac Exchange Ratio established pursuant to the
provisions of Section 2.2(b) hereof shall be adjusted accordingly to provide to
the holders of Impac Units, P-Burg Common Stock, Hazard Common Stock, Memphis
Common Stock, Delk Common Stock, IHD Common Stock, IDC Common Stock and IHG
Common Stock the same economic effect as contemplated by this Agreement prior to
such reclassification, recapitalization, split-up, combination, exchange or
dividend.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SERVICO
Servico hereby represents and warrants to Impac and the Impac
Affiliated Companies as follows:
3.1 ORGANIZATION, STANDING AND POWER. Each of Servico and each direct
or indirect subsidiary (including the Servico Constituents (as defined herein))
of Servico (the "Servico Subsidiaries") has been duly organized and is validly
existing and in good standing under the laws of its state of incorporation or
organization, as the case may be, and has all requisite right, power and
authority to enter into this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby.
3.2 LEGAL, VALID AND BINDING AGREEMENT. The execution, delivery and
performance of this Agreement by Servico, SHG, Impac Merger Sub, Servico Merger
Sub and each of the Impac Affiliated Merger Subs (collectively, the "Servico
Constituents") and the consummation by Servico and the Servico Constituents of
the Mergers contemplated hereby have been duly and effectively authorized by all
requisite corporate action and no other corporate proceedings on the part of
Servico or the Servico Constituents are necessary to authorize this Agreement or
to consummate such Mergers (other than the approval of this Agreement and the
Mergers contemplated hereby by the holders of a majority of the outstanding
shares of Servico Common Stock entitled to vote with respect thereto at the
Servico Special Meeting and the filing and recordation of the Servico Articles
of Merger, the Impac Articles of Merger, the P-Burg Articles of Merger, the
Hazard Articles of Merger, the Memphis Articles of Merger, the Delk Certificate
of Merger, the IHD Certificate of Merger, the IDC Certificate of Merger and the
IHG Certificate of Merger, as required by the FBCA, the GLLCA, the KBCA and the
DGCL, as applicable). This Agreement has been duly executed and delivered by
Servico and each of the Servico Constituents and, assuming the due
authorization, execution and delivery by the other parties hereto, constitutes
the legal, valid and binding obligations of Servico and each of the Servico
Constituents, enforceable against Servico and the Servico Constituents in
accordance with its terms.
3.3 AUTHORITY TO DO BUSINESS. Each of Servico and the Servico
Subsidiaries has the corporate power and authority and all necessary
governmental approvals to own, operate and lease its properties and assets and
to conduct its business as presently conducted, and is duly qualified or
licensed to transact business in all jurisdictions where the ownership or
leasing of its properties or the conduct of its business requires such
qualification or license, except where the failure to have such power, authority
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and governmental approvals or to be so qualified or licensed, individually or in
the aggregate, would not have a Servico Material Adverse Effect.
3.4 NO VIOLATION OR CONFLICT. Except as set forth on SCHEDULE 3.4, the
execution, delivery and performance of this Agreement by Servico and each of the
Servico Constituents and the consummation by Servico and each of the Servico
Constituents of the transactions contemplated hereby do not and will not (i)
conflict with or violate any provision of the Articles of Incorporation or
Bylaws of Servico or any equivalent organizational documents of any Servico
Subsidiary, (ii) assuming that all consents, approvals, authorizations and
permits described in Section 3.5 have been obtained and all filings and
notifications described in Section 3.5 have been made, violate or conflict with
any Law applicable to Servico or any Servico Subsidiary or by which any property
or asset of Servico or any Servico Subsidiary is bound or effected, and (iii)
with or without the passage of time or the giving of notice, result in the
breach of, or constitute a default under, cause the acceleration of performance
of, permit the unilateral modification or termination of, or require any consent
under, or result in the creation of any liens or other encumbrance upon any
property or assets of Servico or any Servico Subsidiary pursuant to any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other obligation, except, with respect to clauses (ii) and (iii),
for any such conflicts, violations, breaches, defaults or other occurrences
which would neither, individually or in the aggregate, (A) have a Servico
Material Adverse Effect nor (B) prevent or materially delay the performance by
Servico or any Servico Constituent of its material obligations pursuant to this
Agreement or the consummation of the Mergers.
3.5 GOVERNMENTAL CONSENTS. The execution and delivery of this Agreement
by Servico and each of the Servico Constituents does not, and the performance by
Servico and each of the Servico Constituents of its obligations hereunder and
the consummation of the Mergers will not, require any consent, approval,
authorization or permit of, or filing by Servico or any Servico Constituent with
or notification by Servico or any Servico Constituent to, any United States
federal, state or local or any foreign governmental, regulatory or
administrative authority, agency or commission or any court, tribunal or
arbitral body (a "Governmental Entity"), except (i) applicable requirements of
the Securities Exchange Act of 1934, as amended (together with the rules and
regulations promulgated thereunder, the "Exchange Act"), the Securities Act of
1933, as amended (together with the rules and regulations promulgated
thereunder, the "Securities Act"), state securities or "blue sky" laws ("Blue
Sky Laws"), the rules and regulations of the NYSE, state takeover laws, the
premerger notification requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder
(the "HSR Act"), the filing and recordation of the respective Articles or
Certificates of Merger as referenced in Section 3.2 above, and as set forth on
SCHEDULE 3.5, and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
(A) prevent or materially delay the performance by Servico or any Servico
Constituent of its material obligations pursuant to this Agreement and the
consummation of the Mergers, or (B) individually or in the aggregate have a
Servico Material Adverse Effect.
3.6 EXCHANGE ACT REPORTS; FINANCIAL STATEMENTS.
(a) Since January 1, 1995, Servico has timely filed all
reports and other documents required to be filed by it with the United States
Securities and Exchange Commission (the "SEC") under each of the Securities Act
and the Exchange Act and the respective rules and regulations thereunder,
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including but not limited to proxy statements and reports on Form 10-K, Form
10-Q and Form 8-K (collectively, the "Servico SEC Reports"). As of the
respective dates they were filed with the SEC, the Servico SEC Reports,
including all documents incorporated by reference into such reports, complied in
all material respects with the rules and regulations of the SEC and did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) The consolidated financial statements (the "Servico
Financial Statements") of Servico included in the Servico SEC Reports, as of the
dates thereof and for the periods covered thereby, present fairly, in all
material respects, the financial position, results of operations, and cash flows
of Servico and the Servico Subsidiaries on a consolidated basis (subject, in the
case of unaudited statements, to normal recurring year-end audit adjustments
which were not and are not expected, individually or in the aggregate, to have a
Servico Material Adverse Effect). Any supporting schedules included in the
Servico SEC Reports present fairly, in all material respects, the information
required to be stated therein. Such Servico Financial Statements and supporting
schedules were prepared: (A) in accordance with the requirements of Regulation
S-X promulgated by the SEC; and (B) except as otherwise noted in the Servico SEC
Reports, in conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis. Other than as disclosed by the Servico Financial
Statements included in the Servico SEC Reports or on SCHEDULE 3.6 hereto,
neither Servico nor any of the Servico Subsidiaries has any liabilities,
commitments or obligations of any nature whatsoever, whether accrued, contingent
or otherwise that would be required to be reflected on, or reserved against in,
a balance sheet or in notes thereto, prepared in accordance with GAAP, other
than liabilities, commitments or obligations incurred since December 31, 1996 in
the ordinary course of business that would not, individually or in the
aggregate, have a Servico Material Adverse Effect.
3.7 COMPLIANCE WITH LAWS.
(a) Each of Servico and the Servico Subsidiaries is in
compliance with all federal, state, local and foreign laws, ordinances,
regulations, judgments, rulings, orders and other legal requirements applicable
to it, its operations or its properties, including without limitation those
relating to employment, building and zoning, safety and health, and
environmental matters, except where the failure to so comply, individually or in
the aggregate, would not have a Servico Material Adverse Effect. Except as set
forth on SCHEDULE 3.7(A) or as would not reasonably be expected to have a
Servico Material Adverse Effect, neither Servico nor any Servico Subsidiary has
received notification from any Governmental Entity asserting that it may not be
in compliance with, or may have violated, any of the Laws which said
Governmental Entity enforces, or threatening to revoke any authorization,
consent, approval, franchise, license or permit, and neither Servico nor any
Servico Subsidiary is subject to any agreement or consent decree with any
Governmental Entity arising out of previously asserted violations.
(b) Without limiting the generality of Section 3.7(a), except
as disclosed by the environmental audits and reports listed on SCHEDULE 3.7,
copies of which have heretofore been delivered to Impac, or as otherwise set
forth on SCHEDULE 3.7, or as will not, individually or in the aggregate, have a
Servico Material Adverse Effect:
(i) Servico and the Servico Subsidiaries are in
compliance with all applicable Environmental Laws. All past
noncompliance of Servico or any Servico Subsidiary with
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Environmental Laws or Environmental Permits has been resolved
without any pending, ongoing or future obligation, cost or
liability; and
(ii) neither Servico nor any Servico Subsidiary has
released a Hazardous Material at, or transported a Hazardous
Material to or from, any real property currently or formerly
owned, leased or occupied by Servico or any Servico Subsidiary
in violation of any Environmental Law.
For purposes of this Agreement:
"ENVIRONMENTAL LAW" means any federal, state or local statute,
law, ordinance, regulation, rule, code or order of the United States or
any other jurisdiction and any enforceable judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent decree or judgment, relating to pollution or protection of the
environmental or natural resources, including, without limitation,
those relating to the use, handling, transportation, treatment,
storage, disposal, release or discharge of Hazardous Material, as in
effect as of the date of this Agreement.
"ENVIRONMENTAL PERMIT" means any permit, approval,
identification number, license or other authorization required under or
issued pursuant to any applicable Environmental Law.
"HAZARDOUS MATERIAL" means (i) any petroleum, petroleum
products, by-products or breakdown products, radioactive materials,
asbestos-containing materials or polychlorinated biphenyls or (ii) any
chemical, material or substance defined or regulated as toxic or
hazardous or as a pollutant or contaminant or waste under any
applicable Environmental Law.
3.8 LEGAL PROCEEDINGS. Except as set forth on SCHEDULE 3.8 or the
Servico SEC Reports, neither Servico nor any of the Servico Subsidiaries is a
party to any pending or, to the knowledge of Servico, threatened, legal,
administrative or other proceeding, arbitration or investigation, that is or
would be reasonably expected to, either individually or in the aggregate, result
in a Servico Material Adverse Effect. Servico has no knowledge of any set of
facts which would reasonably be expected to result in any such legal,
administrative or other proceeding, arbitration or investigation involving
Servico or any Servico Subsidiary. Except as set forth on SCHEDULE 3.8, neither
Servico nor any of the Servico Subsidiaries is subject to any order, injunction
or other judgment of any court or governmental authority which, individually or
in the aggregate, could reasonably be expected to have a Servico Material
Adverse Effect.
3.9 BROKERS. Other than Lehman Brothers, Inc. ("Lehman Brothers") and
Hodges Ward & Elliot ("HW&E"), neither Servico nor any of the Servico
Subsidiaries has employed any financial advisor, broker or finder and has not
incurred and none will incur any broker's, finder's, investment banking or
similar fees, commissions or expenses to any other party in connection with the
transactions contemplated by this Agreement. Servico has provided to Impac
complete and correct copies of all agreements between Servico and Lehman
Brothers pursuant to which such firm would be entitled to any payment related to
the Mergers.
3.10 ABSENCE OF MATERIAL ADVERSE CHANGES. Except as disclosed on
SCHEDULE 3.10 or in the Servico SEC Reports, since December 31, 1996 each of
Servico and the Servico Subsidiaries has conducted its businesses only in the
ordinary and usual course and in a manner consistent with past
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practices. Except as disclosed on SCHEDULE 3.10: (i) there has not been any
Servico Material Adverse Effect; (ii) neither Servico nor any Servico Subsidiary
has engaged or agreed to engage in any of the actions described in Section
5.2(a) (except as otherwise specifically permitted therein); and (iii) there has
not been any event that would reasonably be expected to prevent or materially
delay the performance of Servico's material obligations pursuant to this
Agreement and the consummation of the Mergers by Servico.
3.11 CAPITALIZATION. The authorized capital stock of Servico consists
of 25 million shares of Servico Common Stock, of which 21,038,995 shares were
issued and outstanding as of March 20, 1998. The authorized capital stock of SHG
is 75 million shares of common stock and 25 million shares of preferred stock,
and the authorized capital stock of Servico Sub and Impac Sub is 1,000 shares
and 100 membership interests, respectively, of which 1,000 shares and 100
membership interests, respectively, are issued and outstanding as of the date
hereof. All shares of Servico's and each Servico Subsidiary's outstanding
capital stock have been duly authorized, are validly issued and outstanding, and
are fully paid and nonassessable. No securities issued by Servico or any Servico
Subsidiary from the date of its organization or incorporation to the date hereof
were issued in violation of any statutory or common law preemptive rights or the
rules and regulations of the Securities Act or any Blue Sky Laws.
3.12 TAX MATTERS. To the knowledge of Servico, neither Servico nor any
of its affiliates has taken or agreed to take any action (other than actions
contemplated by this Agreement) that would prevent the Servico Merger or any of
the Impac Affiliated Mergers (except the IHD Merger) from constituting a
transaction qualifying under Section 368(a) of the Code or would prevent the
Impac Merger or the IHD Merger from constituting a transaction qualifying under
Section 351 of the Code. Servico is not aware of any agreement, plan or other
circumstance that would prevent the Mergers from so qualifying under Section
368(a) or Section 351 of the Code.
3.13 TITLE TO PERSONAL PROPERTY AND CONDITION OF ASSETS. Servico and
the Servico Subsidiaries have good title to each item of personal (movable)
property, tangible and intangible, to the extent reflected on the Servico
Financial Statements and to each material item of material personal (movable)
property, tangible and intangible, acquired since December 31, 1996 (other than
property disposed of in the ordinary course of business consistent with past
practice since December 31, 1996), free and clear of any liens or other
encumbrances, except as set forth on the Servico Financial Statements or in
SCHEDULE 3.13 hereto and except for liens arising by operation of law in favor
of carriers, warehousemen, repairmen or landlords or other like liens which
arise in the ordinary course of business for amounts which are not due and
payable (all such personal property being hereinafter referred to as the
"Servico Personal Property"). All equipment, machinery, fixtures and other
Servico Personal Property owned or utilized by Servico or any Servico Subsidiary
are in an operating condition and a state of maintenance and repair adequate for
the conduct of their respective businesses.
3.14 REAL PROPERTY. SCHEDULE 3.14 sets forth a true and complete list
of all real property owned or leased by Servico or any Servico Subsidiary and a
description of all structures, fixtures or improvements ("Servico Improvements")
thereon has been made available to Impac (such real property and Servico
Improvements, collectively, the "Servico Real Property"). Servico and/or any
Servico Subsidiary has such title to the Servico Real Property as shown or
described on title insurance policies or commitments made available to Impac and
listed on SCHEDULE 3.14. To the knowledge of Servico, except as disclosed in
engineering reports made available to Impac or disclosed on SCHEDULE 3.14, all
Servico Improvements are
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in good structural condition, free of any structural or other defect or
impairment which could reasonably be expected to impair in any material respect
the value, utility or life expectancy of such Servico Improvements, or which
might otherwise adversely affect, in any material respect, the operation
thereof. Except as disclosed on SCHEDULE 3.14, neither the whole nor any portion
of the Servico Real Property is being condemned or otherwise taken by any public
authority, nor is any such condemnation or taking, to the knowledge of Servico,
threatened or contemplated. Servico has no information or knowledge of (a) any
change contemplated in any Law, (b) any judicial or administrative action, (c)
any action by adjacent landowners, or (d) any other fact or condition of any
kind or character which would materially adversely affect the current use or
operation of the Servico Real Property.
3.15 OPINION OF FINANCIAL ADVISOR. Lehman Brothers has delivered to the
Board of Directors its opinion to the effect that, as of March 11, 1998, the
Servico Exchange Ratio to be offered to the shareholders of Servico in the
proposed Servico Merger is fair to such shareholders from a financial point of
view. Lehman Brothers has authorized the inclusion of its opinion in the Joint
Proxy Statement.
3.16 DISCLOSURE. No representation or warranty of Servico herein
(including the exhibits and schedules hereto), and no certificate or notice
furnished or to be furnished by or on behalf of Servico to Impac or its agents
pursuant to this Agreement, contains or will, at the time it is made, contain
any untrue statement of a material fact or omits or will, at the time it is
made, omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading, in light of the circumstances under
which they were made.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF IMPAC AND THE IMPAC AFFILIATED COMPANIES
Impac and the Impac Affiliated Companies hereby jointly and severally
represent and warrant to Servico as follows:
4.1 ORGANIZATION, STANDING AND POWER. Each of Impac, each subsidiary of
Impac (the "Impac Subsidiaries") and each Impac Affiliated Company is a limited
liability company, limited partnership or corporation duly organized, validly
existing and in good standing under the laws of the state of its organization or
incorporation, as the case may be, and has all requisite right, power and
authority to enter into this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby.
4.2 MEMBERS' INTEREST. SCHEDULE 4.2 sets forth the name and state of
residence of each record and beneficial member of Impac (a "Member"), along with
the number of Impac Units each Member owns. The amount of cash and a description
and statement of the agreed value of the other property or services contributed
by each Member and which each Member has agreed to contribute to Impac is also
set forth on SCHEDULE 4.2. Except as set forth on SCHEDULE 4.2, no Member of
Impac has agreed to contribute any additional cash, property or services to the
capital of Impac. The Members own beneficially and of record 100% of the
outstanding Impac Units, representing all of the membership interests in Impac
except for the one Class B Ordinary Membership Interest owned by Banc One
Capital Partners III, Ltd.. Except as also set forth on SCHEDULE 4.2 hereto, to
the knowledge of Impac no written or oral agreement or understanding
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with Impac exists with respect to the disposition by any Member of the Impac
Units, or any portion thereof, or any rights attendant or relating thereto,
exists, other than this Agreement.
4.3 LEGAL, VALID AND BINDING AGREEMENT. The execution, delivery and
performance of this Agreement by Impac and each Impac Affiliated Company and the
consummation by Impac and each Impac Affiliated Company of the Mergers
contemplated hereby have been duly and effectively authorized by all requisite
action and no other corporate or company proceedings on the part of Impac or any
Impac Affiliated Company are necessary to authorize this Agreement or to
consummate such Mergers (other than, with respect to Impac, the approval of this
Agreement and the Mergers contemplated hereby by Members owning a majority of
the Impac Units at the Impac Special Meeting entitled to vote with respect
thereto at the Impac Special Meeting and the filing and recordation of the Impac
Articles of Merger, the P-Burg Articles of Merger, the Hazard Articles of
Merger, the Memphis Articles of Merger, the Delk Certificate of Merger, the IHD
Certificate of Merger, the IDC Certificate of Merger and the IHG Certificate of
Merger as required by the GLLCA, the FBCA, the KBCA and the DGCL, as
applicable). This Agreement has been duly executed and delivered by Impac and
each of the Impac Affiliated Companies and, assuming the due authorization,
execution and delivery by the other parties hereto, constitutes the legal, valid
and binding obligations of Impac and each of the Impac Affiliated Companies,
enforceable against Impac, each of the Impac Affiliated Companies and the
Members in accordance with its terms. The Members do not and will not have any
dissenters' rights or other similar statutory or contractual rights to be paid
the fair value of their membership interests in Impac by virtue of the Mergers.
None of the shareholders of the Impac Affiliated Companies will have exercised
or perfected any dissenters' rights or other similar statutory or contractual
rights to be paid the fair value of their shares of any Impac Affiliated Company
by virtue of the Mergers.
4.4 AUTHORITY TO DO BUSINESS. Each of Impac, the Impac Affiliated
Companies and the Impac Subsidiaries has all requisite power and authority and
all necessary governmental approvals to own, operate and lease its properties
and assets and to conduct its business as presently conducted, except where the
failure to have such approvals, individually or in the aggregate, would not have
an Impac Material Adverse Effect. SCHEDULE 4.4 sets forth (i) those
jurisdictions in which Impac, any of the Impac Affiliated Companies or any of
the Impac Subsidiaries manage or operate facilities and/or properties and (ii)
all jurisdictions in which Impac, any of the Impac Affiliated Companies or any
of the Impac Subsidiaries are qualified to do business. Each of Impac, the Impac
Affiliated Companies and the Impac Subsidiaries is duly qualified or licensed to
transact business and is in good standing as a foreign limited liability company
or foreign corporation, as the case may be, in all jurisdictions where the
ownership or leasing of its properties or the conduct of its business requires
such qualification or license, except where the failure to be so qualified or
licensed, individually or in the aggregate, would not have an Impac Material
Adverse Effect.
4.5 ARTICLES OF ORGANIZATION AND OPERATING AGREEMENT. Copies of the
Articles of Organization and Articles or Certificate of Incorporation (certified
by the appropriate public official in the state of organization or
incorporation) and the Operating Agreement and Bylaws of Impac and each Impac
Affiliated Company, in each case as in effect on the date hereof, have been
delivered to Servico and are complete and correct as of the date hereof. The
corporate minutes, written consents and records of Impac, the Impac Affiliated
Companies and the Impac Subsidiaries have been delivered to Servico and are
complete and correct as of the date hereof and reflect all material actions
taken by the Managers, Members, Board of Directors, any committee thereof,
incorporators and shareholders of each of Impac, the Impac
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Affiliated Companies and the Impac Subsidiaries from its respective date of
incorporation or organization to the date hereof.
4.6 SUBSIDIARIES; IMPAC AFFILIATED COMPANIES.
(a) SCHEDULE 4.6(A) lists all Impac Affiliated Companies and
all Impac Subsidiaries, their respective jurisdictions of incorporation or
organization, the number of shares of their respective capital stock or other
equity or membership interests issued and outstanding, and the record owners and
the amounts and percentage of ownership of such shares of capital stock or
equity or membership interests. Except as set forth on SCHEDULE 4.6, neither
Impac, any Impac Affiliated Company nor any Impac Subsidiary has any equity
investment in any other corporation, limited liability company, association,
partnership, joint venture or other entity. Except as set forth on SCHEDULE 4.6,
all of the outstanding membership interests or shares of capital stock of each
Impac Subsidiary are owned by either Impac or another Impac Subsidiary, free and
clear of all liens or other encumbrances.
(b) Except as described on SCHEDULE 4.6(B), the sole assets of
the Impac Affiliated Companies are Impac Units and none of the Impac Affiliated
Companies have any liabilities whatsoever. None of the Impac Affiliated
Companies presently conduct any business or operations and, from the date
hereof, none of the Impac Affiliated Companies shall conduct any business or
commence any operations whatsoever other than passive ownership of Impac Units.
None of the Impac Affiliated Companies are subject to and there is no basis for
assertion against any Impac Affiliated Company of, any claim, liability,
commitment or obligation of any nature, whether absolute, accrued, contingent or
otherwise.
4.7 NO VIOLATION OR CONFLICT. Except as set forth on SCHEDULE 4.7, the
execution, delivery and performance of this Agreement by Impac and the Impac
Affiliated Companies and the consummation by Impac and the Impac Affiliated
Companies of the transactions contemplated hereby do not and will not (i)
conflict with or violate any provision of the Articles of Organization, Articles
or Certificate of Incorporation, Operating Agreement or Bylaws of Impac, any
Impac Affiliated Company or any equivalent organizational documents of any Impac
Subsidiary or any Impac Affiliated Company, (ii) assuming that all consents,
approvals, authorizations and permits described in Section 4.8 have been
obtained and all filings and notifications described in Section 4.8 have been
made, violate or conflict with any Law applicable to Impac, any Impac Affiliated
Company or any Impac Subsidiary or by which any property or asset of Impac, any
Impac Affiliated Company or any Impac Subsidiary is bound or effected, and (iii)
with or without the passage of time or the giving of notice, result in the
breach of, or constitute a default, cause the acceleration of performance,
permit the unilateral modification or termination of, or require any consent
under, or result in the creation of any liens or other encumbrance upon any
property or assets of Impac, any Impac Affiliated Company or any Impac
Subsidiary pursuant to any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other obligation, except, with respect to
clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults
or other occurrences which would neither, individually or in the aggregate, (A)
have an Impac Material Adverse Effect nor (B) prevent or materially delay the
performance by Impac or any Impac Affiliated Company of its obligations pursuant
to this Agreement or the consummation of the Mergers.
4.8 GOVERNMENTAL CONSENTS. The execution and delivery of this Agreement
by each of Impac and the Impac Affiliated Companies does not, and the
performance by each of Impac and the Impac
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Affiliated Companies of its obligations hereunder and the consummation of the
Mergers will not, require any consent, approval, authorization or permit of, or
filing by Impac or any Impac Affiliated Company with or notification by Impac or
any Impac Affiliated Company to, any Governmental Entity, except (i) as set
forth on SCHEDULE 4.8; (ii) the premerger notification requirements of the HSR
Act and the filing and recordation of the respective Articles and Certificates
of Merger as referenced in Section 4.3 above; and (iii) where failure to obtain
such consents, approvals, authorizations or permits, or to make such filings or
notifications, would not (A) prevent or materially delay the performance by
Impac of its obligations pursuant to this Agreement and the consummation of the
Mergers or (B) individually or in the aggregate, have an Impac Material Adverse
Effect. Neither Impac, any Impac Affiliated Company nor any Impac Subsidiary is
subject to the periodic reporting requirements of the Exchange Act or required
to file any form, report or other document with the SEC, any stock exchange or
any other comparable Governmental Entity.
4.9 IMPAC STATEMENTS. Impac has previously delivered to Servico a true
and complete copy of the balance sheets of Impac, IHD and the Impac Subsidiaries
as of December 31, 1995, 1996 and 1997 and March 31, 1998, and the related
statements of income, cash flows and changes in member's equity of Impac, IHD
and the Impac Subsidiaries for the fiscal years ended December 31, 1995, 1996
and 1997 and March 31, 1998, including any related notes, certified (except for
the March 31, 1998 Financial Statements) without qualification, by
Pricewaterhouse Coopers LLP, Impac's independent public accountants, pursuant to
their audit of the financial records of Impac, IHD and the Impac Subsidiaries
(collectively, the "Impac Financial Statements"). The Impac Financial Statements
present fairly, in all material respects, Impac's, IHD's and the Impac
Subsidiaries' combined financial condition, assets, liabilities, equity, results
of operations and cash flows at the dates and for the periods specified in those
statements in accordance with GAAP applied on a consistent basis. Other than as
disclosed by the Impac Financial Statements or on SCHEDULE 4.9, neither Impac
nor any of the Impac Subsidiaries has any liabilities, commitments or
obligations of any nature whatsoever, whether accrued, contingent or otherwise
that would be required to be reflected on, or reserved against in, a combined
balance sheet of Impac, IHD and the Impac Subsidiaries or in the notes thereto,
prepared in accordance with GAAP, other than non-material liabilities,
commitments or obligations incurred by Impac or the Impac Subsidiaries, since
March 31, 1998 in the ordinary course of business consistent with past practices
to persons other than Managers, Members or other affiliates of Impac, or any
material unrealized or anticipated losses from any commitments of Impac or the
Impac Subsidiaries and, to Impac's knowledge, there is no reasonable basis for
assertion against Impac or any of the Impac Subsidiaries of any such liability,
commitment, obligation or loss. The Impac Financial Statements included in the
Registration Statement of SHG and Joint Proxy Statement of Servico and Impac
will satisfy the requirements of Regulation S-X promulgated by the SEC.
4.10 COMPLIANCE WITH LAWS.
(a) Except as set forth on SCHEDULE 4.10(A), each of Impac,
the Impac Affiliated Companies and the Impac Subsidiaries is in compliance with
all federal, state, local and foreign laws, ordinances, regulations, judgments,
rulings, orders and other legal requirements applicable to it, its operations or
its properties, including, without limitation, those relating to employment,
building, zoning,
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safety and health, and environmental matters, except where the failure to so
comply, individually or in the aggregate, would not have an Impac Material
Adverse Effect. Except as set forth on SCHEDULE 4.10(A) or as would not
reasonably be expected to have an Impac Material Adverse Effect, neither Impac,
any Impac Affiliated Company, nor any Impac Subsidiary has received notification
from any Governmental Entity asserting that it may not be in compliance with, or
may have violated, any of the Laws which said Governmental Entity enforces, or
threatening to revoke any authorization, consent, approval, franchise, license
or permit, and neither Impac, any Impac Affiliated Company, nor any Impac
Subsidiary is subject to any agreement or consent decree with any Governmental
Entity arising out of previously asserted violations.
(b) Without limiting the generality of Section 4.10(a), except
as disclosed by the environmental audits and reports listed on SCHEDULE 4.10,
copies of which have heretofore been delivered to Servico, or as otherwise set
forth on SCHEDULE 4.10, or as would not, individually or in the aggregate, have
an Impac Material Adverse Effect:
(i) Each of Impac, the Impac Affiliated Companies and
the Impac Subsidiaries are in compliance with all applicable
Environmental Laws. All past noncompliance of Impac, any Impac
Affiliated Company or any Impac Subsidiary with Environmental
Laws or Environmental Permits has been resolved without any
pending, ongoing or future obligation, cost or liability; and
(ii) neither Impac, any Impac Affiliated Company nor
any Impac Subsidiary has released a Hazardous Material at, or
transported a Hazardous Material to or from, any real property
currently or formerly owned, leased or occupied by Impac, any
Impac Affiliated Company or any Impac Subsidiary in violation
of any Environmental Law.
4.11 LEGAL PROCEEDINGS. Except as set forth on SCHEDULE 4.11, neither
Impac, any Impac Affiliated Company nor any Impac Subsidiary is a party to any
pending or, to the knowledge of Impac, threatened, legal, administrative or
other proceeding, arbitration or investigation, that is or would be reasonably
expected to, individually or in the aggregate, result in an Impac Material
Adverse Effect. Neither Impac nor any Impac Affiliated Company has any knowledge
of any set of facts which would reasonably be expected to result in any such
legal, administrative or other proceeding, arbitration or investigation
involving Impac, any Impac Affiliated Company or any Impac Subsidiary. Except as
set forth on SCHEDULE 4.11, neither Impac, any Impac Affiliated Company nor any
Impac Subsidiary is subject to any order, writ, injunction, decree, judgment,
stipulation, determination or award entered by or with any Governmental Entity
which could, individually or in the aggregate, reasonably be expected to have an
Impac Material Adverse Effect.
4.12 BROKERS. Other than Allen & Company Incorporated ("Allen &
Company"), Bear, Stearns & Co. Inc. and HW&E, neither Impac, any Impac
Affiliated Company nor any Impac Subsidiary has employed any financial advisor,
broker or finder in connection with the transactions contemplated by this
Agreement and has not incurred and none will incur any broker's, finder's,
investment banking or similar fees, commissions or expenses to any other party
in connection with the transactions contemplated by this Agreement. Impac has
provided to Servico complete and correct copies of all agreements between Impac
and Allen & Company pursuant to which such firm would be entitled to any payment
related to the
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Mergers. Notwithstanding the foregoing, Impac may retain another financial
advisor to advise it in connection with the transactions contemplated by this
Agreement provided (i) the aggregate amount of all fees, commissions or expenses
owing to all financial advisors and brokers engaged by Impac or any Impac
Subsidiary in connection with the transactions contemplated by this Agreement
shall in no event exceed $3.6 million and (ii) neither Impac, any Impac
Affiliated Company nor any Impac Subsidiary shall enter into any agreement with
any financial advisor which would, following the Closing, obligate Impac, any
Impac Affiliated Company, any Impac Subsidiary, their respective successors and
assigns, Servico or SHG to utilize such financial advisor or its affiliates in
connection with any other transactions.
4.13 ABSENCE OF MATERIAL ADVERSE CHANGES. Except as set forth on
SCHEDULE 4.13, since March 31, 1998: (i) each of Impac, IHD and the Impac
Subsidiaries has conducted its business only in the ordinary and usual course
and in a manner consistent with past practices and the business of each of the
Impac Affiliated Companies (other than IHD) has been limited to the passive
ownership of Impac Units or Holdings Units; (ii) there has not been any Impac
Material Adverse Effect, (iii) there has not been any event that would
reasonably be expected to prevent or materially delay the performance of Impac's
or any Impac Affiliated Company's material obligations pursuant to this
Agreement and the consummation of the Mergers by Impac and the Impac Affiliated
Companies; and (iv) neither Impac, any Impac Affiliated Company nor any Impac
Subsidiary has engaged or agreed to engage in any of the actions described in
Section 5.1 (except as otherwise specifically permitted in Section 5.1).
4.14 CAPITALIZATION. The only membership interests in Impac are the
Class A Ordinary Membership Interests and one Class B Ordinary Membership
Interest. The authorized capital stock of P- Burg consists of 200 shares of
P-Burg Common Stock, of which 200 shares are issued and outstanding; the
authorized capital stock of Hazard consists of 2,000 shares of Hazard Common
Stock, of which 2,000 shares are issued and outstanding; the authorized capital
stock of Memphis consists of 100,000 shares of Memphis Common Stock, of which
100,000 shares are issued and outstanding; the authorized capital stock of Delk
consists of 100 shares of Delk Common Stock, of which 100 shares are issued and
outstanding; the authorized capital stock of IHD consists of 2,000 shares of IHD
Common Stock, of which 2,000 shares are issued and outstanding; the authorized
capital stock of IDC consists of 2,000 shares of IDC Common Stock, of which
2,000 shares are issued and outstanding; and the authorized capital stock of IHG
consists of 100 shares of IHG Common Stock, of which 100 shares are issued and
outstanding. All such membership interests and each of the Impac Affiliated
Companies' and Impac's Subsidiaries' membership interests, partnership interests
or outstanding capital stock have been duly authorized, are validly issued and
outstanding, and are fully paid and nonassessable. No interests or securities
issued by Impac, any Impac Affiliated Company or any Impac Subsidiary from the
date of its organization or incorporation to the date hereof were issued in
violation of any statutory or common law preemptive rights or the rules and
regulations of the Securities Act or any Blue Sky Laws. There are no dividends
or distributions which have accrued or been declared but are unpaid on the
membership interests or capital stock of Impac, any Impac Affiliated Company or
any Impac Subsidiary. All Taxes required to be paid in connection with the
issuance by Impac, any Impac Affiliated Company or any Impac Subsidiary of its
respective membership interests or capital stock have been paid.
4.15 RIGHTS, WARRANTS, OPTIONS. Except as set forth on SCHEDULE 4.15,
there are no outstanding: (i) securities or instruments convertible into or
exercisable for any of the capital stock or other equity or membership interests
of Impac, any Impac Affiliated Company or any Impac Subsidiary; (ii) options,
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warrants, subscriptions or other rights to acquire capital stock or other equity
or membership interests of Impac, any Impac Affiliated Company or any Impac
Subsidiary; (iii) debt securities with any voting rights or convertible into
securities with voting rights; or (iv) commitments, agreements or understandings
of any kind, including employee benefit arrangements, relating to any capital
stock or other equity or membership interests of Impac, any Impac Affiliated
Company or any Impac Subsidiary, or the issuance or repurchase by Impac, any
Impac Affiliated Company or any Impac Subsidiary of any capital stock or other
equity or membership interests of Impac, any Impac Affiliated Company or any
Impac Subsidiary, any such securities or instruments convertible into or
exchangeable for capital stock or other equity or membership interests of Impac,
any Impac Affiliated Company or any Impac Subsidiary or any such options,
warrants or rights.
4.16 TITLE TO PERSONAL PROPERTY AND CONDITION OF ASSETS. Impac and the
Impac Subsidiaries have good title to each item of personal (movable) property,
tangible and intangible, to the extent reflected on the March 31, 1998 Impac
Financial Statements and to each item of material personal (movable) property,
tangible and intangible, acquired since March 31, 1998 (other than non-material
property disposed of in the ordinary course of business consistent with past
practice since March 31, 1998 to persons who are not Managers or Members or
other affiliates of Impac), free and clear of any liens or other encumbrances,
except as set forth on the March 31, 1998 Impac Financial Statements or in
SCHEDULE 4.16 hereto and except for liens arising by operation of law in favor
of carriers, warehousemen, repairmen or landlords or other like liens which
arise in the ordinary course of business for amounts which are not due and
payable (all such personal property being hereinafter referred to as the
"Personal Property"). All equipment, machinery, fixtures and other Personal
Property owned or utilized by Impac or any Impac Subsidiary are in an operating
condition and in a state of maintenance and repair adequate for the conduct of
their respective businesses. Except for leasehold interests and other leased
properties specifically identified in either SCHEDULE 4.16 or 4.17 hereto, and
except for equipment leases or other personal property leases with annual lease
payments of less than $20,000 or which are terminable by Impac or any Impac
Subsidiary without penalty or payment of any additional consideration upon less
than 90 days notice, there are no assets owned by any third party which are used
in the operations or the business of Impac or any Impac Subsidiary, as presently
conducted or proposed to be conducted. The Impac Affiliated Companies do not own
or lease any real or personal property or other assets, other than Impac Units
or Holdings Units, all of which are held free and clear of any liens or other
encumbrances.
4.17 REAL PROPERTY.
(a) SCHEDULE 4.17(A) hereto sets forth a true and complete
list of all real property owned or leased by Impac or any Impac Subsidiary,
together with a brief description of all structures, fixtures or improvements
("Improvements") thereon (such real property and Improvements, collectively, the
"Real Property"). Impac and/or an Impac Subsidiary owns good and marketable
title to the Real Property, free and clear of all liens, mortgages, security
interests, pledges, liens, conditional sales agreements, claims, restrictions,
reservations, covenants, encumbrances, charges, restraints on transfer, or any
other material title defect of any nature, other than liens for real property
taxes not yet due and other than those matters specifically disclosed on
SCHEDULE 4.17(A) or any title insurance policies or commitments provided to
Servico and listed on SCHEDULE 4.17(A), which matters, individually or in the
aggregate, do not adversely impair, in any material respect, the marketability
of the Real Property as it is now used by Impac or any Impac Subsidiary (the
"Permitted Exceptions"). Except as disclosed on SCHEDULE 4.17(A), all
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Improvements are in good structural condition, free of any structural or other
defect or impairment which might impair in any material respect the value,
utility, or life expectancy of such Improvements, or which might otherwise
adversely affect, in any material respect, the operation thereof. Except as
disclosed on any surveys delivered to Servico or in title commitments listed on
SCHEDULE 4.17(A), none of the Improvements encroach onto adjoining land or onto
any easements and there is no encroachment of improvements from adjoining land
onto any of the Real Property. To the knowledge of Impac, except as specifically
disclosed on the title insurance policies, commitments or surveys listed on
SCHEDULE 4.17(A), (i) none of the Real Property is located in an area identified
by any Governmental Entity as having special flood or mud slide hazards or
wetlands and (ii) there are no soil or geological conditions which might impair
or adversely affect in any material respect the current use of any of the Real
Property. Except as disclosed on SCHEDULE 4.17(A), neither the whole nor any
portion of the Real Property is being condemned or otherwise taken by any public
authority, nor is any such condemnation or taking, to the knowledge of Impac,
threatened or contemplated. Except as disclosed on SCHEDULE 4.17(A), no portion
of any of the Real Property is affected by any outstanding special assessments
or impact fees imposed by any Governmental Entity. Except for any Permitted
Exceptions, no commitments relating to the Real Property have been made to any
Governmental Entity, utility company, school board, church or other religious
body or any homeowner or homeowners association, merchant's association or any
other organization, group or individual which would impose an obligation upon
Impac or any Impac Subsidiary or its successors or assigns to make any
contribution or dedication of money or land or to construct, install or maintain
any improvements of a public or private nature on or off the Real Property; and
no Governmental Entity has imposed any requirement that any owner of the Real
Property pay directly or indirectly any special fees or contributions or incur
any expenses or obligations in connection with the Real Property. Impac has no
information or knowledge of (a) any change contemplated in any Law, (b) any
judicial or administrative action, (c) any action by adjacent landowners, or (d)
any other fact or condition of any kind or character which would materially
adversely affect the current use or operation of the Real Property. Neither any
Manager or Member nor any of their affiliates owns or leases, directly or
indirectly, any adjacent property to the Real Property. Except as disclosed on
SCHEDULE 4.17(A), neither the air rights over the Real Property nor any other
"development rights" with respect to the Real Property have been assigned,
transferred, leased or encumbered.
(b) SCHEDULE 4.17(B) hereto sets forth a true and complete
list of those portions of the Real Property whereon Impac or any Impac
Subsidiary is constructing new hotel projects (the "Construction Projects"),
together with a brief description of the Improvements to be constructed thereon,
the stage of completion, and projected completion date. SCHEDULE 4.17(B) further
sets forth a true and complete list of all construction contracts (including all
material amendments thereto) with respect to each of the Construction Projects
(the "Construction Contracts"). Except as set forth on SCHEDULE 4.17(B) all of
the Construction Contracts are in full force and effect as of the date hereof;
there are no material defaults thereunder; to the knowledge of Impac, all of the
contractors under the Construction Contracts are duly licensed in the states
where such Construction Contracts are being performed; there are full payment
and performance bonds for each Construction Contract, and as of the date hereof
no claims have been made against any surety under such payment and performance
bonds; all payments currently due have been made under the Construction
Contracts; and Impac or an Impac Subsidiary has available through existing
credit lines or other existing financing or equity, the funds necessary to
complete each of the Construction Projects and to pay the balance due under each
of the respective Construction Contracts.
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4.18 INTANGIBLE PROPERTY. Except as would not, individually or in the
aggregate, have an Impac Material Adverse Effect, Impac, the Impac Affiliated
Companies and the Impac Subsidiaries own or possess adequate licenses or other
valid rights to use all patents, patent rights, trademarks, trademark rights,
trade names, trade dress, trade name rights, copyrights, service marks, trade
secrets, applications for trademarks and for service marks, know-how and other
proprietary rights and information used or held for use in connection with the
respective businesses of Impac, the Impac Affiliated Companies and the Impac
Subsidiaries as currently conducted and Impac is unaware of any assertion or
claim challenging the validity of any of the foregoing. The conduct of the
respective businesses of Impac, the Impac Affiliated Companies and the Impac
Subsidiaries as currently conducted does not conflict in any way with any
patent, patent right, license, trademark, trademark right, trade dress, trade
name, trade name right, service mark or copyright of any third party that,
individually or in the aggregate, would have an Impac Material Adverse Effect.
To the knowledge of Impac, there are no infringements of any proprietary rights
owned by or licensed by or to Impac, the Impac Affiliated Companies or any Impac
Subsidiary that, individually or in the aggregate, would have an Impac Material
Adverse Effect.
4.19 GOVERNMENTAL AUTHORIZATIONS. Except as disclosed on SCHEDULE 4.19,
Impac, the Impac Affiliated Companies and the Impac Subsidiaries have in full
force and effect all authorizations, consents, approvals, franchises,
certificates, operating authorities, licenses and permits required under
applicable Law (collectively referred to as "Licenses") for the ownership of
Impac's, the Impac Affiliated Companies' and the Impac Subsidiaries' respective
properties, for the existing construction of all Construction Projects, and the
operation of their respective businesses as presently operated, except where the
failure to have any such Licenses would not reasonably be expected to have an
Impac Material Adverse Effect.
4.20 INSURANCE. SCHEDULE 4.20 sets forth a list and description of all
insurance policies existing as of the date hereof providing insurance coverage
of any nature to Impac, any Impac Affiliated Company or any Impac Subsidiary.
All such policies are in full force and effect, are valid and enforceable in
accordance with their terms and are sufficient for compliance with all Impac
Material Agreements, except where the failure to so comply would not have an
Impac Material Adverse Effect.
4.21 EMPLOYMENT MATTERS.
(a) LABOR RELATIONS. Except as set forth on SCHEDULE 4.21(A),
none of the managers or employees of Impac or any Impac Subsidiary is
represented by any labor union, and neither Impac nor any Impac Subsidiary is
subject to any labor or collective bargaining agreement. None of the Impac
Affiliated Companies have any employees. Except as set forth on SCHEDULE
4.21(A), none of the managers or employees of Impac or any Impac Subsidiary is
known by Impac to be engaged in organizing any labor union or other employee
group that is seeking recognition as a bargaining unit. Impac and the Impac
Subsidiaries have not experienced any material strike, work stoppage or labor
disturbance with any group of employees or managers, and to Impac's knowledge,
no set of facts exists which would reasonably be expected to lead to any of the
foregoing events.
(b) EMPLOYMENT POLICIES. Except as set forth on SCHEDULE
4.21(B), Impac has provided to Servico all of Impac's and the Impac
Subsidiaries' employee policies (written or otherwise), employee manuals or
other written statements of rules or policies concerning employment.
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(c) EMPLOYMENT AGREEMENTS. Except as set forth on SCHEDULE
4.21(C) and except for agreements that have terms of less than one year
involving less than $75,000 or annual payments of less than $75,000, there are
no employment, consulting, severance or indemnification agreements, or to the
knowledge of Impac, material understandings or arrangements between Impac or any
Impac Subsidiary and any manager, officer, director, consultant or employee.
Except as set forth on SCHEDULE 4.21(C), the terms of employment or engagement
of all managers, employees, agents, consultants and professional advisors
of Impac or any Impac Subsidiary are such that their employment or engagement
may be terminated by not more than two weeks' notice given at any time without
liability for payment of compensation or damages, except as required by
applicable Law.
(d) EMPLOYEE BENEFIT PLANS. Except as set forth on SCHEDULE
4.21(D), there are no pension, retirement, stock or equity purchase, stock or
equity bonus, stock or equity ownership, stock or equity option, profit sharing,
savings, medical, disability, hospitalization, insurance, deferred compensation,
bonus, incentive, welfare or any other employee benefit plan, policy, agreement,
commitment or arrangement maintained by or binding upon Impac, any Impac
Affiliated Company or any Impac Subsidiary for any of their managers, directors,
officers, consultants, employees or former employees (the "Impac Plans").
Neither Impac, any Impac Affiliated Company nor any Impac Subsidiary maintains
any funded welfare plans. SCHEDULE 4.21(D) also identifies each Impac Plan which
constitutes an "employee pension benefit plan" ("Impac Pension Plan") or an
"employee welfare benefit plan" ("Impac Welfare Plan"), as such terms are
defined in the Employee Retirement Income Security Act of 1974, as amended, and
the rules and regulations promulgated thereunder ("ERISA"). None of the Impac
Plans is a "multiemployer plan," as such term is defined in ERISA, or is subject
to Title IV of ERISA.
Impac has delivered to Servico current, accurate and complete copies of
each Impac Plan (including all other instruments relating thereto) and, to the
extent applicable, summary plan descriptions therefor and, to the extent
applicable, copies of their most recent (i) Internal Revenue Service
determination letter and any outstanding request for a determination letter;
(ii) Form 5500 and attached Schedule B (including any related actuarial
valuation report) with respect to the last three plan years for each Impac Plan;
(iii) certified financial statements; (iv) attorney's response to an auditor's
request for information; (v) collective bargaining agreements or other such
contracts; (vi) ruling letter and any outstanding request for a ruling letter
with respect to the tax-exempt status of any voluntary employees' beneficiary
association which is implementing such Impac Plan; and (vii) general
notification to employees of their rights under Code Section 4980B and form of
letter(s) distributed upon the occurrence of a qualifying event described in
Code Section 4980B, in the case of a Impac Plan that is a "group health plan" as
defined in Code Section 5000(b)(1).
Each Impac Pension Plan has been determined to be qualified under
Section 401(a) of the Code and, except as disclosed on SCHEDULE 4.21(D) to
Impac's knowledge, no facts or circumstances exist which could result in the
revocation of such qualification. Except as disclosed on SCHEDULE 4.21(D), each
Impac Plan has been administered in all material respects in accordance with its
terms and the Code, and each Impac Pension Plan and Impac Welfare Plan has been
administered in all material respects in accordance with ERISA. The assets of
each Impac Pension Plan are at least equal in value to the present value of the
accrued benefits of participants of such Plan. Except as disclosed on SCHEDULE
4.21(D), no facts or circumstances exist which could reasonably be expected to
give rise to any liability of any Impac Plan, Impac, any Impac Affiliated
Company, Servico, SHG or any subsidiary thereof to any person other than
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routine claims for benefits and for the fees and expenses of third parties
arising in the ordinary course of business which were incurred in connection
with the maintenance of such plans. Impac has paid all amounts required under
applicable Law, any Impac Pension Plan and any Impac Welfare Plan to be paid as
a contribution to each Impac Pension Plan and Impac Welfare Plan through the
date hereof. Except as disclosed on SCHEDULE 4.21(D), neither Impac, any Impac
Affiliated Company, any Impac Subsidiary, nor, to the knowledge of Impac, any
other person has engaged in any transaction or taken any other action with
respect to any Impac Plan which would subject Impac, Servico, SHG, any Impac
Affiliated Company or any subsidiary thereof to: (i) any Tax, penalty or
liability for prohibited transactions under ERISA or the Code; (ii) any Tax
under Code Sections 4971, 4972, 4976, 4977 or 4979; or (iii) a penalty under
ERISA Sections 502(c) or 502(l). None of Impac, any Impac Affiliated Company or
any Impac Subsidiary, or any manager, director, officer or employee of Impac,
any Impac Affiliated Company or any Impac Subsidiary, to the extent it or he is
a fiduciary with respect to any Impac Pension Plan or Impac Welfare Plan, has
breached any of its or his responsibilities or obligations imposed upon
fiduciaries under ERISA or the Code or which could result in any claim being
made under, by or on behalf of any Impac Pension Plan or Impac Welfare Plan or
any participant or beneficiary thereof which would reasonably be expected to
result in an Impac Material Adverse Effect. Each Impac Welfare Plan which is a
group health plan within the meaning of Code Section 5000(b)(1) complies in all
material respects with and in each and every case has complied in all material
respects with the applicable requirements of Code Section 4980B and Part 6 of
Title I of ERISA and does not benefit retirees, except as otherwise required by
law. As of the date thereof, there was no accrued vacation or sick leave payable
to any person by Impac, any Impac Affiliated Company or any Impac Subsidiary
which is not reflected in the Impac Financial Statements. None of the items
disclosed on Schedule 4.21(d) could reasonably be expected to have an Impac
Material Adverse Effect.
(e) PERSONNEL. SCHEDULE 4.21(E) sets forth: (i) the names of
all managers and officers of Impac, each Impac Affiliated Company and each Impac
Subsidiary; and (ii) the names and job designations of all employees of Impac
and each Impac Subsidiary whose salary (including bonuses) exceeds $100,000 per
annum. Except as disclosed in the Impac Financial Statements and except for
unpaid base compensation accrued in the ordinary course of business consistent
with past practice since September 30, 1997, there are no material sums due to
any employees, officers, directors or managers of Impac, any Impac Affiliated
Company or any Impac Subsidiary.
4.22 MATERIAL AGREEMENTS.
(a) SCHEDULE 4.22 sets forth a list of the following written
and oral agreements, arrangements or commitments (collectively, the "Impac
Material Agreements") to which either Impac, any Impac Affiliated Company or any
Impac Subsidiary is a party or by which it or any of its respective assets are
bound which are or would reasonably be expected to be material to the financial
position or results of operations of Impac, IHD and the Impac Subsidiaries on a
consolidated basis, including, but not limited to, any: (i) contract,
commitment, or agreement (a) resulting in a commitment for expenditure or other
obligation, or which provides for the receipt of amounts involving in excess of
$250,000, or a series or related contracts, commitments or agreements that in
the aggregate give rise to rights or liabilities exceeding such amounts or (b)
binding any Impac Affiliated Entity or any of its respective assets, regardless
of amount; (ii) indenture, mortgage, promissory note, loan agreement, guarantee
or other agreement or commitment relating to the borrowing of money, encumbrance
of assets or guaranty of any obligation in excess of $250,000; (iii) licensing,
franchise or royalty agreements or agreements providing
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for other similar rights or agreements with third parties involving annual
royalty payments in excess of $250,000; (iv) agreements which restrict Impac,
any Impac Affiliated Company or any Impac Subsidiary from engaging in any line
of business or from competing with any other person or entity anywhere in the
world; (v) agreements or arrangements for the sale of any of the assets,
property or rights of Impac, any Impac Affiliated Company or any Impac
Subsidiary or requiring the consent of any party to the transfer and assignment
of such assets, property and rights, except for agreements or arrangements to
sell products or services in the ordinary course of business consistent with
past practices; (vi) agreement, contract or arrangement with any affiliate of
Impac, any Impac Affiliated Company or any Impac Subsidiary or any affiliate of
any manager, officer, director or employee of Impac, any Impac Affiliated
Company or any Impac Subsidiary involving in excess of $60,000; (vii) any
indemnification, contribution or similar agreement or arrangement pursuant to
which Impac, any Impac Affiliated Company or any Impac Subsidiary may be
required to make any indemnification or contribution to any other person except
to the extent provided in the Articles of Organization or Operating Agreement of
Impac as in effect on the date hereof; or (viii) any other material contract,
agreement or instrument which cannot be terminated without penalty to Impac, any
Impac Affiliated Company or any Impac Subsidiary, upon the provision of not
greater than 30 days notice. True and correct copies of all written agreements
listed on SCHEDULE 4.22 have been furnished or made available to Servico.
(b) Except as set forth on SCHEDULE 4.22 or SCHEDULE 4.24, all
Impac Material Agreements have been entered into on an "arms-length" basis with
parties who are not affiliates of Impac, any Impac Affiliated Company or any
Impac Subsidiary. The Impac Material Agreements are each in full force and
effect and are the valid and legally binding obligations of Impac, the
applicable Impac Affiliated Company or the applicable Impac Subsidiary which is
a party to same and, to Impac's or any Impac Affiliated Company's knowledge,
have not been breached by any of the other parties thereto, except for those
breaches which would not, individually or in the aggregate, reasonably be
expected to have an Impac Material Adverse Effect, and are valid and binding
obligations of the other parties thereto. Neither Impac, any Impac Affiliated
Company nor any Impac Subsidiary is in default under its Articles of
Organization or Articles of Incorporation or Operating Agreement or Bylaws or in
material default or alleged material default under any Impac Material Agreement
to which it is a party, and, to the knowledge of Impac, no event has occurred
which with the giving of notice or lapse of time or both would constitute such a
default.
4.23 LIST OF ACCOUNTS. SCHEDULE 4.23 sets forth, as of the date hereof:
(i) the name of each bank or other institution in which Impac, any Impac
Affiliated Company or any Impac Subsidiary maintains an account (cash,
securities or other) or safe deposit box; and (ii) the account number of the
relevant account and a description of the type of account.
4.24 RELATED PARTY TRANSACTIONS. Except as set forth on SCHEDULE 4.22
OR 4.24 or reflected in the Impac Financial Statements, no director, officer,
manager, or other affiliate of Impac, any Impac Affiliated Company or any Impac
Subsidiary, (individually an "Impac Related Party" and collectively the "Impac
Related Parties") or any affiliate of any Impac Related Party: (i) owns,
directly or indirectly, any interest in any person which is a competitor of
Impac, any Impac Affiliated Company or any Impac Subsidiary, except for the
ownership of not more than 5% of the outstanding stock of any company listed by
a national stock exchange or the Nasdaq National Market; (ii) owns, directly or
indirectly, in whole or in part, any material property, asset (other than cash)
or right, real, personal or mixed, tangible or intangible, which is associated
with or necessary in the operation of the business of Impac, any Impac
Affiliated Company or
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any Impac Subsidiary, as presently conducted; or (iii) has an interest in or is,
directly or indirectly, a party to any contract, agreement, lease or arrangement
to which Impac, any Impac Affiliated Company or any Impac Subsidiary is bound or
is a party.
4.25 TAX MATTERS.
(a) Except as set forth on SCHEDULE 4.25(A), all federal,
state, local and foreign Tax returns and Tax reports, if any, required to be
filed with respect to the business or assets of Impac, the Impac Affiliated
Companies and the Impac Subsidiaries have been filed with the appropriate
governmental agencies in all jurisdictions in which such returns and reports are
required to be filed; all of the foregoing as filed are true, correct and
complete, and reflect accurately all liability for Taxes of Impac, the Impac
Affiliated Companies and the Impac Subsidiaries for the periods for which such
returns relate; and all amounts shown as owing thereon have been paid. Except as
set forth on SCHEDULE 4.25(A), none of such returns or reports have been audited
by any governmental authority.
(b) All Taxes, if any, payable by Impac, the Impac Affiliated
Companies and the Impac Subsidiaries or relating to or chargeable against any of
their assets, revenues or income through March 31, 1998, were fully paid by such
date or provided for by adequate reserves in the Impac Financial Statements, and
all similar items due through the Closing will have been fully paid by that date
or provided for by adequate reserves on the books of Impac, the Impac Affiliated
Companies and the Impac Subsidiaries.
(c) Except as set forth on SCHEDULE 4.25(C), none of Impac,
any of the Impac Affiliated Companies nor any of the Impac Subsidiaries will
have any liability with respect to any such Taxes including, but not limited to,
interest and/or penalties, in excess of the amount so paid or the reserves so
established on the books of Impac, the Impac Affiliated Companies and the Impac
Subsidiaries. Except as set forth on SCHEDULE 4.25(C), neither Impac, any of the
Impac Affiliated Companies nor any of the Impac Subsidiaries is delinquent in
the payment of any Tax. No deficiencies for any Tax have been asserted against
Impac, any of the Impac Affiliated Companies or any of the Impac Subsidiaries
with respect to any Taxes which have not been paid, settled or adequately
provided for and there exists no basis for the making of any such deficiency,
assessment or charge. None of the items disclosed on Schedule 4.25(c) could
reasonably be expected to have an Impac Material Adverse Effect.
(d) Except as set forth on SCHEDULE 4.25(D), neither Impac,
any of the Impac Affiliated Companies nor any of the Impac Subsidiaries has
waived any restrictions on assessment or collection of Taxes or consented to the
extension of any statute of limitations relating to federal, state, local or
foreign taxation.
4.26 QUALIFYING TRANSACTION. To the knowledge of Impac, neither Impac,
any of the Impac Affiliated Companies nor any of their respective affiliates has
taken or agreed to take any action (other than actions contemplated by this
Agreement) that would prevent the Servico Merger, or any of the Impac Affiliated
Mergers (except the IHD Merger) from constituting a transaction qualifying under
Section 368(a) of the Code or would prevent the Impac Merger or the IHD Merger
from constituting a transaction qualifying under Section 351 of the Code. Impac
is not aware of any agreement, plan or other circumstance that would prevent the
Mergers from so qualifying under Section 368(a) and Section 351 of the Code.
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4.27 AFFILIATES. SCHEDULE 4.27 sets forth the names and addresses of
those persons who may be deemed to be "affiliates" of Impac or any of the Impac
Affiliated Companies within the meaning of Rule 145 of the rules and regulations
promulgated under the Securities Act (each such person, an "Impac Affiliate").
4.28 OPINION OF FINANCIAL ADVISOR. Allen & Company has delivered to the
Manager its opinion to the effect that the Impac Exchange Ratio is fair to the
Members from a financial point of view. Allen & Company has authorized the
inclusion of its opinion in the Joint Proxy Statement.
4.29 DISCLOSURE. No representation or warranty of Impac or any Impac
Affiliated Company herein (including the exhibits and schedules hereto), and no
certificate furnished or to be furnished by or on behalf of Impac or any Impac
Affiliated Company to Servico or its agents pursuant to this Agreement, contains
or will, at the time it is made, contain any untrue statement of a material fact
or omits or will, at the time it is made, omit to state a material fact
necessary in order to make the statements contained herein or therein not
misleading, in light of the circumstances under which they were made.
ARTICLE V
COVENANTS
5.1 INTERIM OPERATIONS OF IMPAC AN THE IMPAC AFFILIATED COMPANIES.
During the period from the date of this Agreement to the Effective Time, Impac
shall, and shall cause each Impac Subsidiary to, operate its business only in
the usual and ordinary course consistent with past practices and (i) use
reasonable good faith efforts to preserve intact its business organization and
goodwill in all material respects, (ii) continuously maintain insurance coverage
substantially equivalent to the insurance coverage in existence on the date
hereof, and (iii) use reasonable good faith efforts to maintain its
relationships with franchisors, licensors, distributors, suppliers and others
with which it has business relations. During such period, none of the Impac
Affiliated Companies shall conduct any business or commence any operations other
than the passive ownership of Impac Units. Except as otherwise expressly
contemplated herein (including the provisions of Section 4.12) or set forth on
SCHEDULE 5.1, without the written consent of Servico, which consent shall not be
unreasonably withheld or delayed, Impac shall not, nor shall it cause or permit
any Impac Subsidiary to, and no Impac Affiliated Company shall (i) amend or
otherwise change its Articles of Organization or Articles or Certificate of
Incorporation or Operating Agreement or Bylaws or other charter documents; (ii)
issue, sell or authorize for issuance or sale, any membership interests or
shares of any class of its securities (including, but not limited to, by way of
stock split or dividend) or other equity interests or any subscriptions,
options, warrants, rights or convertible securities or enter into any agreements
or commitments of any character obligating it to issue or sell any such
membership interests, securities or other equity interests; (iii) redeem,
purchase or otherwise acquire, directly or indirectly, any of its membership
interests or any shares of capital stock or other equity interests or any
option, warrant or other right to purchase or acquire any such shares,
membership interests or other equity interests or return all or any portion of
any capital contributions; (iv) enter into any commitment or transaction
(including, but not limited to, any capital expenditure or sale of assets),
other than in the ordinary course of business consistent with past practices;
provided, however, that no commitment or transaction involving the receipt or
potential receipt of in excess of Five Hundred Thousand Dollars ($500,000) or
payment or potential payment of in excess of Five Hundred Thousand Dollars
($500,000) shall be entered into without
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the prior written consent of Servico, which shall not be unreasonably withheld
or delayed; (v) create, incur or assume any long-term indebtedness or short-term
indebtedness or indebtedness for borrowed money (including purchase money
financing), except in the ordinary course of business consistent with past
practices under an existing loan availability (but in no event in an aggregate
amount exceeding Two Hundred Fifty Thousand Dollars ($250,000) more than is
currently owed and outstanding as of the date hereof) and except for
indebtedness in the amounts and for the purposes indicated on SCHEDULE 5.1, or
any lien, pledge, mortgage or other encumbrance affecting any of its assets;
(vi) pay, discharge or satisfy claims, liabilities or obligations (absolute,
accrued, contingent or otherwise) which involve payments or commitments to make
payments which exceed normal business operating requirements, consistent with
past practice; (vii) cancel any debts or waive any claims or rights other than
the cancellation of immaterial debts or waiver of immaterial claims, in the
ordinary course of business and consistent with past practice, of persons who
would not be deemed affiliates of Impac or any Impac Subsidiary; (viii) make any
loans, advances or capital contributions to, or investments in financial
instruments of, any person or entity other than capital contributions to Impac
Subsidiaries consistent with past practices; (ix) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person or entity other than
immaterial assumptions, guarantees or endorsements made in the ordinary course
of business and consistent with past practice in favor of persons who would not
be deemed affiliates of Impac or any Impac Subsidiary; (x) grant any increase in
the compensation payable or to become payable to any of its managers, officers,
employees or consultants or establish, adopt or increase any bonus, insurance or
other employee benefit plan, payment or arrangement made to, for or with any
such persons or pay any bonus to any manager, officer, director or employee,
other than increases in the compensation or bonuses payable to such persons
(other than Robert Cole or Robert Flanders), in the ordinary course of business
and consistent with past practice; (xi) enter into any employment agreement or
grant any severance or termination pay with or to any manager, officer or
director or, except in the ordinary course of business consistent with past
practices, any employee; (xii) declare or pay any dividend or other distribution
(whether in cash, stock, membership interests or other property) with respect to
is membership interests or capital stock; (xiii) alter in any material way the
manner of keeping its books, accounts or records or its accounting practices
therein reflected; (xiv) enter into any agreement which would be an Impac
Material Agreement or terminate or materially amend any existing Impac Material
Agreement; (xv) enter into any indemnification, contribution or similar
agreement requiring it to indemnify any other person or entity or make
contributions to any other person or entity other than immaterial
indemnification, contribution or similar agreements made in the ordinary course
of business and consistent with past practice with persons who would not be
deemed affiliates of Impac, any Impac Affiliated Company or any Impac
Subsidiary; (xvi) do any act, or omit to do any act, or permit, to the extent
within Impac's control, any act or omission to act which would cause a material
violation or breach of any of the representations, warranties or covenants of
Impac or any Impac Affiliated Company set forth in this Agreement; (xvii) enter
into any agreement or take any action which could have an Impac Material Adverse
Effect (financial or otherwise); or (xviii) agree, whether in writing or
otherwise, to do any of the foregoing.
5.2 INTERIM OPERATIONS OF SERVICO.
(a) During the period from the date of this Agreement to the
Effective Time, Servico shall, and shall cause each Servico Subsidiary to,
operate its business only in the usual and ordinary course consistent with past
practices and shall (i) use reasonable good faith efforts to preserve intact its
business
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organization and goodwill in all material respects, (ii) continuously maintain
insurance coverage substantially equivalent to the insurance coverage in
existence on the date hereof, and (iii) use reasonable good faith efforts to
maintain its relationships with franchisors, licensors, distributors, suppliers
and others with which it has business relations. Except as otherwise expressly
contemplated herein or set forth on SCHEDULE 5.2, without the written consent of
Impac, which consent shall not be unreasonably withheld or delayed, Servico and
the Servico Subsidiaries shall not (i) do any act, or omit to do any act, or
permit, to the extent within Servico's control, any act or omission to act which
could cause a material violation or breach of any of the representations,
warranties or covenants of Servico set forth in this Agreement; (ii) enter into
any agreement or take any action which could have a Servico Material Adverse
Effect (financial or otherwise); (iii) enter into any commitment or transaction
which would be dilutive to Servico's earnings per share in the fiscal year in
which such transaction is consummated; (iv) enter into any commitment or
transaction outside of the ordinary course of Servico's business requiring the
payment of in excess of Two Million Dollars ($2,000,000) or create, incur or
assume indebtedness in excess of Five Million Dollars ($5,000,000) other than in
connection with or related to the acquisition, operation or renovation of hotel
or hotel related properties; (v) issue or sell any shares of its Common Stock or
securities convertible into its Common Stock other than either pursuant to or in
connection with (A) options granted to directors or employees or shares issued
pursuant to currently outstanding options or warrants and (B) transactions
involving shares representing no more than ten percent (10%) of Servico's
outstanding Common Stock; or (vi) agree, whether in writing or otherwise, to do
any of the foregoing.
(b) During the period from the date of this Agreement to the
Effective Time, in the event that Servico determines to acquire hotels and
related properties for an aggregate purchase price of more than One Hundred
Million Dollars ($100,000,000) (excluding any hotels currently under contract
such as the AMI Operating Partners, L.P. properties), then Servico shall
promptly notify Impac. If Impac reasonably determines that such acquisitions
will result in a Material Adverse Effect or materially change the nature of
Servico's operations, then Impac may exercise its right to terminate this
Agreement pursuant to Section 7.4(i) of this Agreement.
5.3 ACCESS.
(a) SERVICO ACCESS. Servico shall: (i) afford to Impac and its
agents and representatives reasonable access to the properties, books, records
and other information of Servico and the Servico Subsidiaries, provided that
such access shall be granted upon reasonable notice and at reasonable times
during normal business hours in such a manner as to not unreasonably interfere
with normal business operations; (ii) use its reasonable efforts to cause
Servico's personnel, without unreasonable disruption of normal business
operations, to assist Impac in its investigation of Servico and the Servico
Subsidiaries pursuant to this Section 5.3(a); and (iii) furnish promptly to
Impac all information and documents concerning the business, assets,
liabilities, properties and personnel of Servico and Servico Subsidiaries as
Impac may from time to time reasonably request. In addition, from the date of
this Agreement until the Closing, Servico shall cause one or more of its
officers to confer on a regular basis with the Manager of Impac and to report on
the general status of Servico's ongoing operations.
(b) IMPAC ACCESS. Impac and each Impac Affiliated Company
shall: (i) afford to Servico and its agents and representatives full access to
the properties, books, records and other information of Impac, the Impac
Affiliated Companies and the Impac Subsidiaries, provided that such
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access shall be granted upon reasonable notice and at reasonable times during
normal business hours in such a manner as to not unreasonably interfere with
normal business operations; (ii) use its reasonable efforts to cause Impac's
personnel, without unreasonable disruption of normal business operations, to
assist Servico in its investigation of Impac, the Impac Affiliated Companies and
the Impac Subsidiaries pursuant to this Section 5.3(b); and (iii) furnish
promptly to Servico all information and documents concerning the business,
assets, liabilities, properties and personnel of Impac, the Impac Affiliated
Companies and the Impac Subsidiaries as Servico may from time to time reasonably
request. In addition, from the date of this Agreement until the Closing, Impac
shall cause one or more of its managers or officers to confer on a regular basis
with officers of Servico and to report on the general status of Impac's ongoing
operations.
5.4 CONSENTS. Each of Impac, the Impac Affiliated Companies and Servico
agrees to cooperate with each other, file, submit or request promptly after the
date of this Agreement and to prosecute diligently any and all applications or
notices required to be filed or submitted to any Governmental Entity, including
those specified in Sections 3.5 and 4.8. Each of Impac, the Impac Affiliated
Companies and Servico shall promptly make available to the other such
information as each of them may reasonably request relating to its business,
assets, liabilities, properties and personnel as may be required by each of them
to prepare and file or submit such applications and notices and any additional
information requested by any Governmental Entity, and shall update by amendment
or supplement any such information given in writing. Each of Impac, the Impac
Affiliated Companies, on the one hand, and Servico, on the other hand,
represents and warrants to the other that such information, as amended or
supplemented, shall be true and not misleading. Each of Impac, the Impac
Affiliated Companies and Servico shall promptly provide the other with copies of
all filings made with Governmental Entities in connection with this Agreement.
5.5 REASONABLE EFFORTS. Subject to the terms and conditions of this
Agreement, each of the parties shall use its reasonable efforts in good faith to
take or cause to be taken as promptly as practicable all reasonable actions that
are within its control to cause to be fulfilled those conditions precedent to
its obligations to consummate the Merger. The parties shall use reasonable
efforts to obtain all consents and approvals required in connection with the
consummation of the transactions contemplated by this Agreement.
5.6 NOTIFICATION. Each party to this Agreement shall promptly notify
the other parties in writing of the occurrence, or threatened occurrence, of (i)
any event that, with the lapse of time or notice or both, would constitute a
violation or breach of this Agreement by such party, (ii) any event that would
cause any representation or warranty made by such party in this Agreement to be
false or misleading in any respect; and (iii) any other matter which may occur
from and after the date of this Agreement which, if existing on the date of such
Agreement, would have been required to be disclosed herein. The updating of any
schedule pursuant to this Section 5.6 shall not be deemed to release any party
for the breach of any representation, warranty or covenant hereunder or of any
other liability arising hereunder.
5.7 NO SOLICITATION. Except for the transactions contemplated by this
Agreement, unless and until this Agreement shall have been terminated, neither
Impac nor any Impac Affiliated Company shall (nor shall it permit any of its
managers, officers, directors, agents or affiliates to) enter into a binding
agreement to sell all or substantially all of the business, assets or capital
stock or membership units of Impac, any Impac Affiliated Company or any Impac
Subsidiary, whether by merger, purchase of assets or otherwise (a "Competing
Transaction") and shall not, directly or indirectly:
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(i) from the period from the date of this Agreement to May 1,
1998, except as required by Law or under an appropriate confidentiality
agreement, disclose any non-public information or any other information not
customarily disclosed to any person or entity concerning the business or assets
of Impac, any Impac Affiliated Company and any Impac Subsidiary or afford to any
person or entity (other than Servico and its designees) access to the books or
records of Impac or any Impac Subsidiary; and
(ii) after May 1, 1998 or such later date during which Servico
is actively negotiating with any Designated Person or enters into active
negotiations with any other third party with respect to any offer or proposal
regarding a Change of Control (such date being hereinafter referred to as the
"Designated Date"), solicit, encourage, initiate or participate in any
negotiations or discussions with respect to any offer or proposal to acquire all
or substantially all of the business, assets or capital stock or membership
interests of Impac, any Impac Affiliated Company or any Impac Subsidiary,
whether by merger, purchase of assets or otherwise, or, except as required by
Law, disclose any nonpublic information or any other information not customarily
disclosed to any person or entity concerning the business and assets of Impac,
any Impac Affiliated Company and any Impac Subsidiary, afford to any person or
entity (other than Servico and its designees) access to the books or records of
Impac, any Impac Affiliated Company or any Impac Subsidiary or otherwise assist
or encourage any person or entity in connection with any of the foregoing. In
the event Impac or any Impac Affiliated Company shall receive or become aware of
any offer or proposal of the type referred to in the foregoing provision, Impac
shall promptly inform Servico as to any such offer or proposal.
5.8 CONFIDENTIALITY. The parties acknowledge that all confidential or
proprietary information with respect to the business and operations of the other
party and their respective subsidiaries is valuable, special and unique. The
parties shall not disclose, directly or indirectly, to any person or entity, or
use or purport to authorize any person or entity to use any confidential or
proprietary information with respect to the other party or any of their
respective subsidiaries, without the prior written consent of the other party,
including without limitation, information as to the financial condition, results
of operations, customers, suppliers, proposed projects, projects under
development, services, services under development, inventions, sources, leads or
methods of obtaining new business or projects, pricing methods or formulas,
costs, marketing strategies or any other information relating to Impac, any
Impac Affiliated Company or Servico or any of their respective subsidiaries,
which could reasonably be regarded as confidential or proprietary, but not
including information which (i) is or shall become generally available to the
public, other than as a result of an unauthorized disclosure by any of the
parties or any of its affiliates, (ii) becomes available to the other party on a
nonconfidential basis from a source other than a party to this Agreement,
provided such source is not in violation of a confidentiality agreement with the
party providing such information or (iii) is required to be disclosed by law or
by the rules and regulations of the NYSE. The covenants of the parties contained
in this Section 5.8 shall survive any termination of this Agreement.
5.9 PUBLICITY. The parties agree to consult and cooperate with each
other in issuing any press release or other public announcement or making any
governmental filing concerning this Agreement or the transactions contemplated
hereby. Nothing contained herein shall prevent any party from at any time
furnishing any information to any Governmental Entity which it is by Law or
pursuant to the rules and regulations of the NYSE so obligated to disclose or
from making any disclosure which its independent outside counsel (which may be
such party's regularly engaged outside counsel) deems (in the case of
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governmental filings, in writing) necessary in order to fulfill such party's
disclosure obligations under applicable law, or the rules and regulations of the
NYSE.
5.10 LETTERS OF ACCOUNTANTS. Each of Servico and Impac shall use all
reasonable efforts to cause to be delivered to the other a "comfort" letter of
each of Ernst & Young L.L.P. and Pricewaterhouse Coopers LLP, respectively, each
such letter dated and delivered as of the date the Registration Statement shall
have become effective and as of the Effective Time, and addressed to Servico and
Impac, respectively, in form and substance reasonably satisfactory to the
recipient thereof and reasonably customary in scope and substance for letters
delivered by independent public accountants in connection with mergers such as
those contemplated by this Agreement.
5.11 PLAN OF REORGANIZATION. This Agreement is intended to constitute a
"plan of reorganization" within the meaning of Section 1.368-2(g) of the income
tax regulations promulgated under the Code. From and after the date of this
Agreement, each party hereto shall use all reasonable efforts to cause the
Mergers to qualify, and shall not, without the prior written consent of the
other parties hereto, knowingly take any actions or cause any actions to be
taken which could prevent the Servico Merger or any of the Impac Affiliated
Mergers (except the IHD Merger) from qualifying as a reorganization under the
provisions of Section 368(a) of the Code or the Impac Merger or the IHD Merger
as a transfer of property described in Section 351 of the Code. In the event
that the Mergers shall fail to qualify as transactions under the provisions of
Section 351 and 368(a) of the Code, as the case may be, then the parties hereto
agree to negotiate in good faith to restructure the Mergers in order that they
shall qualify as tax-free transactions under the Code. Following the Effective
Time, and consistent with any such consent, none of the Surviving Corporations,
Servico, Impac, the Impac Affiliated Companies, SHG nor any of their affiliates
shall knowingly take any action or knowingly cause any action to be taken which
would cause the Mergers to fail to qualify as a reorganization under Section
368(a) of the Code or as a transfer of property described in Section 351 of the
Code, as the case may be.
5.12 REGISTRATION STATEMENT; JOINT PROXY STATEMENT.
(a) As promptly as practicable after the execution of this
Agreement, Servico and Impac shall jointly prepare and SHG shall file with the
SEC a document or documents that will constitute (i) the prospectus forming part
of the registration statement on Form S-4 of SHG (together with all amendments
thereto, the "Registration Statement"), in connection with the registration
under the Securities Act of (A) the SHG Common Stock to be issued to Servico's
and each of the Impac Affiliated Companies' shareholders pursuant to the Servico
Merger and the Impac Affiliated Mergers and (B) the SHG Common Stock to be
issued to Impac's Members pursuant to the Impac Merger, and (ii) the Joint Proxy
Statement with respect to the Mergers relating to the special meeting of each of
Servico's shareholders (the "Servico Special Meeting") and Impac's Members (the
"Impac Special Meeting" and, together with the Servico Special Meeting, the
"Special Meetings") to be held to consider the approval of this Agreement and
the Mergers contemplated hereby (such document, together with any amendments
thereto, the "Joint Proxy Statement"). Copies of the Joint Proxy Statement shall
be provided to the NYSE in accordance with the rules of such exchange. Each of
the parties hereto shall use all reasonable efforts to cause the Registration
Statement to become effective as promptly as practicable, and, prior to the
effective date of the Registration Statement, the parties hereto shall take all
action required under any applicable Laws in connection with the issuance of
shares of SHG Common Stock pursuant to the Mergers. Servico, Impac or the Impac
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Affiliated Companies, as the case may be, shall furnish all information
concerning Servico, Impac or the Impac Affiliated Companies (including updated
financial information as required by Regulation S-X) as the other party may
reasonably request in connection with such actions and the preparation of the
Registration Statement and Joint Proxy Statement. As promptly as practicable
after the effective date of the Registration Statement, the Joint Proxy
Statement shall be mailed to the shareholders of Servico and the Impac
Affiliated Companies and the Members of Impac. Each of the parties hereto shall
cause the Joint Proxy Statement to comply as to form and substance in all
material respects with the applicable requirements of (i) the Exchange Act, (ii)
the NYSE, (iii) the Securities Act and (iv) the FBCA and the GLLCA.
(b) (i) The Joint Proxy Statement shall include the adoption
of the Mergers and recommendation of the Board of Directors of Servico to
Servico's shareholders that they vote in favor of approval of this Agreement and
the Mergers contemplated hereby. In addition, the Joint Proxy Statement shall
include the opinion of Lehman Brothers referred to in Section 3.15.
(ii) The Joint Proxy Statement shall reflect (A) the
approval of the Mergers and recommendation of the Manager of Impac to Impac's
Members that they vote in favor of approval of this Agreement and the Mergers
contemplated hereby and (B) the adoption and approval of the Mergers by the
Board of Directors and the requisite percentage of the shareholders of each of
the Impac Affiliated Companies. In addition, the Joint Proxy Statement shall
include the opinion of Allen & Company referred to in Section 4.28.
(c) No amendment or supplement to the Joint Proxy Statement or
the Registration Statement shall be made without the approval of Servico and
Impac, which approval shall not be unreasonably withheld or delayed. Each of the
parties hereto shall advise the other parties hereto, promptly after it receives
notice thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, of the issuance of any stop
order, of the suspension of the qualification of the SHG Common Stock issuable
in connection with the Mergers for offering or sale in any jurisdiction, or of
any request by the SEC or the NYSE for amendment of the Joint Proxy Statement or
the Registration Statement or comments thereon and responses thereto or requests
by the SEC for additional information.
(d) The information supplied by Impac or any Impac Affiliated
Company for inclusion in the Registration Statement and the Joint Proxy
Statement shall not, at (i) the time the Registration Statement is filed with
the SEC, (ii) if different, the time the Registration Statement is declared
effective, (iii) the time the Joint Proxy Statement (or any amendment thereof or
supplement thereto) is first mailed to the Members of Impac and the shareholders
of Servico and the Impac Affiliated Companies, (iv) the time of the Impac
Special Meeting, (v) the time of the Servico Special Meeting and (vi) the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. If at any time prior to the Effective Time any event or
circumstance relating to Impac, any Impac Affiliated Company or any Impac
Subsidiary, or their respective managers, officers or directors, should be
discovered by Impac or any Impac Affiliated Company that should be set forth in
an amendment or a supplement to the Registration Statement or Joint Proxy
Statement, Impac shall promptly inform Servico.
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(e) The information supplied by Servico for inclusion in the
Registration Statement and the Joint Proxy Statement shall not, at (i) the time
the Registration Statement is filed with the SEC, (ii) if different, the time
the Registration Statement is declared effective, (iii) the time the Joint Proxy
Statement (or any amendment thereof or supplement thereto) is first mailed to
the shareholders of Servico and the Impac Affiliated Companies and the Members
of Impac, (iv) the time of the Impac Special Meeting, (v) the time of the
Servico Special Meeting and (vi) the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. If, at any time
prior to the Effective Time, any event or circumstance relating to Servico or
any Servico Subsidiary, or their respective officers or directors, should be
discovered by Servico that should be set forth in an amendment or a supplement
to the Registration Statement or Joint Proxy Statement, Servico shall promptly
inform Impac.
5.13 SPECIAL MEETINGS. Impac shall call and hold the Impac Special
Meeting and Servico shall call and hold the Servico Special Meeting as promptly
as practicable for the purpose of voting upon the approval of this Agreement
pursuant to the Joint Proxy Statement and the Mergers contemplated hereby, and
each of Servico and Impac shall use its reasonable efforts to hold the Special
Meetings on the same day and as soon as practicable after the date on which the
Registration Statement becomes effective. Impac shall use its reasonable efforts
to solicit from its Members, proxies in favor of the approval of this Agreement
and the Mergers contemplated hereby pursuant to the Joint Proxy Statement and
shall take all other action necessary or advisable to secure the vote or consent
of Members required by the GLLCA. Servico shall use its reasonable efforts to
solicit from its shareholders proxies in favor of the approval of this Agreement
and the Mergers contemplated hereby pursuant to the Joint Proxy Statement, and
shall take all other action necessary or advisable to secure the vote or consent
of its shareholders required by the FBCA or applicable stock exchange
requirements to obtain such approval. Each of the parties hereto shall take all
other action necessary or, in the opinion of the other parties hereto, advisable
to promptly and expeditiously secure any vote or consent of shareholders or
Members required by applicable Law and such party's Articles of Incorporation or
Articles of Organization and Bylaws or Operating Agreement to effect the
Mergers.
5.14 EMPLOYEE BENEFITS MATTERS.
(a) Except as otherwise provided herein, each benefit plan of
Servico (the "Servico Plans") and the Impac Plans in effect as of the Effective
Time shall be maintained in effect with respect to the employees or former
employees of Servico and the Servico Subsidiaries, on the one hand, and of Impac
and the Impac Subsidiaries, on the other hand, respectively, who are covered by
such benefit plans immediately prior to the Closing until SHG otherwise
determines after the Effective Time; PROVIDED, HOWEVER, that nothing contained
herein shall limit any reserved right in any Servico Plan or Impac Plan to
amend, modify, suspend, revoke or terminate any such plan.
(b) With respect to any Servico Plan or benefit plan of SHG
under which the delivery of Servico Common Stock or SHG Common Stock, as the
case may be, is required upon payment of benefits, grant of awards or exercise
of options (the "Stock Plans"), SHG shall take all corporate action necessary or
appropriate to (i) obtain shareholder approval with respect to such plan to the
extent such approval is required for purposes of the Code or other applicable
law, or to enable such plan to comply
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with Rule 16b-3 promulgated under the Exchange Act, (ii) reserve for issuance
under such plan or otherwise provide a sufficient number of shares of SHG Common
Stock for delivery upon payment of benefits, grant of awards or exercise of
options under such plan and (iii) as soon as practicable after the Effective
Time, file registration statements on Form S-3 or Form S-8, as appropriate (or
any successor or other appropriate forms), with respect to the shares of SHG
Common Stock subject to such plan to the extent such registration statement is
required under applicable law, and SHG shall use its best efforts to maintain
the effectiveness of such registration statements (and maintain the current
status of the prospectuses contained therein) for so long as such benefits and
grants remain payable and such options remain outstanding. Further, SHG shall
reserve for issuance under a stock option plan approved by the Board of
Directors of SHG, that number of shares of SHG Common Stock which equals seven
and one-half percent (7-1/2%) of the Base Number, such options to be granted to
certain employees of Impac or any Impac Subsidiary. SHG agrees that such options
shall be granted to such employees effective as of the Closing and in the names
and respective allocations determined by the Board of Directors of SHG after
consideration of recommendations from Robert Cole and the grants of stock
options made to employees in comparable positions at Servico and the Servico
Subsidiaries. With respect to those individuals who subsequent to the Mergers
will be subject to the reporting requirements under Section 16(a) of the
Exchange Act, SHG shall administer the Stock Plans, where applicable, in a
manner that complies with Rule 16b-3 promulgated under the Exchange Act.
(c) Without limiting the applicability of the foregoing or of
Section 2.8 hereof, each of the parties hereto shall take all actions as are
necessary to ensure that Servico and Impac shall not be, at the Effective Time,
bound by any options, stock or equity appreciation rights, warrants or other
rights or agreements which would entitle any person, other than SHG, to own any
capital stock or interests of the Surviving Corporations or to receive any
payment in respect thereof, and all Servico Plans conferring any rights with
respect to shares or other capital stock or interests of Servico shall be deemed
hereby to be amended to be in conformity with this Section 5.14.
5.15 EXECUTIVE OFFICERS. At the Effective Time, subject to the Bylaws
of SHG and each of the Surviving Corporations (i) David A. Buddemeyer shall hold
the position of Chief Executive Officer of SHG and each of the Surviving
Corporations, (ii) Robert S. Cole shall hold the position of President of SHG
and each of the Surviving Corporations and (iii) David Buddemeyer and Robert
Cole shall hold the positions of Co-Chairmen of the Board of Directors of SHG
and each of the Surviving Corporations. If any of such persons is unable or
unwilling to hold such offices as set forth above, his successor shall be
selected by the Board of Directors of SHG or the Surviving Corporations in
accordance with their respective Bylaws.
5.16 AFFILIATES. Each of Impac and the Impac Affiliated Companies shall
use its reasonable efforts to deliver or cause to be delivered to Servico, prior
to the Effective Time, an affiliate letter in the form attached hereto as
Exhibit 5.16 (the "Impac Affiliate Letter"), executed by each of the Impac
Affiliates identified in SCHEDULE 4.27. The foregoing notwithstanding, SHG shall
be entitled to place legends in the form specified in the Impac Affiliate Letter
on the certificates evidencing any of the SHG Common Stock to be received by (i)
any Impac Affiliate or (ii) any person Servico reasonably identifies (by written
notice to Impac) as being a person who may be deemed an "affiliate" within the
meaning of Rule 145 of the rules and regulations of the Securities Act and to
issue appropriate stop transfer instructions to the transfer agent for the SHG
Common Stock, consistent with the terms provided for in
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the Impac Affiliate Letter, regardless of whether such person has executed an
Impac Affiliate Letter and regardless of whether such person's name and address
appear on SCHEDULE 4.27.
5.17 HEADQUARTERS. The corporate headquarters of SHG shall initially be
located in Atlanta, Georgia.
5.18 POST-MERGER SHG BOARD OF DIRECTORS. At the Effective Time, the
total number of persons serving on the Board of Directors of SHG shall be eight
(unless otherwise agreed in writing by Servico and Impac prior to the Effective
Time), five of whom shall be Servico Directors, two of whom shall be Impac
Directors and one of whom shall be selected by both Impac and Servico. The
initial directors of SHG and the initial allocations of the directors among the
three classes of directors shall, at the Effective Time, be as follows: The
Board of Directors shall be divided into three classes, designated as Class I to
initially serve for one year, Class II to initially serve for two years and
Class III to initially serve for three years. The initial directors of SHG shall
allocate the directors among the three classes as follows: (i) Class I shall
consist of two directors, comprised of Peter R. Tyson and the person mutually
selected as provided above; (ii) Class II shall consist of three directors,
comprised of Joseph C. Calabro, Michael Levin and John Lang; and (iii) Class III
shall consist of three directors, comprised of David Buddemeyer, Robert S. Cole
and Richard H. Weiner. Such directors shall serve as the directors of SHG from
and after the Effective Time in accordance with the Restated Certificate of
Incorporation and Bylaws of SHG until their successors are elected or appointed
and qualified or until their resignation or removal. In the event that, prior to
the Effective Time, any person so selected to serve on the Board of Directors of
SHG is unable or unwilling to serve in such position, the company that selected
such person shall designate another person to serve in such person's stead. From
and after the Effective Time, the composition of the Board of Directors shall be
determined in accordance with the Restated Certificate of Incorporation and
Bylaws of SHG. The term "Impac Director" means any person serving as a Manager
or executive officer of Impac on the date hereof who become a director of SHG at
the Effective Time; and the term "Servico Director" means any person serving as
a director or executive officer of Servico on the date hereof who is designated
by Servico become a director of SHG at the Effective Time.
5.19 STOCK EXCHANGE LISTINGS. Each of the parties hereto shall use its
reasonable efforts to obtain, prior to the Effective Time, the approval for
listing on the NYSE, effective upon official notice of issuance, of the shares
of SHG Common Stock into which the Shares will be converted pursuant to Article
II hereof and which will be issuable upon exercise of options pursuant to
Section 2.8 hereof.
5.20 INDEMNIFICATION.
(a) From and after the Effective Time, SHG agrees that it
will, and will cause the Surviving Corporations to, indemnify and hold harmless
each present and former director, manager, member, officer and agent of Servico
and Impac (the "Indemnified Parties"), against any costs or expenses (including
attorneys' fees), judgments, fines, losses, claims, damages, liabilities or
amounts paid in settlement incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent that Servico or Impac, as the
case may be, would have been permitted under Florida or Georgia law, as the case
may be, and its articles of incorporation, articles of organization, operating
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agreement or bylaws in effect on the date hereof to indemnify such Indemnified
Party (and SHG and the Surviving Corporations shall also advance expenses as
incurred to the fullest extent permitted under applicable Law, provided the
Indemnified Party to whom expenses are advanced provides an undertaking to repay
such advances if it is ultimately determined that such Indemnified Party is not
entitled to indemnification).
(b) For a period of six (6) years after the Effective Time,
SHG shall maintain or shall cause the Surviving Corporations to maintain (to the
extent available in the market) in effect a directors' and officers' liability
insurance policy covering those persons who are currently covered by Servico or
Impac directors' and officers' liability insurance policy (copies of which have
been heretofore delivered by Servico and Impac to each other ) with coverage in
amount and scope at least as favorable as Servico's or Impac's existing
coverage; provided that in no event shall SHG or the Surviving Corporations be
required to expend in the aggregate in excess of 200% of the annual premium
currently paid by Servico or Impac for such coverage; and if such premium would
at any time exceed 200% of such amount, then SHG or the Surviving Corporations
shall maintain insurance policies which provide the maximum and best coverage
available at an annual premium equal to 200% of such amount.
(c) The provisions of this Section 5.20 are intended to be an
addition to the rights otherwise available to the current officers, directors
and managers of Servico and Impac by law, charter, statute, bylaw or agreement,
and shall operate for the benefit of, and shall be enforceable by, each of the
Indemnified Parties, their heirs and their representatives.
5.21 GUARANTEES. SHG shall use its reasonable efforts (without the
requirement to pay any fee or adversely modify the terms of any agreement) to
obtain a release of any individuals from liability as guarantor of Impac's or
any Impac Subsidiary's obligations to third parties under those franchise
agreements and related documentation identified on SCHEDULE 5.21. In any event,
SHG shall indemnify and hold harmless each such individual guarantor from and
against any liability such guarantor may incur after the Effective Time under
such guarantees as a result of Impac's or any Impac Subsidiary's failure to
satisfy its obligations under such franchise agreements or related
documentation.
5.22 REGISTRATION RIGHTS. Pursuant to, and subject to the provisions
of, a Registration Rights Agreement, the form of which is set forth as Exhibit
5.22 hereto, SHG shall grant certain "piggy-back" registration rights to those
Members of Impac who receive SHG Common Stock in the Mergers and who (i) as a
result of the Mergers, become subject to the restrictions on the sale of such
SHG Common Stock pursuant to Rule 145 of the rules and regulations of the
Securities Act and (ii) would be prohibited from selling, over a twelve month
period, all of their respective shares of SHG Common Stock so received in the
Mergers by virtue of the volume limitations set forth in paragraph (d)(i) of
Rule 145 incorporating paragraph (e) of Rule 144 promulgated by the SEC under
the Securities Act.
5.23 TERMINATION OF DEVELOPMENT AGREEMENT; USE OF AFFILIATED NAMES.
Impac shall, prior to Closing, cause the termination of that certain Development
Agreement between Impac and IHD, dated March 10, 1998, as assigned by IHD to a
newly-formed corporation owned by the shareholders of IHD (the "IHD Assignee")
without any cost or liability of any kind to Impac and shall take all other
action necessary to ensure that, after the Closing, neither Impac nor any Impac
Subsidiary has any further obligation of any kind, contingent or otherwise,
including any payment obligation, to the IHD Assignee after the Closing
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other than the payment of up to a 4% development fee upon the acquisition by
SHG, after the Closing of any of the hotels or properties identified on SCHEDULE
5.23; provided, however, that in no event shall the aggregate amount of
development fees payable to the IHD Assignee exceed $2.5 million. Additionally,
Impac shall cause all affiliates of Impac (other than any Impac Subsidiary) and
all affiliates of each Impac Subsidiary to, within sixty (60) days after the
Closing, cease using any and all tradenames and any other names, trademarks,
logos or tradedress containing the word "Impac" and, as applicable, to file an
appropriate amendment to its charter documents changing its name to a name which
does not use or include the name "Impac" or any similar name.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 SURVIVAL OF THE REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Impac, the Impac Affiliated Companies and Servico contained in
this Agreement shall terminate at the Closing.
6.2 INVESTIGATION. Notwithstanding any provisions contained herein to
the contrary, the representations, warranties, covenants and agreements of this
Agreement shall not be affected or diminished in any way by the receipt of any
notice pursuant to Section 5.6 or by any investigation (or failure to
investigate) at any time by or on behalf of the party for whose benefit such
representations, warranties, covenants and agreements were made. All statements
contained herein or in any schedule, certificate or exhibit delivered pursuant
hereto or in connection with the transactions contemplated hereby shall be
deemed to be representations and warranties for purposes of this Agreement.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 MUTUAL CONDITIONS PRECEDENT. The respective obligations of the
parties to consummate the transactions contemplated by this Agreement are
subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) GOVERNMENTAL CONSENTS. All material consents and approvals
required by Governmental Entities for the consummation of the transactions
contemplated by this Agreement shall have been obtained, including without
limitation, the expiration or termination of any notice and waiting period under
the HSR Act. All of such consents and approvals shall have been obtained without
the imposition of any conditions which would materially adversely affect SHG's
ability to operate Servico, any Impac Affiliated Company, Impac or any of their
subsidiaries following the Closing.
(b) NO LITIGATION. No litigation, arbitration or other
proceeding shall be pending or, to the knowledge of the parties, threatened by
or before any court, arbitration panel or governmental authority; no law or
regulation shall have been enacted after the date of this Agreement; and no
judicial or administrative decision shall have been rendered; in each case,
which enjoins, prohibits or materially
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restricts, or seeks to enjoin, prohibit or materially restrict, the consummation
of the transactions contemplated by this Agreement.
(c) REGISTRATION STATEMENT. The Registration Statement shall
have been declared effective by the SEC under the Securities Act and no stop
order suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and no proceeding for that purpose shall have been initiated
by the SEC and not concluded or withdrawn.
(d) LISTING OF EXCHANGE SHARES. SHG shall have obtained
approval for listing on the NYSE of the shares of SHG Common Stock to be issued
in the Mergers.
(e) CORPORATE APPROVALS. The shareholders of Servico and the
Members of Impac shall have approved this Agreement and the Mergers in
accordance with the FBCA and the GLLCA, respectively.
(f) OPINION OF SERVICO'S TAX COUNSEL. Stearns Weaver Miller
Weissler Alhadeff & Sitterson, P.A. shall have issued its opinion, such opinion
dated on or about the date hereof and on or about the date of the Closing,
addressed to SHG, Servico, Impac and the Impac Affiliated Companies, based upon
customary representations of Servico, Impac and the Impac Affiliated Companies
and customary assumptions, to the effect that the Servico Merger will be treated
for federal income tax purposes as a reorganization qualifying under the
provisions of Section 368(a) of the Code and that each of Servico, Servico
Merger Sub and SHG shall be a party to the reorganization within the meaning of
Section 368(b) of the Code, which opinion shall not have been withdrawn or
modified in any material respect;
(g) OPINION OF IMPAC'S TAX COUNSEL. Powell, Goldstein, Frazer
& Murphy, LLP shall have issued its opinion, such opinion dated on or about the
date hereof and on or about the date of the Closing, addressed to SHG, Servico,
Impac and the Impac Affiliated Companies, based upon customary representations
of Servico, Impac and the Impac Affiliated Companies and customary assumptions,
to the effect that the Impac Merger and the IHD Merger will be treated for
federal income tax purposes as a transfer of property described in Section 351
of the Code, and each of the Impac Affiliated Mergers (except the IHD Merger)
will be treated for federal income tax purposes as a reorganization qualifying
under Section 368(a) of the Code and that each of the Impac Affiliated Companies
(except IHD), each of the Impac Affiliated Merger Subs (except IHD Merger Sub)
and SHG shall be a party to a reorganization within the meaning of Section
368(b) of the Code, which opinion shall not have been withdrawn or modified in
any material respect;
(h) COMFORT LETTERS. Each of Coopers & Lybrand and Ernst &
Young shall have delivered the comfort letters referred to in Section 5.10.
7.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SERVICO. The obligations
of Servico to consummate the transactions contemplated by this Agreement are
subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. Each of the
representations and warranties of Impac and the Impac Affiliated Companies
contained herein or in any certificate or other document
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delivered pursuant to the provisions hereof or in connection with the
transactions contemplated hereby shall be true and correct in all material
respects (except for such representations and warranties qualified by
materiality which shall be true and correct in all respects) on and as of the
Closing with the same force and effect as though made on and as of such date.
(b) PERFORMANCE. Each of Impac and the Impac Affiliated
Companies shall have performed and complied in all material respects with all of
the agreements, covenants and obligations required under this Agreement to be
performed or complied with by if prior to or at the Closing.
(c) NO MATERIAL ADVERSE EFFECT. There shall not have occurred
any event or condition which has adversely affected or may adversely affect in
any material respect the condition (financial or otherwise) of Impac and the
Impac Subsidiaries, taken as a whole or, or any of the Impac Affiliated
Companies or their respective assets, liabilities (whether absolute, accrued,
contingent or otherwise), earnings, business, prospects or operations.
(d) CONSENTS. Impac shall have obtained all material
authorizations, consents, waivers and approvals as may be required in connection
with the consummation of the transactions contemplated hereby, including,
without limitation, any consents required to be obtained in connection with
those instruments and agreements listed on SCHEDULE 4.7 hereto and consents
necessary to enable the business and operations of Impac after consummation of
the transactions contemplated hereby to continue to be conducted in the same
manner as currently conducted. Each such consent shall have been obtained
without the imposition of any adverse terms or conditions or without the
imposition of any significant cost.
(e) OPINION OF COUNSEL. Servico shall have received from
Powell, Goldstein, Frazer & Murphy, LLP ("PGFM"), legal counsel to Impac and
each of the Impac Affiliated Companies, an opinion letter, dated the Closing
Date, in form and substance reasonably satisfactory to Servico, with respect to
the matters set forth in Exhibit 7.2(e) to this Agreement, including an opinion
that no membership interests or other securities issued by Impac, any Impac
Affiliated Company or any Impac Subsidiary from the date of its organization or
incorporation to the date hereof were issued in violation of the rules and
regulations of the Securities Act or Blue Sky Laws. The opinion of PGFM
regarding the issuance of membership interests or other securities of any Impac
Affiliated Company or any Impac Subsidiary may be limited to issuances occurring
after PGFM first acted as legal counsel for Impac, any Impac Affiliated Company
or any Impac Subsidiary.
(f) CERTIFICATES. Each of Impac and the Impac Affiliated
Companies shall have delivered to Servico a certificate executed by its Manager
or President, dated as of the Closing, certifying in such detail as Servico may
reasonably request, that (i) the conditions specified in Sections 7.2(a) and (b)
(insofar as they are to be performed by Impac or any Impac Affiliated Company)
have been fulfilled and (ii) attached to such certificate is a true and correct
copy of the resolutions or consents of the shareholders of each of the Impac
Affiliated Companies and the Members authorizing and approving the execution,
delivery and performance of this Agreement by Impac and the Impac Affiliated
Companies, respectively. Servico shall also have received (i) a certificate of
Secretary as to the incumbency and signatures of the officers of each of Impac
and the Impac Affiliated Companies executing this Agreement and the Articles and
Certificates of Merger of each of Impac and the Impac Affiliated Companies with
respect to the Impac Merger and each of the Impac Affiliated Mergers, and (ii) a
certificate issued by the
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secretary of state of the applicable state of organization or incorporation of
each state in which Impac, any Impac Affiliated Company or any Impac Subsidiary
is qualified to do business, as of a date reasonably acceptable to Servico, as
to the good standing of Impac, each of the Impac Affiliated Companies and the
Impac Subsidiaries in those states.
(g) DEBT RESTRUCTURING. Impac and Servico shall have received
a commitment, effective as of the Closing, to restructure the indebtedness of
Impac and the Impac Subsidiaries substantially in accordance with the terms
described on SCHEDULE 7.2(G).
(h) IMPAC AFFILIATED COMPANIES' FINANCIAL STATEMENTS. Servico
shall have received a balance sheet for each of the Impac Affiliated Companies
(other than IHD) as of June 30, 1998, certified without qualification, by
Pricewaterhouse Coopers LLP, pursuant to their audit of the financial records of
such Impac Affiliated Companies. Such balance sheets shall present fairly, in
all material respects, the financial condition, assets, liabilities and equity
of each of such Impac Affiliated Companies at June 30, 1998, and shall reflect
that none of such Impac Affiliated Companies have any liabilities, commitments
or obligations of any nature whatsoever whether accrued, contingent or
otherwise.
7.3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF IMPAC AND THE IMPAC
AFFILIATED COMPANIES. The obligations of Impac and the Impac Affiliated
Companies to consummate the transactions contemplated by this Agreement are
subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. Each of the
representations and warranties of Servico contained herein or in any certificate
or document delivered pursuant to the provisions hereof or in connection with
the transactions contemplated hereby shall be true and correct in all material
respects (except for such representations and warranties qualified by
materiality which shall be true and correct in all respects) on and as of the
Closing with the same force and effect as though made on and as of such date.
(b) PERFORMANCE. Servico shall have performed and complied in
all material respects with all of the agreements, covenants and obligations
required under this Agreement to be performed or complied with by them prior to
or at the Closing.
(c) NO MATERIAL ADVERSE EFFECT. There shall not have occurred
any event or condition which has adversely affected or may adversely affect in
any material respect the condition (financial or otherwise) of Servico and the
Servico Subsidiaries, taken as a whole, or their assets, liabilities (whether
absolute, accrued, contingent or otherwise), earnings, business, prospects or
operations.
(d) CONSENTS. Servico shall have obtained all material
authorizations, consents, waivers and approvals as may be required in connection
with the consummation of the transactions contemplated hereby, including,
without limitation, any consents required to be obtained in connection with
those instruments and agreements listed on SCHEDULE 3.4 hereto and consents
necessary to enable the business and operations of Servico after consummation of
the transactions contemplated hereby to continue to be conducted in the same
manner as currently conducted. Each such consent shall have been obtained
without imposition of any adverse terms or conditions or without the imposition
of any significant costs.
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(e) OPINION OF COUNSEL. Impac shall have received from Stearns
Weaver Miller Weissler Alhadeff & Sitterson, P.A., legal counsel to Servico, an
opinion letter, dated the Closing, in form and substance reasonably satisfactory
to Impac, with respect to the matters set forth in Exhibit 7.3(e) to this
Agreement.
(f) SERVICO'S CERTIFICATES. Servico shall have delivered to
Impac a certificate executed by its Chairman and President, dated as of the
Closing, certifying in such detail as Impac may reasonably request, that: (i)
the conditions specified in Sections 7.3(a) and (b) (insofar as they are to be
performed by Servico) have been fulfilled; and (ii) attached to such certificate
is a true and correct copy of the resolutions of the Board of Servico
authorizing the execution, delivery and performance of this Agreement by
Servico. Impac shall have also received a certificate of Secretary as to the
incumbency and signatures of the officers of Servico executing this Agreement
and the Servico Articles of Merger.
(g) EMPLOYMENT AGREEMENTS. Each of those persons listed on
SCHEDULE 7.3(G) shall have been offered employment by SHG substantially upon the
terms described in SCHEDULE 7.3(G).
7.4 TERMINATION. This Agreement may be terminated and the Mergers may
be abandoned at any time prior to the Effective Time, notwithstanding any
requisite adoption and approval of this Agreement (with Impac in each case
acting on behalf of itself and the Impac Affiliated Companies), as follows:
(a) by mutual written consent of Servico and Impac;
(b) by either Servico or Impac, if any Governmental Entity
shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the Mergers, and
such order, decree, ruling or other action shall have become final and
nonappealable;
(c) by either Servico or Impac, after the End Date, if the
Mergers have not been consummated on or before December 31, 1998 (such date or
such later date mutually agreed to in writing by the parties hereto referred to
as the "End Date") (other than due to the failure of the party seeking to
terminate this Agreement to perform its obligations under this Agreement
required to be performed at or prior to the Closing);
(d) by either Servico or Impac, if at the Servico Special
Meeting (including any adjournment or postponement thereof), the requisite vote
of the shareholders of Servico in favor of approval of the adoption of this
Agreement and the Mergers shall not have been obtained;
(e) by Servico at any time in its sole discretion if any of
the representations or warranties of Impac or any Impac Affiliated Company in
this Agreement are not in all material respects true and correct, or if Impac or
any Impac Affiliated Company breaches in any material respect any covenant
contained in this Agreement, provided that if such misrepresentation or breach
is curable, it is not cured within fifteen (15) business days after notice
thereof, but in any event prior to the End Date;
(f) by Impac at any time in its sole discretion if any of the
representations or warranties of Servico in this Agreement are not in all
material respects true and correct, or if Servico breaches in any
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material respect any covenant contained in this Agreement, provided that if such
misrepresentation or breach is curable, it is not cured within fifteen (15)
business days after notice thereof, but in any event prior to the End Date;
(g) by Impac, if after May 1, 1998, Servico shall be actively
engaged in negotiating with any person or entity with which it has exchanged any
non-public information under a confidentiality agreement during the period from
January 1, 1998 to the date of this Agreement (a "Designated Person"), with
respect to any offer or proposal involving a Change of Control of Servico;
(h) by Impac or Servico, if a proposal for a Change of Control
of Servico shall have been publicly announced and Servico's Board of Directors
shall have withdrawn or adversely modified their recommendation to Servico's
shareholders that they vote in favor of the approval of this Agreement and the
Mergers contemplated hereby or Servico chooses to enter into a definitive
agreement for a Change of Control;
(i) by Impac, if since the date of this Agreement, Servico
shall have provided Impac a notice pursuant to Section 5.2(b) and Impac
reasonably determines that Servico's proposed acquisitions will result in a
Servico Material Adverse Effect or materially change the nature of Servico's
operations taken as a whole; provided that Impac so notifies Servico of its
election to terminate hereunder within ten days after receipt of the notice
delivered by Servico pursuant to Section 5.2(b); or
(j) by Impac or Servico after May 1, 1998, if the
non-terminating party (i) has entered into active negotiations with any third
party (other than a Designated Person) with respect to any offer or proposal
regarding a Change of Control (with respect to Servico) or a Competing
Transaction (with respect to Impac) or (ii) provides (or provides access to) any
third party (other than a Designated Person) with non-public information
concerning its business or assets with respect to any offer or proposal
involving a Change of Control (with respect to) Servico or a Competing
Transaction (with respect to Impac), as the case may be (any such third party
referred to in this Section 7.4(j) with which Servico or Impac engages in such
negotiations or provides (or provides access to) any such non-public information
prior to the termination of this Agreement being hereafter referred to as a
"Third Party").
If this Agreement is terminated pursuant to this Section 7.4, written
notice thereof shall promptly be given by the party electing such termination to
the other party and, subject to the expiration of the cure periods provided in
clauses (e) and (f) above, if any, this Agreement shall terminate without
further actions by the parties and no party shall have any further obligations
under this Agreement except to the extent provided in Section 8.8.
Notwithstanding the termination of this Agreement, the respective obligations of
the parties under SECTIONS 5.8 (Confidentiality), 8.8 (Fees and Expenses), 8.12
(Litigation; Prevailing Party), 8.14 (Injunctive Relief), 8.15 (Governing Law)
and 8.16 (Jurisdiction and Venue) shall survive the termination of this
Agreement. Subject to Section 5.8 hereof, upon termination of this Agreement,
each party shall return all documents and other materials of any other party
relating to the transactions contemplated by this Agreement, whether so obtained
before or after the execution of this Agreement, to the party furnishing the
same.
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ARTICLE VIII
MISCELLANEOUS
8.1 FURTHER ASSURANCES. The parties hereto shall deliver any and all
other instruments or documents required to be delivered pursuant to, or
necessary or proper in order to give effect to, all of the terms and provisions
of this Agreement including, without limitation, all necessary stock powers and
such other instruments of transfer as may be necessary or desirable to transfer
ownership.
8.2 NOTICES. Any notice or other communication under this Agreement
shall be in writing and shall be delivered personally or sent by registered
mail, return receipt requested, postage prepaid, or sent by facsimile or prepaid
overnight courier to the parties at the addresses set forth below their names on
the signature pages of this Agreement (or at such other addresses as shall be
specified by the parties by like notice). Such notices, demands, claims and
other communications shall be deemed given when actually received or (a) in the
case of delivery by overnight service with guaranteed next day delivery, the
next day or the day designated for delivery, (b) in the case of registered U.S.
mail, five days after deposit in the U.S. mail, or (c) in the case of facsimile,
the date upon which the transmitting party received confirmation of receipt by
facsimile, telephone or otherwise. A copy of any notices delivered to Servico,
SHG or Holdings shall also be sent to Stearns Weaver Miller Weissler Alhadeff &
Sitterson, P.A., 150 West Flagler Street, Suite 2200, Miami, Florida 33130,
Attention: Alison W. Miller, Esq. A copy of any notices delivered to Impac or
any Impac Affiliated Company shall also be sent to Powell, Goldstein, Frazer &
Murphy LLP, 191 Peachtree Street, N.E., Suite 1600, Atlanta, Georgia, 30303,
Attention: Ken Harrigan, Esquire.
8.3 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties hereto and supersedes all prior agreements, understandings,
negotiations and discussions, both written and oral, among the parties hereto
with respect to the subject matter hereof. This Agreement may not be amended or
modified in any way except by a written instrument executed by all of the
parties hereto.
8.4 ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder may be assigned by any party without the written
consent of the other parties hereto (whether by operation of Law or otherwise).
Subject to the preceding sentence, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
heirs, personal representatives, legal representatives, and permitted assigns.
8.5 WAIVER. At any time prior to the Effective Time, any
representation, warranty, covenant, term or condition of this Agreement which
may legally be waived, may be waived, or the time of performance thereof
extended, at any time by the party hereto entitled to the benefit thereof, and
any term, condition or covenant hereof may be amended by the parties hereto at
any time. Any such waiver, extension or amendment shall be evidenced by an
instrument in writing duly executed on behalf of the appropriate party by a
person who has been authorized by its Board of Directors or Manager, as the case
may be, to execute waivers, extensions or amendments on its behalf. No waiver by
any party hereto, whether express or implied, of its rights under any provision
of this Agreement shall constitute a waiver of such party's rights under such
provisions at any other time or a waiver of such party's rights under any other
provision of this Agreement or any other agreement. No failure by any party
hereto to take any action against any breach of this Agreement or default by
another party shall constitute a waiver of the former party's right to enforce
any provision of this Agreement or to take action against such breach or default
or any subsequent breach or default by such other party.
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8.6 NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and permitted assigns, any
rights or remedies under or by reason of this Agreement.
8.7 SEVERABILITY. In the event that any one or more of the provisions
contained in this Agreement shall be declared invalid, void or unenforceable,
the remainder of the provisions of this Agreement shall remain in full force and
effect, and such invalid, void or unenforceable provision shall be interpreted
as closely as possible to the manner in which it was written.
8.8 FEES AND EXPENSES.
(a) Except as set forth in Section 8.8(a) and (b) below, all
fees and expenses incurred in connection with the Mergers, this Agreement and
the transactions contemplated by this Agreement shall be paid by the party
incurring such fees or expenses, except that the fees for filing under the HSR
Act and any termination or other fees payable to Nomura Asset Capital
Corporation ("Nomura") pursuant to that certain $200 million loan commitment
from Nomura, shall be shared equally between Impac and Servico, it being
specifically agreed and acknowledged that if Nomura or any of its affiliates
waives any portion of such fees, the benefit of such waiver shall inure equally
to Servico and Impac.
(b) If this Agreement shall be terminated pursuant to Section
7.4(e) as the result of an intentional or willful breach by Impac or any Impac
Affiliated Company of any representation, warranty or covenant contained herein,
then Impac shall pay Servico an amount equal to all reasonable costs and
out-of-pocket expenses (including reasonable attorneys' and advisors' fees) of
up to $2.5 million incurred by Servico in connection with this Agreement and the
transactions contemplated by this Agreement; provided, however, that if, within
twelve (12) months after such termination of this Agreement Impac or any Impac
Subsidiary shall consummate a Competing Transaction with any party with which or
to which, prior to such termination, Impac or any Impac Subsidiary, directly or
indirectly, (i) had negotiations or discussions regarding a potential Competing
Transaction or (ii) provided (or provided access to) non-public information
concerning its business or assets, then Impac shall pay Servico an amount equal
to $10 million, less any amounts previously paid to Servico pursuant to this
Section 8.8(b) for costs and expenses.
(c) If this Agreement shall be terminated pursuant to Section
7.4(f) as the result of an intentional or willful breach by Servico of any
representation, warranty or covenant contained herein, or terminated pursuant to
Section 7.4(i) then Servico shall pay Impac an amount equal to all reasonable
costs and out-of-pocket expenses (including reasonable attorneys' and advisors'
fees) of up to $2.5 million incurred by Impac in connection with this Agreement
and the transactions contemplated by this Agreement.
(d) If this Agreement shall be terminated pursuant to Section
7.4(g), then Servico shall pay Impac an amount equal to all reasonable costs and
out-of-pocket expenses (including reasonable attorneys' and advisors' fees) of
up to $2.5 million incurred by Impac in connection with this Agreement and the
transactions contemplated by this Agreement; provided, however, that if, within
twelve (12) months after such termination of this Agreement, Servico shall
consummate a Designated Change of Control (as hereafter defined), then Servico
shall pay Impac an amount equal to $7.5 million, if the termination shall occur
on or before April 10, 1998, $10 million if the termination shall occur after
April
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10, 1998 and on or before May 15, 1998, or $15 million if the termination
shall occur after May 15, 1998, in any such case, less any amounts previously
paid to Impac pursuant to this Section 8.8(d) for costs and expenses.
(e) (i) If this Agreement shall be terminated pursuant to
Section 7.4(h) and within twelve months after such termination of this Agreement
such Change of Control shall have been consummated, then Servico shall pay Impac
an amount equal to $10 million. For purposes of this Agreement, "Change of
Control" shall mean either (A) a consensual merger, consolidation, share
exchange, business combination or similar consensual transaction involving
Servico pursuant to which any person, or any "group" (as such term is defined
under Section 13(d) of the Exchange Act) acquire more than 28% of the
outstanding shares of Servico Common Stock; or (B) a sale, lease, exchange,
transfer or other disposition of all or substantially all of Servico's business
in a single transaction or series of related transactions. The provisions of
this Section 8.8(e)(i) shall not apply to a Designated Change of Control (as
defined in Section 8.8(e)(ii) below).
(ii) If this Agreement shall be terminated by Servico
pursuant to Section 7.4(c), 7.4(d) or 7.4(e) (except for incorrect
representations or warranties or breaches which have resulted in, or could
reasonably be expected to result in, an Impac Material Adverse Effect, in which
case no amount would be due hereunder), or by Impac pursuant to Section 7.4(d),
7.4(f) (and such breach is intentional or willful), or 7.4(h) and, within twelve
(12) months after such termination of this Agreement a Designated Change of
Control (as hereafter defined) shall have been consummated, then Servico shall
pay Impac an amount equal to $7.5 million, if the termination shall occur on or
before April 10, 1998, $10 million if the termination shall occur after April
10, 1998, and on or before May 15, 1998, or $15 million if the termination shall
occur after May 15, 1998. For purposes of this Agreement, "Designated Change of
Control" shall mean a Change of Control transaction involving a Designated
Person or its affiliates. In no event will a Designated Change of Control be
deemed to exist for purposes of this Section 8.8(e) if, at the time of
termination of this Agreement, there shall have occurred any event or condition
which has resulted in, or could reasonably be expected to result in, an Impac
Material Adverse Effect.
(f) If this Agreement shall be terminated pursuant to Section
7.4(j), then the non-terminating party shall, unless, prior to such
termination, the terminating party has also provided non-pubic information
concerning its business or assets to any Third Party (in which case, no
reimbursement for expenses incurred shall be made), pay the terminating party an
amount equal to all reasonable costs and out-of-pocket expenses (including
reasonable attorneys' and advisors' fees) of up to $2.5 million incurred by the
terminating party in connection with this Agreement and the transactions
contemplated by this Agreement; provided, however, that if, within twelve months
after such termination of this Agreement, (i) Impac or any Impac Subsidiary
shall consummate a Competing Transaction with a Third Party, then Impac shall
pay Servico an amount equal to $10 million, less any amounts previously paid to
Servico pursuant to this Section 8.8(f) for reimbursement of costs and expenses
and (ii) if Servico consummates a Change of Control with a Third Party, then
Servico shall pay Impac an amount equal to $10 million, less any amounts
previously paid to Impac pursuant to this Section 8.8(f) for reimbursement of
costs and expenses.
(g) Each party agrees that the actual damages accruing from
termination of this Agreement pursuant to the termination provisions referenced
in Section 8.8(b), (c), (d), (e) or (f) are
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incapable of precise estimation and would be difficult to prove, and that the
damages stipulated herein bear a reasonable relationship to the potential injury
likely to be sustained in the event of termination pursuant to such occurrence.
The payments stipulated in Section 8.8(b), (c), (d), (e) or (f) are intended by
the parties to provide just compensation in the event of termination pursuant to
said termination provision referenced in Section 8.8(b), (c), (d), (e) or (f),
and are not intended to compel performance or to constitute a penalty for
nonperformance.
(h) Any payment required to be made pursuant to Section
8.8(b), (c), (d), (e) or (f) shall be made not later than five business days
after the occurrence of the event for which a party is entitled to payment and
delivery by such party to the other party of a notice of demand for payment,
provided that such notice shall include an itemization setting forth in
reasonable detail all expenses of such party for which it is entitled to
reimbursement hereunder (which itemization may be supplemented and updated from
time to time by such party until the sixtieth day after such party delivers such
notice of demand for payment). All payments required to be made pursuant to this
Section 8.8 shall be made by wire transfer of immediately available funds to an
account designated by such party in the notice of demand for payment delivered
pursuant to this Section 8.8(h).
(i) In the event a party shall fail to make any payment
required pursuant to Section 8.8(b), (c), (d), (e) or (f), the amount of any
such required payment shall be increased to include the costs and expenses
actually incurred or accrued by the other party (including, without limitation,
fees and expenses of counsel) in connection with the collection under and
enforcement of this Section 8.8, together with interest on such unpaid amounts
commencing on the date that such payment under Section 8.8(b), (c), (d), (e) or
(f) became due, at a rate equal to the rate of interest publicly announced by
Citibank, N.A., from time to time, in The City of New York, from time to time,
as such bank's base rate plus 2.00%.
8.9 SECTION HEADINGS. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of any provisions of this Agreement.
8.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the several parties hereto in separate counterparts, each of
which shall be deemed to be one and the same instrument.
8.11 TIME OF ESSENCE. Wherever time is specified for the doing or
performance of any act or the payment of any funds, time shall be considered of
the essence.
8.12 LITIGATION; PREVAILING PARTY. In the event of any litigation with
regard to this Agreement, the prevailing party shall be entitled to receive from
the non-prevailing party and the non-prevailing party shall pay upon demand all
reasonable fees and expenses of counsel for the prevailing party.
8.13 REMEDIES CUMULATIVE. No remedy made available by any of the
provisions of this Agreement is intended to be exclusive of any other remedy,
and each and every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity.
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<PAGE> 246
8.14 INJUNCTIVE RELIEF. It is possible that remedies at law may be
inadequate and, therefore, the parties hereto shall be entitled to equitable
relief including, without limitation, injunctive relief, specific performance or
other equitable remedies in addition to all other remedies provided hereunder or
available to the parties hereto at law or in equity.
8.15 GOVERNING LAW. This Agreement has been entered into and shall be
construed and enforced in accordance with the laws of the State of Florida
without reference to the choice of law principles thereof.
8.16 JURISDICTION AND VENUE. This Agreement shall be subject to the
exclusive jurisdiction and venue of the courts of Palm Beach County, Florida.
The parties to this Agreement agree that any breach of any term or condition of
this Agreement shall be deemed to be a breach occurring in the State of Florida
by virtue of a failure to perform an act required to be performed in the State
of Florida and irrevocably and expressly agree to submit to the jurisdiction of
the courts of the State of Florida for the purpose of resolving any disputes
among the parties relating to this Agreement or the transactions contemplated
hereby. The parties irrevocably waive, to the fullest extent permitted by law,
any objection which they may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to this Agreement, or any
judgment entered by any court in respect hereof brought in Palm Beach County,
Florida, and further irrevocably waive any claim that any suit, action or
proceeding brought in Palm Beach County, Florida has been brought in an
inconvenient forum.
8.17 CERTAIN DEFINITIONS. For purposes of this Agreement, the following
terms have the following meanings:
(a) "AFFILIATE" has the meaning specified in Rule 144
promulgated by the SEC under the Securities Act;
(b) "BUSINESS DAY" means any day on which the principal
offices of the SEC in Washington, D.C. are open to accept filings, or, in the
case of determining a date when any payment is due, any day on which banks are
not required or authorized by law or executive order to close in the City of New
York, USA;
(c) "IMPAC MATERIAL ADVERSE EFFECT" means any change in or
effect on the business of Impac, the Impac Affiliated Companies and the Impac
Subsidiaries that is, or is reasonably likely to be, materially adverse to the
business, assets (including intangible assets), liabilities (contingent or
otherwise), condition (financial or otherwise) or results of operations of
Impac, and the Impac Subsidiaries taken as a whole;
(d) "KNOWLEDGE" means, with respect to any matter in question,
that the executive officers and Manager of Impac, each Impac Affiliated Company
or Servico, as the case may be, (i) have actual knowledge of such matter or (ii)
after due investigation, should have known of such matter;
(e) "LAW" means any federal, state or local statute, law,
ordinance, regulation, rule, code, order or other requirement or rule of law of
the United States or any other jurisdiction;
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(f) "MEMBERSHIP INTEREST" means a member's rights in the
subject limited liability company, collectively, including the member's share of
the profits and losses of the limited liability company, the right to receive
distributions of the limited liability company's assets, and any right to vote
or participate in management;
(g) "PERSON" means an individual, corporation, partnership,
limited partnership, limited liability company, syndicate, person (including,
without limitation, a "PERSON" as defined in Section 13(d)(3) of the Exchange
Act), trust, association, entity or government or political subdivision, agency
or instrumentality of a government;
(h) "SERVICO MATERIAL ADVERSE EFFECT" means any change in or
effect on the business of Servico and the Servico Subsidiaries that is, or is
reasonably likely to be, materially adverse to the business, assets (including
intangible assets), liabilities (contingent or otherwise), condition (financial
or otherwise) or results of operations of Servico and the Servico Subsidiaries
taken as a whole;
(i) "SUBSIDIARY" or "SUBSIDIARIES" of any person means any
corporation, limited liability company, partnership, joint venture or other
legal entity of which such person (either alone or through or together with any
other subsidiary of such person) owns, directly or indirectly, more than fifty
percent of the stock or other equity interests, the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity; and
(j) "TAX" means any federal, state, local or foreign income,
gross receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, transportation, transportation excise, registration, value
added, documentary stamp, excise, natural resources, severance, stamp,
occupation, premium, windfall profit, environmental, customs, duties, real
property, personal property, capital stock, social security, unemployment,
disability, payroll, license, employee or other withholding, or other tax or
governmental charge, of any kind whatsoever, including any interest, penalties
or additions to tax or additional amounts in respect of the foregoing; the
foregoing shall include any transferee or secondary liability for a Tax and any
liability assumed by agreement or arising as a result of being (or ceasing to
be) a member of any affiliated group (or being included (or required to be
included) in any tax return relating thereto).
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IN WITNESS WHEREOF, the parties hereto have each executed and
delivered this Agreement as of the day and year first above written.
SERVICO, INC., a Florida
corporation
By:
-----------------------------------------------
Name: David A. Buddemeyer
Title: President and Chief Executive Officer
Address: 1601 Belvedere Road
West Palm Beach, Florida 33406
LODGIAN, INC.,
a Delaware corporation
By:
-----------------------------------------------
Name: David A. Buddemeyer
Title: Chief Executive Officer
Address: 1601 Belvedere Road
West Palm Beach, Florida 33406
IMPAC HOTEL GROUP, L.L.C.,
a Georgia limited liability company
By:
-----------------------------------------------
Name: Robert S. Cole
Title: President and Manager
Address: 3445 Peachtree Road, N.E.
Suite 7800
Atlanta, Georgia 30326
SHG-S SUB, INC.,
a Florida corporation
By:
-----------------------------------------------
Name: David A. Buddemeyer
Title: President
Address: 1601 Belvedere Road
West Palm Beach, Florida 33406
SHG-I SUB, L.L.C.,
a Georgia limited liability company
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<PAGE> 249
By:
-----------------------------------------------
Name: David A. Buddemeyer
Title: Manager
Address: 1601 Belvedere Road
West Palm Beach, Florida 33406
P-BURG LODGING ASSOCIATES, INC.,
a Kentucky corporation
By:
-----------------------------------------------
Name:
Title:
Address:
SHG-II SUB, INC., a Kentucky corporation
By:
-----------------------------------------------
Name: David A. Buddemeyer
Title: President
Address: 1601 Belvedere Road
West Palm Beach, FL 33406
HAZARD LODGING ASSOCIATES, INC.,
a Kentucky corporation
By:
-----------------------------------------------
Name:
Title:
Address:
SHG-III SUB, INC., a Kentucky corporation
By:
-----------------------------------------------
Name: David A. Buddemeyer
Title: President
Address: 1601 Belvedere Road
West Palm Beach, FL 33406
MEMPHIS LODGING ASSOCIATES, INC.,
a Florida corporation
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By:
-----------------------------------------------
Name:
Title:
Address:
SHG-IV SUB, INC., a Florida corporation
By:
-----------------------------------------------
Name: David A. Buddemeyer
Title: President
Address: 1601 Belvedere Road
West Palm Beach, FL 33406
DELK LODGING ASSOCIATES, INC.,
a Delaware corporation
By:
-----------------------------------------------
Name:
Title:
Address:
SHG-V SUB, INC., a Delaware corporation
By:
-----------------------------------------------
Name: David A. Buddemeyer
Title: President
Address: 1601 Belvedere Road
West Palm Beach
IMPAC HOTEL DEVELOPMENT, INC.,
a Delaware corporation
By:
-----------------------------------------------
Name:
Title:
Address:
SHG-VI SUB, INC., a Delaware corporation
By:
-----------------------------------------------
Name: David A. Buddemeyer
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Title: President
Address: 1601 Belvedere Road
West Palm Beach, FL 33406
IMPAC DESIGN AND
CONSTRUCTION, INC.,
a Delaware corporation
By:
-----------------------------------------------
Name:
Title:
Address:
SHG-VII SUB, INC., a Delaware corporation
By:
-----------------------------------------------
Name: David A. Buddemeyer
Title: President
Address: 1601 Belvedere Road
West Palm Beach, FL 33406
IMPAC HOTEL GROUP, INC.,
a Florida corporation
By:
-----------------------------------------------
Name:
Title:
Address:
SHG-VIII SUB, INC., a Florida corporation
By:
-----------------------------------------------
Name: David A. Buddemeyer
Title: President
Address: 1601 Belvedere Road
West Palm Beach, FL 33406
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APPENDIX B
LEHMAN BROTHERS
March 12, 1998
Board of Directors
Servico, Inc.
1601 Belvedere Road
West Palm Beach, FL 33406
Members of the Board:
We understand that Servico, Inc. ("SER" or the "Company") has entered into
an Agreement and Plan of Merger (the "Agreement") by and among Servico Hotel
Group, Inc. (which subsequently changed its name to Lodgian, Inc. "Lodgian"),
the Company, Impac Hotel Group, L.L.C. ("Impac"), SHG-S Sub, Inc. ("Servico
Merger Sub") and SHG-I Sub, L.L.C. ("Impac Merger Sub"), pursuant to which (i)
Lodgian, a wholly-owned subsidiary of the Company, formed two wholly-owned
merger subsidiaries, Servico Merger Sub and Impac Merger Sub, (ii) Servico
Merger Sub will be merged with and into SER and Impac Merger Sub will be merged
with and into Impac, with SER and Impac continuing as surviving entities and
wholly-owned by Lodgian, (iii) each issued and outstanding share of common stock
of the Company will be exchangeable for one share of common stock of Lodgian,
and (iv) Impac's membership interests will be exchangeable for an aggregate of
7.4 million shares of common stock of Lodgian (the "Base Number"), 1.4 million
shares of which will be reserved for future issuance to Impac's current members
upon the satisfaction of certain conditions and milestones as set forth in more
detail in the Agreement; provided, however, that if the ten day trading average
of SER's common stock is (i) less than $14.00, the Base Number shall be equal to
the product of the Base Number and a fraction, the numerator of which is $14.00
and the denominator of which is such ten day trading average, or (ii) greater
than $25.00, the Base Number shall be equal to the product of the Base Number
and a fraction, the numerator of which is $25.00 and the denominator of which is
such ten day trading average (the "Proposed Transaction"). We further understand
that, in connection with the Proposed Transaction, SER will assume approximately
$406 million of indebtedness of Impac. The terms and conditions of the Proposed
Transaction are set forth in more detail in the Agreement.
We have been requested by the Board of Directors of the Company to render
our opinion with respect to the fairness, from a financial point of view, to the
Company of the consideration to be paid in the Proposed Transaction. We have not
been requested to opine as to, and our opinion does not in any manner address,
the Company's underlying business decision to proceed with or effect the
Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement and
the specific terms of the Proposed Transaction; (2) publicly available
information concerning the Company that we believe to be relevant to our
analysis, including its annual report on Form 10-K for the year ended December
31, 1996 and quarterly reports on Form 10-Q for the quarters ended March 31,
June 30 and September 30, 1997; (3) financial statements for Impac and it
subsidiaries, including balance sheets as of December 31, 1995 and 1996 and
September 30, 1997, and the related statements of income, cash flow and changes
in member's equity for the fiscal years ended December 31, 1994, 1995 and 1996
and the nine months ended September 30, 1997, including any related notes,
certified, without qualification, by Coopers & Lybrand L.L.P., Impac's
independent public accountants; (4) financial and operating
information with respect to
<PAGE> 253
the business, operations and prospects of the Company and Impac furnished to us
by the Company and Impac, respectively; (5) a comparison of the historical
financial results and present financial condition of the Company with those of
other companies that we deemed relevant; (6) the trading history of the
Company's common stock from January 1996 to the present and a comparison of that
trading history with those of other companies that we deemed relevant; (7) the
potential pro forma impact of the Proposed Transaction on the Company, including
the cost savings, operating synergies and strategic benefits expected by the
management of the Company to result from a combination of the applicable
businesses; (8) a comparison of the relative contribution of Impac to the
financial results of Lodgian following the consummation of the Proposed
Transaction to the Impac ownership interest in Lodgian following the Proposed
Transaction; and (9) a comparison of the financial terms of the Proposed
Transaction with the financial terms of certain other recent transactions that
we deemed relevant. In addition, we have had discussions with the management of
the Company and Impac concerning their respective businesses, operations,
assets, financial conditions and prospects and have undertaken such other
studies, analyses and investigations as we deemed appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy and
completeness of the financial and other information used by us without assuming
any responsibility for independent verification of such information and have
further relied upon the assurances of management of the Company and Impac that
they are not aware of any facts or circumstances that would make such
information inaccurate or misleading. With respect to the financial projections
of the Company and Impac, upon advice of the Company and Impac we have assumed
that such projections have been reasonably prepared on a basis reflecting the
best currently available estimates and judgments of the management of the
Company and Impac as to the future financial performance of the Company and
Impac, respectively, and that the Company and Impac will perform substantially
in accordance with such projections. In arriving at our opinion, we have not
conducted a physical inspection of the properties and facilities of the Company
and Impac and have not made or obtained any evaluations or appraisals of the
assets or liabilities of the Company or Impac. In addition, you have not
authorized us to solicit, and we have not solicited, any indications of interest
from any third party with respect to the purchase of all or a part of the
Company's business. Upon advice of the Company, Impac and their respective legal
and accounting advisors, we have assumed that the Proposed Transaction will
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended, and therefore as a tax-free transaction to the
stockholders of the Company. Our opinion necessarily is based upon market,
economic and other conditions as they exist on, and can be evaluated as of, the
date of this letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration to be paid
in the Proposed Transaction is fair to the Company.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services a portion of which
is contingent upon the consummation of the Proposed Transaction. In addition,
the Company has agreed to indemnify us for certain liabilities that may arise
out of the rendering of this opinion. We also have performed various investment
banking services for the Company in the past and have received customary fees
for such services. In addition, an affiliate of Lehman Brothers currently acts
as a lender to the Company, with an outstanding amount owed by the Company to
such affiliate of approximately $200 million. In the ordinary course of our
business, we actively trade in the equity securities of the Company for our own
account and for the accounts of our customers and, accordingly, may at any time
hold a long or short position in such securities.
<PAGE> 254
This opinion is for the use and benefit of the Board of Directors of the
Company and is rendered to the Board of Directors in connection with its
consideration of the Proposed Transaction. This opinion is not intended to be
and does not constitute a recommendation to any stockholder of the Company as to
how such stockholder should vote with respect to the Proposed Transaction.
Very truly yours,
LEHMAN BROTHERS
<PAGE> 255
APPENDIX C
ALLEN & COMPANY INCORPORATED
March 19, 1998
Impac Hotel Group, L.L.C.
Two Live Oak Center
3445 Peachtree Road, NE
Suite 700
Atlanta, Georgia 30326
Attn: Mr. Robert Cole
President
Dear Sirs:
You have requested our opinion, as of this date, as to the
fairness, from a financial point of view, to the holders (the "Members") of
Class A Ordinary Membership Interests of Impac Hotel Group, L.L.C., a Georgia
limited liability company (the "Company") of the Impac Exchange Ratio (as
defined below).
Pursuant to the Agreement and Plan of Merger (the "Merger
Agreement"), to be entered into by and between the Company, Servico, Inc., a
Delaware corporation ("Servico"), Lodgian, Inc. ("Lodgian"), SHG-S Sub, Inc. and
SHG-I Sub, the Company will enter into a business combination transaction with
Servico pursuant to which as a result of the merger of SHG-I Sub, Inc. with and
into the Company (the "Impac Merger") and the merger of SHG-S Sub, Inc. with and
into Servico (the "Servico Merger"), each effected pursuant to the Merger
Agreement, (i) the Company will be a wholly-owned subsidiary of Lodgian, (ii)
Servico will be a wholly-owned subsidiary of Lodgian, (iii) the Members will
become shareholders of Lodgian, and (iv) the shareholders of Servico will become
shareholders of Lodgian (the "Proposed Transaction"). Pursuant to the terms of
the Merger Agreement, each Class A Ordinary Membership Interest of the Company
will be converted into such number of shares of common stock, par value $0.01
per share, of Lodgian, in accordance with the exchange ratio specified in the
Merger Agreement (such ratio, as the same may be adjusted pursuant to the Merger
Agreement, the "Impac Exchange Ratio"). We understand that the Impac Merger has
been structured as a transfer of property pursuant to Section 351 of the
Internal Revenue Code or 1986, as amended (the "Code"), and the regulations
thereunder, and that the Servico Merger
<PAGE> 256
Impac Hotel Group, L.L.C.
March 19, 1998
Page 2
has been structured as a reorganization pursuant to Section 368(a) of the Code
and the regulations thereunder.
We understand that all approvals required for the consummation
of the Proposed Transaction have been or, prior to consummation of the Proposed
Transaction, will be obtained. As you know, pursuant to its agreement with the
Company, Allen & Company Incorporated ("Allen") will receive a fee for its
services to the Company.
In arriving at our opinion, we have among other things:
(i) reviewed the terms and conditions of the Merger
Agreement and related documents;
(ii) analyzed historical business and financial
information relating to the Company and management's
forecasts prepared by the Company, as presented in
documents provided to us by the Company;
(iii) analyzed publicly available historical business and
financial information relating to Servico, as
presented in documents filed with the Securities and
Exchange Commission;
(iv) reviewed the Company's and Servico's respective
operations and considered the views of professional
analysts covering Servico;
(v) reviewed certain limited non-public information
relating to Servico, including financial and
operating results of Servico and management's
forecasts prepared by Servico;
(vi) conducted discussions with certain members of the
senior management of the Company and Servico with
respect to the financial condition, business,
operations, strategic objectives and prospects of the
Company and Servico, respectively;
(vii) reviewed and analyzed public information, including
certain stock market data and financial information
relating to selected public companies which we deemed
generally comparable to the Company and Servico;
<PAGE> 257
Impac Hotel Group, L.L.C.
March 19, 1998
Page 3
(viii) reviewed the trading history of the common stock of
Servico, including such stock's performance in
comparison to market indices and to selected
companies in comparable businesses;
(ix) considered multiples paid in merger and acquisition
transactions we deemed to be comparable to the
Proposed Transaction; and
(x) conducted such other financial analyses and
investigations and reviewed such other materials as
we deemed necessary or appropriate for the purposes
of the opinion expressed herein.
In rendering our opinion, we have assumed and relied upon the
accuracy and completeness of the financial and other information respecting the
Company and Servico and any other information provided to us, and we have not
assumed any responsibility for any independent verification of such information
or any independent valuation or appraisal of any of the assets of the Company or
Servico. With respect to the financial forecasts referred to above, we have
assumed that they have been reasonably prepared on a basis reflecting the best
currently available judgments of the management of the Company and Servico as to
the future financial performance of the Company and Servico, respectively.
In addition to our review and analysis of the specific
information set forth above, our opinion herein reflects and gives effect to our
assessment of general economic, monetary and market conditions existing as of
the date hereof as they may affect the business and prospects of the Company and
Servico.
The opinion rendered herein does not constitute a
recommendation of the Proposed Transaction over any other alternative
transactions which may be available to the Company. Our engagement and the
opinion expressed herein are solely for the benefit of the Members and are not
intended to confer rights or remedies upon Servico or any of its shareholders.
Furthermore, the opinion rendered herein does not constitute a recommendation by
Allen as to the manner in which any security holder of the Company should vote
with respect to any security holder action required to approve the Proposed
Transaction. Allen consents to the inclusion of the text of this opinion in any
notification or appropriate disclosure to the Company's security holders and in
any filing the Company is required by applicable law to make, or include in
documents filed, with the Securities and Exchange Commission.
<PAGE> 258
Impac Hotel Group, L.L.C.
March 19, 1998
Page 4
Based on and subject to the foregoing, we are of the opinion
that, as of this date, the Impac Exchange Ratio is fair to the Members from a
financial point of view.
Very truly yours,
ALLEN & COMPANY INCORPORATED
By: /s/ Paul A. Gould
--------------------------------
Paul A. Gould
Managing Director
<PAGE> 259
APPENDIX D
LODGIAN, INC.
1998 SHORT-TERM INCENTIVE
COMPENSATION PLAN
<PAGE> 260
LODGIAN, INC.
1998 SHORT-TERM INCENTIVE COMPENSATION PLAN
<TABLE>
<CAPTION>
<S> <C> <C>
1. Purpose........................................................................1
2. Definitions....................................................................1
3. Effective Date.................................................................4
4. Administration.................................................................4
5. Eligibility....................................................................6
6. Maximum Amount of Award per Participant........................................6
7. Target Awards..................................................................6
8. Performance Objectives.........................................................6
9. Notice of Target Award.........................................................7
10. Final Award Determination......................................................7
11. Payment of Final Awards........................................................8
12. Shares of Stock Subject to the Plan............................................8
13. Termination of Employment......................................................8
14. Transfer.......................................................................9
15. Amendment, Suspension or Termination of Plan...................................9
16. Non-Transferability............................................................9
17. Recapitalization or Reorganization.............................................9
18. Change in Control.............................................................10
19. Miscellaneous.................................................................10
</TABLE>
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<PAGE> 261
LODGIAN, INC.
1998 SHORT-TERM INCENTIVE
COMPENSATION PLAN
1. PURPOSE. The Lodgian, Inc. 1998 Short-Term Incentive Compensation
Plan (the "Plan") is intended to increase the profitability of LODGIAN, INC., a
Delaware corporation (the "Company"), and its Subsidiaries (as hereinafter
defined) by providing the opportunity for key executives to earn incentive
payment for outstanding achievement and performance. The Plan has the further
purpose of fulfilling the Company's objective of offering a fully competitive
total compensation package to its key employees, thus enabling the Company to
attract and retain executives of the highest caliber and ability.
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 4(d).
"AFFILIATE" and "ASSOCIATE" have the respective meanings ascribed to
such terms in Rule 12b-2 promulgated under the Exchange Act.
"AWARD" means the right of a Participant to receive a payment under the
Plan subject to the terms and conditions hereof, including satisfaction of the
Participant's Performance Objectives during the applicable Performance Period.
"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.
"CEO" means the Chief Executive Officer 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
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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 shareholders of the Company approve 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 of such merger or consolidation (the
"SURVIVING ENTITY") 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 shareholders of the Company approve 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;
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 any other Committee appointed by the Board to
administer the Plan.
"COMMON STOCK" means the Common Stock, par value $.01 per share, of the
Company.
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"COVERED EMPLOYEE" 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.
"DISABILITY" means eligibility for disability benefits under the terms
of the Company's long-term disability plan in effect at the time the Participant
becomes disabled.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the applicable filings and regulations 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.
"FINAL AWARD" means the amount determined pursuant to Section 10 as
payable to a Participant under the Plan in respect of a Performance Period.
"MANAGEMENT" means the Co-Chairmen of the Board and the CEO, and such
other member of the Company's management as they may from time to time designate
to take action with respect to the Plan.
"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 a key executive of the Company whose decisions and
actions significantly affect the Company 's growth and profitability and who
receives an Award opportunity under the Plan as determined by the Committee.
"PERFORMANCE OBJECTIVES" means significant financial or individual
objectives to be achieved by the Participant during the Performance Period and
upon which the payment of the Award shall be based.
"PERFORMANCE PERIOD" means each calendar year or multi-year cycle as
determined by the Committee.
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"PERSON" means any person, entity or "group" within the meaning of
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act.
"RETIREMENT" means retirement at normal retirement age, as defined in
the retirement plan applicable to a Participant, or under the early retirement
provisions of such plan.
"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.
"TARGET AWARD" means the amount established pursuant to Section 7 with
respect to a Participant. Target Awards shall be denominated in cash.
3. EFFECTIVE DATE. The Plan shall be effective as of the date (the
"EFFECTIVE DATE") of either (i) the consummation of the proposed reorganization
pursuant to which Servico, Inc. and Impac Hotel Group, L.L.C. will become
wholly-owned subsidiaries of the Company, contingent upon its prior approval by
the shareholders of Servico, Inc. and unitholders of Impac Hotel Group, Inc., or
(ii) following such reorganization, on the date of its approval by the
shareholders of the Company. If, in either case, shareholder approval is not
obtained at or prior to the first annual meeting of the shareholders of the
Company to occur after the adoption of the Plan by the Board, the Plan and any
Awards thereunder shall terminate as AB INITIO and be of no further force and
effect. Subject to compliance with all applicable legal requirements and the
foregoing, the first fiscal year of the Company beginning on or after January 1,
1998 shall be the first Performance Period of the Plan. No Award shall be made
with respect to Performance Periods ending after December 31, 2002, unless the
Plan is extended by the Board.
4. ADMINISTRATION.
(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,
(ii) to make Awards in accordance with the Plan,
(iii) to determine the amount of each Target Award,
(iv) to determine the terms and conditions of each
Award, including, without limitation, those related to vesting, forfeiture and
payment, and the effect, if any, of a Participant's termination of employment
with the Company or, subject to Section 18 hereof, of a Change in Control on the
Award made to such Participant, and including the authority to amend the
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<PAGE> 265
terms and conditions of an Award after the making thereof to a Participant in a
manner that is not prejudicial to the rights of such Participant in such Award
and not otherwise prohibited by the Plan,
(v) to determine Performance Objectives applicable to
each Award,
(vi) to determine the degree of the attainment of the
Performance Objectives,
(vii) to determine the amount of Final Awards and the
form of payments to Participants,
(viii) to prescribe, amend and rescind rules and
procedures relating to the Plan,
(ix) to vary the terms of Awards to take account of tax,
securities law and other regulatory requirements of foreign jurisdictions,
(x) 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
(xi) to make all other determinations and to formulate
such procedures as may be necessary or advisable for the administration of the
Plan. In reaching its decisions, the Committee shall consider recommendations
made by Management. In addition, the Committee is authorized to use the services
of independent auditors to determine the level of achievement of Performance
Objectives, subject to the certification of the Committee with respect to the
achievement of the Performance Objectives for the Covered Employees.
(b) PLAN CONSTRUCTION AND INTERPRETATION. The Committee shall
have all 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.
(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 Participants (A) who are Covered
Employees or (B) who are officers of the Company who are delegated authority by
the Committee hereunder, or (ii) under Sections 4(b)and 15 of the Plan. Any
delegation hereunder shall be subject to the restrictions and limitations 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
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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 4(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.
5. ELIGIBILITY. The Committee shall select Participants based on
recommendations of Management. Selection as a Participant shall be limited to
those officers or other key employees or consultants of the Company or a
Subsidiary who, by virtue of their positions, have a demonstrable impact on
either the profitability of a major business unit of the Company, or upon the
overall profitability of the Company. An individual's status as a member of the
Committee will not affect his or her eligibility to participate in the Plan. No
Participant or employee of the Company shall have any right to be awarded an
Award or to receive an actual payment under the Plan.
6. MAXIMUM AMOUNT OF AWARD PER PARTICIPANT. The maximum Award that may
be earned by any Participant in respect of any Performance Period shall equal
$1,000,000.
7. TARGET AWARDS. The Target Award for each Participant shall be
determined by the Committee at or near the start of the applicable Performance
Period based upon Management's recommendation. The Target Award for any
Participant shall not exceed the amount specified in Section 6 as the maximum
Award that may be earned by any Participant. For Covered Employees, the Target
Award, the related award schedule and the Performance Objective(s) shall be
established within 90 days of the beginning of the Performance Period (or such
other time as may be required or permitted by Section 162(m) of the Code). Each
individual Target Award shall be for a stated dollar amount, but Final Awards
may be paid in cash, in shares of Common Stock (valued at their Fair Market
Value as of the date of payment) or in a combination of cash and shares as the
Committee shall determine.
8. PERFORMANCE OBJECTIVES. Performance Objectives for each Participant
shall be established as provided in this section at demanding levels so that
their achievement reflects commendable performance by the Participant. The
Performance Objectives may consist of Financial Objectives, Individual
Objectives or a combination of Financial and Individual Objectives. With
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respect to Covered Employees, the Performance Objectives shall consist of
Financial Objectives only. Financial and Individual Objectives are defined as
follows:
(a) FINANCIAL OBJECTIVES. Financial Objectives shall be
expressed in terms of one or more of the following performance measures
established by the Committee for each Performance Period: (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) pre
profits, (viii) earnings growth, (ix) revenue growth, (x) book value per share,
(xi) stock price and (xii) performance relative to peer group companies, each of
which may be established on a Company-wide basis or established with respect to
one or more operating units, divisions, acquired businesses, minority
investments, partnerships or joint ventures. At the same time, a "range" of
achievement for financial objectives ranging from "zero" to "target" (100% of
Target Award relating to Financial Objectives) to "maximum" shall be
established. The Committee shall have the authority to alter or adjust Financial
Objectives during the course of a Performance Period, or to alter or adjust the
financial results otherwise reported or achieved by the Company during such
Performance Period, if it is deemed appropriate to do so, except with respect to
the Covered Employees who are subject to the terms of the last sentence of
Section 10(b).
(b) INDIVIDUAL OBJECTIVES. Individual Objectives, if
appropriate for a Participant, shall be expressed in terms of significant
qualitative or quantitative individual goals to be achieved during the
Performance Period. Individual Objectives usually shall be established jointly
by the Participant and the Participant's immediate superior, subject to approval
by the CEO, or his delegate. A Participant's Individual Objectives may be
altered or amended during a Performance Period, if necessary, to properly
reflect changed business conditions and priorities, subject to approval by the
CEO or his delegate.
9. NOTICE OF TARGET AWARD. Except as may otherwise be determined by the
Committee, a Participant shall be notified in writing on or near the start of
the Performance Period of the amount of the Participant's Target Award and the
Performance Objectives.
10. FINAL AWARD DETERMINATION. As soon as practicable following the
completion of each Performance Period, the level of achievement of Performance
Objectives for each Participant and the amount of the Final Award payment shall
be determined by Management. With respect to Covered Employees, the Committee
shall review such determination and shall certify in writing as to such level of
achievement. The level of achievement of the Performance Objectives shall be
determined in the following manner:
(a) FINANCIAL OBJECTIVES. For performance at or below the
"zero" level of achievement, there shall be no payment. Performance between the
"zero" level of achievement and the "target" level shall result in a payment in
accordance with the established range of achievement payment schedule.
Performance between the "target" and the "maximum" level of achievement shall
result in a payment in accordance with the established range of achievement
payment schedule.
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(b) ADJUSTMENTS IN FINANCIAL CALCULATIONS. Except as provided
below with respect to Covered Employees, the Committee in its sole discretion
has the authority to effect adjustments from time to time in connection with
determining the degree of achievement of the Financial Objectives for the
Company or a business unit of the Company for the applicable year in question,
and to make any other determinations, as it deems equitable, fair or advisable
for the purpose of ascertaining the amount of any payments under this Plan. With
respect to Covered Employees, the Committee shall have no discretion to
increase, but may decrease, the amount of the Final Award based on the range of
achievement of the Financial Objectives established under Sections 7 and 8
hereof.
(c) INDIVIDUAL OBJECTIVES. The attainment of Individual
Objectives shall be determined by the Participant's superior, subject to review
by Management and the Committee for consistent and equitable evaluations and
judgments.
(d) MAXIMUM AWARDS. Where one or more objectives (but not
necessarily all) have been clearly and demonstrably exceeded, a Participant
(other than a Covered Employee) may be paid an amount in excess of the portion
of the Target Award related to such objectives.
11. PAYMENT OF FINAL AWARDS. Final Award payments shall be made, less
required tax and other applicable withholdings, as soon as practicable after the
determination and final approval of such payments as provided in Section 10.
Final Awards shall be paid in cash, in shares of Common Stock (valued at their
Fair Market Value as of the date of payment) or in a combination of cash and
shares as the Committee shall determine. With respect to Final Awards that are
paid in Common Stock, the Committee may establish at or prior to the time of
payment such restrictions on the transferability and/or vesting requirements, if
any, as the Committee considers appropriate.
12. SHARES OF STOCK SUBJECT TO THE PLAN. Subject to adjustment as
provided in Section 17(b) hereof, the number of shares of Common Stock that may
be issued under the Plan in payment of Final Awards shall not exceed, in the
aggregate, 1,000,000 shares. Such shares may be either authorized but unissued
shares, treasury shares or any combination thereof.
13. TERMINATION OF EMPLOYMENT. If a Participant's employment with the
Company terminates during a Performance Period because of death, Disability or
Retirement or with the approval of the Committee, the Participant (or the
Participant's designated beneficiary or estate in the absence of a surviving
designated beneficiary) shall receive a pro rata payment based on the number of
full months during which the Participant was employed during the Performance
Period and the degree to which during such Performance Period the Performance
Objectives were judged to have been achieved. A Participant whose employment
with the Company terminates during a Performance Period for any reason other
than death, Disability or Retirement (including without limitation by voluntary
resignation or termination by the Company with or without cause) shall not be
eligible for any payment for such Performance Period. A leave of absence, if
approved by the Committee, shall not be deemed to be a termination of employment
for purposes of this Plan, and may warrant the payment of a full or pro rata
Award as determined by the Committee.
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14. TRANSFER. If a Participant is transferred within the Company during
a Performance Period to a position that is not considered as eligible for
participation in the Plan, the Committee may, in its sole and absolute
discretion, authorize a pro rata payment based on the number of full months
during the Performance Period during which the Participant was employed and the
degree to which during such Performance Period the Performance Objectives were
judged to have been achieved.
15. AMENDMENT, SUSPENSION OR TERMINATION OF 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 without shareholder
approval, the Board or Committee shall not change (i) the performance measures
listed in Section 8(a) with respect to Covered Employees, (ii) the individuals
or class of individuals eligible to participate in the Plan, or (iii) the
maximum amount payable to a Participant 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 awarded, adversely
affect his or her rights under such Awards.
16. NON-TRANSFERABILITY. No Award made 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. In the event of a
Participant's death, the payment of the Award as provided in the Plan, if any,
shall be made to the Participant's designated beneficiary, or estate in the
absence of a surviving beneficiary.
17. RECAPITALIZATION OR REORGANIZATION.
(a) AUTHORITY OF THE COMPANY AND SHAREHOLDERS. The existence
of the Plan 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, 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
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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, adjustment shall be made shall be final and binding on the
Company and all Participants.
18. CHANGE IN CONTROL. In the event of a Change in Control, and except
as the Committee (as constituted immediately prior to such Change in Control)
may otherwise determine in its sole discretion, the Company shall pay to each
Participant the pro rata amount of such Participant's Target Award for said
Performance Period, determined by the ratio which the number of months during
the applicable Performance Period during which the Award had been outstanding
(including the month in which the Change in Control occurred) bears to number of
full months in the Performance Period.
19. 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 obligations 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 AWARDS OR EMPLOYMENT. No Participant shall
have any claim or right to receive Awards under the Plan. Nothing in the Plan
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 than those of a general creditor of
the Company. In its sole discretion, the Committee may authorize the creation of
this or other arrangement to meet the obligations created under the Plan to
deliver Common Stock or payments in lieu thereof with respect to Awards
hereunder.
(d) SECURITIES LAW RESTRICTIONS. The Committee may require
each Participant acquiring shares of Common Stock pursuant to an Award to
represent to and agree with the
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Company in writing that such Participant 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 New York 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.
(e) EXPENSES. The costs and expenses incurred in administering
the Plan, including any Committee fees, charges by the Company's independent
auditors, or other costs, shall be borne by the Company.
(f) 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.
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APPENDIX E
LODGIAN, INC.
1998 STOCK INCENTIVE PLAN
<PAGE> 273
LODGIAN, INC.
1998 STOCK INCENTIVE PLAN
-------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
1. Purpose.........................................................................1
2. Definitions.....................................................................1
3. Administration of the Plan......................................................4
4. Duration of Plan................................................................5
5. Shares of Stock Subject to the Plan.............................................6
6. Eligible Individuals............................................................6
7. Awards Generally................................................................7
8. Stock Options...................................................................7
9. Stock Appreciation Rights.......................................................8
10. Stock Awards....................................................................9
11. Performance Share Awards........................................................9
12. Other Awards....................................................................9
13. Section 162(m) Awards...........................................................9
14. Non-Transferability............................................................10
15. Recapitalization or Reorganization.............................................10
16. Change in Control..............................................................11
17. Amendment of the Plan..........................................................11
18. Miscellaneous..................................................................12
</TABLE>
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LODGIAN, INC.
1998 STOCK INCENTIVE PLAN
1. PURPOSE. The purposes of the Lodgian, Inc. 1998 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.
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,
<PAGE> 275
(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 shareholders of the Company approve 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 shareholders of the Company approve 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;
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 any other committee appointed by the
Board to administer the Plan.
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"COMMON STOCK" means the Common Stock, par value $.01 per
share, of the Company.
"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.
"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)
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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.
"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.
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
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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.
(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.
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,
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no Awards may be granted under the Plan after the tenth anniversary of the
Effective Date (as defined in Section 18(k)).
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,
3,000,000 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, 3,000,000 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:
(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.
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 of the Company or a Subsidiary with
the potential to contribute to the future success of the Company or its
Subsidiaries. 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 250,000 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
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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.
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 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 for any reason will have on the
vesting, exercisability, payment or lapse of restrictions applicable to an
outstanding Award.
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
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(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, 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 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.
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
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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.
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.
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 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.
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.
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."
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(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.
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.
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
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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.
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
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.
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.
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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) LOANS. On such terms and conditions as shall be approved
by the Committee, the Company may directly or indirectly lend money to
a Participant to accomplish the purposes of the Plan, including to
assist such Participant to acquire or carry shares of Common Stock
acquired upon the exercise of Stock Options granted hereunder, and the
Committee may also separately lend money to any Participant to pay
taxes with respect to any of the transactions contemplated by the Plan.
(c) 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.
(d) 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 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.
(e) 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.
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(f) 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 New York 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.
(g) COMPLIANCE WITH RULE 16B-3.
(i) The Plan is intended to comply with 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 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 insofar as Participants
subject to Section 16 of the Exchange Act are concerned.
(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.
(h) 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.
(i) EXPENSES. The costs and expenses of administering the Plan
shall be borne by the Company.
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(j) 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.
(k) EFFECTIVE DATE. The Plan shall be effective as of the date
(the "EFFECTIVE DATE") of either (i) the consummation of the proposed
reorganization pursuant to which Servico, Inc. and Impac Hotel Group,
L.L.C. will become wholly-owned subsidiaries of the Company, contingent
upon its prior approval by the shareholders of Servico, Inc. and the
unitholders of Impac Hotel Group, L.L.C. or (ii) following such
reorganization, on the date of its approval by the shareholders of the
Company. If, in either case, shareholder approval is not obtained at or
prior to the first annual meeting of the shareholders of the Company to
occur after the adoption of the Plan by the Board, the Plan and any
Awards thereunder shall terminate AB INITIO and be of no further force
and effect.
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APPENDIX F
LODGIAN, INC.
NON-EMPLOYEE DIRECTORS' STOCK PLAN
<PAGE> 289
LODGIAN, INC.
NON-EMPLOYEE DIRECTORS' STOCK PLAN
<TABLE>
<CAPTION>
<S> <C> <C>
1. Definitions..................................................................1
2. Purposes.....................................................................3
3. Administration...............................................................3
4. Shares Available.............................................................3
5. Director Shares .............................................................4
6. Options......................................................................4
7. Recapitalization or Reorganization...........................................7
8. Termination and Amendment of the Plan........................................7
9. Miscellaneous................................................................8
</TABLE>
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LODIGIAN, INC.
NON-EMPLOYEE DIRECTORS' STOCK PLAN
1. DEFINITIONS.
"AFFILIATE" and "ASSOCIATE" have the respective meanings ascribed to
such terms in Rule 12b-2 promulgated under the Exchange Act.
"ANNUAL FEES" means the cash portion of (i) any annual fee payable to a
Non-Employee Director for service on the Board, (ii) any other fee determined on
an annual basis and payable for service on, or for acting as chairperson of, any
committee of the Board and (iii) any similar annual fee payable in respect of
service on the board of directors of any Subsidiary or any committee of any such
board of directors.
"ANNUAL MEETING" means an annual meeting of the Company's stockholders.
"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.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMBINED VOTING POWER" means the combined voting power of the
Company's or other relevant entity's then outstanding voting securities.
"COMMITTEE" means the committee appointed by the Board to administer
the Plan, which shall be composed exclusively of members of the Board who are
not Non-Employee Directors.
"COMMON STOCK" means the Common Stock of the Company, par value $.01
per share.
"COMPANY" means LODGIAN, Inc., a Delaware corporation, or any successor
to substantially all of its business.
"DIRECTOR'S FEES" means the aggregate of a Non-Employee Director's
Annual Fees and Meeting Fees.
"DIRECTOR SHARES" means shares of Common Stock granted to a
Non-Employee Director, which shall be subject to such terms and conditions as
are set forth in Section 5 below.
"DISABILITY" means eligibility for disability benefits under the terms
of the Company's long-term disability plan in effect at the time the
Non-Employee Director becomes disabled.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"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.
"MEETING FEES" means (i) any meeting fee payable in respect of
attendance at or participation in meetings of the Board or any committee of the
Board or any meeting of the stockholders of the Company and (ii) any similar
meeting fee payable in respect of service on the board of directors of any
Subsidiary or any committee of any such board of directors.
"MERGER" means the proposed reorganization pursuant to which Servico,
Inc. and Impac Hotel Group, L.L.C. will become wholly-owned Subsidiaries of the
Company.
"NON-EMPLOYEE DIRECTOR" means a member of the Board who is not an
employee of the Company or any of its Subsidiaries.
"OPTION" means an option to purchase shares of Common Stock awarded to
a Non-Employee Director pursuant to the Plan, which option shall not be intended
to qualify, and shall not be treated, as an "incentive stock option" within the
meaning of Section 422 of the Code.
"PARENT" means any corporation which is a "parent corporation" within
the meaning of Section 424 of the Code with respect to the relevant entity.
"PERSON" means any person, entity, or "group" within the meaning of
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act.
"PLAN" means the Lodgian, Inc. Non-Employee Directors' Stock Plan.
"RETIREMENT" means a Non-Employee Director ceasing to be a member of
the Board as a result of retirement from the Board in accordance with the
retirement Policy then applicable to Board members.
"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.
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2. PURPOSES. The purposes of the Plan are to retain the services of
qualified individuals who are not employees of the Company to serve as members
of the Board and to secure for the Company the benefits of the incentives
inherent in increased Common Stock ownership by such individuals by awarding
such individuals Options to purchase shares of Common Stock.
3. ADMINISTRATION.
(a) AUTHORITY. The Committee will be responsible for
administering the Plan. The Committee will have authority to adopt such
rules as it may deem appropriate to carry out the purposes of the Plan,
and shall have authority to interpret and construe the provisions of
the Plan and any agreements and notices under the Plan and to make
determinations pursuant to any Plan provision. The Committee shall also
have the authority to adjust the number of shares subject to an Option
related to each Annual Award pursuant to Section 6(a) at any time and
from time to time. Each interpretation, determination or other action
made or taken by the Committee pursuant to the Plan shall be final and
binding on all Persons. No member of the Committee shall be liable for
any action or determination made in good faith, and the members of the
Committee shall be entitled to indemnification and reimbursement in the
manner provided in the Company's Restated Certificate of Incorporation
as it may be amended from time to time.
(b) DELEGATION. The Committee may designate a committee
composed of one or more members of the Board to carry out its
responsibilities under such conditions as it may set.
4. SHARES AVAILABLE. Subject to the provisions of Section 12 of the
Plan, the maximum number of shares of Common Stock which may be issued under the
Plan shall not exceed 300,000 shares (the "SECTION 4 LIMIT"). Either authorized
and unissued shares of Common Stock or treasury shares may be delivered pursuant
to the Plan. 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 awards granted under the
Plan shall be charged against the Section 4 Limit; and
(b) the Section 4 Limit shall be increased by:
(i) the number of shares subject to an Option which
lapses, expires or is otherwise terminated without the
issuance of such shares,
(ii) the number of shares tendered to pay the
exercise price of an Option, and
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(iii) the number of shares withheld to satisfy any
tax withholding obligations of a Non-Employee Director with
respect to any shares or other payments hereunder.
5. DIRECTORS SHARES.
(a) DIRECTOR SHARE AWARDS. A Non-Employee Director may elect
to receive all or a specified percentage of his or her Director Fees
for each year of service on the Board in Director Shares, in lieu of
cash compensation for such portion thereof, rounded up or down to the
next whole share in the event of fractional amounts. The number of
Director Shares so awarded to each Non-Employee Director shall be
determined by dividing the portion of such Non-Employee Director's
Director Fees to be paid in Director Shares by the Fair Market Value of
a share of Common Stock on the date of award.
(b) TERMS OF DIRECTOR SHARE AWARDS. At the time Director
Shares are granted to a Non-Employee Director, share certificates
representing the appropriate number of Director Shares shall be
registered in the name of the Non-Employee Director and shall be
delivered to the Non-Employee Director. The Non-Employee Director shall
have all the rights and privileges of a stockholder as to such shares,
including the right to receive dividends and the right to vote such
shares. The Director Shares shall be immediately vested upon grant,
shall not be forfeitable to the Company and shall not be subject to any
restrictions on transfer (other than those imposed under applicable law
or under any trading policy of the Company).
6. OPTIONS. In addition to the awards of Director Shares described
above in Section 5, each Non-Employee Director shall also receive awards of
Options under the Plan as follows:
(a) OPTION GRANTS. At each Annual Meeting, commencing with the
Annual Meeting held in 1999, each Non-Employee Director who will remain
on the Board following the date of such Annual Meeting shall receive as
of such date an award consisting of an Option to purchase 5,000 shares
of Common Stock (or such lesser number determined by multiplying 5,000
by a fraction, the numerator of which is the number of full or partial
months since the immediately preceding Annual Meeting during which such
individual served on the Board in the capacity of a Non-Employee
Director, and the denominator of which is the number of full or partial
months since the immediately preceding Annual Meeting). Such Option
shall have a per share exercise price equal to the Fair Market Value of
the Common Stock on the date of award and shall be subject to the
vesting schedule provided for in Section 6(b) and the other terms and
conditions provided for herein.
(b) VESTING SCHEDULE OF OPTIONS. Options awarded pursuant to
the Plan shall vest and become exercisable in equal installments as of
each of the first three Annual Meetings following the date of grant;
PROVIDED, HOWEVER, that an Option shall become fully vested and
exercisable upon a Non-Employee ceasing to be a member of the Board as
a result of death, Disability or Retirement.
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(c) EXERCISE OF OPTIONS FOLLOWING TERMINATION OF SERVICE.
(i) EXERCISE FOLLOWING TERMINATION OF SERVICE DUE TO
DEATH, DISABILITY OR RETIREMENT. If a Non-Employee Director
ceases to be a member of the Board by reason of death,
Disability, Retirement or in the event of his involuntary
termination of service on the Board other than for cause, all
Options awarded to such Non-Employee Director may be exercised
by such Non-Employee Director, or by his or her estate,
personal representative or beneficiary, as the case may be, at
any time within one year after the date of termination of
service. At the end of such one-year period the Options shall
expire.
(ii) EXERCISE FOLLOWING OTHER TERMINATIONS OF
SERVICE. If a Non-Employee Director ceases to be a member of
the Board for any reason other than as set forth above in
subsection (i) hereof, then (A) the Non-Employee Director
shall have the right, subject to the terms and conditions
hereof, to exercise the Option, to the extent it has vested as
of the date of such termination of service, at any time within
six months after the date of such termination, and (B) the
unvested portion of any Options awarded to the Non-Employee
Director shall be forfeited as of the date of termination of
service.
(d) TIME AND MANNER OF EXERCISE OF OPTIONS.
(i) NOTICE OF EXERCISE. Subject to the other terms
and conditions hereof, a Non-Employee Director may exercise
any Options, to the extent such Options are vested, by giving
written notice of exercise to the Company; PROVIDED, HOWEVER,
that in no event shall an Option be exercisable for a
fractional share. The date of exercise of an Option shall be
the later of (i) the date on which the Company receives such
written notice or (ii) the date on which the conditions
provided in Section 6(d)(ii) are satisfied.
(ii) PAYMENT. Prior to the issuance of a certificate
pursuant to Section 6(d)(v) hereof evidencing the shares of
Common Stock in respect of which all or a portion of an Option
shall have been exercised, a Non-Employee Director shall have
paid to the Company the exercise price of the Option for all
such shares purchased pursuant to the exercise of such Option.
Payment may be made by personal check, bank draft or postal or
express money order (such modes of payment are collectively
referred to as "cash") payable to the order of the Company in
U.S. dollars or in shares of Common Stock already owned by the
Non-Employee Director valued at their Fair Market Value as of
the last business day preceding the date of exercise, or in
any combination of cash or such shares as the Committee in its
sole discretion may approve. Payment of the exercise price in
shares of Common Stock shall be made by delivering to the
Company the share certificate(s) representing the required
number of shares, with the Non-Employee Director signing his
or her name on the
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back, or by attaching executed stock powers (the signature of
the Non-Employee Director must be guaranteed in either case).
When payment of the exercise price for an Option consists of
shares of Common Stock, such shares will not be accepted as
payment unless the Non-Employee Director has held such shares
for the requisite period necessary to avoid a charge to the
Company's earnings for financial reporting purposes.
(iii) STOCKHOLDER RIGHTS. A Non-Employee Director
shall have no rights as a stockholder with respect to any
shares of Common Stock issuable upon exercise of an Option
until a certificate evidencing such shares shall have been
issued to the Non-Employee Director pursuant to Section
6(d)(v), and no adjustment shall be made for dividends or
distributions or other rights in respect of any share for
which the record date is prior to the date upon which the
Non-Employee Director shall become the holder of record
thereof.
(iv) LIMITATION ON EXERCISE. No Option shall be
exercisable unless the Common Stock subject thereto has been
registered under the Securities Act and qualified under
applicable state "blue sky" laws in connection with the offer
and sale thereof, or the Company has determined that an
exemption from registration under the Securities Act and from
qualification under such state "blue sky" laws is available.
(v) ISSUANCE OF SHARES. Subject to the foregoing
conditions, as soon as is reasonably practicable after its
receipt of a proper notice of exercise and payment of the
exercise price of the Option for the number of shares with
respect to which the Option is exercised, the Company shall
deliver to the Non-Employee Director (or following the
Non-Employee Director's death, such other Person entitled to
exercise the Option), at the principal office of the Company
or at such other location as may be acceptable to the Company
and the Non-Employee Director (or such other Person), one or
more stock certificates for the appropriate number of shares
of Common Stock issued in connection with such exercise. Such
shares shall be fully paid and nonassessable and shall be
issued in the name of the Non-Employee Director (or such other
Person).
(e) RESTRICTIONS ON TRANSFER. An Option may not be
transferred, pledged, assigned, or otherwise disposed of, except by
will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined in the Code or Title I of
ERISA ("QDRO"); PROVIDED, HOWEVER, that the Committee may, subject to
such terms and conditions as the Committee shall specify, permit the
transfer of an Option to a Non-Employee Director'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. The Option shall be exercisable,
during the Non-Employee Director's lifetime, only by the Non-Employee
Director or by the Person to whom the Option has been transferred in
accordance with the previous sentence. No
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assignment or transfer of the Option, or of the rights represented
thereby, whether voluntary or involuntary, by operation of law or
otherwise, except by will or the laws of descent and distribution or
pursuant to a QDRO, shall vest in the assignee or transferee any
interest or right in the Option, but immediately upon any attempt to
assign or transfer the Option the same shall terminate and be of no
force or effect.
7. RECAPITALIZATION OR REORGANIZATION.
(a) AUTHORITY OF THE COMPANY AND STOCKHOLDERS. The existence
of the Plan shall not affect or restrict in any way the right or power
of the Company or the stockholders 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 other
provision of the Plan, 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 as it considers appropriate (in the form
determined by the Committee in its sole discretion) to prevent
diminution or enlargement of the rights of Non-Employee Directors under
the Plan with respect to the aggregate number of shares of Common Stock
authorized to be awarded under the Plan, the number of shares of Common
Stock covered by each outstanding Option and the exercise prices in
respect thereof, the number of shares of Common Stock covered by future
Option awards and the number of Phantom Stock Units credited to a
Non-Employee Director's Deferred Compensation Account 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 Non-Employee Directors.
8. TERMINATION AND AMENDMENT OF THE PLAN.
(a) TERMINATION. The Plan shall terminate as of the tenth
anniversary of the Effective Date. Following the Effective Date, no
further awards of Director Shares or Options shall be granted pursuant
to the Plan.
(b) GENERAL POWER OF BOARD. Notwithstanding anything herein to
the contrary, the Board or the Committee may at any time and from time
to time terminate, modify, suspend or amend the Plan in whole or in
part (including by amending the Plan as provided
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in Section 3(a)); 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 FURTHER, that the
Board may not, without shareholder approval, increase the maximum
number of shares issuable under the Plan except as provided in Section
7(b) above.
(c) WHEN NON-EMPLOYEE DIRECTORS' CONSENTS REQUIRED. The
Committee may not alter, amend, suspend, or terminate the Plan without
the consent of any Non-Employee Director to the extent that such action
would adversely affect his or her rights with respect to Director
Shares or Options that have previously been granted.
9. MISCELLANEOUS.
(a) TAX WITHHOLDING. No later than the date as of which an
amount first becomes includable in the gross income of the Non-Employee
Director for applicable income tax purposes with respect to any award
under the Plan, the Non-Employee Director 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 Non-Employee Director.
(b) LOANS. On such terms and conditions as shall be approved
by the Committee, the Company may directly or indirectly lend money to
a Non-Employee Director to accomplish the purposes of the Plan,
including to assist such Non-Employee Director to acquire or carry
shares of Common Stock acquired upon the exercise of Options granted
hereunder, and the Committee may also separately lend money to any
Non-Employee Director to pay taxes with respect to any of the
transactions contemplated by the Plan.
(c) NO RIGHT TO REELECTION. Nothing in the Plan shall be
deemed to create any obligation on the part of the Board to nominate
any of its members for reelection by the Company's stockholders, nor
confer upon any Non-Employee Director the right to remain a member of
the Board for any period of time, or at any particular rate of
compensation.
(d) UNFUNDED PLAN. This Plan is unfunded. Amounts payable
under the Plan will be satisfied solely out of the general assets of
the Company subject to the claims of the Company's creditors.
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(e) OTHER COMPENSATION ARRANGEMENTS. Payments received by a
Non-Employee Director 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 arrangement provided by the
Company.
(f) SECURITIES LAW RESTRICTIONS. The Committee may require
each Non-Employee Director purchasing or acquiring shares of Common
Stock pursuant to the Plan to agree with the Company in writing that
such Non-Employee Director 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 or any 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.
(g) COMPLIANCE WITH RULE 16B-3.
(i) The Plan is intended to comply with 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 in a manner consistent therewith. To
the extent any provision of the Plan 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 does not
include a provision required by Rule 16b-3 to be stated
therein, such provision (other than one relating to
eligibility requirements, or the price and amount of Options)
shall be deemed automatically to be incorporated by reference
into the Plan.
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(ii) Notwithstanding anything contained in the Plan
to the contrary, if the consummation of any transaction under
the Plan would result in the possible imposition of liability
on a Non-Employee Director 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.
(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) EFFECTIVE DATE. The Plan shall be effective as of the date
(the "EFFECTIVE DATE") of either (i) the consummation of the Merger,
contingent upon its prior approval by the shareholders of Servico, Inc.
and the unitholders of Impac Hotel Group, L.L.C. or (ii) following the
Merger, on the date of its approval by the shareholders of the Company.
If, in either case, shareholder approval is not obtained at or prior to
the first Annual Meeting of the shareholders of the Company to occur
after the adoption of the Plan by the Board, the Plan and any awards
hereunder shall terminate AB INITIO and be of no further force and
effect.
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APPENDIX G
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").
<PAGE> 301
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
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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, 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
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<PAGE> 303
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.
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<PAGE> 304
(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 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
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<PAGE> 305
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 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
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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.
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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.
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.
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<PAGE> 308
APPENDIX H
===============================================================================
RESTATED
BYLAWS
OF
LODGIAN, INC.
===============================================================================
<PAGE> 309
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I OFFICES............................................................................-1-
SECTION 1. Registered Office in Delaware......................................................-1-
SECTION 2. Other Offices......................................................................-1-
ARTICLE II MEETINGS OF STOCKHOLDERS...........................................................-1-
SECTION 1. Annual Meeting.....................................................................-1-
SECTION 2. Special Meetings...................................................................-1-
SECTION 3. Notice of Meetings.................................................................-1-
SECTION 4. Waiver of Notice...................................................................-2-
SECTION 5. Adjournments.......................................................................-2-
SECTION 6. Quorum.............................................................................-2-
SECTION 7. Voting.............................................................................-3-
SECTION 8. Proxies............................................................................-3-
SECTION 9. Organization.......................................................................-3-
SECTION 10. Advance Notice of Business to Be Transacted at Annual Meetings.....................-3-
ARTICLE III BOARD OF DIRECTORS.................................................................-4-
SECTION 1. General Powers.....................................................................-4-
SECTION 2. Number and Term of Holding Office..................................................-5-
SECTION 3. Nomination of Directors and Advance Notice Thereof.................................-5-
SECTION 4. Resignation........................................................................-6-
SECTION 5. Vacancies..........................................................................-6-
SECTION 6. Meetings...........................................................................-6-
SECTION 7. Action by Consent..................................................................-7-
SECTION 8. Meetings by Conference Telephone, etc..............................................-7-
SECTION 9. Compensation.......................................................................-8-
ARTICLE IV COMMITTEES.........................................................................-8-
SECTION 1. Committees.........................................................................-8-
ARTICLE V OFFICERS...........................................................................-9-
SECTION 1. Officers...........................................................................-9-
SECTION 2. Authority and Duties...............................................................-9-
SECTION 3. Term of Office, Resignation and Removal............................................-9-
SECTION 4. Vacancies..........................................................................-9-
SECTION 5. The Chairman.......................................................................-9-
SECTION 6. The Chief Executive Officer.......................................................-10-
SECTION 7. The President.....................................................................-10-
SECTION 8. Vice Presidents...................................................................-10-
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 9. The Secretary.....................................................................-10-
SECTION 10. Assistant Secretaries.............................................................-10-
SECTION 11. Chief Financial Officer...........................................................-11-
SECTION 12. The Treasurer.....................................................................-11-
SECTION 13. Assistant Treasurers..............................................................-11-
SECTION 14. Additional Officers...............................................................-11-
ARTICLE VI DIVIDENDS, CHECKS, DRAFTS, NOTES AND PROXIES......................................-11-
SECTION 1. Dividends.........................................................................-11-
SECTION 2. Checks, Drafts and Notes..........................................................-11-
SECTION 3. Execution of Proxies..............................................................-12-
ARTICLE VII SHARES AND TRANSFER OF SHARES.....................................................-12-
SECTION 1. Certificates of Stock.............................................................-12-
SECTION 2. Record............................................................................-12-
SECTION 3. Transfer of Stock.................................................................-12-
SECTION 4. Addresses of Stockholders.........................................................-12-
SECTION 5. Lost, Destroyed or Mutilated Certificates.........................................-13-
SECTION 6. Facsimile Signatures..............................................................-13-
SECTION 7. Regulations.......................................................................-13-
SECTION 8. Record Date.......................................................................-13-
SECTION 9. Registered Stockholders...........................................................-14-
ARTICLE VIII BOOKS AND RECORDS.................................................................-14-
SECTION 1. Books and Records.................................................................-14-
ARTICLE IX SEAL..............................................................................-14-
SECTION 1. Seal..............................................................................-14-
ARTICLE X FISCAL YEAR.......................................................................-14-
SECTION 1. Fiscal Year.......................................................................-14-
ARTICLE XI INDEMNIFICATION...................................................................-14-
SECTION 1. Indemnification...................................................................-14-
ARTICLE XII AMENDMENTS........................................................................-17-
SECTION 1. Amendments........................................................................-17-
</TABLE>
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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 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,
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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.
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
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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 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
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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.
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
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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.
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(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 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. A director elected
to fill a vacancy shall hold office only until the next election of directors by
the stockholders. If there are no remaining directors, the vacancy shall be
filled by the stockholders.
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
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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.
(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
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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 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.
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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.
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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 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
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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 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 the payment of money, notes and other evidences of indebtedness
issued in the name of the Corporation
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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,
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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.
SECTION 5. LOST, DESTROYED OR MUTILATED CERTIFICATES. A holder
of any shares of 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, in 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 the Corporation. 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, resignation, 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 or
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 to 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.
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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.
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
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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, 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.
(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
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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.
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(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 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.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Certificate of Incorporation provides, and its
Restated Certificate of Incorporation (the "Certificate") will provide, that the
Registrant shall indemnify to the fullest extent authorized by the Delaware
General Corporation Law (the "DGCL"), each person who is involved in any
litigation or other proceeding because such person is or was a director or
officer of the Registrant, against all expense, loss or liability reasonably
incurred or suffered in connection therewith. The Registrant's Bylaws provide,
and its Restated Bylaws will provide, that a director or officer may be paid
expenses incurred in defending any proceeding in advance of its final
disposition upon receipt by the Registrant of an undertaking, by or on behalf of
the director or officer, to repay all amounts so advanced if it is ultimately
determined that such director or officer is not entitled to indemnification.
Section 145 of the DGCL permits a corporation to indemnify any director
or officer of the corporation against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with any action, suit or proceeding brought by reason of the fact
that such person is or was a director or officer of the corporation, if such
person acted in good faith and in a manner that 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, if he had no reason to believe his conduct
was unlawful. In a derivative action, (i.e., one brought by or on behalf of the
corporation), indemnification may be made only for expenses, actually and
reasonably incurred by any director or officer in connection with the defense or
settlement of such an action or suit, if such person acted in good faith and in
a manner that he reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made if
such person shall have been adjudged to be liable to the corporation, unless and
only to the extent that the court in which the action or suit was brought shall
determine that the defendant is fairly and reasonably entitled to indemnity for
such expenses despite such adjudication of liability.
Pursuant to Section 102(b)(7) of the DGCL, the Certificate will
eliminate the liability of a director to the Registrant or its stockholders for
monetary damages for such breach of fiduciary duty as a director, except for
liabilities arising (a) from any breach of the director's duty of loyalty to the
corporation or its stockholders, (b) from acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (c) under
Section 174 of the DGCL, or (d) from any transaction from which the director
derived an improper personal benefit.
The Registrant has obtained primary and excess insurance policies
insuring the directors and officers of the Registrant and its subsidiaries
against certain liabilities they may incur in their capacity as directors and
officers. Under such policies, the insurer, on behalf of the Registrant, may
also pay amounts for which the Registrant has granted indemnification to the
directors or officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
The following exhibits either are filed herewith or incorporated by
reference to documents previously filed or will be filed by amendment, as
indicated below:
EXHIBIT DESCRIPTION
- ------- -----------
2.1 Amended and Restated Agreement and Plan of Merger, dated as of
July ____, 1998, among the Registrant, Servico, Inc., Impac
Hotel Group, L.L.C., SHG-S Sub, Inc., SHG-I Sub, L.L.C.,
Lodgian Holdings, L.L.C., P-Burg Lodging Associates, Inc.,
Hazard Lodging Associates, Inc., Memphis Lodging Associates,
Inc., Delk Lodging Associates, Inc., Impac Hotel Development,
Inc., Impac Design and Construction, Inc. and Impac Hotel
Group, Inc. (included as Appendix A to the Prospectus/Proxy
Statement/Solicitation of Written Consent which is part of
this Registration Statement).
3.1 Restated Certificate of Incorporation of the Registrant
(included as Appendix G to the Prospectus/Proxy
Statement/Solicitation of Written Consent which is part of
this Registration Statement).
3.2 Restated Bylaws of the Registrant (included as Appendix H to
the Prospectus/Proxy Statement/Solicitation of Written Consent
which is part of this Registration Statement).
5 Opinion of Stearns Weaver Miller Weissler Alhadeff &
Sitterson, P.A. regarding the validity of the shares of
Lodgian Common Stock being offered.
8.1 Opinion of Stearns Weaver Miller Weissler Alhadeff &
Sitterson, P.A. regarding certain federal income tax matters.
8.2 Opinion of Powell, Goldstein, Frazer & Murphy, LLP regarding
certain federal income tax matters.
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8.3 Opinion of Lehman Brothers (included as Appendix B to the
Prospectus/Proxy Statement/Solicitation of Written Consent
which is part of this Registration Statement).
8.4 Opinion of Allen & Company (included as Appendix C to the
Prospectus/Proxy Statement/Solicitation of Written Consent
which is part of this Registration Statement).
10.1 Indenture, dated as of June 17, 1998, between Servico, Inc.,
the Registrant and Wilmington Trust Company, as Trustee.
10.2 First Supplemental Indenture, dated as of June 17, 1998,
between Servico, Inc., the Registrant and Wilmington Trust
Company, as Trustee.
10.3 Guarantee Agreement, dated as of June 17, 1998, between the
Servico, Inc., the Registrant and Wilmington Trust Company, as
Guarantee Trustee.
10.4 Registration Rights Agreement, dated June 17, 1998, among
Lodgian Capital Trust I, Servico, Inc. NationsBanc Montgomery
Securities, LLC.
10.5 Amended and Restated Declaration of Trust of Lodgian Capital
Trust I, dated as of June 17, 1998, between Servico, Inc., as
Sponsor, David A. Buddemeyer, Charles M. Diaz and Phillip
Hale, as Regular Trustees, and Wilmington Trust Company, as
Delaware Trustee.
10.6 Form of Lodgian 1998 Short-Term Incentive Compensation Plan
(included as Appendix D to the Prospectus/Proxy
Statement/Solicitation of Written Consent which is part of
this Registration Statement).
10.7 Form of Lodgian 1998 Stock Incentive Plan (included as
Appendix E to the Prospectus/Proxy Statement/Solicitation of
Written Consent which is part of this Registration Statement).
10.8 Form of Lodgian Non-Employee Directors' Stock Plan (included
as Appendix F to the Prospectus/Proxy Statement/Solicitation
of Written Consent which is part of this Registration
Statement).
10.9 Form of Employment Agreement between the Registrant and David
A. Buddemeyer
10.10 Form of Employment Agreement between the Registrant and Robert
S. Cole
10.11 Form of Registration Rights Agreement between the Registrant
and certain unitholders of Impac Hotel Group, L.L.C.
21 Subsidiaries of the Registrant.
23.1 Consent of Lehman Brothers.
23.2 Consent of Allen & Company (included with Exhibit 8.4 filed
herewith).
23.3 Consent of Stearns Weaver Miller Weissler Alhadeff &
Sitterson, P.A.
23.4 Consent of Powell, Goldstein, Frazer & Murphy, LLP (included
with Exhibit 8.2 filed herewith).
23.5 Consent of Ernst & Young, L.L.P.
23.6 Consent of Coopers & Lybrand, L.L.P.
24 Power of Attorney (included with signature pages to this
Registration Statement).
27 Financial Data Schedule.
99.1 Form of Servico, Inc. Common Stock Proxy Card for Special
Meeting of Shareholders of Servico, Inc.
99.2 Form of Written Consent for unitholders of Impac Hotel Group,
L.L.C.
99.3 Consent of Peter R. Tyson, as a person named as about to
become a director.
99.4 Consent of Joseph C. Calabro, as a person named as about to
become a director.
99.5 Consent of Michael Leven, as a person named as about to become
a director.
99.6 Consent of John Lang, as a person named as about to become a
director.
99.7 Consent of Richard H. Weiner, as a person named as about to
become a director.
99.8 Consent of Robert S. Cole, as a person named as about to
become a director.
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(b) FINANCIAL STATEMENT SCHEDULES.
Schedules are omitted because they are either not required, are not
applicable or because equivalent information has been included in the financial
statements, the notes thereto or elsewhere herein.
(c) REPORTS, OPINIONS AND APPRAISALS.
Omitted because they are included as appendicies to the
Prospectus/Proxy Statement/Solicitation of Written Consent which is a part of
this Registration Statement.
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
and
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the Registration Statement or any
material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment
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.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, whether applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement 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.
(c) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(d) The Registrant hereby undertakes that every prospectus (i) that is
filed pursuant to paragraph (c) immediately preceding or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment 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.
(e) Insofar as indemnification for liability arising under the
Securities Act of 1933 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 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 Act and will
be governed by the final adjudication of such issue.
(f) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
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(g) The undersigned Registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
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SIGNATURES
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, in the City of West Palm
Beach, State of Florida, on this 17th day of July, 1998
LODGIAN, INC.
By: /s/ David A. Buddemeyer
-----------------------------------
David A. Buddemeyer
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints David A. Buddemeyer and Charles M. Diaz,
and each of them acting alone, his true and lawful attorneys-in-fact and agents,
each 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 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,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that each said attorneys-in-fact and agents or any
of them, or their or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ David A. Buddemeyer President and Chief Executive Officer and July 17, 1998
- -------------------------------- Sole Director
David A. Buddemeyer
/s/ Warren M. Knight Vice President Finance (Principal July 17, 1998
- ---------------------------------- Financial and Accounting Officer)
Warren M. Knight
</TABLE>
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Exhibit 5
July 17, 1998
Mr. David A. Buddemeyer
President and Chief Executive Officer
Lodgian, Inc.
1601 Belvedere Road
West Palm Beach, Florida 33406
Re: Lodgian, Inc. - Mergers of Servico, Inc. with and into
SHG-s Sub, Inc and of Impac Hotel Group, L.L.C.
with and into SHG-I Sub, L.L.C.
Dear Mr. Buddemeyer
As counsel to Lodgian, Inc. a Delaware corporation (the "Corporation"),
we have examined (i) the Certificate of Incorporation and Bylaws of the
Corporation, (ii) the form of Restated Certificate of Incorporation and the form
of Restated Bylaws of the Corporation and (iii) such other documents and
proceedings as we have considered necessary for the purposes of this opinion.
We have also examined and are familiar with the proceedings taken by the
Corporation in connection with the mergers (the "Mergers") of Servico, Inc., a
Florida corporation, ("Servico") with and into SHG-S Sub, Inc., a Florida
corporation which is a wholly-owned subsidiary of the Corporation, and of Impac
Hotel Group, L.L.C., a Georgia limited liability company ("Impac"), with and
into SHG-I Sub, L.L.C., a Georgia limited liability company which is a
wholly-owned subsidiary of the
<PAGE> 2
Mr. David A. Buddemeyer
July 17, 1998
Page 2
Corporation, and the registration under the Securities Act of 1933, as amended,
of the shares of the Common Stock, par value $.01 per share (the "Shares"), of
the Corporation to be issued in connection with the Mergers, all as more fully
described in the Corporation's Registration Statement on Form S-4 (the
"Registration Statement"), filed with the Securities and Exchange Commission on
July 17, 1998. We have also examined a copy of the Amended and Restated
Agreement and Plan of Merger (the "Agreement") set forth as Appendix A to the
Prospectus/Proxy Statement/Solicitation of Written Consent of the Corporation,
Servico and Impac which comprises a part of the Registration Statement. We have
assumed the genuineness of signatures on and the authenticity of all documents
submitted to us as copies. Also, we have relied upon such certificates of public
officials, corporate agents and officers of the Corporation, Servico and Impac
and such other certificates with respect to the accuracy of material factual
matters contained therein which were not independently established.
Based upon the foregoing, and having regard to legal considerations
which we deem relevant, we are of the opinion that, following the issuance and
delivery of the Shares by the Corporation in accordance with the terms of the
Agreement and in the manner contemplated by the Registration Statement, the
Shares will be validly issued, fully paid and non-assessable.
Very truly yours,
STEARNS WEAVER MILLER WEISSLER
ALHADEFF & SITTERSON, P.A.
<PAGE> 1
EXHIBIT 8.1
July 17, 1998
Servico, Inc.
1601 Belvedere Road
West Palm Beach, Florida 33406
Re: Registration Statement on Form S-4 of Lodgian, Inc.,
containing the Joint Proxy Statement/Prospectus of Servico,
Inc. ("Servico") and Impac Hotel Group, L.L.C. ("Impac") dated
July 17, 1998 (the "Joint Proxy Statement/Prospectus")
Gentlemen:
You have requested our opinion concerning certain of the federal income
tax consequences of certain of the transactions described in the Joint Proxy
Statement/Prospectus, specifically, the tax consequences of the "Servico Merger"
(as defined in the Joint Proxy Statement/Prospectus). In connection with this
opinion we have made certain assumptions and relied upon certain
representations, including representations of the management of Servico, Impac,
P-Burg, Hazard, Memphis, Delk, IHD, IDC and IHG (as those terms are defined in
the Joint Proxy Statement/Prospectus) as to the facts upon which this opinion is
based.
Based upon the assumptions and the representations, we confirm our
opinions as set forth in the Joint Proxy Statement/Prospectus under the headings
"THE MERGER; Material Federal Income Tax Consequences."
This opinion addresses only the effect under the federal income tax
laws of the Servico Merger, and we express no opinion with respect to the
applicability thereto, or the effect thereon, or other federal laws, the laws of
any state or other jurisdiction, or as to any matters of municipal law or the
laws of any other local agencies within any state.
We hereby consent to the filing of this opinion as an exhibit to such
Joint Proxy Statement/Prospectus and the reference to our firm and the
above-mentioned opinion under the headings "Material Federal Income Tax
Consequences" included in the Joint Proxy Statement/Prospectus. In giving such
consent, we do not thereby admit that we are acting within the category of
persons whose consent is required under Section 7 of the Securities Act and the
rules and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
STEARNS WEAVER MILLER WEISSLER
ALHADEFF & SITTERSON, P.A.
<PAGE> 1
EXHIBIT 8.2
July 17, 1998
Impac Hotel Group, Inc.
Two Live Oak Center
3445 Peachtree Road, N.E., Suite 700
Atlanta, Georgia 30326
Re: Registration Statement on Form S-4 of Lodgian, Inc., containing the
Joint Proxy Statement/Prospectus of Servico, Inc. ("Servico") and
Impac Hotel Group, L.L.C. ("Impac") dated July 17, 1998 (the "Joint
Proxy Statement/Prospectus")
Gentlemen:
You have requested our opinion concerning certain of the federal income
tax consequences of certain of the transactions described in the Joint Proxy
Statement/Prospectus, specifically, the tax consequences of the "P-Burg Merger,"
the "Hazard Merger," the "Memphis Merger," the "Delk Merger," the "IHD Merger,"
the "IDC Merger," the "IHG Merger," and the "Impac Merger" (as those terms are
defined in the Joint Proxy Statement/Prospectus). In connection with this
opinion we have made certain assumptions and relied upon certain
representations, including representations of the management of Servico, Impac,
P-Burg, Hazard, Memphis, Delk, IHD, IDC and IHG (as those terms are defined in
the Joint Proxy Statement/Prospectus) as to the facts upon which this opinion is
based.
Based upon the assumptions and the representations, we confirm our
opinions as set forth in the Joint Proxy Statement/Prospectus under the headings
"THE MERGER; Material Federal Income Tax Consequences."
This opinion addresses only the effect under the federal income tax
laws of the P-Burg Merger, the Hazard Merger, the Memphis Merger, the Delk
Merger, the IHD Merger, the IDC Merger, the IHG Merger, and the Impac Merger,
and we express no opinion with respect to the applicability thereto, or the
effect thereon, or other federal laws, the laws of any state or other
jurisdiction, or as to any matters of municipal law or the laws of any other
local agencies within any state.
We hereby consent to the filing of this opinion as an exhibit to such
Joint Proxy Statement/Prospectus and the reference to our firm and the
above-mentioned opinion under the headings "Material Federal Income Tax
Consequences" included in the Joint Proxy
<PAGE> 2
Statement/Prospectus. In giving such consent, we do not thereby admit that we
are acting within the category of persons whose consent is required under
Section 7 of the Securities Act and the rules and regulations of the Securities
and Exchange Commission thereunder.
Very truly yours,
POWELL, GOLDSTEIN, FRAZER &
MURPHY LLP
<PAGE> 1
Exhibit 10.1
================================================================================
INDENTURE
AMONG
SERVICO, INC.
AS ISSUER,
LODGIAN, INC.
AND
WILMINGTON TRUST COMPANY
AS TRUSTEE
DATED AS OF JUNE 17, 1998
SUBORDINATED DEBENTURES
================================================================================
<PAGE> 2
TABLE OF CONTENTS(1)
----------------------
<TABLE>
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ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.01. DEFINITIONS......................................................................1
SECTION 1.02. COMPLIANCE CERTIFICATES AND OPINIONS............................................10
SECTION 1.03. FORM OF DOCUMENTS DELIVERED TO TRUSTEE..........................................11
SECTION 1.04. ACTS OF HOLDERS.................................................................12
SECTION 1.05. NOTICE, ETC., TO TRUSTEE, COMPANY AND LODGIAN...................................15
SECTION 1.06. NOTICE TO HOLDERS OF DEBENTURES; WAIVER.........................................15
SECTION 1.07. LANGUAGE OF NOTICES, ETC........................................................16
SECTION 1.08. CONFLICT WITH TRUST INDENTURE ACT...............................................16
SECTION 1.09. EFFECT OF HEADINGS AND TABLE OF CONTENTS........................................16
SECTION 1.10. SUCCESSORS AND ASSIGNS..........................................................16
SECTION 1.11. SEPARABILITY CLAUSE.............................................................16
SECTION 1.12. BENEFITS OF INDENTURE...........................................................16
SECTION 1.13. GOVERNING LAW...................................................................17
SECTION 1.14. COUNTERPARTS....................................................................17
SECTION 1.15. LEGAL HOLIDAYS..................................................................17
SECTION 1.16. IMMUNITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS,
DIRECTORS AND EMPLOYEES.........................................................17
ARTICLE 2
ISSUE, DESCRIPTION, TERMS, EXECUTION, REGISTRATION AND EXCHANGE OF
DEBENTURES
SECTION 2.01. DESIGNATION, TERMS, AMOUNT AUTHENTICATION AND DELIVERY
OF DEBENTURES...................................................................18
SECTION 2.02. FORM OF DEBENTURE AND TRUSTEE'S CERTIFICATE.....................................20
SECTION 2.03. DATE AND DENOMINATIONS OF DEBENTURES AND PROVISIONS FOR
PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST......................................20
SECTION 2.04. EXECUTION OF DEBENTURES.........................................................22
SECTION 2.05. EXCHANGE OF DEBENTURES..........................................................23
SECTION 2.06. TEMPORARY DEBENTURES............................................................25
SECTION 2.07. MUTILATED, DESTROYED, LOST OR STOLEN DEBENTURES.................................25
</TABLE>
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(1) Note: This table of contents shall not, for any purpose be deemed
to be part of the Indenture.
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SECTION 2.08. CANCELLATION OF SURRENDERED DEBENTURES..........................................26
SECTION 2.09. PROVISIONS OF INDENTURE AND DEBENTURES FOR SOLE BENEFIT OF
PARTIES AND DEBENTUREHOLDERS....................................................27
SECTION 2.10. APPOINTMENT OF AUTHENTICATING AGENT.............................................27
SECTION 2.11. GLOBAL DEBENTURE................................................................27
SECTION 2.12. CUSIP NUMBERS...................................................................29
ARTICLE 3
SATISFACTION AND DISCHARGE
SECTION 3.01. SATISFACTION AND DISCHARGE OF INDENTURE.........................................29
SECTION 3.02. APPLICATION OF TRUST MONEY......................................................30
SECTION 3.03. COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT
DEFEASANCE......................................................................31
SECTION 3.04. DISCHARGE AND DEFEASANCE........................................................31
SECTION 3.05. COVENANT DEFEASANCE.............................................................31
SECTION 3.06. CONDITIONS TO DEFEASANCE........................................................32
ARTICLE 4
REMEDIES
SECTION 4.01. EVENTS OF DEFAULT...............................................................35
SECTION 4.02. ACCELERATION OF MATURITY; RECISSION AND ANNULMENT...............................37
SECTION 4.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE.........................................................................39
SECTION 4.04. TRUSTEE MAY FILE PROOFS OF CLAIM................................................40
SECTION 4.05. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
DEBENTURES......................................................................41
SECTION 4.06. APPLICATION OF MONEY COLLECTED..................................................42
SECTION 4.07. LIMITATION ON SUITS.............................................................42
SECTION 4.08. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST............................................................43
SECTION 4.09. RESTORATION OF RIGHTS AND REMEDIES..............................................43
SECTION 4.10. RIGHTS AND REMEDIES CUMULATIVE..................................................43
SECTION 4.11. DELAY OR OMISSION NOT WAIVER....................................................44
SECTION 4.12. CONTROL BY HOLDERS OF DEBENTURES................................................44
SECTION 4.13. WAIVER OF PAST DEFAULTS.........................................................44
SECTION 4.14. UNDERTAKING FOR COSTS...........................................................45
SECTION 4.15. WAIVER OF STAY OR EXTENSION LAWS................................................46
</TABLE>
ii
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ARTICLE 5
THE TRUSTEE
SECTION 5.01. DUTIES AND RESPONSIBILITIES OF THE TRUSTEE; DURING DEFAULT;
PRIOR TO DEFAULT................................................................46
SECTION 5.02. CERTAIN RIGHTS OF TRUSTEE.......................................................47
SECTION 5.03. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF DEBENTURES..........................49
SECTION 5.04. MAY HOLD DEBENTURES.............................................................49
SECTION 5.05. MONEY HELD IN TRUST.............................................................49
SECTION 5.06. COMPENSATION AND REIMBURSEMENT..................................................49
SECTION 5.07. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR...............................50
SECTION 5.08. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR..........................................52
SECTION 5.09. DISQUALIFICATION; CONFLICTING INTERESTS.........................................53
SECTION 5.10. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.........................................54
SECTION 5.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY...............................54
SECTION 5.12. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS........................................................................54
SECTION 5.13. NOTICE OF DEFAULTS..............................................................54
ARTICLE 6
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 6.01. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS..........................55
SECTION 6.02. REPORTS BY TRUSTEE..............................................................56
SECTION 6.03. REPORTS BY COMPANY..............................................................56
ARTICLE 7
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
SECTION 7.01. COMPANY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS..................................56
SECTION 7.02. SUCCESSOR CORPORATION SUBSTITUTED...............................................57
SECTION 7.03. MERGER WITH IMPAC...............................................................57
SECTION 7.04. OPINION OF COUNSEL TO TRUSTEE...................................................58
ARTICLE 8
SUPPLEMENTAL INDENTURES
SECTION 8.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS..............................58
SECTION 8.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.................................59
SECTION 8.03. EXECUTION OF SUPPLEMENTAL INDENTURES............................................61
SECTION 8.04. EFFECT OF SUPPLEMENTAL INDENTURES...............................................61
SECTION 8.05. CONFORMITY WITH TRUST INDENTURE ACT.............................................61
</TABLE>
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SECTION 8.05. CONFORMITY WITH TRUST INDENTURE ACT.............................................61
SECTION 8.06. REFERENCE IN DEBENTURES TO SUPPLEMENTAL INDENTURES..............................61
ARTICLE 9
COVENANTS
SECTION 9.01. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST......................................62
SECTION 9.02. MAINTENANCE OF OFFICE OR AGENCY.................................................62
SECTION 9.03. MONEY FOR DEBENTURES PAYMENTS TO BE HELD IN TRUST...............................62
SECTION 9.04. LIMITATION ON DIVIDENDS; TRANSACTIONS WITH AFFILIATES...........................64
SECTION 9.05. COVENANTS AS TO LODGIAN CAPITAL TRUST...........................................64
SECTION 9.06. EXISTENCE.......................................................................65
SECTION 9.07. STATEMENT BY OFFICERS AS TO DEFAULT.............................................65
SECTION 9.08. FINANCIAL INFORMATION; SEC REPORTS..............................................65
ARTICLE 10
REDEMPTION OF DEBENTURES
SECTION 10.01. APPLICABILITY OF ARTICLE.......................................................66
SECTION 10.02. ELECTION TO REDEEM; NOTICE TO TRUSTEE..........................................66
SECTION 10.03. SELECTION BY TRUSTEE OF DEBENTURES TO BE REDEEMED..............................67
SECTION 10.04. NOTICE OF REDEMPTION...........................................................68
SECTION 10.05. DEPOSIT OF REDEMPTION PRICE....................................................69
SECTION 10.06. DEBENTURES PAYABLE ON REDEMPTION DATE..........................................69
SECTION 10.07. DEBENTURES REDEEMED IN PART....................................................69
ARTICLE 11
SINKING FUNDS
SECTION 11.01. APPLICABILITY OF ARTICLE.......................................................70
SECTION 11.02. SATISFACTION OF SINKING FUND PAYMENTS WITH DEBENTURES..........................70
SECTION 11.03. REDEMPTION OF DEBENTURES FOR SINKING FUND......................................71
ARTICLE 12
CONVERSION OF DEBENTURES
SECTION 12.01. APPLICABILITY OF ARTICLE.......................................................71
SECTION 12.02. EXERCISE OF CONVERSION PRIVILEGE...............................................71
SECTION 12.03. NO FRACTIONAL SHARES...........................................................73
SECTION 12.04. ADJUSTMENT OF CONVERSION PRICE.................................................73
SECTION 12.05. RESERVATION OF SHARES OF COMMON STOCK..........................................74
SECTION 12.06. PAYMENT OF CERTAIN TAXES UPON CONVERSION.......................................74
SECTION 12.07. NONASSESSABILITY...............................................................74
</TABLE>
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SECTION 12.08. EFFECT OF CONSOLIDATION OR MERGER ON CONVERSION
PRIVILEGE......................................................................74
SECTION 12.09. DUTIES OF TRUSTEE REGARDING CONVERSION.........................................75
SECTION 12.10. REPAYMENT OF CERTAIN FUNDS UPON CONVERSION.....................................75
ARTICLE 13
SUBORDINATION OF DEBENTURES
SECTION 13.01. DEBENTURES SUBORDINATE TO SENIOR INDEBTEDNESS..................................75
SECTION 13.02. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.................................76
SECTION 13.03. NO PAYMENT WHEN SENIOR INDEBTEDNESS IN DEFAULT.................................77
SECTION 13.04. PAYMENT PERMITTED IN CERTAIN SITUATIONS........................................78
SECTION 13.05. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS........................78
SECTION 13.06. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS....................................78
SECTION 13.07. TRUSTEE TO EFFECTUATE SUBORDINATION............................................79
SECTION 13.08. NO WAIVER OF SUBORDINATION PROVISIONS..........................................79
SECTION 13.09. NOTICE TO TRUSTEE..............................................................79
SECTION 13.10. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING
AGENT..........................................................................80
SECTION 13.11. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR INDEBTEDNESS.......................81
SECTION 13.12. RIGHTS OF TRUSTEE AS HOLDER OF SENIOR INDEBTEDNESS,
PRESERVATION OF TRUSTEE'S RIGHTS...............................................81
SECTION 13.13. ARTICLE APPLICABLE TO PAYING AGENTS............................................81
SECTION 13.14. CERTAIN CONVERSIONS DEEMED PAYMENT.............................................81
</TABLE>
v
<PAGE> 7
INDENTURE, dated as of June 17, 1998, among Servico Inc. (the
"COMPANY"), Lodgian, Inc. ("LODGIAN") and Wilmington Trust Company, as Trustee
(the "TRUSTEE").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its secured or
unsecured subordinated debentures, notes or other evidences of indebtedness (the
"DEBENTURES"), to be issued in one or more series as in this Indenture provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Debentures by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Debentures or of a series thereof,
as follows:
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.01. DEFINITIONS. For all purposes of this Indenture, except
as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(b) all other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision; and
(d) a reference to a Section or Article is to a Section or Article of
this Indenture.
"ACT," when used with respect to any Holder of a Debenture, has the
meaning specified in Section 1.04.
<PAGE> 8
"AFFILIATE" has the same meaning as given to that term in Rule 405 of
the Securities Act of 1933, as amended, or any successor rule thereunder.
"AUTHENTICATING AGENT" means any Person authorized by the Trustee
pursuant to Section 2.10 to act on behalf of the Trustee to authenticate
Debentures of one or more series.
"AUTHORIZED NEWSPAPER" means a newspaper, in the English language or in
an official language of the country of publication, customarily published on
each Business Day, whether or not published on Saturdays, Sundays or holidays,
and of general circulation in the place, in connection with which the term is
used, or in the financial community of such place. Where successive publications
are required to be made in Authorized Newspapers, the successive publications
may be made in the same or in different newspapers in the same city meeting the
foregoing requirements and in each case on any Business Day.
"BOARD OF DIRECTORS" means either the board of directors of the Company
or any duly authorized committee of that board.
"BOARD RESOLUTION" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"BUSINESS DAY," when used with respect to any Place of Payment or any
other particular location referred to in this Indenture or in the Debentures,
means any day other than a Saturday, Sunday or any other day on which banking
institutions in that Place of Payment or other location are permitted or
required by any applicable law to close.
"COMMISSION" means the United States Securities and Exchange
Commission.
"COMMON SECURITIES" means undivided beneficial interests in the assets
of the Lodgian Capital Trust that rank PARI PASSU with Preferred Securities
issued by such Lodgian Capital Trust; PROVIDED, that upon the occurrence of an
Event of Default, the rights of holders of Common Securities to payment in
respect to distributions and payments upon liquidation, redemption and otherwise
are subordinated to the rights of holders of Preferred Securities.
2
<PAGE> 9
"COMMON STOCK" includes any stock of any class of the Company that has
no preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company
and that is not subject to redemption by the Company. Subject to the
anti-dilution provisions of any convertible Debenture, however, shares of Common
Stock of the Company issuable on conversion of a Debenture shall include only
shares of the class designated as Common Stock of the Company at the date of any
supplemental indenture, Board Resolution or other instrument authorizing such
Debenture or shares of any class or classes resulting from any reclassification
or reclassifications thereof that have no preference in respect of the payment
of dividends or the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company and that are not subject
to redemption by the Company; PROVIDED, that if at any time there shall be more
than one such resulting class, the shares of each such class then so issuable
shall be substantially in the proportion that the total number of shares of such
class resulting from all such reclassifications bears to the total number of
shares of all classes resulting from all such reclassifications.
"COMPANY" means the Person named as the "COMPANY" in the first
paragraph of this Indenture until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"COMPANY" shall mean such successor Person.
"COMPANY REQUEST" or "COMPANY ORDER" means a written request or order
signed in the name of the Company by the Chairman of the Board of Directors or
the President or any Executive Vice President or any Vice President and by the
Treasurer or the Secretary or any Assistant Treasurer or any Assistant Secretary
of the Company and delivered to the Trustee.
"CORPORATE TRUST OFFICE" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered.
"CORPORATION" means a corporation, association, company, joint-stock
company or business trust.
"COVENANT DEFEASANCE" has the meaning specified in Section 3.05.
"DEBENTURE REGISTER" has the meaning specified in Section 2.05.
"DEBENTURE REGISTRAR" has the meaning specified in Section 2.05.
3
<PAGE> 10
"DEBENTURES" has the meaning stated in the first recital of this
Indenture and more particularly means any Debentures authenticated and delivered
under this Indenture.
"DECLARATION," with respect to a Lodgian Capital Trust, means the
Amended and Restated Declaration of Trust of such Lodgian Capital Trust.
"DEFAULTED INTEREST" has the meaning specified in Section 2.03.
"DEFEASANCE" has the meaning specified in Section 3.04.
"DEPOSITARY" means, with respect to the Debentures of any series for
which the Company shall determine that such Debentures will be issued as a
Global Debenture, The Depository Trust Company, New York, New York, another
clearing agency, or any successor registered as a clearing agency under the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), or other
applicable statute or regulation, which, in each case, shall be designated by
the Company pursuant to either Section 2.01 or 2.11.
"DOLLAR" or "$" means a dollar or other equivalent unit in such coin or
currency of the United States of America as at the time shall be legal tender
for the payment of public and private debts.
"EVENT OF DEFAULT" has the meaning specified in Section 4.01.
"GLOBAL DEBENTURE" means, with respect to any series of Debentures, a
Debenture executed by the Company and authenticated and made available for
delivery by the Trustee to the Depositary, or pursuant to the Depositary's
instruction, all in accordance with the Indenture, which shall be registered in
the name of the Depositary or its nominee.
"GUARANTEE" means any Guarantee that the Guarantor may enter into with
Wilmington Trust Company or other Persons that operates directly or indirectly
for the benefit of holders of Trust Securities of a Lodgian Capital Trust.
"GUARANTOR" means the Company in its capacity as guarantor under any
Guarantees.
"HOLDER", when used with respect to any Debenture, means the Person in
whose name the Debenture is registered in the Debenture Register.
"INDENTURE" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
4
<PAGE> 11
supplemental hereto entered into pursuant to the applicable provisions hereof
and shall include the terms of Debentures of any series established as
contemplated by Section 2.01.
"INTEREST," when used with respect to an Original Issue Discount
Debenture that by its terms bears interest only at Maturity, means interest
payable at Maturity.
"INTEREST PAYMENT DATE," when used with respect to any Debenture, means
the Stated Maturity of an installment of interest on such Debenture.
"LODGIAN" has the meaning stated in the first paragraph of this
Indenture.
"LODGIAN CAPITAL TRUST" means Lodgian Capital Trust I, a Delaware
statutory business trust, or any permitted successor thereto, or any
substantially similar Delaware statutory business trust sponsored by the Company
for the purpose of issuing Debentures hereunder.
"MATURITY," when used with respect to any Debenture, means the date on
which the principal of such Debenture or an installment of such principal
becomes due and payable as therein or herein provided, whether at the Stated
Maturity or by declaration of acceleration, call for redemption, notice of
option to elect repayment or otherwise.
"MERGER" has the meaning specified in Section 7.03.
"NOTICE OF DEFAULT" has the meaning specified in Section 4.01.
"NYSE" means the New York Stock Exchange, Inc. or any successor
thereto.
"OFFICERS' CERTIFICATE" means, in the case of the Company, signed in
the name of the Company by its Chairman of the Board, Chief Executive Officer,
President, Chief Operating Officer, Chief Financial Officer, any Vice President
(whether or not designated by a number or word or words added before or after
the title Vice President), or Treasurer or an Assistant Treasurer, and by its
Secretary or an Assistant Secretary, or its Comptroller or an Assistant
Comptroller, as the case may be, and delivered to the Trustee.
"OPINION OF COUNSEL" means a written opinion of counsel, who may be an
employee of or counsel for the Company and who shall be acceptable to the
Trustee.
5
<PAGE> 12
"ORIGINAL ISSUE DISCOUNT DEBENTURE" means any Debenture that provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the Maturity thereof pursuant to Section 4.02.
"OUTSTANDING," when used with respect to Debentures of any series,
means, as of the date of determination, all Debentures of such series
theretofore authenticated and delivered under this Indenture, except:
(i) Debentures of such series theretofore canceled by the
Trustee or any Paying Agent or delivered to the Trustee for
cancellation or that have previously been canceled;
(ii) Debentures of such series for whose payment or redemption
of which money or United States Government Obligations in the necessary
amount has been theretofore deposited in accordance with Article 3 with
the Trustee or any Paying Agent (other than the Company) in trust or
set aside and segregated in trust by the Company (if the Company shall
act as its own Paying Agent) for the Holders of Debentures of such
series; PROVIDED, if Debentures of such series or portions of
Debentures of such series are to be redeemed prior to the Maturity
thereof, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has been
made;
(iii) Debentures of such series that have been paid pursuant
to Section 2.07 or in exchange for or in lieu of which other Debentures
of such series have been authenticated and delivered pursuant to this
Indenture, other than any Debentures of such series in respect of which
there shall have been presented to the Trustee proof satisfactory to it
that Debentures of such series are held by a bona fide purchaser in
whose hands Debentures of such series are valid obligations of the
Company; and
(iv) Debentures of such series as to which Defeasance has been
effected pursuant to Section 3.04;
PROVIDED, that in determining whether the Holders of the requisite aggregate
principal amount of the Outstanding Debentures of such series have given any
request, demand, authorization, direction, notice, consent or waiver hereunder
or whether a quorum is present at a meeting of Holders of Debentures of such
Series (A) the principal amount of an Original Issue Discount Debenture of such
series that shall be deemed to be Outstanding shall be the amount of the
principal thereof that would be due and payable as of the date of such
determination upon acceleration of the Maturity thereof pursuant to Section
4.02, (B) the principal amount of a Debenture of such series denominated in a
foreign currency or
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currencies shall be the U.S. dollar equivalent, determined on the date of
original issuance of such Debenture, of the principal amount (or, in the case of
an Original Issue Discount Debenture of such series, the U.S. dollar equivalent
on the date of original issuance of such Debenture of the amount determined as
provided in (A) above) of such Debenture, and (C) Debentures of such series
owned by the Company or any other obligor upon such Debentures, or any Affiliate
of the Company or of such other obligor shall be disregarded and deemed not to
be Outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, or upon any such determination as to the presence of
a quorum, only Debentures of such series that a Responsible Officer of the
Trustee actually knows to be so owned shall be so disregarded. Debentures of
such series so owned that have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Debentures and that the pledgee
is not the Company or any other obligor upon such Debentures or any Affiliate of
the Company or of such other obligor.
"PAYING AGENT" means any Person authorized by the Company to pay the
principal of and any premium and interest on any Debentures on behalf of the
Company.
"PERSON" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association or government or any agency
or political subdivision thereof, or any other entity of whatever nature.
"PLACE OF PAYMENT," when used with respect to the Debentures of any
series, means the place or places where, subject to the provisions of Section
9.02, the principal of and any premium and interest on Debentures of such series
are payable as specified as contemplated by Section 2.01.
"PREDECESSOR DEBENTURE" of any Debenture of any series means every
previous Debenture evidencing all or a portion of the same debt as that
evidenced by such Debenture; and, for the purposes of this definition, any
Debenture of any series authenticated and delivered under Section 2.07 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Debenture
shall be deemed to evidence the same debt as the mutilated, destroyed, lost or
stolen Debenture.
"PREFERRED SECURITIES" means undivided beneficial interests in the
assets of Lodgian Capital Trust that rank PARI PASSU with Common Securities
issued by such Lodgian Capital Trust; PROVIDED, that upon the occurrence of an
Event of Default, the rights of holders of Common Securities to payment in
respect of
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distributions and payments upon liquidation, redemption and otherwise are
subordinated to the rights of holders of Preferred Securities.
"REDEMPTION DATE," when used with respect to any Debenture to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"REDEMPTION PRICE," when used with respect to any Debenture to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"REPRESENTATIVE" means (a) the indenture trustee or other trustee,
agent or representative for any Senior Indebtedness or (b) with respect to any
Senior Indebtedness that does not have any such trustee, agent or other
representative, (i) in the case of such Senior Indebtedness issued pursuant to
an agreement providing for voting arrangements as among the holders or owners of
such Senior Indebtedness, any holder or owner of such Senior Indebtedness acting
with the consent of the required persons necessary to bind such holders or
owners of such Senior Indebtedness and (ii) in the case of all other such Senior
Indebtedness, the holder or owner of such Senior Indebtedness.
"RESALE RESTRICTION TERMINATION DATE" means the first date on which the
Preferred Securities, the Guarantee, the Debentures and any Common Stock issued
or issuable upon the conversion or exchange thereof (other than (i) such
securities acquired by the Company or any Affiliate thereof and (ii) Common
Stock issued upon the conversion or exchange of any such security described in
clause (i) above) may be sold pursuant to Rule 144(k).
"RESPONSIBLE OFFICER" means, when used with respect to the Trustee, any
vice president, any assistant vice president or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and assigned to the Corporate Trust Administration
department of the Trustee and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of such
officer's knowledge of and familiarity with the particular subject.
"RULE 144(K)" means Rule 144(k) under the Securities Act or any
successor rule.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor statute.
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"SENIOR INDEBTEDNESS" shall mean, with respect to the Company, the
principal of, premium, if any, and interest on (i) all indebtedness of the
Company, whether outstanding on the date hereof or hereafter created, incurred
or assumed, which is for money borrowed, or evidenced by a note or similar
instrument given in connection with the acquisition of any business, properties
or assets, including securities (other than trade accounts in the ordinary
course of business), (ii) any indebtedness of others of the kinds described in
the preceding clause (i) for the payment of which the Company is responsible or
liable (directly or indirectly, contingently or otherwise) as guarantor or
otherwise and (iii) amendments, renewals, extensions and refundings of any such
indebtedness, unless in any instrument or instruments evidencing or securing
such indebtedness or pursuant to which the same is outstanding, or in any such
amendment, renewal, extension or refunding, it is expressly provided that such
indebtedness is not superior in right of payment to the Debentures of any
series. The Senior Indebtedness shall continue to be Senior Indebtedness and
entitled to the benefits of the provisions of Article 13 irrespective of any
amendment, modification or waiver of any term of the Senior Indebtedness or
extension or renewal of the Senior Indebtedness.
"STATED MATURITY," when used with respect to any Debenture or any
installment of principal thereof or interest thereon, means the date specified
in such Debenture as the fixed date on which the principal of such Debenture or
such installment of principal or interest is due and payable.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation at
least a majority of whose outstanding Voting Stock shall at the time be owned,
directly or indirectly, by such Person or by one or more of its Subsidiaries or
by such Person and one or more of its Subsidiaries, (ii) any general
partnership, joint venture, business trust or similar entity, at least a
majority of whose outstanding partnership or similar interests shall at the time
be owned by such Person or by one or more of its Subsidiaries or by such Person
and one or more of its Subsidiaries and (iii) any limited partnership of which
such Person or any of its Subsidiaries is a general partner.
"TRUSTEE" means the Person named as the "TRUSTEE" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"TRUSTEE" shall mean or include each Person who is then a Trustee hereunder, and
if at any time there is more than one such Person, "TRUSTEE" as used with
respect to the Debentures of any series shall mean the Trustee with respect to
Debentures of that series.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939 as in force
at the date as of which this instrument was executed; PROVIDED, that in the
event the Trust Indenture Act of 1939 is amended after such date, "TRUST
INDENTURE
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ACT" means, to the extent required by any such amendment, the Trust Indenture
Act of 1939 as so amended.
"TRUST SECURITIES" means Common Securities and Preferred Securities of
a Lodgian Capital Trust.
"UNITED STATES" means the United States of America (including the
States and the District of Columbia), its territories, its possessions and other
areas subject to its jurisdiction.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations of the United
States for the payment of which its full faith and credit is pledged, or
obligations of a person controlled or supervised by and acting as an agency or
instrumentality of the United States and the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States that, in
either case, are not callable or redeemable at the option of the issuer thereof,
and shall also include a depository receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act) as custodian with respect to any such
U.S. Government Obligations or a specific payment of principal of or interest on
any such U.S. Government Obligations held by such custodian for the account of
the holder of such depository receipt; PROVIDED that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the U.S. Government Obligations or the specific payment
of principal of or interest on the U.S. Government Obligations evidenced by such
depository receipt.
"VOTING STOCK," as applied to stock of any Person, means shares,
interests, participations or other equivalents in the equity interest (however
designated) in such Person having ordinary voting power for the election of a
majority of the directors (or the equivalent) of such Person, other than shares,
interests, participations or other equivalents having such power only by reason
of the occurrence of a contingency.
"YIELD TO MATURITY" means the yield to maturity on Debentures of any
series, calculated at the time of issuance of such series, or, if applicable, at
the most recent redetermination of interest on such series, and calculated in
accordance with accepted financial practice.
SECTION 1.02. COMPLIANCE CERTIFICATES AND OPINIONS. Except as otherwise
expressly provided by this Indenture, upon any application or request by the
Company to the Trustee to take any action under any provision of this Indenture,
the Company shall furnish to the Trustee an Officers' Certificate stating that
all conditions precedent, if any, provided for in this Indenture relating to the
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proposed action have been complied with and an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
Every certificate or opinion by or on behalf of the Company with
respect to compliance with a condition or covenant provided for in this
Indenture, except for certificates provided for in Section 9.07, shall include:
(a) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of each such individual,
the individual has made such examination or investigation as is
necessary to enable such individual to express an informed opinion as
to whether or not such covenant or condition has been complied with;
and
(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 1.03. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where
several matters are required to be certified by, or covered by an opinion of,
any specified Person, it is not necessary that all such matters be certified by,
or covered by the opinion of, only one such Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which such officer's certificate or opinion is
based are erroneous. Any such certificate or Opinion of Counsel may be based,
insofar as it relates to factual matters, upon a certificate or opinion of, or
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representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.04. ACTS OF HOLDERS. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided or permitted by this
Indenture to be given or taken by Holders may be embodied in and evidenced by
one or more instruments of substantially similar tenor signed by such Holders in
person or by agent duly appointed in writing. Except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments or record or both are delivered to the Trustee and, where it is
hereby expressly required, to the Company. Such instrument or instruments and
any such record (and the action embodied therein and evidenced thereby) are
herein sometimes referred to as the "ACT" of the Holders signing such instrument
or instruments and so voting at any such meeting. Proof of execution of any such
instrument or of a writing appointing any such agent or proxy, or of the holding
by any Person of a Debenture of any series, shall be sufficient for any purpose
of this Indenture and (subject to Section 5.02) conclusive in favor of the
Trustee and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to the execution thereof. Where such
execution is by a signer acting in a capacity other than the signer's individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of the signer's authority. The fact and date of the execution of any such
instrument or writing, or the authority of the Person executing the same, may
also be proved in any other manner that the Trustee deems sufficient.
(c) The principal amount and serial numbers of Debentures of any
series held by any Person, and the date of holding the same, shall be proved by
the Debenture Register.
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(d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Debenture of any series shall bind
every future Holder of the same Debenture and the Holder of every Debenture
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof in respect of anything done, omitted or suffered to be done by the
Trustee or the Company in reliance thereon, whether or not notation of such
action is made upon such Debenture.
(e) With respect to the Debentures of any series, upon receipt by the
Trustee of (i) any written notice directing the time, method or place of
conducting any proceeding or exercising any trust or power pursuant to Section
4.01 with respect to Debentures of such series or (ii) a request by the Company
pursuant to a resolution of its Board of Directors or any written demand,
request or notice with respect to any matter on which the Holders of Debentures
of such series are entitled to act under this Indenture, in each case from
Holders of less than, or proxies representing less than, 25% of the aggregate
principal amount or, if a higher percentage is specified pursuant to this
Indenture, the requisite principal amount of Outstanding Debentures of such
series entitled to give such demand, request or notice, the Trustee shall
establish a record date for determining Holders of Outstanding Debentures of
such series entitled to join in such demand, request or notice, which record
date shall be the close of business on the day the Trustee received such demand,
request or notice. The Holders on such record date, or their duly designated
proxies, and only such Persons, shall be entitled to join in such demand,
request or notice whether or not such Holders remain Holders after such record
date; PROVIDED, that unless the Holders of the requisite principal amount of
Outstanding Debentures of such series shall have joined in such demand, request
or notice prior to the day that is the ninetieth day after such record date,
such demand, request or notice shall automatically and without further action by
any Holder be canceled and of no further effect. Nothing in this paragraph shall
prevent a Holder, or a proxy of a Holder, from giving, (i) after the expiration
of such 90-day period, a new demand, request or notice identical to a demand,
request or notice that has been canceled pursuant to the proviso to the
preceding sentence or (ii) during any such 90-day period, a new demand, request
or notice that has been canceled pursuant to the proviso to the preceding
sentence or (iii) during any such 90-day period, a new demand, request or notice
contrary to or different from such demand, request or notice, in either of which
events a new record date shall be established pursuant to the provisions of this
clause.
(f) The Persons entitled to vote a majority in principal amount of the
Outstanding Debentures of a series shall constitute a quorum for a meeting of
Holders of Debentures of such series. In the absence of a quorum within 30
minutes of the time appointed for any such meeting, the meeting shall, if
convened at the request of Holders of Debentures of such series, be dissolved.
In
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any other case, the meeting may be adjourned for a period of not less than 10
days as determined by the chairman of the meeting prior to the adjournment of
such meeting. In the absence of a quorum at any such adjourned meeting, such
adjourned meeting may be further adjourned for a period of not less than 10 days
as determined by the chairman of the meeting prior to the adjournment of such
meeting. Subject to the foregoing, at the reconvening of any such further
adjourned meeting, the Persons entitled to vote 40% in aggregate principal
amount of the Outstanding Debentures of such series shall constitute a quorum
for the taking of any action set forth in the notice of the original meeting.
Notice of the reconvening of an adjourned meeting which was adjourned for lack
of a quorum shall state expressly the percentage, as provided above, of the
principal amount of the Outstanding Debentures of such series which shall
constitute a quorum.
Except as limited by Sections 4.13 and 8.02, and subject to the
provisions described in the next succeeding paragraph, any resolution presented
to a meeting or adjourned meeting duly reconvened at which a quorum is present
as aforesaid may be adopted by the affirmative vote of the lesser of (i) the
Holders of a majority in principal amount of the Outstanding Debentures of that
series and (ii) 662/3% in principal amount of Outstanding Debentures of such
series represented and voting at such meeting or adjourned meeting; PROVIDED,
HOWEVER, that any resolution with respect to any request, demand, authorization,
direction, notice, consent, waiver or other action which this Indenture
expressly provides may be made, given or taken by the Holders of a specified
percentage which is less than a majority in principal amount of the Outstanding
Debentures of a series may be adopted at a meeting or an adjourned meeting duly
reconvened and at which a quorum is present as aforesaid by the affirmative vote
of the lesser of (i) the Holders of such specified percentage in principal
amount of the Outstanding Debentures of that series and (ii) a majority in
principal amount of Debentures of such series represented and voting at such
meeting or adjourned meeting. Any resolution passed or decision taken at any
meeting of Holders of Debentures of any series duly held in accordance with this
Section shall be binding on all the Holders of Debentures of such series whether
or not present or represented at the meeting.
With respect to any consent, waiver or other action which this
Indenture expressly provides may be given by the Holders of a specified
percentage of Outstanding Debentures of all series affected thereby (acting as
one class), only the principal amount of Outstanding Debentures of any series
represented at a meeting or adjourned meeting duly reconvened at which a quorum
is present, held in accordance with this Section, and voting in favor of such
action, shall be counted for purposes of calculating the aggregate principal
amount of Outstanding Debentures of all series affected thereby favoring such
action. Notwithstanding
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the foregoing or the Trust Indenture Act, the Company shall not set a record
date for, and the provisions of this clause shall not apply with respect to, any
action to be given or taken by Holders pursuant to Section 4.01, 4.02 or 4.12.
SECTION 1.05. NOTICE, ETC., TO TRUSTEE, COMPANY AND LODGIAN. Any
request, demand, authorization, direction, notice, consent, waiver or Act of
Holders or other document provided or permitted by this Indenture to be made
upon, given or furnished to, or filed with,
(a) the Trustee by any Holder or by the Company or Lodgian shall be
sufficient for every purpose hereunder if made, given, furnished or filed in
writing to or with the Trustee at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890, Telecopy No.: 302-651-8882, Attention: Corporate
Trust Administration, or
(b) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to the Company or Lodgian
addressed to it at 1601 Belvedere Road, West Palm Beach, Florida 35406, Telecopy
No.: 561- 689-8946, to the attention of the Chief Executive Officer, or at any
other address previously furnished in writing to the Trustee by the Company.
SECTION 1.06. NOTICE TO HOLDERS OF DEBENTURES; WAIVER. Except as
otherwise expressly provided herein, where this Indenture provides for notice to
Holders of Debentures of any event, such notice shall be sufficiently given to
Holders of any series if in writing and mailed, first-class postage prepaid, to
each Holder of a Debenture affected by such event, at the address of such Holder
as registered in the books of the Company, not earlier than the earliest date,
and not later than the latest date, prescribed for the giving of such notice;
PROVIDED, that any notice of redemption of Debentures required to be given to
all Holders shall also be given by release made by the Company to Reuters
Economic Services and Bloomberg Business News not earlier than the earliest
date, and not later than the latest date, prescribed for the giving of such
notice.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice to
Holders of Debentures by mail, then such notification as shall be made with the
approval of the Trustee shall constitute sufficient notice to such Holders for
every purpose hereunder. In any case where notice to Holders of Debentures is
given by mail, neither the failure to mail such notice, nor any defect in any
notice mailed to any particular Holder of a Debenture shall affect the
sufficiency of such notice with respect to other Holders of Debentures.
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Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders of Debentures shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
SECTION 1.07. LANGUAGE OF NOTICES, ETC.. Any request, demand,
authorization, direction, notice, consent or waiver required or permitted under
this Indenture shall be in the English language, except that any published
notice may be in an official language of the country of publication.
SECTION 1.08. CONFLICT WITH TRUST INDENTURE ACT. If and to the extent
that any provision of this Indenture limits, qualifies or conflicts with another
provision included in this Indenture that is required to be included in this
Indenture by any of Sections 310 to 318, inclusive, of the Trust Indenture Act,
such required provision shall control.
SECTION 1.09. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 1.10. SUCCESSORS AND ASSIGNS. Subject to Section 7.03, all
covenants and agreements in this Indenture by the Company shall bind its
successors and assigns, whether so expressed or not; PROVIDED that the Company
shall have the right at all times to assign any of its respective rights or
obligations under this Indenture to a direct or indirect wholly owned subsidiary
of the Company; PROVIDED, FURTHER that, in the event of any such assignment, the
Company will remain liable for all of their respective obligations. Except as
provided in this Section 1.10, this Indenture may not otherwise be assigned by
the parties thereto.
SECTION 1.11. SEPARABILITY CLAUSE. In case any provision in this
Indenture or the Debentures shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 1.12. BENEFITS OF INDENTURE. Nothing in this Indenture or the
Debentures, express or implied, shall give to any Person, other than the parties
hereto, any Authenticating Agent, any Paying Agent, any Debentures Registrar and
their successors hereunder, the holders of Trust Securities, the Holders of
Debentures, and the holders of Senior Indebtedness, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
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SECTION 1.13. GOVERNING LAW. This Indenture and the Debentures shall be
governed by and construed in accordance with the laws of the State of New York,
without regard to conflict of laws principles thereof.
SECTION 1.14. COUNTERPARTS. This instrument may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 1.15. LEGAL HOLIDAYS. In any case where any Interest Payment
Date, Redemption Date, sinking fund payment date, Maturity or Stated Maturity of
any Debenture of any series shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the Debentures
other than a provision in the Debentures of any series that specifically states
that such provision shall apply in lieu of this Section) payment of interest or
principal (and premium, if any) will be made on the next succeeding Business Day
at such Place of Payment; PROVIDED, that no interest shall accrue on the amount
so payable for the period from and after such Interest Payment Date, Redemption
Date or Stated Maturity, as the case may be, to such succeeding Business Day and
except that, if such Business Day is in the next succeeding calendar year, then
such payment shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such date.
SECTION 1.16. IMMUNITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS,
DIRECTORS AND EMPLOYEES. No recourse under or upon any obligation, covenant or
agreement of this Indenture, or of a Debenture of any series, or for any claim
based thereon or otherwise in respect thereof, shall be had against any
incorporator, shareholder, officer, director or employee, as such, past, present
or future, of the Company or of any successor corporation, either directly or
through the Company, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise; it being
expressly understood that this Indenture and the obligations issued hereunder
are solely corporate obligations of the Company, and that no such personal
liability whatever shall attach to, or is or shall be incurred by, the
incorporators, shareholders, officers, directors or employees, as such, of the
Company or of any successor corporation, or any of them, because of the creation
of the indebtedness hereby authorized, or under or by reason of the obligations
or agreements contained in this Indenture or in any of the Debentures or implied
therefrom; and that any and all such personal liability, either at common law or
in equity or by constitution or statute, of, and any and all such rights and
claims against, every such incorporator, shareholder, officer, director or
employee, as such, because of the creation of the indebtedness hereby
authorized, or under of by reason of the obligations or agreements contained in
this Indenture or in any of the Debentures or implied
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therefrom, are hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issue of such
Debentures.
All payments of interest and other amounts, if any, to be made by the
Trustee hereunder shall be made only from the money deposited with the Trustee
and only to the extent that the Trustee shall have sufficient income or proceeds
to make such payments in accordance with the terms of this Indenture, and each
Holder thereof, by its acceptance of a Debenture, agrees that it will look
solely to the income and proceeds deposited with the Trustee to the extent
available for distribution to such Holder as provided and that the Trustee is
not personally liable in any manner to such Holder for any amounts payable or
any liability under this Indenture or any Debenture.
ARTICLE 2
ISSUE, DESCRIPTION, TERMS, EXECUTION, REGISTRATION AND
EXCHANGE OF DEBENTURES
SECTION 2.01. DESIGNATION, TERMS, AMOUNT AUTHENTICATION AND DELIVERY OF
DEBENTURES. The aggregate principal amount of Debentures that may be
authenticated and delivered under this Indenture is unlimited.
The Debentures may be issued in one or more series up to the aggregate
principal amount of Debentures of that series from time to time authorized by or
pursuant to a Board Resolution or pursuant to one or more indentures
supplemental hereto, prior to the initial issuance of Debentures of a particular
series. Prior to the initial issuance of Debentures of any series, there shall
be established in or pursuant to a Board Resolution, and set forth in an
Officers' Certificate, or established in one or more indentures supplemental
hereto:
(a) the title of the Debentures of the series (which shall
distinguish the Debentures of the series from all other Debentures);
(b) any limit upon the aggregate principal amount of the
Debentures of that series that may be authenticated and delivered under
this Indenture (except for Debentures authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Debentures of that series);
(c) the date or dates on which the principal of the Debentures
of the series is payable;
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(d) the rate or rates at which the Debentures of the series
shall bear interest or the manner of calculation of such rate or rates,
if any;
(e) the date or dates from which such interest shall accrue,
the Interest Payment Dates on which such interest will be payable or
the manner of determination of such Interest Payment Dates and the
record date for the determination of Holders to whom interest is
payable on any such Interest Payment Dates;
(f) the right, if any, to extend or defer the interest payment
periods and the duration of such extension;
(g) the period or periods within which, the price or prices at
which, and the terms and conditions upon which, Debentures of the
series may be redeemed, in whole or in part, at the option of the
Company;
(h) the obligation, if any, of the Company to redeem or
purchase Debentures of the series pursuant to any sinking fund or
analogous provisions (including payments made in cash in anticipation
of future sinking fund obligations) or at the option of a Holder
thereof and the period or periods within which, the price or prices at
which, and the terms and conditions upon which, Debentures of the
series shall be redeemed or purchased, in whole or in part, pursuant to
such obligation;
(i) any exchangeability, conversion or prepayment provisions
of the Debentures;
(j) the form of the Debentures of the series including the
form of the certificate of authentication for such series;
(k) if other than denominations of $50 or any integral
multiple thereof, the denominations in which the Debentures of the
series shall be issuable;
(l) any and all other terms with respect to such series (which
terms shall not be inconsistent with the terms of this Indenture);
(m) whether the Debentures are issuable as a Global Debenture
and, in such case, the identity of the Depositary for such series; and
(n) If the Debentures of such series are to be deposited as
trust assets in a Lodgian Capital Trust the name of the applicable
Lodgian
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Capital Trust (which shall distinguish such Lodgian Capital Trust from
all other Lodgian Capital Trusts) into which the Debentures of such
series are to be deposited as trust assets and the date of its
Declaration.
All Debentures of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided in or pursuant
to any such Board Resolution or in any indenture supplemental hereto.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
SECTION 2.02. FORM OF DEBENTURE AND TRUSTEE'S CERTIFICATE. The
Debentures of any series and the Trustee's certificate of authentication to be
borne by such Debentures shall be substantially of the tenor and purport as set
forth in one or more indentures supplemental hereto or as provided in a Board
Resolution and as set forth in an Officers' Certificate, and may have such
letters, numbers or other marks of identification or designation and such
legends or endorsements printed, lithographed or engraved thereon as the Company
may deem appropriate and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which Debentures of that series may be listed, or to conform to
usage.
SECTION 2.03. DATE AND DENOMINATIONS OF DEBENTURES AND PROVISIONS FOR
PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST. The Debentures shall be issuable as
registered Debentures and in the denominations of $50 or any integral multiple
thereof, subject to Section 2.01(k). The Debentures of a particular series shall
bear interest payable on the dates and at the rate specified with respect to
that series. The principal of and the interest on the Debentures of any series,
as well as any premium thereon in case of redemption thereof prior to maturity,
shall be payable in the coin or currency of the United States of America that at
the time is legal tender for public and private debt, at the office or agency of
the Company maintained for that purpose in the City of Wilmington, State of
Delaware, or any other place designated by the Company; PROVIDED that in the
event the Debentures are issued in definitive form, interest may be paid at the
option of the Company by check mailed to the address of the holder entitled
thereto. Each Debenture shall be dated the date of its authentication. Interest
on the Debentures shall be computed on the basis of a 360-day year composed of
twelve 30-day months.
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The interest installment on any Debenture that is payable, and is
punctually paid or duly provided for, on any Interest Payment Date for
Debentures of that series shall be paid to the person in whose name said
Debenture (or one or more Predecessor Debentures) is registered at the close of
business on the regular record date for such interest installment. Except as
provided below, accrued but unpaid interest shall not be paid in cash on
Debentures that are converted by a Holder into Common Stock, nor shall such
accrued interest be converted into additional shares of Common Stock. Holders of
Debentures at the close of business on a regular record date shall be entitled
to receive the interest payable on such Debentures (except that holders of
Debentures called for redemption on a redemption date between such regular
record date and the Interest Payment Date shall not be entitled to receive such
interest on such Interest Payment Date) on the corresponding Interest Payment
Date notwithstanding the conversion of such Debentures following such regular
record date and prior to such Interest Payment Date. However, Debentures
surrendered for conversion during the period between the close of business on
any regular record date and the opening of business on the corresponding
Interest Payment Date (except Debentures called for redemption on a redemption
date during such period) shall be accompanied by payment of an amount equal to
the interest payable on such Debentures on such Interest Payment Date. A Holder
of Debentures on a regular record date who (or whose transferee) tenders any
such Debentures for conversion into shares of Common Stock on such Interest
Payment Date shall receive the interest payable by the Company on such
Debentures on such date, and the converting Holder need not include payment of
the amount of such interest upon surrender of Debentures for conversion. The
Company shall make no payment or allowance for dividends on the shares of Common
Stock issued upon conversion.
Any interest on any Debenture that is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date for Debentures of the
same series (herein called "DEFAULTED INTEREST") shall forthwith cease to be
payable to the registered Holder on the relevant regular record date by virtue
of having been such Holder; and such Defaulted Interest shall be paid by the
Company, at its election, as provided in clause (a) or clause (b) below:
(a) The Company may make payment of any Defaulted Interest on
Debentures to the persons in whose names such Debentures (or their
respective Predecessor Debentures) are registered at the close of
business on a special record date for the payment of such Defaulted
Interest, which shall be fixed in the following manner: the Company
shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each such Debenture and the date of the proposed
payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of
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such Defaulted Interest or shall make arrangements satisfactory to the
Trustee for such deposit prior to the date of the proposed payment,
such money when deposited to be held in trust for the benefit of the
persons entitled to such Defaulted Interest as in this clause provided.
Thereupon the Trustee shall fix a special record date for the payment
of such Defaulted Interest, which shall not be more than 15 nor less
than 10 days prior to the date of the proposed payment and not less
than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
special record date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest
and the special record date therefor to be mailed, first class postage
prepaid, to each Debentureholder at his or her address as it appears in
the Debenture Register, not less than 10 days prior to such special
record date. Notice of the proposed payment of such Defaulted Interest
and the special record date therefor having been mailed as aforesaid,
such Defaulted Interest shall be paid to the Persons in whose names
such Debentures (or their Predecessor Debentures) are registered on
such special record date and shall be no longer payable pursuant to the
following clause (b).
(b) The Company may make payment of any Defaulted Interest on
any Debentures in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Debentures may be
listed, and upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustee of the proposed
payment pursuant to this clause, such manner of payment shall be deemed
practicable by the Trustee.
Unless otherwise set forth in a Board Resolution or one or more
indentures supplemental hereto establishing the terms of any series of
Debentures pursuant to Section 2.01 hereof, the term "regular record date" as
used in this Section with respect to a series of Debentures with respect to any
Interest Payment Date for such series shall mean the fifteenth day preceding
such Interest Payment Date, whether or not such date is a Business Day.
Subject to the foregoing provisions of this Section, each Debenture of
a series delivered under this Indenture upon transfer of or in exchange for or
in lieu of any other Debenture of such series shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Debenture.
SECTION 2.04. EXECUTION OF DEBENTURES. The Debentures shall be signed
on behalf of the Company by the Chairman or Vice Chairman of its Board of
Directors or its President or one of its Vice Presidents. The signature of the
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Chairman, Vice Chairman, President or a Vice President upon the Debentures, may
be in the form of a manual or facsimile signature of a present or any future
Chairman, Vice Chairman, President or Vice President and may be imprinted or
otherwise reproduced on the Debentures and for that purpose the Company may use
the manual or facsimile signature of any person who shall have been a Chairman,
Vice Chairman, President or Vice President notwithstanding the fact that at the
time the Debentures shall be authenticated and delivered or disposed of such
person shall have ceased to be the Chairman, Vice Chairman, President or a Vice
President of the Company, as the case may be.
Only such Debentures as shall bear thereon a certificate of
authentication substantially in the form established for such Debentures,
executed manually by an authorized signatory of the Trustee, or by any
Authenticating Agent with respect to such Debentures, shall be entitled to the
benefits of this Indenture or be valid or obligatory for any purpose. Such
certificate executed by the Trustee, or by any Authenticating Agent appointed by
the Trustee with respect to such Debentures, upon any Debenture executed by the
Company shall be conclusive evidence that the Debenture so authenticated has
been duly authenticated and made available for delivery hereunder and that the
Holder is entitled to the benefits of this Indenture.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Debentures of any series executed by the
Company to the Trustee for authentication, together with a written order of the
Company for the authentication and delivery of such Debentures, signed by its
President or any Vice President and its Treasurer or any Assistant Treasurer,
and the Trustee in accordance with such written order shall authenticate and
make available for delivery such Debentures.
In authenticating such Debentures and accepting the additional
responsibilities under this Indenture in relation to such Debentures, the
Trustee shall be entitled to receive, and (subject to Section 5.01) shall be
fully protected in relying upon that the form and terms thereof have been
established in conformity with the provisions of this Indenture.
The Trustee shall not be required to authenticate such Debentures if
the issue of such Debentures pursuant to this Indenture will affect the
Trustee's own rights, duties or immunities under the Debentures and this
Indenture or otherwise in a manner that is not reasonably acceptable to the
Trustee.
SECTION 2.05. EXCHANGE OF DEBENTURES. (a) Debentures of any series
may be exchanged upon presentation thereof at the office or agency of the
Company designated for such purpose in the Borough of Manhattan, The City and
State of
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New York, or such other location designated by the Company for such purpose for
other Debentures of such series of authorized denominations, and for a like
aggregate principal amount, upon payment of a sum sufficient to cover any tax or
other governmental charge in relation thereto, all as provided in this Section
2.05. In respect of any Debentures so surrendered for exchange, the Company
shall execute, the Trustee shall authenticate and such office or agency shall
make available for delivery in exchange therefor the Debenture or Debentures of
the same series that the Debentureholder making the exchange shall be entitled
to receive, bearing numbers not contemporaneously outstanding.
(b) The Company shall keep, or cause to be kept, at its office or
agency designated for such purpose in the City of Wilmington, State of Delaware,
or such other location designated by the Company a register or registers (herein
referred to as the "DEBENTURE REGISTER") in which, subject to such reasonable
regulations as it may prescribe, the Company shall register the Debentures and
the transfers of Debentures as in this Article provided and that at all
reasonable times shall be open for inspection by the Trustee. The registrar for
the purpose of registering Debentures and transfer of Debentures as herein
provided shall be appointed as authorized by Board Resolution (the "DEBENTURE
REGISTRAR").
Upon surrender for transfer of any Debenture at the office or agency of
the Company designated for such purpose in the City of Wilmington, State of
Delaware, or such other location designated by the Company, the Company shall
execute, the Trustee shall authenticate and such office or agency shall make
available for delivery in the name of the transferee or transferees a new
Debenture or Debentures of the same series as the Debenture presented for a like
aggregate principal amount.
All Debentures presented or surrendered for exchange or registration of
transfer, as provided in this Section, shall be accompanied by a written
instrument or instruments of transfer, in form satisfactory to the Company or
the Debenture Registrar, duly executed by the registered Holder or by his duly
authorized attorney in writing.
(c) No service charge shall be made for any exchange or registration
of transfer of Debentures, or issue of new Debentures in case of partial
redemption of any series, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge in relation thereto,
other than exchanges pursuant to Section 2.06, Section 8.06 and Section 10.07
not involving any transfer.
(d) The Company shall not be required (i) to issue, exchange or
register the transfer of any Debentures during a period beginning at the opening
of
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business 15 days before the day of the mailing of a notice of redemption of less
than all the outstanding Debentures of the same series and ending at the close
of business on the day of such mailing, nor (ii) to register the transfer of or
exchange any Debentures of any series or portions thereof called for redemption.
The provisions of this Section 2.05 are, with respect to any Global Debenture,
subject to Section 2.11 hereof.
SECTION 2.06. TEMPORARY DEBENTURES. Pending the preparation of
definitive Debentures of any series, the Company may execute, and the Trustee
shall authenticate and make available for delivery, temporary Debentures of any
authorized denomination, and substantially in the form of the definitive
Debentures in lieu of which they are issued, but with such omissions, insertions
and variations as may be appropriate for temporary Debentures, all as may be
determined by the Company. Every temporary Debenture of any series shall be
executed by the Company and be authenticated by the Trustee upon the same
conditions and in substantially the same manner, and with like effect, as the
definitive Debentures of such series. Without unnecessary delay the Company will
execute and will furnish definitive Debentures of such series and thereupon any
or all temporary Debentures of such series may be surrendered in exchange
therefor (without charge to the Holders), at the office or agency of the Company
designated for the purpose in the City of Wilmington, State of Delaware, or such
other location designated by the Company, and the Trustee shall authenticate and
such office or agency shall make available for delivery in exchange for such
temporary Debentures an equal aggregate principal amount of definitive
Debentures of such series, unless the Company advises the Trustee to the effect
that definitive Debentures need not be executed and furnished until further
notice from the Company. Until so exchanged, the temporary Debentures of such
series shall be entitled to the same benefits under this Indenture as definitive
Debentures of such series authenticated and delivered hereunder.
SECTION 2.07. MUTILATED, DESTROYED, LOST OR STOLEN DEBENTURES. In case
any temporary or definitive Debenture shall become mutilated or be destroyed,
lost or stolen, the Company (subject to the next succeeding sentence) shall
execute, and upon its request the Trustee (subject as aforesaid) shall
authenticate and make available for delivery, a new Debenture of the same series
bearing a number not contemporaneously outstanding, in exchange and substitution
for the mutilated Debenture, or in lieu of and in substitution for the Debenture
so destroyed, lost or stolen. In every case the applicant for a substituted
Debenture shall furnish to the Company and to the Trustee such security or
indemnity as may be required by them to save each of them harmless, and, in
every case of destruction, loss or theft, the applicant shall also furnish to
the Company and to the Trustee evidence to their satisfaction of the
destruction, loss or theft of the applicant's Debenture and of the ownership
thereof. The Trustee may authenticate
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any such substituted Debenture and make available for delivery the same upon the
written request or authorization of any officer of the Company. Upon the
issuance of any substituted Debenture, the Company may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses (including the fees and expenses of
the Trustee) connected therewith. In case any Debenture that has matured or is
about to mature shall become mutilated or be destroyed, lost or stolen, the
Company may, instead of issuing a substitute Debenture, pay or authorize the
payment of the same (without surrender thereof except in the case of a mutilated
Debenture) if the applicant for such payment shall furnish to the Company and to
the Trustee such security or indemnity as they may require to save them
harmless, and, in case of destruction, loss or theft, evidence to the
satisfaction of the Company and the Trustee of the destruction, loss or theft of
such Debenture and of the ownership thereof.
Every Debenture issued pursuant to the provisions of this Section in
substitution for any Debenture that is mutilated, destroyed, lost or stolen
shall constitute an additional contractual obligation of the Company, whether or
not the mutilated, destroyed, lost or stolen Debenture shall be found at any
time, or be enforceable by anyone, and shall be entitled to all the benefits of
this Indenture equally and proportionately with any and all other Debentures of
the same series duly issued hereunder. All Debentures shall be held and owned
upon the express condition that the foregoing provisions are exclusive with
respect to the replacement or payment of mutilated, destroyed, lost or stolen
Debentures, and shall preclude (to the extent lawful) any and all other rights
or remedies, notwithstanding any law or statute existing or hereafter enacted to
the contrary with respect to the replacement or payment of negotiable
instruments or other securities without their surrender.
SECTION 2.08. CANCELLATION OF SURRENDERED DEBENTURES. All Debentures
surrendered for the purpose of payment, redemption, exchange or registration of
transfer shall, if surrendered to the Company or any paying agent, be delivered
to the Trustee for cancellation, or, if surrendered to the Trustee, shall be
canceled by it, and no Debentures shall be issued in lieu thereof except as
expressly required or permitted by any of the provisions of this Indenture. On
written request of the Company, the Trustee shall deliver to the Company
canceled Debentures held by the Trustee. If the Company shall otherwise acquire
any of the Debentures, however, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such Debentures
unless and until the same are delivered to the Trustee for cancellation.
SECTION 2.09. PROVISIONS OF INDENTURE AND DEBENTURES FOR SOLE BENEFIT
OF PARTIES AND DEBENTUREHOLDERS. Nothing in this Indenture or in the Debentures,
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express or implied, shall give or be construed to give to any person, firm or
corporation, other than the parties hereto and the Holders, any legal or
equitable right, remedy or claim under or in respect of this Indenture, or under
any covenant, condition or provision herein contained; all such covenants,
conditions and provisions being for the sole benefit of the parties hereto and
of the Holders.
SECTION 2.10. APPOINTMENT OF AUTHENTICATING AGENT. So long as any of
the Debentures of any series remain outstanding there may be an Authenticating
Agent for any or all such series of Debentures, which the Trustee shall have the
right to appoint. Said Authenticating Agent shall be authorized to act on behalf
of the Trustee to authenticate Debentures of such series issued upon exchange,
transfer or partial redemption thereof, and Debentures so authenticated shall be
entitled to the benefits of this Indenture and shall be valid and obligatory for
all purposes as if authenticated by the Trustee hereunder. All references in
this Indenture to the authentication of Debentures by the Trustee shall be
deemed to include authentication by an Authenticating Agent for such series
except for authentication upon original issuance or pursuant to Section 2.07
hereof. Each Authenticating Agent shall be acceptable to the Company and shall
be a corporation that has a combined capital and surplus, as most recently
reported or determined by it, sufficient under the laws of any jurisdiction
under which it is organized or in which it is doing business to conduct a trust
business, and that is otherwise authorized under such laws to conduct such
business and is subject to supervision or examination by Federal or State
authorities. If at any time any Authenticating Agent shall cease to be eligible
in accordance with these provisions, it shall resign immediately.
Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time (and upon request by the Company shall) terminate the agency of any
Authenticating Agent by giving written notice of termination to such
Authenticating Agent and to the Company. Upon resignation, termination or
cessation of eligibility of any Authenticating Agent, the Trustee may appoint an
eligible successor Authenticating Agent acceptable to the Company. Any successor
Authenticating Agent, upon acceptance of its appointment hereunder, shall become
vested with all the rights, powers and duties of its predecessor hereunder as if
originally named as an Authenticating Agent pursuant hereto.
SECTION 2.11. GLOBAL DEBENTURE. (a) If the Company shall establish
pursuant to Section 2.01 that the Debentures of a particular series are to be
issued as one or more Global Debentures, then the Company shall execute and the
Trustee shall, in accordance with Section 2.04, authenticate and make available
for delivery, one or more Global Debentures, which shall represent, and shall be
denominated in an aggregate amount equal to the aggregate principal amount of,
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all of the Outstanding Debentures of such series, shall be registered in the
name of the Depositary or its nominee, shall be made available for delivery by
the Trustee to the Depositary or pursuant to the Depositary's instruction and
shall bear a legend substantially to the following effect: "Except as otherwise
provided in Section 2.11 of the Indenture, this Debenture may be transferred, in
whole but not in part, only to another nominee of the Depositary or to a
successor Depositary or to a nominee of such successor Depositary."
(b) Notwithstanding the provisions of Section 2.05, the Global
Debenture of a series may be transferred, in whole but not in part and in the
manner provided in Section 2.05, only to another nominee of the Depositary for
such series, or to a successor Depositary for such series selected or approved
by the Company or to a nominee of such successor Depositary.
(c) If at any time the Depositary for a series of Debentures notifies
the Company that it is unwilling or unable to continue as Depositary for such
series or if at any time the Depositary for such series shall no longer be
registered or in good standing under the Exchange Act, or other applicable
statute or regulation and a successor Depositary for such series is not
appointed by the Company within 90 days after the Company receives such notice
or becomes aware of such condition, as the case may be, this Section 2.11 shall
no longer be applicable to the Debentures of such series and the Company will
execute and, subject to Section 2.05, the Trustee will authenticate and make
available for delivery Debentures of such series in definitive registered form
without coupons, in authorized denominations, and in an aggregate principal
amount equal to the principal amount of the Global Debentures of such series in
exchange for such Global Debenture. In addition, the Company may at any time
determine that the Debentures of any series shall no longer be represented by
one or more Global Debentures and that the provisions of this Section 2.11 shall
no longer apply to the Debentures of such series. In such event the Company will
execute and, subject to Section 2.05, the Trustee, upon receipt of an Officers'
Certificate evidencing such determination by the Company, will authenticate and
make available for delivery Debentures of such series in definitive registered
form without coupons, in authorized denominations, and in an aggregate principal
amount equal to the principal amount of the Global Debentures of such series in
exchange for such Global Debentures. Upon the exchange of the Global Debentures
for such Debentures in definitive registered form without coupons, in authorized
denominations, the Global Debentures shall be canceled by the Trustee. Such
Debentures in definitive registered form issued in exchange for the Global
Debentures pursuant to this Section 2.11 shall be registered in such names and
in such authorized denominations as the Depositary, pursuant to instructions
from its direct or indirect participants or otherwise, shall instruct the
Trustee. The
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Trustee shall make available for delivery such Debentures to the Depositary for
delivery to the persons in whose names such Debentures are so registered.
SECTION 2.12. CUSIP NUMBERS. The Company in issuing the Debentures may
use "CUSIP" numbers (if then generally in use), and the Trustee shall use CUSIP
numbers in notices of redemption or exchange as a convenience to
Debentureholders and no representation shall be made as to the correctness of
such numbers either as printed on the Debentures or as contained in any notice
of redemption or exchange and any such redemption or exchange shall not be
affected by any defect in or omission of such numbers. The Company will promptly
notify the Trustee of any change in the "CUSIP" numbers.
ARTICLE 3
SATISFACTION AND DISCHARGE
SECTION 3.01. SATISFACTION AND DISCHARGE OF INDENTURE. Except as
otherwise specified as contemplated by Section 2.01, this Indenture shall upon
Company Request cease to be of further effect (except as to any surviving rights
of registration of transfer or exchange of Debentures herein expressly provided
for), and the Trustee, at the expense of the Company, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture, when:
(a) either,
(i) all Debentures theretofore authenticated and
delivered and have been delivered to the Trustee for
cancellation; or
(ii) all such Debentures not theretofore delivered to
the Trustee for cancellation,
(A) have become due and payable, or
(B) will become due and payable at their
Stated Maturity within one year, or
(C) are to be called for redemption within
one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the
Company,
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and the Company, in the case of (A), (B) or (C)
above, has deposited or caused to be deposited with
the Trustee as trust funds in trust for the purpose,
an amount sufficient to pay and discharge the entire
indebtedness on such Debentures not theretofore
delivered to the Trustee for cancellation, for
principal (and premium, if any) and any interest to
the date of such deposit (in the case of Debentures
that have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be;
(b) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 5.06, the obligations of
the Company to any Authenticating Agent under Section 2.10 and, if money shall
have been deposited with the Trustee pursuant to clause 3.01(a)(ii) of this
Section, the obligations of the Trustee under Section 3.02 and the last
paragraph of Section 9.03 shall survive.
SECTION 3.02. APPLICATION OF TRUST MONEY. Subject to the provisions of
the last paragraph of Section 9.03, all money and U.S. Government Obligations
deposited with the Trustee pursuant to Section 3.01 or 3.03 and all money
received by the Trustee in respect of such U.S. Government Obligations shall be
held in trust and applied by it, in accordance with the provisions of the
Debentures and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent), to the
Persons entitled thereto, of the principal (and premium, if any) and any
interest for whose payment such money and U.S. Government Obligations have been
deposited with or received by the Trustee. Money deposited pursuant to this
Section not in violation of this Indenture shall not be subject to claims of the
holders of Senior Indebtedness under Article 13. All moneys deposited with the
Trustee pursuant to Section 3.04 for the payment of Debentures subsequently
converted shall be returned to the Company upon Company Request; PROVIDED, that
the Company shall have furnished to the Trustee such security or indemnity as
the Trustee may require.
SECTION 3.03. COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT
DEFEASANCE. If applicable to Debentures of any series, the Company may elect, at
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its option at any time, to have Section 3.04 or Section 3.05 applied to any such
series of Debentures or any Debentures of such series, as the case may be,
designated pursuant to Section 2.01 as being defeasible pursuant to such Section
3.04 or 3.05, in accordance with any applicable requirements provided pursuant
to Section 2.01 and upon compliance with the conditions set forth below in this
Article. Any such election shall be evidenced by a Board Resolution or in
another manner specified as contemplated by Section 2.01 for such Debentures.
SECTION 3.04. DISCHARGE AND DEFEASANCE. If this Section 3.04 is
specified, under the terms of Section 2.01, to be applicable to Debentures of
any series, then notwithstanding Section 3.01 and upon compliance with the
applicable conditions set forth in 3.06: (1) the Company shall be deemed to have
paid and discharged the entire indebtedness on all the Outstanding Debentures of
any such series ("DEFEASANCE") and (2) the provisions of this Indenture as it
relates to such Outstanding Debentures shall no longer be in effect (except (i)
as to the rights of Holders of Debentures of such series to receive, solely from
the trust fund described in Section 3.06, payment of (a) the principal of (and
premium, if any) and any installment of principal of (and premium, if any) or
interest on Debentures of such series on the Stated Maturity of such principal
(and premium, if any) or installment of principal (and premium, if any) or
interest or upon optional redemption and/or (b) any mandatory sinking fund
payments or analogous payments applicable to the Debentures of such series on
that day on which such payments are due and payable in accordance with the terms
of the Indenture and of Debentures of such series, (ii) the Company's
obligations with respect to Debentures of such series under Sections 2.06, 2.05,
2.07, 9.02, 9.03, and 9.04 and (iii) the rights, powers, trusts, duties and
immunities of the Trustee hereunder, including those under Section 5.08 hereof).
SECTION 3.05. COVENANT DEFEASANCE. If this Section 3.05 is specified,
as contemplated by Section 2.01, to be applicable to any series of Debentures or
any Debentures of such series, as the case may be, (a) the Company shall be
released from its obligations under Sections 9.04 through 9.07, inclusive, and
any covenants provided pursuant to Section 2.01(l) or 8.01(b) for the benefit of
the Holders of Debentures of such series that pursuant to the terms of such
Debentures of such series are defeasible pursuant to this Section 3.05 and (b)
the occurrence of any event specified in Sections 4.01(d) (with respect to any
of Sections 9.03 through 9.07, inclusive, and any such covenants provided
pursuant to Sections 2.01(l), 8.01(b) or 8.01(d) and 4.01(g) (if pursuant to the
terms of such Debentures this Section 3.05 is applicable to any such event
specified in Section 4.01(g)) shall be deemed not to be or result in an Event of
Default, in each case with respect to Debentures of such series as provided in
this Section on and after the date the conditions set forth in Section 3.06 are
satisfied (hereinafter called "COVENANT DEFEASANCE"). For this purpose, such
Covenant Defeasance means
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that, with respect to Debentures of such series, the Company may omit to comply
with and shall have no liability in respect of any term, condition or limitation
set forth in any such specified Section (to the extent so specified in the case
of Section 4.01(d) and 4.01(g)), whether directly or indirectly by reason of any
reference elsewhere herein to any such Section or by reason of any reference in
any such Section to any other provision herein or in any other document, but the
remainder of this Indenture and such Debentures shall be unaffected thereby.
SECTION 3.06. CONDITIONS TO DEFEASANCE. The following shall be the
conditions to the application of Section 3.04 or Section 3.05 to any applicable
series of Debentures or any Debentures of such series, as the case may be
(a) either
(i) with respect to all Outstanding Debentures of
such series or such Debentures of such Series, as the case may
be, with reference to this Section 3.06, the Company has
deposited or caused to be deposited with the Trustee, under
the terms of an escrow trust agreement satisfactory to the
Trustee, irrevocably (but subject to the provisions of Section
3.02 and the last paragraph of Section 9.03), as trust funds
in trust, specifically pledged as security for, and dedicated
solely to, the benefit of the Holders of the Debentures of
such series, (A) lawful money of the United States in an
amount, or (B) U.S. Government Obligations that through the
payment of interest and principal in respect thereof in
accordance with their terms will provide not later than the
opening of business on the due dates of any payment referred
to in clause (A) or (B) of this subparagraph (a)(i) lawful
money of the United States in an amount, or (C) a combination
thereof, sufficient, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and
discharge (1) the principal of (and premium, if any) and each
installment of principal (and premium, if any) and interest on
such Debentures the Stated Maturity of such principal or
installment of principal or interest or upon optional
redemption and (2) any mandatory sinking fund payments or
analogous payments applicable to the Debentures of such series
on the day on which such payments are due and payable in
accordance with the terms of this Indenture and of the
Debentures of such series; or
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(ii) the Company has properly fulfilled such other
means of satisfaction and discharge as is specified, as
contemplated by Section 2.01, to be applicable to the
Debentures of such series;
(b) the Company has paid or caused to be paid all other sums
payable with respect to the Debentures of such series;
(c) such deposit for the benefit of Holders of Debentures of
such series will not result in a breach or violation of, or constitute
a default under, this Indenture, any material indenture, or any other
agreement or instrument to which the Company or its subsidiaries or any
of their properties is a party or by which any of them is bound;
(d) no Event of Default or event (including such deposit) that
with the giving of notice or lapse of time, or both, would become an
Event of Default with respect to the Debentures of such series shall
have occurred and be continuing on the date of such deposit and no
Event of Default under Section 4.01(e) or Section 4.01(f) or event
that, with the giving of notice or lapse of time, or both, would become
an Event of Default under Section 4.01(e) or Section 4.01(f), shall
have occurred and be continuing on the 91st day after such date;
(e) in the event of an election to have Section 3.04 apply to
the Debentures of any series, the Company has delivered to the Trustee
(i) an Opinion of Counsel satisfactory to the Trustee to the effect, or
(ii) an Internal Revenue Service ruling satisfactory to the Trustee to
the effect, that the Holders of Debentures of such series shall not
recognize income, gain or loss for federal income tax purposes as a
result of such deposit, defeasance and discharge and will be subject to
federal income tax on the same amount and in the same manner and at the
same times as would have been the case if such deposit, defeasance and
discharge had not occurred;
(f) in the event of an election to have Section 3.05 apply to
Debentures of any series, the Company shall have delivered to the
Trustee an Opinion of Counsel to the effect that the Holders of
Debentures of such series will not recognize gain or loss for federal
income tax purposes as a result of the deposit and Covenant Defeasance
to be effected with respect to the Debentures of such series and will
be subject to United States federal income tax on the same amount, in
the same manner and at the same times as would be the case if such
deposit and Covenant Defeasance were not to occur;
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(g) if the Debentures of such series are then listed on any
domestic or foreign securities exchange, the Company shall have
delivered to the Trustee an Opinion of Counsel to the effect that such
deposit, defeasance and discharge will not cause the Debentures of such
series to be delisted;
(h) no default in the payment of the principal (and premium,
if any) or any interest on any Senior Indebtedness beyond any
applicable grace period shall have occurred and be continuing;
(i) no other default with respect to any Senior Indebtedness
shall have occurred and be continuing and shall have resulted in the
acceleration of such Senior Indebtedness; and
(j) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the Defeasance or Covenant
Defeasance with respect to Debentures of such series have been complied
with and an Opinion of Counsel to the effect that either (i) as a
result of such deposit and the related exercise of the Company's option
under this Article, registration is not required under the Investment
Company Act of 1940, as amended, by the Company, the trust funds
representing such deposit or the Trustee or (ii) all necessary
registrations under said Act have been effected.
Any deposits with the Trustee referred to in Section 3.06(a)(i) shall
be irrevocable and shall be made under the terms of an escrow/trust agreement in
form and substance satisfactory to the Trustee. If any Outstanding Debentures of
such series are to be redeemed prior to their Stated Maturity, whether pursuant
to any optional redemption provisions or in accordance with any mandatory
sinking fund requirement, the applicable escrow trust agreement shall provide
therefor and the Company shall make such arrangements as are satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name, and
at the expense, of the Company.
Upon Defeasance with respect to all the Debentures of any series, the
terms and conditions of the Debentures of such series, including the terms and
conditions with respect thereto set forth in this Indenture, shall no longer be
binding upon, or applicable to, the Company; PROVIDED, that the Company shall
not be discharged from any payment obligations in respect of Debentures of such
series that are deemed not to be Outstanding under clause (iii) of the
definition thereof if such obligations continue to be valid obligations of the
Company under applicable law.
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Notwithstanding the cessation, termination and discharge of all
obligations, covenants and agreements (except as provided above in this Section
3.06) of the Company under this Indenture with respect to the Debentures of any
series, the obligations of the Company to the Trustee under Section 5.06, and
the obligations of the Trustee under Section 3.02 and the last paragraph of
Section 9.03 shall survive with respect the Debentures of such series.
Anything in this Article to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in this Section 3.06
with respect to Debentures of any series that, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount
thereof that would then be required to be deposited to effect the Defeasance or
Covenant Defeasance, as the case may be, with respect to Debentures of such
series.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to this Section 3.06 or the principal and interest received
in respect thereof other than any such tax, fee or other charge which by law is
for the account of the Holders of Outstanding Debentures.
ARTICLE 4
REMEDIES
SECTION 4.01. EVENTS OF DEFAULT. "EVENT OF DEFAULT," wherever used
herein with respect to Debentures of any series, unless otherwise provided the
applicable supplemental indenture, means any one or more of the following events
(whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) default in the payment of any interest upon any Debenture
of such series when it becomes due and payable, and continuance of such
default for a period of 30 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Outstanding Debentures of such series, a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "NOTICE OF DEFAULT"
hereunder (whether or not such payment is
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prohibited by the subordination provisions set forth in Article 13);
PROVIDED, that a valid extension of an interest payment period by the
Company in accordance with the terms of any indenture supplemental
hereto, shall not constitute a default in the payment of interest for
this purpose; or
(b) default in the payment of the principal of (or premium, if
any, on) any Debenture of such series as and when the same shall become
due and payable whether at maturity, upon redemption, by declaration or
otherwise, or in any payment required by any sinking or analogous fund
established with respect to that series (whether or not such payment is
prohibited by the subordination provisions set forth in Article 13);
PROVIDED, that a valid extension of the maturity of the Debentures of
such series in accordance with the terms of any indenture supplemental
hereto shall not constitute a default in the payment of principal or
premium, if any; or
(c) if the Debentures of such series are convertible or
exchangeable into or for shares of Common Stock of the Company or other
securities, cash or other property pursuant to any supplemental
indenture, Board Resolution or other instrument authorizing Debentures
of such series, failure by the Company to convert such Debentures
(whether or not conversion or exchange is prohibited by the
subordination provisions set forth in Article 13); or
(d) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with or that has expressly been
included in this Indenture solely for the benefit of any series of
Debentures other than such series), and continuance of such default or
breach for a period of 90 days after a Notice of Default; or
(e) the entry by a court having jurisdiction in the premises
of a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of any
substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in
effect for a period of 60 consecutive days; or
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(f) the commencement by the Company of a voluntary case or
proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated as bankrupt or insolvent, or the consent
by it to the entry of a decree or order for relief in respect of the
Company in an involuntary case or proceeding under any applicable
federal or state bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any bankruptcy or insolvency case
or proceeding against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under any applicable
federal or state law, or the consent by it to the filing of such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidation, assignee, trustee, sequestrator or similar
official of the Company or of any substantial part of its property, or
the making by it of an assignment for the benefit of creditors; or
(g) in the event Debentures of any series are issued to a
Lodgian Capital Trust or a trustee of such trust in connection with the
issuance of Trust Securities by such Lodgian Capital Trust, such
Lodgian Capital Trust shall have voluntarily or involuntarily
dissolved, wound-up its business or otherwise terminated its existence
except in connection with (i) the distribution of Debentures of such
series to holders of Trust Securities in liquidation of their interest
in such Lodgian Capital Trust, (ii) the redemption or conversion of all
of the outstanding Trust Securities of such Lodgian Capital Trust or
(iii) certain mergers, consolidations or amalgamations, each as
permitted by the Declaration of such Lodgian Capital Trust;
(h) an event of default under any mortgage, indenture, loan
agreement or other instrument under which the Company has or shall
hereafter have outstanding indebtedness of borrowed money in excess of
$10,000,000 which has become due and payable by its terms and has not
been paid of whose maturity has been accelerated and such payment
default has not been cured or such acceleration has not been annulled
within 30 days after a Notice of Default has been given; or
(i) any other Event of Default provided pursuant to Section
2.01 with respect to Debentures of such series.
SECTION 4.02. ACCELERATION OF MATURITY; RECISSION AND ANNULMENT. If an
Event of Default described in clause (a), (b), (c), (d), (g), (h) or (i) (if the
Event of Default under clause (d) is with respect to less than all series of
Debentures then Outstanding) of Section 4.01 above occurs and is continuing,
then, and in each and every such case, unless the principal of all of the
Debentures of such series
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shall have already become due and payable, either the Trustee or the Holders of
not less than 25% in aggregate principal amount of the Debentures of such series
then Outstanding hereunder (each such series voting as a separate class), by
notice in writing to the Company (and to the Trustee if given by the Holders of
Debentures of such series), may declare the entire principal (or, if the
Debentures of such series are Original Issue Discount Debentures, such portion
of the principal amount as may be specified in the terms of such series) of all
Debentures of such series and the interest accrued thereon, if any, to be due
and payable immediately, and upon any such declaration the same shall become
immediately due and payable. If an Event of Default described under clause (e)
or (f) of Section 4.01 shall occur and be continuing, then the entire principal
(or, if any Debentures are Original Issue Discount Debentures such portion of
the principal as may be specified in the terms thereof) of all Debentures of all
series then Outstanding and interest accrued thereon, if any, shall be and
become immediately due and payable, without notice or demand. If an Event of
Default described in clause (d) (if the Event of Default under clause (d)
relates to all series of Debentures then Outstanding), of Section 4.01 occurs
and is continuing, then and in each and every such case, unless the principal of
all the Debentures of all series shall have already become due and payable,
either the Trustee or the Holders of not less than 25% in aggregate principal
amount of all the Debentures of all series then Outstanding hereunder (treated
as one class), by notice in writing to the Company (and to the Trustee if given
by Holders of Debentures), may declare the entire principal (or, if any
Debentures are Original Issue Discount Debentures such portion of the principal
as may be specified in the terms thereof) of all Debentures of all series then
Outstanding and interest accrued thereon, if any, to be due and payable
immediately, and upon any such declaration the same shall become immediately due
and payable.
The foregoing provisions, however, are subject to the condition that
if, at any time after the principal (or, if any Debentures are Original Issue
Discount Debentures, such portion of the principal as may be specified in the
terms thereof) of the Debentures of any series (or of all the Debentures of all
series, as the case may be) then Outstanding shall have been so declared due and
payable, and before any judgment or decree for the payment of such moneys shall
have been obtained or entered as hereinafter provided, the Company shall pay or
shall deposit with the Trustee a sum sufficient to pay all matured installments
of interest upon all the Debentures of such series (or of all Debentures of all
series, as the case may be) and the principal of (and premium, if any on)
Debentures of such series (or of all Debentures of all series, as the case may
be) that shall have become due otherwise than by acceleration (with interest
upon such principal and, to the extent that payment of such interest is
enforceable under applicable law, on overdue installments of interest, at the
same rate as the rate of interest or Yield to Maturity (in the case of Original
Issue Discount Debentures) specified in the Debentures of
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such series (or at the respective rates of interest or Yields to Maturity of
all Debentures of all series, as the case may be) to the date of such payment or
deposit) and such amount as shall be sufficient to cover reasonable compensation
to the Trustee, and each predecessor Trustee, their respective agents, attorneys
and counsel, and all other expenses and liabilities incurred, and all advances
made, by the Trustee and each predecessor Trustee except as a result of
negligence or bad faith, and if any and all Events of Default under the
Indenture, other than the non-payment of the principal of Debentures of such
series (or, if any Debentures are Original Issue Discount Debentures, such
portion of the principal as may be specified in the terms thereof) that shall
have become due by acceleration, shall have been cured, waived or otherwise
remedied as provided herein -- then and in every such case the Holders of a
majority in aggregate principal amount of all the Debentures of such series,
each series voting as a separate class (or of all Debentures of all series, as
the case may be, voting as a single class), then Outstanding, by written notice
to the Company and to the Trustee, may waive all such defaults with respect to
the Debentures of such series (or with respect to all Debentures of all series,
as the case may be) and rescind and annul such declaration and its consequence,
but no such waiver or rescission and annulment shall extend to or shall affect
any subsequent default or shall impair any right consequent thereon.
In case the Trustee shall have proceeded to enforce any right with
respect to Debentures of such series under this Indenture and such proceedings
shall have been discontinued or abandoned because of such rescission or
annulment or for any other reason or shall have been determined adversely to the
Trustee, then and in every such case the Company and the Trustee shall be
restored respectively to their former positions and rights hereunder, and all
rights, remedies and powers of the Company and the Trustee shall continue as
though no such proceedings had been taken.
SECTION 4.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE. The Company covenants that if:
(a) default is made in the payment of any interest on any
Debenture of any series, or any payment required by any sinking or
analogous fund established with respect to Debentures of such series as
and when the same shall have become due and payable and such default
continues for a period of 30 days (provided that a valid extension of
the interest payment period permitted by the terms of the supplemental
indenture or Board Resolutions setting forth the terms of the
Debentures of such series shall not constitute a default in the payment
of interest), or
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(b) default is made in the payment of the principal of (or
premium, if any, on) any Debenture of any series when the same shall
have become due and payable, whether upon maturity of the Debentures of
such series or upon redemption or upon declaration or otherwise,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of Debentures of such series, the whole amount then due and payable on
such Debentures of such series and any premium and interest and, to the extent
that payment of such interest shall be legally enforceable under applicable law,
interest on any overdue principal and on the premium, if any, and overdue
interest, at the rate or rates prescribed therefor in Debentures of such series
and, if the Debentures of such series are held by a Lodgian Capital Trust or a
trustee of such trust, without duplication of any other amounts paid by such
Lodgian Capital Trust or trustee in respect thereof, upon overdue installments
of interest at the rate per annum expressed in the Debentures of such series;
and in addition thereto, such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel
under Section 5.06.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon Debentures of such series and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or any other obligor upon Debentures of
such series, wherever situated.
If an Event of Default with respect to Debentures of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Debentures of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights, either at law or in equity or in
bankruptcy or otherwise whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy.
SECTION 4.04. TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the pendency
of any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
the Company or any other obligor upon the Debentures of any series or the
property of the Company or of such other obligor or their creditors, the Trustee
(irrespective of whether the principal of the Debentures of such series shall
then
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be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand on the Company
for the payment of overdue principal or interest) shall be entitled and
empowered, by intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of
principal and any premium and interest owing and unpaid in respect of
the Debentures of any series and to file such other papers or documents
as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and
of the Holders of Debentures of such series, and
(b) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same,
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder of Debentures of such series to make such payments to the Trustee
and, in the event that the Trustee shall consent to the making of such payments
directly to the Holders of Debentures of such series, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 5.06.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of a
Debenture of any series, any plan of reorganization, arrangement, adjustment or
composition affecting the Debentures of such series or the rights of any Holder
thereof or to authorize the Trustee to vote in respect of the claim of any
Holder of Debentures of any series in any such proceeding.
SECTION 4.05. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
DEBENTURES. All rights of action and claims under this Indenture or under any of
the terms established with respect to the Debentures of any series may be
prosecuted and enforced by the Trustee without the possession of any of the
Debentures of such series or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel due under
Section 5.06, be for the ratable benefit of the Holders of the Debentures of
such series in respect of which such judgment has been recovered.
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SECTION 4.06. APPLICATION OF MONEY COLLECTED. Any money collected by
the Trustee pursuant to this Article with respect to Debentures of any series
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal
or any premium or interest, upon presentation of the Debentures of such series,
or both, as the case may be, and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 5.06;
SECOND: To the payment of all Senior Indebtedness of the
Company and to the extent required by Article 13:
THIRD: To the payment of the amounts then due and unpaid for
principal of and any premium and interest on the Debentures of such
series in respect of which or for the benefit of which such money has
been collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on Debentures of such series
for principal and any premium and interest, respectively; and
FOURTH: To the payment of the remainder, if any, to the
Company.
SECTION 4.07. LIMITATION ON SUITS. No Holder of any Debenture of any
series shall have any right to institute any proceeding, judicial or otherwise,
with respect to this Indenture, or for the appointment of a receiver or trustee,
or for any other remedy hereunder, unless;
(a) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the Debentures
of such series and of the continuance thereof with respect to the
Debentures of such series specifying such Event of Default, as
hereinbefore provided;
(b) the Holders of not less than 25% in principal amount of
the Outstanding Debentures of such series shall have made written
request to the Trustee to institute proceedings in respect of such
Event of Default in its own name as Trustee hereunder;
(c) such Holder or Holders shall have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
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(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(e) no direction inconsistent with such written request has
been given to the Trustee during such 60 day period by the Holders of a
majority in principal amount of the Outstanding Debentures of such
series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
SECTION 4.08. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST. Notwithstanding any other provision in this Indenture, but
subject to Article 13 of this Indenture, the Holder of any Debenture of any
series shall have the right, which is absolute and unconditional, to receive
payment of the principal of and any premium and (subject to Section 2.03)
interest on Debenture of such series on the Stated Maturity or Maturities
expressed in Debentures of such series (or, in the case of redemption, on the
Redemption Date) and to institute suit for the enforcement of any such payment,
and such rights shall not be impaired without the consent of such Holder.
SECTION 4.09. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any
Holder of Debentures of any series has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
to such Holder, then and in every such case, subject to any determination in
such proceeding, the Company, the Trustee and the Holders of Debentures of such
series shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
SECTION 4.10. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Debentures in the last paragraph of Section 2.07, no right or
remedy herein conferred upon or reserved to the Trustee or to the Holders of
Debentures is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy
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hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 4.11. DELAY OR OMISSION NOT WAIVER. No delay or omission of the
Trustee or of any Holder of any Debenture to exercise any right or remedy
accruing upon any Event of Default occurring and continuing as aforesaid shall
impair any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Subject to the provisions of Section 4.07,
every right and remedy given by this Article or by law to the Trustee or to the
Holders of Debentures may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the Holders of Debentures, as the case
may be.
SECTION 4.12. CONTROL BY HOLDERS OF DEBENTURES. The Holders of a
majority in aggregate principal amount of the Outstanding Debentures of any
series shall have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred on the Trustee, with respect to the Debentures of such
series; PROVIDED, that
(a) such direction shall not be in conflict with any rule of
law or with this Indenture, and
(b) the Trustee may take any other action deemed proper by the
Trustee; PROVIDED, that such direction shall not be in conflict with
any rule of law or with this Indenture or be unduly prejudicial to the
rights of Holders of Debentures of any other series at the time
Outstanding. Subject to the provisions of Section 5.02, the Trustee
shall have the right to decline to follow any such direction if the
Trustee in good faith shall, by a Responsible Officer or Officers of
the Trustee, determine that the proceeding so directed would involve
the Trustee in personal liability.
SECTION 4.13. WAIVER OF PAST DEFAULTS. The Holders of not less than a
majority in principal amount of the Outstanding Debentures of any series may on
behalf of the Holders of all the Debentures of such series waive any past
default hereunder with respect to the Debentures of such series and its
consequences, except a default
(a) in the payment of the principal of (or premium, if any) or
any interest on any Debenture of such series as and when the same shall
become due by the terms of Debentures of such series otherwise than by
acceleration (unless such default has been cured and sums sufficient to
pay
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all matured installments of interest and principal and any premium has
been deposited with the Trustee (in accordance with Section 4.02)), or
(b) in respect of a covenant or provision hereof that under
Article 8 cannot be modified or amended without the consent of the
Holder of each Outstanding Debenture of such series affected;
PROVIDED, that if the Debentures of such series are held by a Lodgian Capital
Trust or a trustee of such trust, such waiver or modification to such waiver
shall not be effective until the holders of a majority of the aggregate
liquidation amount of Trust Securities of the applicable Lodgian Capital Trust
shall have consented to such waiver or modification to such waiver; PROVIDED
FURTHER, that where a consent under this Indenture would require the consent of
Holders of more than a majority of the principal amount of Outstanding
Debentures of such series, such waiver shall not be effective until the holders
of at least the same proportion in aggregate liquidation amount of the Trust
Securities of the applicable Lodgian Capital Trust shall have consented to such
waiver; PROVIDED FURTHER, that a default in respect of any covenant or provision
contained in Article 12 may only be waived by the Holders affected thereby.
Upon any such waiver, the default covered thereby shall cease to exist,
and any Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Indenture and the Company, the Trustee and the Holders
of the Debentures of such series shall be restored to their former positions and
rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 4.14. UNDERTAKING FOR COSTS. All parties to this Indenture
agree, and each Holder of any Debenture by his acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken, suffered or omitted by it as Trustee,
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees and expenses, against any party litigant in
such suit, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; but the provisions of this Section shall
not apply to any suit instituted by the Company, to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding Debentures of
any series, or to any suit instituted by any Holder of any Debenture for the
enforcement of the payment of the principal of or any premium or interest on
such Debenture on or after the Stated Maturity or
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Maturities expressed in such Debenture (or, in the case of redemption, on or
after the Redemption Date).
SECTION 4.15. WAIVER OF STAY OR EXTENSION LAWS. The Company covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and the Company (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE 5
THE TRUSTEE
SECTION 5.01. DUTIES AND RESPONSIBILITIES OF THE TRUSTEE; DURING
DEFAULT; PRIOR TO DEFAULT. With respect to the Holders of any series of
Debentures issued hereunder, the Trustee, prior to the occurrence of an Event of
Default with respect to the Debentures of a such series and after the curing or
waiving of all Events of Default that may have occurred with respect to
Debentures of such series, undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture. In case an Event of
Default with respect to the Debentures of such series has occurred (which has
not been cured or waived), the Trustee shall exercise with respect to the
Debentures of such series such of the rights and powers vested in it by this
Indenture, and shall use the same degree of care and skill in their exercise, as
a prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own wilful misconduct, except that:
(a) prior to the occurrence of an Event of Default with
respect to the Debentures of any series and after the curing or waiving
of all such Events of Default with respect to the Debentures of such
series that may have occurred:
(i) the duties and obligations of the Trustee with
respect to the Debentures of such series shall be determined
solely by the
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express provisions of this Indenture, and the Trustee shall
not be liable except for the performance of such duties and
obligations as are specifically set forth in this Indenture,
and no implied covenants or obligations shall be read into
this Indenture against the Trustee: and
(ii) in the absence of bad faith on the part of the
Trustee, the Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed
therein, upon any statements, certificates or opinions
furnished to the Trustee and conforming to the requirements of
this Indenture; but in the case of any such statement,
certificates or opinions that by any provision hereof are
specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this
Indenture;
(b) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer or Responsible Officers of
the Trustee, unless it shall be proved that such Responsible Officers
of the Trustee were negligent in ascertaining the pertinent facts; and
(c) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders pursuant to Section 4.12 relating to the time,
method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or Power conferred upon the
Trustee, under this Indenture.
No provision of this Indenture shall require the Trustee to extend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it.
SECTION 5.02. CERTAIN RIGHTS OF TRUSTEE. Subject to the provisions of
the Trust Indenture Act:
(a) the Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
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(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by an Officers' Certificate and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, conclusively rely upon an
Officers' Certificate;
(d) the Trustee may consult with counsel of its selection and
the advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders of Debentures of any series pursuant
to this Indenture, unless such Holders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses
and liabilities that might be incurred by it in compliance with such
request or direction, including such reasonable advances as may be
requested by the Trustee;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder;
(h) the Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith and reasonably
believed by it to
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be authorized or within the discretion or rights or powers conferred
upon it by this Indenture, unless the Trustee was negligent in
ascertaining the pertinent facts; and
(i) the Trustee shall not be deemed to have notice of any
default or Event of Default unless a Responsible Officer of the Trustee
has actual knowledge thereof or unless written notice of any event
which is in fact such a default is received by the Trustee at the
Corporate Trust Office of the Trustee, and such notice references the
Debentures and this Indenture.
SECTION 5.03. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF DEBENTURES.
The recitals contained herein and in the Debentures (except the Trustee's
certificates of authentication) shall be taken as the statements of the Company,
and the Trustee or any Authenticating Agent assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of any Debentures. The Trustee or any
Authenticating Agent shall not be accountable for the use or application by the
Company of Debentures or the proceeds thereof.
SECTION 5.04. MAY HOLD DEBENTURES. The Trustee, any Authenticating
Agent, any Paying Agent, or any other agent of the Company, in its individual or
any other capacity, may become the owner or pledgee of Debentures and, subject
to Section 5.09 and 5.11, may otherwise deal with the Company with the same
rights it would have if it were not Trustee, Authenticating Agent, Paying Agent,
or such other agent.
SECTION 5.05. MONEY HELD IN TRUST. Money held by the Trustee in trust
hereunder need not be segregated from other funds except to the extent required
by law. The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed in writing with the Company.
SECTION 5.06. COMPENSATION AND REIMBURSEMENT. The Company agrees:
(a) to pay to the Trustee or any successor Trustee from time
to time such compensation as shall be agreed in writing between the
Company and the Trustee for all services rendered by it hereunder
(which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to
reimburse the Trustee or any predecessor Trustee upon its request for
all reasonable expenses, disbursements and advances incurred or made by
the Trustee in accordance with any provision of this Indenture
(including the
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compensation and the expenses and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(c) to indemnify the Trustee and any predecessor Trustee for,
and to hold it harmless against, any and all loss, damage, claim,
liability or expense, including taxes (other than taxes based on the
income of the Trustee) incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs
and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder.
When the Trustee incurs expenses or renders services in connection with
an Event of Default specified in Section 4.01(e) or Section 4.01(f), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency or
other similar laws.
The Trustee shall have a lien prior to the Debentures as to all
property and funds held by it hereunder for any amount owing it or any
predecessor Trustee pursuant to this Section 5.06, except with respect to
unclaimed funds held in trust for the benefit of the Holders of particular
Debentures.
The provisions of this Section 5.06 shall survive the termination of
this Indenture.
SECTION 5.07. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. (a) No
resignation or removal of the Trustee and no appointment of a successor Trustee
pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee in accordance with the applicable
requirements of Section 5.08.
(b) The Trustee may resign at any time with respect to the Debentures
of one or more series by giving written notice thereof to the Company, or so
long as no Event of Default shall have occurred or be continuing, be removed
with respect to the Debentures of one or more series by the Company by a Board
Resolution, a copy of which shall be delivered to the Trustee and the Holders of
such series. If the instrument of acceptance by a successor Trustee required by
Section 5.08 shall not have been delivered to the Trustee within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition any
court of competent
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jurisdiction for the appointment of a successor Trustee with respect to the
Debentures of such series.
(c) The Trustee may be removed at any time with respect to the
Debentures of any series by Act of the Holders of a majority in principal amount
of the Outstanding Debentures of such series delivered to the Trustee and to the
Company. If the instrument of acceptance by a successor Trustee required by
Section 5.08 shall not have been delivered to the Trustee within 30 days after
the delivery of such Act of removal, the Trustee being removed may petition any
court of competent jurisdiction for the appointment of a successor Trustee with
respect to the Debentures of such series.
(d) If at any time:
(i) the Trustee shall fail to comply with Section 310(b) of
the Trust Indenture Act after written request therefor by the Company
or by any Holder of a Debenture who has been a bona fide Holder of a
Debenture for at least six months, or
(ii) the Trustee shall cease to be eligible under Section 6.10
and Section 310(a) of the Trust Indenture Act and shall fail to resign
after written request therefor by the Company or by any such Holder of
a Debenture who has been a bona fide Holder of Debenture for at least
six months, or
(iii) the Trustee shall become incapable of acting or shall be
adjudged bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then, in any such case,
(A) the Company by a Board Resolution may remove the Trustee with respect to all
Debentures, or
(B) subject to Section 4.14 any Holder of a Debenture who has been a bona fide
Holder of a Debenture for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee with respect to all Debentures and the appointment of a
successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, with
respect to the Debentures of one or more series, the Company, by a Board
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Resolution, shall promptly appoint a successor Trustee or Trustees with respect
to the Debentures of that or those series (it being understood that any such
successor Trustee may be appointed with respect to the Debentures of one or more
or all of such series and that at any time there shall be only one Trustee with
respect to the Debentures of any particular series) and shall comply with the
applicable requirements of Section 5.08. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee with respect to the Debentures of any series shall be
appointed by Act of the Holders of a majority in principal amount of Outstanding
Debentures of such series delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment in accordance with the applicable requirements of Section 5.08,
become the successor Trustee with respect to the Debentures of such series and
to that extent supersede the successor Trustee appointed by the Company. If no
successor Trustee with respect to the Debentures of any series shall have been
so appointed by the Company or the Holders of Debentures of such series and
accepted appointment in the manner required by Section 5.08, any Holder of a
Debenture of such series who has been a bona fide Holder of a Debenture of such
series for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Debentures of such
series.
(f) The Company shall give notice of each resignation and each removal
of the Trustee with respect to the Debentures of any series and each appointment
of a successor Trustee with respect to the Debentures of any series in the
manner provided in Section 1.06. Each notice shall include the name of the
successor Trustee with respect to the Debentures of such series and the address
of its Corporate Trust Office.
SECTION 5.08. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. (a) In case of
the appointment hereunder of a successor Trustee with respect to all Debentures,
every such successor Trustee so appointed shall execute, acknowledge and deliver
to the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but on the written request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder.
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(b) In case of the appointment hereunder of a successor Trustee with
respect to the Debentures of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Debentures of
such series shall execute and deliver an indenture supplemental hereto wherein
each successor Trustee shall accept such appointment and that (i) shall contain
such provisions as shall be necessary or desirable to transfer and conform to,
and to vest in, each successor Trustee all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Debentures of such series to which
the appointment of such successor Trustee relates, (ii) if the retiring Trustee
is not retiring with respect to all Debentures, shall contain such provisions as
shall be deemed necessary or desirable to confirm that all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Debentures of such
series as to which the retiring Trustee is not retiring shall continue to be
vested in the retiring Trustee, and (iii) shall add to or change any of the
provisions of this Indenture as shall be necessary to provide for or facilitate
the administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental indenture shall
constitute such Trustees as co-trustees of the same trust and that each such
Trustee shall be trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such Trustee; and upon
the execution and delivery of such supplemental indenture the resignation or
removal of the retiring Trustee shall become effective to the extent provided
therein and each such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Debentures of such series to which
the appointment of such successor Trustee relates; but, on the written request
of the Company or any successor Trustee, such retiring Trustee shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder with respect to the Debentures of such
series to which the appointment of such successor Trustee relates.
(c) Upon the written request of any such successor Trustee, the
Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts referred to in paragraph (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
SECTION 5.09. DISQUALIFICATION; CONFLICTING INTERESTS. If the Trustee
has or shall acquire a conflicting interest within the meaning of Section 310(b)
of the Trust Indenture Act, the Trustee and the holder of Common Securities (as
if it were the obligor referred to in Section 310(b) of the Trust Indenture Act)
shall in
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all respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
SECTION 5.10. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall be
at all times a Trustee hereunder, which shall be a Person that is eligible
pursuant to the Trust Indenture Act to act as such and (a) has a combined
capital and surplus of at least $50,000,000 or (b) has a combined capital and
surplus of at least $10,000,000 and is a wholly-owned subsidiary of a
corporation having a combined capital and surplus of at least $50,000,000, and
in each case subject to supervision by Federal, State or District of Columbia
authority. If such Person publishes reports of condition at least annually,
pursuant to law or to the requirements of said supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such Person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time
the Trustee shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect hereunder
specified in this Article.
SECTION 5.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. If and
when the Trustee shall be or become a creditor of the Company (or any other
obligor upon the Debentures), the Trustee shall be subject to the provisions of
the Trust Indenture Act regarding the collection of claims against the Company
(or any such other obligor).
SECTION 5.12. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS. Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Debentures shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Debentures so authenticated with the same effect
as if such successor Trustee had itself authenticated such Debentures.
SECTION 5.13. NOTICE OF DEFAULTS. If a default occurs hereunder with
respect to Debentures of any series, the Trustee shall give the Holders of
Debentures of such series notice of such default as and to the extent provided
by the Trust Indenture Act; provided, that in the case of any default of the
character specified in Section 4.01(d) with respect to Debentures of such
series, no such
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notice to Holders shall be given until at least 30 days after the occurrence
thereof. For the purpose of this Section, the term "default" means any event
that is, or after notice or lapse of time or both would become, an Event of
Default with respect to Debentures of such series.
ARTICLE 6
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 6.01. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders of Debentures (i) contained in
the most recent list furnished to the Trustee as provided in Section 312(a) of
the Trust Indenture Act, (ii) received by the Trustee in its capacity as
Debenture Registrar and (iii) filed with it within the two preceding years
pursuant to Section 313(c)(2) of the Trust Indenture Act.
(b) If three or more Holders of Debentures of any series (herein
referred to as "APPLICANTS") apply in writing to the Trustee, and furnish to the
Trustee reasonable proof that each such applicant has owned a Debenture of such
series for a period of at least six months preceding the date of such
application, and such application states that the applicants desire to
communicate with other Holders of Debentures of such series with respect to
their rights under this Indenture or under the Debentures of such series and is
accompanied by a copy of the form of proxy or other communication that such
applicants propose to transmit, then the Trustee shall, within five Business
Days after the receipt of such application, at its election, either
(i) afford such applicants access to the information preserved
at the time by the Trustee in accordance with Section 6.01(a), or
(ii) inform such applicants as to the approximate number of
Holders of Debentures of such series whose names and addresses appear
in the information preserved at the time by the Trustee in accordance
with Section 6.01(a), and as to the approximate cost of mailing to such
Holders the form of proxy or other communication, if any, specified in
such application.
(c) Every Holder of Debentures, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the Holders
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of Debentures in accordance with Section 6.01(b), regardless of the source from
which such information was derived and that the Trustee shall not be held
accountable by reason of mailing any material pursuant to a request made under
Section 6.01(b).
SECTION 6.02. REPORTS BY TRUSTEE. The Trustee shall in each year
transmit to Holders such reports concerning the Trustee and its actions under
this Indenture as may be required pursuant to the Trust Indenture Act in the
manner provided pursuant thereto. If required by Section 313(a) of the Trust
Indenture Act, the Trustee shall, within sixty days after each May 15 following
the date of this Indenture deliver to Holders a brief report, dated as of such
May 15, which complies with the provisions of Section 313(a). The trustee shall
also comply with the requirements of Section 313(d) of the Trust Indenture Act.
SECTION 6.03. REPORTS BY COMPANY. The Company shall file with the
Trustee such documents, reports and information as required by Section 314 (if
any) and the compliance certificate required by Section 314 of the Trust
Indenture Act in the form, in the manner and at the times required by Section
314 of the Trust Indenture Act. The Company shall transmit information to the
Holders of the Debentures as required by Section 313(c) of the Trust Indenture
Act.
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute notice of any information contained therein or determinable from
information contained therein, including the Company's compliance with any of
its covenants hereunder (as to which the Trustee is entitled to rely exclusively
on Officers' Certificates).
ARTICLE 7
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
SECTION 7.01. COMPANY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. The
Company shall not merge or consolidate with any other corporation or sell or
convey all or substantially all of its assets to any Person, unless (a) either
the Company shall be the continuing corporation, or the successor corporation
(if other than the Company) shall be a corporation organized under the laws of
the United States of America or any State thereof and shall expressly assume the
due and punctual payment of the principal of and interest on all the Debentures,
according to their tenor, and the due and punctual performance and observance of
all of the covenants and conditions of this Indenture to be performed or
observed by the Company, by supplemental indenture satisfactory to the Trustee,
executed
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and delivered to the Trustee by such corporation, and (b) the Company or such
successor corporation, as the case may be, shall not, immediately after such
merger or consolidation, or such sale or conveyance, be in default in the
performance of any such covenant or condition.
SECTION 7.02. SUCCESSOR CORPORATION SUBSTITUTED. In case of any such
consolidation, merger, sale or conveyance, and following such an assumption by
the successor corporation, such successor corporation shall succeed to and be
substituted for the Company, with the same effect as if it had been named
herein. Such successor corporation may cause to be signed, and may issue either
in its own name or in the name of the Company prior to such succession any or
all of the Debentures issuable hereunder that theretofore shall not have been
signed by the Company and delivered to the Trustee; and, upon the order of such
successor corporation instead of the Company and subject to all the terms,
conditions and limitations in this Indenture prescribed, the Trustee shall
authenticate and shall make available for delivery any securities that
previously shall have been signed and delivered by the officers of the Company,
to the Trustee for authentication, and any Debentures that such successor
corporation thereafter shall cause to be signed and delivered to the Trustee for
that purpose. All of the Debentures so issued shall in all respects have the
same legal rank and benefit under this Indenture as the Debentures theretofore
or thereafter issued in accordance with the terms of this Indenture as though
all of such Debentures had been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale or conveyance such
changes in phraseology and form (but not in substance) may be made in the
Debentures thereafter to be issued as may be appropriate.
In the event of any such sale or conveyance (other than a conveyance by
way of lease) the Company or any successor corporation that shall theretofore
have become such in the manner described in this Article shall be discharged
from all obligations and covenants under this Indenture and the Debentures and
may be liquidated and dissolved.
SECTION 7.03. MERGER WITH IMPAC. If the merger (the "MERGER")
contemplated pursuant to the Agreement and Plan of Merger dated as of March 20,
1998 among Lodgian, the Company, Impac Hotel Group, L.L.C., SHG-S Sub, Inc. and
SHG-I Sub, L.L.C. is consummated, then, upon the assumption by Lodgian of the
Company's obligations under this Indenture and the Debentures as contemplated by
Section 7.01, Servico, Inc. shall be discharged from all obligations and
covenants under this Indenture and the Debentures.
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SECTION 7.04. OPINION OF COUNSEL TO TRUSTEE. The Trustee may receive an
Opinion of Counsel, prepared in accordance with Section 1.02, as conclusive
evidence that any such consolidation, merger, sale, lease or conveyance, and any
such assumption, and any such liquidation or dissolution, complies with the
applicable provisions of this Indenture.
ARTICLE 8
SUPPLEMENTAL INDENTURES
SECTION 8.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders of Debentures, the Company, when authorized
by a Board Resolution, and the Trustee, at any time and from time to time, may
enter into one or more indentures supplemental hereto, in form satisfactory to
the Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of
the Company herein and in the Debentures; or
(b) to add to the covenants of the Company for the benefit of
the Holders of Debentures of all or any series (and if such covenants
are to be for the benefit of Debentures of less than all series,
stating that such covenants are expressly being included solely for the
benefit of such series) or to surrender any right or power herein
conferred upon the Company; or
(c) to comply with any requirements of the Commission in
connection with the qualification of this Indenture under the Trust
Indenture Act;
(d) to add any additional Events of Default (and if such
Events of Default are to be for the benefit of Debentures of less than
all series, stating that such Events of Default are expressly being
included solely for the benefit of such series); or
(e) to change or eliminate any of the provisions of this
Indenture, provided that any such change or elimination shall become
effective only when there is no Debenture Outstanding of any series
created prior to the execution of such supplemental indenture that is
entitled to the benefit of such provision; or
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(f) to establish the form or terms of Debentures of any series
as permitted by Sections 2.01; or
(g) to evidence and provide for the acceptance of appointment
thereunder by a successor Trustee with respect to the Debentures of one
or more series and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee,
pursuant to the requirements of Section 5.08(b); or
(h) to make provision with respect to the conversion rights of
Holders pursuant to the requirements of Article 12, including providing
for the conversion of the Debentures into any security or property
(other than the Common Stock of the Company); or
(i) to cure any ambiguity, to correct or supplement any
provision herein that may be inconsistent with any other provision
herein, to make any change to the form or term of the Debentures of any
series or to make other changes to this Indenture; PROVIDED, that such
action shall not have a material adverse effect on the interests of the
Holders of Debentures of any series.
SECTION 8.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS. With the
consent of the Holders of not less than a majority in aggregate principal amount
of the Outstanding Debentures of each series affected by such supplemental
indenture, by Act of said Holders delivered to the Company and the Trustee, the
Company, when authorized by a Board Resolution, and the Trustee may enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders of
Debentures of such series under this Indenture; PROVIDED, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Debenture affected thereby,
(a) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Debenture of any
series, or reduce the principal amount thereof or the rate of interest
thereon or any premium payable upon the redemption thereof, or reduce
the amount of the principal of an Original Issue Discount Debenture
that would be due and payable upon a declaration of acceleration of the
Maturity thereof pursuant to Section 4.02 or change the coin or
currency in which any Debenture or any premium or interest thereon is
payable, or change any Place of Payment where any Debenture is payable,
or impair the right to
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institute suit for the enforcement of any such payment on or after the
Stated Maturity thereof (or, in the case of redemption, on or after the
Redemption Date), or
(b) reduce the percentage in principal amount of the
Outstanding Debentures of any series, the consent of whose Holders is
required for any such supplemental indenture, or the consent of whose
Holders is required for any waiver of certain defaults hereunder and
their consequences provided for in this Indenture, or
(c) modify any of the provisions of this Section or Section
4.13, except to increase the percentage of Outstanding Debentures of
any series the consent of the Holders of which is required pursuant to
such provisions or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the
Holder of each Outstanding Debenture affected thereby, or
(d) make any change that adversely affects the right to
convert any Debenture of any series as provided in Article 12 or
pursuant to Section 2.01 (except as permitted by Section 8.01) or
decrease the conversion rate or increase the conversion price of any
such Debenture of such series, or
(e) change the obligation of the Company, with respect to
Outstanding Debentures of a series, to maintain an office or agency in
the places and for the purposes specified in Section 9.02 for such
series; or
(f) if the Debentures of any series are secured, change the
terms and conditions pursuant to which the Debentures of such series
are secured in a manner adverse to the Holders of the secured
Debentures of such series, or
(g) make any change in Article 13 that adversely affects the
rights of any Holders of Outstanding Debentures of such series.
If the Debentures of such series are held by a Lodgian Capital Trust or
a trustee of such trust, such supplemental indenture shall not be effective
until the holders of 662/3% of the aggregate liquidation amount of Trust
Securities of the applicable Trust shall have consented to such supplemental
indenture; PROVIDED, where a consent under this Indenture would require the
consent of Holders of more than 662/3% of the principal amount of Outstanding
Debentures of such series, such supplemental indenture shall not be effective
until the holders of at least the same proportion in aggregate liquidation
amount of the Trust Securities
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of the applicable Lodgian Capital Trust shall have consented to such
supplemental indenture.
A supplemental indenture that changes or eliminates any covenant or
other provision of this Indenture that has expressly been included solely for
the benefit of Debentures of one or more particular series, or that modifies the
rights of the Holders of Debentures of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Debentures of any other series.
It shall not be necessary for any Act of Holders of Debentures of any
series under this Section to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such Act shall approve the
substance thereof.
SECTION 8.03. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing or
accepting the additional trusts created by any supplemental indenture permitted
by this Article or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject to Section
5.02) shall be fully protected in relying upon, an Opinion of Counsel stating
that the execution of such supplemental indenture is authorized or permitted by
this Indenture. The Trustee may, but shall not be obligated to, enter into any
such supplemental indenture that affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 8.04. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of
any supplemental indenture under this Article, this Indenture shall be modified
in accordance therewith, and such supplemental indenture shall form a part of
this Indenture for all purposes; and every Holder of Debentures theretofore or
thereafter authenticated and delivered hereunder shall be bound thereby.
SECTION 8.05. CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental
indenture executed pursuant to this Article shall conform to the requirements of
the Trust Indenture Act of 1939, as amended, in effect on such date.
SECTION 8.06. REFERENCE IN DEBENTURES TO SUPPLEMENTAL INDENTURES.
Debentures of any series authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Debentures of any series so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and made available for delivery by the
Trustee in exchange for Outstanding Debentures of such series.
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ARTICLE 9
COVENANTS
SECTION 9.01. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST. The Company
covenants and agrees for the benefit of Debentures of any series that it will
duly and punctually pay the principal of and any premium and interest on the
Debentures of such series in accordance with the terms of the Debentures of such
series and this Indenture.
SECTION 9.02. MAINTENANCE OF OFFICE OR AGENCY. So long as any series of
the Debentures remain outstanding, the Company agrees to maintain an office or
agency in the City of Wilmington, State of Delaware, with respect to each such
series and at such other location or locations as may be designated as provided
in this Section 9.02, where (i) Debentures of that series may be presented for
payment, (ii) Debentures of that series may be presented as herein above
authorized for registration of transfer and exchange, and (iii) notices and
demands to or upon the Company in respect of the Debentures of that series and
this Indenture may be given or served, such designation to continue with respect
to such office or agency until the Company shall, by written notice signed by
its President or a Vice President and delivered to the Trustee, designate some
other office or agency for such purposes or any of them. If at any time the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations, notices and
demands may be made or served at the Corporate Trust Office of the Trustee, and
the Company hereby appoints the Trustee as its agent to receive all such
presentations, notices and demands.
SECTION 9.03. MONEY FOR DEBENTURES PAYMENTS TO BE HELD IN TRUST. If the
Company shall at any time act as its own Paying Agent with respect to Debentures
of any series, it will, on or before each due date of the principal of and any
premium or interest on any of the Debentures of such series, segregate and hold
in trust for the benefit of the Persons entitled thereto a sum sufficient to pay
the principal and any premium or interest so becoming due until such sums shall
be paid to such Persons or otherwise disposed of as herein provided and will
promptly notify the Trustee of its action or failure to act.
Whenever the Company shall have one or more Paying Agents for
Debentures of any series it will, prior to each due date of the principal of and
any premium or interest on any Debentures of such series, deposit with a Paying
Agent a sum sufficient to pay the principal and any premium or interest so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal, premium or interest, and (unless such Paying Agent
is the
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Trustee) the Company will promptly notify the Trustee of its action or failure
to act.
The Company will cause each Paying Agent for Debentures of any series
other than the Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will:
(a) hold all sums held by it for the payment of the principal
of and any premium or interest on Debentures of such series in trust
for the benefit of the Persons entitled thereto until such sums shall
be paid to such Persons or otherwise disposed of as herein provided;
(b) give the Trustee notice of any default by the Company (or
any other obligor upon the Debentures of such series) in the making of
any payment of principal of and any premium or interest on the
Debentures of such series;
(c) comply with the provisions of the Trust Indenture Act
applicable to it as Paying Agent; and
(d) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of and any premium or
interest on any Debenture of any series and remaining unclaimed for two years
after such principal and any premium or interest has become due and payable
shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of the Debenture of
such series shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money and all liability of the Company as
trustee thereof
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shall thereupon cease; PROVIDED, that the Trustee or such Paying Agent, before
being required to make any such repayment, may at the expense of the Company
cause to be published once, in an Authorized Newspaper in each Place of Payment,
notice that such money remains unclaimed and that after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to the
Company.
SECTION 9.04. LIMITATION ON DIVIDENDS; TRANSACTIONS WITH AFFILIATES. If
Debentures of any series are issued to a Lodgian Capital Trust or a trustee of
such trust in connection with the issuance of Trust Securities by such Lodgian
Capital Trust and (a) there shall have occurred any event that would constitute
an Event of Default, (b) the Guarantor shall be in default with respect to its
payment of any obligations under the Guarantee relating to such Lodgian Capital
Trust, or (c) the Company shall have given notice of its election to defer
payments of interest on Debentures of such series by extending the interest
payment period as provided herein and such period, or any extension thereof,
shall be continuing, then the Company shall not, and shall not permit any
Subsidiary to, (x) declare or pay any dividend on, make any distributions with
respect to, or redeem, purchase or acquire, or make a liquidation payment with
respect to, any of its capital stock or (y) make any payment of principal of,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Company that rank on a parity with or junior in interest to
the Debentures of that series or make any guarantee payments with respect to any
guarantee by the Company of the debt securities of any Subsidiary of the Company
if such guarantee ranks on a parity with or junior in interest to the Debentures
of that series (other than (a) dividends or distributions in common stock of the
Company, (b) payments under the Guarantee relating to such Lodgian Capital
Trust, (c) any declaration of a dividend in connection with the implementation
of a shareholders' rights plan, or issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, and
(d) purchases of common stock related to the issuance of common stock or rights
under any of the Company's benefit plans).
SECTION 9.05. COVENANTS AS TO LODGIAN CAPITAL TRUST. In the event
Debentures are issued to a Lodgian Capital Trust or a trustee of such trust in
connection with the issuance of Trust Securities by such Lodgian Capital Trust,
for so long as such Trust Securities remain outstanding, the Company will (a)
maintain directly or indirectly ownership of all of the Common Securities of
such Lodgian Capital Trust; PROVIDED, that any permitted successor of the
Company under the Indenture may succeed to the Company's ownership of the Common
Securities, (b) cause such Lodgian Capital Trust to remain a statutory business
trust, except in connection with a distribution of Debentures of such series to
the holders of Trust Securities in liquidation of such Lodgian Capital Trust,
the redemption of all of the Trust Securities of such Trust, or certain mergers,
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consolidations or amalgamations, each as permitted by the Declaration, and not
to voluntarily dissolve, wind-up, liquidate or to be terminated, except as
permitted by the Declaration, (c) use its commercially reasonable efforts to
ensure that the Trust shall not be an "investment company" for purposes of the
Investment Company Act of 1940, as amended, and (d) take no action that would be
reasonably likely to cause the Trust to be classified as an association or a
publicly traded partnership taxable as a corporation for United States federal
income tax purposes.
SECTION 9.06. EXISTENCE. Subject to Article 7, the Company will do or
cause to be done all things necessary to preserve and keep in full force and
effect its existence, rights (charter and statutory) and franchises; PROVIDED,
that the Company shall not be required to preserve any such right or franchise
if the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 9.07. STATEMENT BY OFFICERS AS TO DEFAULT. The Company will
deliver to the Trustee, within 120 days after the end of each fiscal year of the
Company ending after the date hereof, an Officers' Certificate signed by its
principal executive officer, principal financial officer or principal accounting
officer stating whether or not to the best knowledge of the signer thereof the
Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture, and if the Company shall be in
default, specifying all such defaults and the nature and status thereof of which
they may have knowledge.
The Company shall file with the Trustee written notice of the
occurrence of any default relating to an Event of Default of the type described
in clause (e), (f) or (g) of Section 4.01 or any Event of Default within five
Business Days of its becoming aware of any such default or Event of Default.
SECTION 9.08. FINANCIAL INFORMATION; SEC REPORTS. The Company shall
file with the Trustee, within 15 days after it files any annual and quarterly
reports, information, documents and other reports with the Commission, copies of
its annual report and of the information, documents and other reports (or copies
of such portions of any of the foregoing as the Commission may by rules and
regulations prescribe) that the Company is required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act.
If at any time, the Company is not required to file any such reports
with the Commission, the Company will deliver to the Trustee (a) as soon as
available and in any event within 90 days after the end of each fiscal year of
the Company
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(i) a consolidated balance sheet of the Company and its Subsidiaries as of the
end of such fiscal year and the related consolidated statements of operations,
stockholders' equity and cash flows for such fiscal year, all reported on by an
independent public accountant of nationally recognized standing and (ii) a
report containing a management's discussion and analysis of the financial
condition and results of operations and a description of the business and
properties of the Company and (b) as soon as available and in any event within
45 days after the end of each of the first three quarters of each fiscal year of
the Company (i) an unaudited consolidated financial report for such quarter and
(ii) a report containing a management's discussion and analysis of the financial
condition and results of operations of the Company; PROVIDED, that the foregoing
shall not be required for any fiscal year or quarter, as the case may be, with
respect to which the Company files or expects to file with the Trustee an annual
report or quarterly report, as the case may be, pursuant to the second paragraph
of this Section 9.08.
With respect to Debentures originally issued in an offering not
registered pursuant to the Securities Act, if prior to the Resale Restriction
Termination Date, the Company is neither subject to Section 13 or 15(d) of the
Exchange Act, the Company shall at the request of any Holder provide to such
Holder and any prospective purchaser designated by such Holder such information,
if any, required by Rule 144A(d)(4) under the Securities Act.
ARTICLE 10
REDEMPTION OF DEBENTURES
SECTION 10.01. APPLICABILITY OF ARTICLE. Debentures of any series that
are redeemable before their Stated Maturity shall be redeemable in accordance
with their terms and (except as otherwise specified as contemplated by Section
2.01 for Debentures of any series) in accordance with this Article.
SECTION 10.02. ELECTION TO REDEEM; NOTICE TO TRUSTEE. The election of
the Company to redeem Debentures of any series shall be evidenced by an
Officers' Certificate. In the case of any redemption, at the election of the
Company, the Company shall, upon not less than 30 nor more than 60 days prior to
the Redemption Date fixed by the Company, notify the Trustee of such Redemption
Date and of the principal amount of Debentures of such series to be redeemed. In
the case of any redemption of Debentures of such series (a) prior to the
expiration of any restriction on such redemption provided in the terms of such
Debentures of such series or elsewhere in this Indenture, or (b) pursuant to an
election of the Company that is subject to a condition specified in the terms of
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Debentures of such series, the Company shall furnish the Trustee with an
Officers' Certificate evidencing compliance with such restriction or condition.
SECTION 10.03. SELECTION BY TRUSTEE OF DEBENTURES TO BE REDEEMED. If
less than all the Debentures of any series and of like tenor are to be redeemed,
the particular Debentures of such series to be redeemed shall be selected not
more than 60 days prior to the Redemption Date by the Trustee, from the
Outstanding Debentures of such series and of like tenor not previously called
for redemption. If the Outstanding Debentures have not been distributed to the
Holders of Trust Securities upon a dissolution of the Lodgian Capital Trust
(where applicable), the Debentures to be redeemed may be selected by such method
as the Trustee shall deem fair and appropriate and that may provide for the
selection of portions (equal to the minimum authorized denomination for
Debentures of such series or any integral multiple thereof) of the principal
amount of Registered Debentures of such series of a denomination larger than the
minimum authorized denomination for Debentures of such series. If the
Outstanding Debentures have been distributed to the Holders of Trust Securities,
then the Trustee must redeem the Outstanding Debentures PRO RATA.
If Debentures of any series selected for partial redemption are
converted in part before termination of the conversion right with respect to the
portion of the Debenture of such series so selected, the converted portion of
the Debentures of such series shall be deemed (so far as may be) to be the
portion selected for redemption. Debentures (or portions thereof) that have been
converted during a selection of Debentures of such series to be redeemed shall
be treated by the Trustee as Outstanding for the purpose of such selection. In
any case where more than one Debenture of such series is registered in the same
name, the Trustee in its discretion may treat the aggregate principal amount so
registered as if it were represented by one Debenture of such series.
The Trustee shall promptly notify the Company in writing of the
Debentures of such series selected for redemption and, in the case of any
Debentures of such series selected for partial redemption, the principal amount
thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Debentures of such series
of such series shall relate, in the case of any Debentures of such series
redeemed or to be redeemed only in part, to the portion of the principal amount
of the Debentures of such series that has been or is to be redeemed.
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SECTION 10.04. NOTICE OF REDEMPTION. Notice of redemption shall be
given in the manner provided in Section 1.06 to the Holders of Debentures to be
redeemed not less than 30 nor more than 60 days prior to the Redemption Date.
All notices of redemption shall identify the Debentures (including the
CUSIP number) to be redeemed and shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all the Outstanding Debentures of any series
are to be redeemed, the identification (and, in the case of partial
redemption, the principal amounts) of the particular Debentures of such
series to be redeemed, and a statement to the effect that on or after
the Redemption Date upon surrender of such Debenture a new Debenture of
such series in the principal amount equal to the unredeemed portion
will be issued;
(d) that on the Redemption Date the Redemption Price will
become due and payable upon each such Debenture of such series to be
redeemed and, if applicable, that interest thereon will cease to accrue
on and after said date;
(e) the place or places where such Debentures of such series,
maturing after the Redemption Date, are to be surrendered for payment
of the Redemption Price;
(f) that the redemption is for a sinking fund, if such is the
case; and
(g) if applicable, the conversion rate or price, the date on
which the right to convert the Debentures of such series to be redeemed
will terminate and the place or places where such Debentures may be
surrendered for conversion.
A notice of redemption published as contemplated by Section 1.06 need
not identify particular Registered Debentures of such series to be redeemed.
Notice of redemption of Debentures to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
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SECTION 10.05. DEPOSIT OF REDEMPTION PRICE. Prior to 10:00 A.M., New
York time, on any Redemption Date, the Company shall deposit with the Trustee or
with a Paying Agent (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 9.03) an amount of money
sufficient to pay the Redemption Price of, and (except if the Redemption Date
shall be an Interest Payment Date) accrued interest on, all the Debentures that
are to be redeemed on that date.
If any Debenture called for redemption is converted into Common Stock
of the Company, any money deposited with the Trustee or with any Paying Agent or
so segregated and held in trust for the redemption of such Debenture shall
(subject to any right of the Holder of such Debenture or any Predecessor
Debenture to receive interest as provided in Section 2.03) be paid to the
Company upon Company Request or, if then held by the Company, shall be
discharged from such trust.
SECTION 10.06. DEBENTURES PAYABLE ON REDEMPTION DATE. Notice of
redemption having been given as aforesaid, the Debentures so to be redeemed
shall on the Redemption Date become due and payable at the Redemption Price
therein specified, and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Debentures shall cease to bear interest. Upon surrender of any such Debenture
for redemption in accordance with said notice maturing after the Redemption
Date, such Debenture shall be paid by the Company at the Redemption Price
together with accrued interest to the Redemption Date; PROVIDED, that, unless
otherwise specified as contemplated by Section 2.01, installments of interest on
Registered Debentures whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Debentures or one or more
Predecessor Debentures, registered as such at the close of business on the
relevant record dates according to their terms and the provisions of Section
2.03.
If any Debenture called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and any premium shall, until
paid, bear interest from the Redemption Date at the rate prescribed therefor in
the Debenture.
SECTION 10.07. DEBENTURES REDEEMED IN PART. Any Registered Debenture of
any series that is to be redeemed only in part shall be surrendered at a Place
of Payment therefor (with due endorsement by, or a written instrument of
transfer in form satisfactory to the Company and the Trustee duly executed by,
the Holder thereof or his attorney duly authorized in writing), and the Company
shall execute, and the Trustee shall authenticate and make available for
delivery to the Holder of such Debenture without service charge, a new
Registered Debenture or Debentures of such series and of like tenor of any
authorized denomination as
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requested by such Holder, in aggregate principal amount equal to and in exchange
for the unredeemed portion of the principal of the Debenture of such series so
surrendered.
ARTICLE 11
SINKING FUNDS
SECTION 11.01. APPLICABILITY OF ARTICLE. The provisions of this Article
shall be applicable to any sinking fund for the retirement of Debentures of any
series except as otherwise specified as contemplated by Section 2.01 for
Debentures of such series.
The minimum amount of any sinking fund payment provided for by the
terms of Debentures of any series is herein referred to as a "MANDATORY SINKING
FUND PAYMENT," and any payment in excess of such minimum amount provided for by
the terms of Debentures of any series is herein referred to as an "OPTIONAL
SINKING FUND PAYMENT." If provided for by the terms of Debentures of any series,
the cash amount of any sinking fund payment may be subject to reduction as
provided in Section 11.02. Each sinking fund payment shall be applied to the
redemption of Debentures of any series as provided for by the terms of
Debentures of such series.
SECTION 11.02. SATISFACTION OF SINKING FUND PAYMENTS WITH DEBENTURES.
The Company (a) may deliver Outstanding Debentures of any series (other than any
previously called for redemption (b) an may apply as a credit Debentures of such
series that have been redeemed either at the election of the Company pursuant to
the terms of the Debentures of such series or through the application of
permitted optional sinking fund payments pursuant to the terms of the
Debentures, in each case in satisfaction of all or any part of any sinking fund
payment with respect to the Debentures of such series required to be made
pursuant to the terms of the Debentures of such series; PROVIDED, that the
Debentures of such series have not been previously so credited. The Debentures
shall be received and credited for such purpose by the Trustee at the Redemption
Price specified in the Debentures of such series for redemption through
operation of the sinking fund and the amount of such sinking fund payment shall
be reduced accordingly.
SECTION 11.03. REDEMPTION OF DEBENTURES FOR SINKING FUND. Not less than
60 days prior to each sinking fund payment date for Debentures of any series,
the Company will deliver to the Trustee an Officers' Certificate specifying the
amount of the next ensuing sinking fund payment for such series pursuant to the
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terms of such series, the portion thereof, if any, that is to be satisfied by
payment of cash and the portion thereof, if any, that is to be satisfied by
delivering and crediting Debentures of such series pursuant to Section 11.02 and
will also deliver to the Trustee any Debentures of such series to be so
delivered. Not less than 45 days before each such sinking fund payment date the
Trustee shall select the Debentures of such series to be redeemed upon such
sinking fund payment date in the manner specified in Section 10.03 and cause
notice of the redemption thereof to be given in the name of and at the expense
of the Company in the manner provided in Section 10.04. Such notice having been
duly given, the redemption of such Debentures of such series shall be made upon
the terms and in the manner stated in Sections 10.06 and 10.07.
ARTICLE 12
CONVERSION OF DEBENTURES
SECTION 12.01. APPLICABILITY OF ARTICLE. The provisions of this Article
shall be applicable to the Debentures of any series that are convertible into
shares of Common Stock of the Company, and the issuance of such shares of Common
Stock upon the conversion of Debentures of such series, except as otherwise
specified as contemplated by Section 2.01 for the Debentures of such series. The
terms and provisions applicable to the conversion of Debentures of any series
into securities of the Company (other than Common Stock) shall, if applicable,
be set forth in an Officers' Certificate or established in one or more
indentures supplemental hereto, prior to the issuance of Debentures of such
series in accordance with Section 2.01.
SECTION 12.02. EXERCISE OF CONVERSION PRIVILEGE. In order to exercise a
conversion privilege, the Holder of a Debenture of any series with such a
privilege shall surrender such Debenture to the Company at the office or agency
maintained for that purpose pursuant to Section 1.02, accompanied by written
notice to the Company that the Holder elects to convert such Debenture or a
specified portion thereof. Such notice shall also state, if different from the
name and address of such Holder, the name or names (with address) in that the
certificate or certificates for shares of Common Stock that shall be issuable on
such conversion shall be issued. Debentures of such series surrendered for
conversion shall (if so required by the Company or the Trustee) be duly endorsed
by or accompanied by instruments of transfer in forms satisfactory to the
Company and the Trustee duly executed by the registered Holder or its attorney
duly authorized in writing. As promptly as practicable after the receipt of such
notice and of any payment required pursuant to a Board Resolution and, subject
to Section 2.01, set forth, or determined in the manner provided, in an
Officers' Certificate, or established in
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one or more indentures supplemental hereto setting forth the terms of Debentures
and the surrender of such Debentures in accordance with such reasonable
regulations as the Company may prescribe, the Company shall issue and shall
deliver, at the office or agency at which such Debenture is surrendered, to such
Holder or on its written order, a certificate or certificates for the number of
full shares of Common Stock issuable upon the conversion of such Debenture (or
specified portion thereof), in accordance with the provisions of such Board
Resolution, Officers' Certificate or supplemental indenture, and cash as
provided therein in respect of any fractional share of such Common Stock
otherwise issuable upon such conversion. Such conversion shall be deemed to have
been effected immediately prior to the close of business on the date on which
such notice and such payment, if required, shall have been received in proper
order for conversion by the Company and such Debenture shall have been
surrendered as aforesaid (unless such Holder shall have so surrendered such
Debenture and shall have instructed the Company to effect the conversion on a
particular date following such surrender and such Holder shall be entitled to
convert such Debenture on such date, in which case such conversion shall be
deemed to be effected immediately prior to the close of business on such date)
and at such time the rights of the Holder of such Debenture as such Debenture
Holder shall cease and the person or persons in whose name or names any
certificate or certificates for shares of Common Stock of the Company shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby. Except as set forth above
and subject to Section 2.03, no payment or adjustment shall be made upon any
conversion on account of any interest accrued on the Debentures of such series
surrendered for conversion or on account of any dividends on the Common Stock of
the Company issued upon such conversion. Debentures surrendered for conversion
on or after any regular record date and prior to the next succeeding Interest
Payment Date (other than a Debenture or a portion of a Debenture called for
redemption on a Redemption Date occurring after such regular record date and on
or prior to such Interest Payment Date) shall be accompanied by payment equal to
the amount of interest payable on such Debenture on such Interest Payment Date.
In the case of any Debenture of any series that is converted in part
only, upon such conversion the Company shall execute and the Trustee shall
authenticate and make available for delivery to or on the order of the Holder
thereof, at the expense of the Company, a new Debenture or Debentures of such
series, of authorized denominations, in aggregate principal amount equal to the
unconverted portion of such Debenture.
SECTION 12.03. NO FRACTIONAL SHARES. No fractional share of Common
Stock of the Company shall be issued upon conversions of Debentures of any
series. If more than one Debenture of such series shall be surrendered for
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conversion at one time by the same Holder, the number of full shares that shall
be issuable upon conversion shall be computed on the basis of the aggregate
principal amount of the Debentures of such series (or specified portions thereof
to the extent permitted hereby) so surrendered. If, except for the provisions of
this Section 12.03, any Holder of a Debenture or Debentures of such series would
be entitled to a fractional share of Common Stock of the Company upon the
conversion of such Debenture or Debentures, or specified portions thereof, the
Company shall pay to such Holder an amount in cash equal to the current market
value of such fractional share based upon the (i) the closing sale price (or, if
no closing price is reported, the last reported sale price) of the Common Stock
(regular way) on the NYSE on the trading day immediately preceding the date of
conversion, (ii) if the Common Stock is not listed for trading on the NYSE on
any such date, as reported in the composite transactions for the principal
United States securities exchange on which the Common Stock is so listed, (iii)
if the Common Stock is not so listed on a United States national or regional
securities exchange, as reported by the NASDAQ Stock Market, (iv) if the Common
Stock is not so reported, the last quoted bid price for the Common Stock in the
over-the-counter market as reported by the National Quotation Bureau or similar
organization, (v) if the Common Stock is not so quoted, the average of the
mid-point of the last bid and ask prices for the Common Stock from at least
three nationally recognized investment banking firms selected by the Board of
Directors or (vi) if not so available in such manner, as otherwise determined in
good faith by the Board of Directors. For purposes of this Section, "trading
day" shall mean any day on which the Common Stock is traded on the NYSE, or if
the Common Stock is not listed or admitted to trading on the NYSE, on the
principal national securities exchange on which the Common Stock is listed or
admitted, or if not listed or admitted to trading on any national securities
exchange, on the NASDAQ Stock Market, or if the Common Stock is not quoted on
the NASDAQ Stock Market, in the applicable securities market in which the Common
Stock is traded.
SECTION 12.04. ADJUSTMENT OF CONVERSION PRICE. The conversion price of
Debentures of any series that is convertible into Common Stock of the Company
shall be adjusted for any stock dividends, stock splits, reclassification,
combinations or similar transactions in accordance with the terms of the
supplemental indenture or Board Resolutions setting forth the terms of the
Debentures of such series.
Whenever the conversion price is adjusted, the Company shall compute
the adjusted conversion price in accordance with terms of the applicable Board
Resolution or supplemental indenture and shall prepare an Officers' Certificate
setting forth the adjusted conversion price and showing in reasonable detail the
facts upon which such adjustment is based, and such certificate shall forthwith
be filed at each office or agency maintained for the purpose of conversion of
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Debentures of such series pursuant to Section 9.02 and, if different, with the
Trustee. The Company shall forthwith cause a notice setting forth the adjusted
conversion price to be mailed, first class postage prepaid, to each Holder of
Debentures of such series at its address appearing on the Debenture Register and
to any conversion agent other than the Trustee.
SECTION 12.05. RESERVATION OF SHARES OF COMMON STOCK. The Company shall
at all times reserve and keep available, free from preemptive rights, out of its
authorized but unissued Common Stock or treasury shares, for the purpose of
effecting the conversion of Debentures, the full number of shares of Common
Stock of the Company then issuable upon the conversion of all outstanding
Debentures of any series that has conversion rights.
SECTION 12.06. PAYMENT OF CERTAIN TAXES UPON CONVERSION. The Company
will pay any and all taxes that may be payable in respect of the issue or
delivery of shares of its Common Stock on conversion of Debentures pursuant
hereto. The Company shall not, however, be required to pay any tax that may be
payable in respect of any transfer involved in the issue and delivery of shares
of its Common Stock in a name other than that of the Holder of the Debenture or
Debentures to be converted, and no such issue or delivery shall be made unless
and until the person requesting such issue has paid to the Company the amount of
any such tax, or has established, to the satisfaction of the Company, that such
tax has been paid.
SECTION 12.07. NONASSESSABILITY. The Company covenants that all shares
of Common Stock that may be issued upon conversion of Debentures will upon issue
in accordance with the terms hereof be duly and validly issued and fully paid
and nonassessable.
SECTION 12.08. EFFECT OF CONSOLIDATION OR MERGER ON CONVERSION
PRIVILEGE. With respect to Debentures of any series, in case of any
consolidation of the Company with, or merger of the Company into or with any
other Person, or in case of any sale of all or substantially all of the assets
of the Company or any other similar event, the conversion privilege shall be
modified in accordance with the terms of the supplemental indenture or Board
Resolutions setting forth the terms of the Debentures of such series.
SECTION 12.09. DUTIES OF TRUSTEE REGARDING CONVERSION. Neither the
Trustee nor any conversion agent shall at any time be under any duty or
responsibility to any Holder of Debentures of any series that is convertible
into Common Stock to determine whether any facts exist that may require any
adjustment of the conversion price, or with respect to the nature or extent of
any such adjustment when made, or with respect to the method employed, whether
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herein or in any supplemental indenture (or whether a supplemental indenture
need be entered into), any resolutions of the Board of Directors or written
instrument executed by one or more officers of the Company provided to be
employed in making the same. Neither the Trustee nor any conversion agent shall
be accountable with respect to the validity or value (or the kind or amount) of
any shares of Common Stock, or of any securities or property, which may at any
time be issued or delivered upon the conversion of any Debentures and neither
the Trustee nor any conversion agent makes any representation with respect
thereto. Neither the Trustee nor any conversion agent shall be responsible for
any failure of the Company to issue, transfer or deliver any shares of Common
Stock or stock certificates or other securities or property upon the surrender
of any Debenture for the purpose of conversion or to comply with any of the
covenants of the Company contained in this Article 12 or in the applicable
supplemental indenture, resolutions of the Board of Directors or written
instrument executed by one or more duly authorized officers of the Company. All
Debentures delivered for conversion shall be delivered to the Trustee to be
canceled by or at the direction of the Trustee, which shall dispose of the same
as provided in Section 2.08.
SECTION 12.10. REPAYMENT OF CERTAIN FUNDS UPON CONVERSION. Any funds
that at any time shall have been deposited by the Company or on its behalf with
the Trustee or any other paying agent for the purpose of paying the principal
of, and premium, if any, and interest, if any, on any of the Debentures
(including funds deposited for the sinking fund referred to in Article 2 hereof)
and that shall not be required for such purposes because of the conversion of
such Debentures as provided in this Article 12 shall after such conversion be
repaid to the Company by the Trustee upon the Company's written request, subject
to Section 2.03 hereof.
ARTICLE 13
SUBORDINATION OF DEBENTURES
SECTION 13.01. DEBENTURES SUBORDINATE TO SENIOR INDEBTEDNESS. The
Company covenants and agrees, and each Holder of a Debenture, by the Holder's
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article, the indebtedness represented
by the Debentures and the payment of the principal of (and premium, if any) and
interest on each and all of the Debentures are hereby expressly made subordinate
and junior in right of payment to the prior payment in full of all Senior
Indebtedness of the Company, whether outstanding at the date of this Indenture
or thereafter incurred. No provision of this Article shall prevent the
occurrence of any default or Event of Default hereunder.
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SECTION 13.02. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC. In the
event of (i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relating
to the Company, its creditors or its property, (ii) any proceeding for the
liquidation, dissolution or other winding up of the Company, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
(iii) any assignment by the Company for the benefit of its creditors or (iv) any
other marshalling of the assets of the Company, all Senior Indebtedness shall
first be paid in full before any payment or distribution, whether in cash,
securities or other property, shall be made by the Company on account of the
Debentures. Any payment or distribution, whether in cash, securities or other
property (other than securities of the Company or any other corporation provided
for by a plan of reorganization or readjustment, the payment of which is
subordinate, at least to the extent provided in the subordination provisions of
the Indenture with respect to the indebtedness evidenced by the Debentures, to
the payment of all Senior Indebtedness at the time outstanding and to any
securities issued in respect thereof under any such plan of reorganization or
readjustment), which would otherwise (but for such subordination provisions) be
payable or deliverable in respect of the Debentures shall be paid or delivered
directly to the holders of Senior Indebtedness in accordance with the priorities
then existing among such holders until all Senior Indebtedness shall have been
paid in full. No present or future holder of any Senior Indebtedness shall be
prejudiced in the right to enforce subordination of the Debentures by any act or
failure to act on the part of the Company.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Trustee before all Senior Indebtedness of the Company is paid in full, or
provision is made for such payment in money in accordance with its terms, such
payment or distribution shall be held in trust for the benefit of and shall be
paid over or delivered to the holders of such Senior Indebtedness or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, and their respective interests may appear, as calculated
by the Company, for application to the payment of all Senior Indebtedness of the
Company, as the case may be, remaining unpaid to the extent necessary to pay
such Senior Indebtedness in full in money in accordance with its terms, after
giving effect to any concurrent payment or distribution to or for the benefit of
the holders of such Senior Indebtedness.
The consolidation of the Company with, or the merger of the Company
into, another Person or the liquidation or dissolution of the Company following
the conveyance or transfer of its properties and assets substantially as an
entirety
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to another Person upon the terms and conditions set forth in Article 7 shall not
be deemed a dissolution, winding up, liquidation, reorganization, assignment for
the benefit of creditors or marshaling of assets and liabilities of the Company
for the purposes of this Section if the Person formed by such consolidation or
into which the Company is merged or the Person that acquires by conveyance or
transfer such properties and assets substantially as an entirety, as the case
may be, shall, as a part of such consolidation, merger, conveyance or transfer,
comply with the conditions set forth in Article 7.
SECTION 13.03. NO PAYMENT WHEN SENIOR INDEBTEDNESS IN DEFAULT. In the
event that (i) the Company shall default in the payment of any principal, or
premium, if any, or interest on any Senior Indebtedness when the same becomes
due and payable, whether at maturity or at a date fixed for prepayment or
declaration or otherwise or (ii) an event of default occurs with respect to any
Senior Indebtedness permitting the holders thereof to accelerate the maturity
thereof and written notice describing such event of default is given to the
Company by the holders of Senior Indebtedness, then unless and until such
default in payment and event of default shall have been cured or waived or shall
have ceased to exist, no direct or indirect payment (in cash, property,
securities, by set-off or otherwise) shall be made or agreed to be made on
account of the Debentures or any interest thereon or in respect of any
repayment, redemption, retirement, purchase or other acquisition of the
Debentures.
In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee when such payment is prohibited by the preceding
paragraph of this Section 13.03 such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior
Indebtedness or their respective representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior Indebtedness may have
been issued, as their respective interests may appear, but only to the extent
that the holders of the Senior Indebtedness (or their representative or
representatives or a trustee) notify the Trustee in writing within 90 days of
such payment of the amounts then due and owing on the Senior Indebtedness and
only the amounts specified in such notice to the Trustee shall be paid to the
holders of Senior Indebtedness.
SECTION 13.04. PAYMENT PERMITTED IN CERTAIN SITUATIONS. Nothing
contained in this Article or elsewhere in this Indenture or in any of the
Debentures shall prevent (a) the Company, at any time except during the pendency
of any dissolution, winding-up, liquidation or reorganization of the Company,
whether voluntary or involuntary or any bankruptcy, insolvency, receivership or
other proceedings of the Company referred to in Section 13.02 or under the
conditions described in Section 13.03, from making payments at any time of
principal of or premium, if any, or interest on the Debentures, or (b) the
application by the
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Trustee of any money deposited with it hereunder to the payment of or on account
of the principal of, or premium, if any, or interest on the Debentures or the
retention of such payment by the Holders, if, at the time of such application by
the Trustee, it did not have knowledge that such payment would have been
prohibited by the provisions of this Article.
SECTION 13.05. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS.
Senior Indebtedness shall not be deemed to have been paid in full unless the
holders thereof shall have received cash, securities or other property, equal to
the amount of such Senior Indebtedness then outstanding. Subject to the payment
in full of all Senior Indebtedness, the rights of the Holders of Debentures
shall be subrogated to the rights of any holders of Senior Indebtedness to
receive any further payments or distributions applicable to the Senior
Indebtedness until the principal of (and premium, if any) and interest on the
Debentures shall be paid in full, by reason of such subrogation, of cash,
property or securities which would be paid or distributed to the holders of
Senior Indebtedness, shall, as among the Company and its creditors other than
holders of Senior Indebtedness, on the one hand, and the Holders of Debentures,
on the other, be deemed to be a payment or distribution by the Company to or on
account of the Senior Indebtedness and not on account of the Convertible
Debentures.
SECTION 13.06. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. The
provisions of this Article are and are intended solely for the purpose of
defining the relative rights of the Holders of Debentures on the one hand and
the holders of Senior Indebtedness on the other hand. Nothing contained in this
Article or elsewhere in this Indenture or in the Debentures is intended to or
shall (a) impair, as among the Company, its creditors other than holders of
Senior Indebtedness and the Holders of Debentures, the obligation of the
Company, which is absolute and unconditional (and which, subject to the rights
under this Article of the holders of Senior Indebtedness, is intended to rank
equally with all other general obligations of the Company), to pay to the
Holders of Debentures the principal of (and premium, if any) and interest on the
Debentures as and when the same shall become due and payable in accordance with
their terms; or (b) affect the relative rights against the Company of the
Holders of Debentures and creditors of the Company, as the case may be, other
than the holders of Senior Indebtedness; or (c) prevent the Trustee or the
Holder of any Debenture from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article of the holders of Senior Indebtedness to receive cash,
property and securities otherwise payable or deliverable to the Trustee or such
Holder.
SECTION 13.07. TRUSTEE TO EFFECTUATE SUBORDINATION. Each Holder of a
Debenture by such Holder's acceptance thereof authorizes and directs the Trustee
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on such Holder's behalf to take such action as may be necessary or appropriate
to effectuate the subordination provided in this Article and appoints the
Trustee such Holder's attorney-in-fact for any and all such purposes.
SECTION 13.08. NO WAIVER OF SUBORDINATION PROVISIONS. No right of any
present or future holder of any Senior Indebtedness to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act or failure to
act, in good faith, by any such holder, or by any noncompliance by the Company
with the terms, provisions and covenants of this Indenture, regardless of any
knowledge thereof any such holder may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Debentures, without incurring responsibility to the Holders of Debentures and
without impairing or releasing the subordination provided in this Article or the
obligations hereunder of the Holders of Debentures to the holders of Senior
Indebtedness do any one or more of the following: (a) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness or otherwise amend or supplement in any manner Senior Indebtedness
or any instrument evidencing the same or any agreement under which Senior
Indebtedness is outstanding; (b) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing Senior Indebtedness; (c)
release any Person liable in any manner for the collection of Senior
Indebtedness; and (d) exercise or refrain from exercising any rights against the
Company and any other Person.
SECTION 13.09. NOTICE TO TRUSTEE. The Company shall give prompt written
notice to a Responsible Officer of the Trustee of any fact known to the Company
that would prohibit the making of any payment to or by the Trustee in respect of
the Debentures pursuant to the provisions of this Article. Notwithstanding the
provisions of this Article or any other provision of this Indenture, the Trustee
shall not be charged with knowledge of the existence of any facts that would
prohibit the making of any payment to or by the Trustee in respect of the
Debentures pursuant to the provisions of this Article, unless and until a
Responsible Officer of the Trustee shall have received written notice thereof
from the Company or a holder or holders of Senior Indebtedness or from any
trustee therefor; and, prior to the receipt of any such written notice, the
Trustee, subject to the provisions of Section 5.02, shall be entitled in all
respects to assume that no such facts exist; PROVIDED, that if the Trustee shall
have not received the notice provided for in this Section at least two Business
Days prior to the date upon which by the terms hereof any money may become
payable for any
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purpose (including, without limitation, the payment of the principal of (or
premium, if any) or interest on any Debentures, then, anything herein contained
to the contrary notwithstanding, the Trustee shall have full power and authority
to receive such money and to apply the same to the purposes for which they were
received, and shall not be affected by any notice to the contrary that may be
received by it within two Business Days prior to such date.
Subject to the provisions of Section 5.02, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee
therefor) to establish that such notice has been given by a holder of Senior
Indebtedness (or a trustee therefor). In the event that the Trustee determines
in good faith that further evidence is required with respect to the right of any
Person as a holder of Senior Indebtedness to participate in any payment or
distribution pursuant to this Article, the Trustee may request such Person to
furnish evidence to the reasonable satisfaction of the Trustee as to the amount
of Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article, and if such evidence
is not furnished, the Trustee may defer any payment to such Person pending
judicial determination as to the right of such Person to receive such payment.
SECTION 13.10. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING
AGENT. Upon any payment or distribution of assets of the Company referred to in
this Article, the Trustee, subject to the provisions of Section 5.02, and the
Holders of Debentures shall be entitled to conclusively rely upon any order or
decree entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Debentures, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other indebtedness of the
Company, as the case may be, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article.
SECTION 13.11. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR
INDEBTEDNESS. With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article, and no implied covenants or
obligations with respect to the holders of such Senior Indebtedness shall be
read into the Indenture against the Trustee. Except with respect to Section
13.03, the Trustee
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shall not be deemed to owe any fiduciary duty to the holders of Senior
Indebtedness and shall not be liable to any such holders or creditors if it
shall in good faith pay over or distribute to Holders of Debentures or to the
Company or to any other Person cash, property or securities to which any holders
of Senior Indebtedness shall be entitled by virtue of this Article or otherwise.
SECTION 13.12. RIGHTS OF TRUSTEE AS HOLDER OF SENIOR INDEBTEDNESS,
PRESERVATION OF TRUSTEE'S RIGHTS. The Trustee in its individual capacity shall
be entitled to all the rights set forth in this Article with respect to any
Senior Indebtedness that may at any time be held by it, to the same extent as
any other holder of Senior Indebtedness and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder.
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 5.06.
SECTION 13.13. ARTICLE APPLICABLE TO PAYING AGENTS. In case at any time
any Paying Agent other than the Trustee shall have been appointed by the Company
and be then acting hereunder, the term "TRUSTEE" as used in this Article shall
in such case (unless the context otherwise requires) be construed as extending
to and including such Paying Agent within its meaning as fully for all intents
and purposes as if such Paying Agent were named in this Article in addition to
or in place of the Trustee; PROVIDED, that this Section 13.13 shall not apply to
the Company or any Affiliate of the Company if it or such Affiliate acts as
Paying Agent.
SECTION 13.14. CERTAIN CONVERSIONS DEEMED PAYMENT. For the purposes of
this Article only, (a) the issuance and delivery of junior securities (or cash
paid in lieu of fractional shares) upon conversion of Debentures in accordance
with Article 12, or pursuant to the terms set forth in an Officers' Certificate
or established in one or more indentures supplemental hereto in accordance with
Section 2.01, shall not be deemed to constitute a payment or distribution on
account of the principal of or premium or interest on Debentures or on account
of the purchase or other acquisition of Debentures, and (b) the payment,
issuance or delivery of cash, property or securities (other than junior
securities and cash paid in lieu of fractional shares) upon conversion of a
Debenture shall be deemed to constitute payment on account of the principal of
such Debenture. For the purposes of this Section, the term "junior securities"
means (i) shares of any stock of any class of the Company and (ii) securities of
the Company that are subordinated in right of payment to all Senior Indebtedness
that may be outstanding at the time of issuance or delivery of such securities
to substantially the same extent as, or to a greater extent than, the Debentures
are so subordinated as provided in this Article. Nothing contained in this
Article or elsewhere in this
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Indenture or in the Debentures is intended to or shall impair, as among the
Company, its creditors other than holders of Senior Indebtedness and the Holders
of Debentures, the right, which is absolute and unconditional, of the Holder of
any Debenture to convert such Debenture in accordance with Article 12.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.
SERVICO, INC.
By: /s/ Charles M. Diaz
-------------------------------------
Name: Charles M. Diaz
Title: Vice President and Secretary
WILMINGTON TRUST COMPANY, AS TRUSTEE
By: /s/ W. Christopher Sponenberg
-------------------------------------
Name: W. Christopher Sponenberg
Title: Senior Financial Services Officer
LODGIAN, INC.
By: /s/ Charles M. Diaz
--------------------------------------
Name: Charles M. Diaz
Title: Vice President and Secretary
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<PAGE> 1
Exhibit 10.2
SERVICO, INC.
As Issuer,
LODGIAN, INC.
and
WILMINGTON TRUST COMPANY
As Trustee
7% Convertible Junior Subordinated Debentures Due 2010
First Supplemental Indenture
Dated as of June 17, 1998
<PAGE> 2
TABLE OF CONTENTS
----------------------
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE 1
DEFINITIONS
SECTION 1.01. DEFINITION OF TERMS..............................................................2
ARTICLE 2
GENERAL TERMS AND CONDITIONS OF THE CONVERTIBLE DEBENTURES
SECTION 2.01. DESIGNATION AND PRINCIPAL AMOUNT................................................11
SECTION 2.02. MATURITY........................................................................12
SECTION 2.03. FORM AND PAYMENT................................................................12
SECTION 2.04. GLOBAL DEBENTURE................................................................12
SECTION 2.05. INTEREST........................................................................16
ARTICLE 3
REDEMPTION OF THE CONVERTIBLE DEBENTURES
SECTION 3.01. TRUST SPECIAL EVENT REDEMPTION..................................................17
SECTION 3.02. OPTIONAL REDEMPTION.............................................................17
SECTION 3.03. DEPOSIT OF REDEMPTION PRICE; PAYMENT OF INTEREST ON
CONVERTIBLE DEBENTURES TO BE REDEEMED...........................................19
SECTION 3.04. REDEMPTION OF LESS THAN ALL CONVERTIBLE DEBENTURES..............................19
SECTION 3.05. NOTICE OF REDEMPTION............................................................20
SECTION 3.06. NO SINKING FUND.................................................................20
ARTICLE 4
OPTIONAL REPURCHASE
SECTION 4.01. REPURCHASE OF CONVERTIBLE DEBENTURES UPON NON-
COMPLETION OF MERGER............................................................21
ARTICLE 5
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 5.01. EXTENSION OF INTEREST PAYMENT PERIOD............................................24
SECTION 5.02. NOTICE OF EXTENSION.............................................................25
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE 6
EXPENSES
SECTION 6.01. PAYMENT OF EXPENSES.............................................................26
SECTION 6.02. PAYMENT UPON RESIGNATION OR REMOVAL.............................................27
ARTICLE 7
COVENANTS
SECTION 7.01. COVENANTS AS TO THE TRUST.......................................................27
ARTICLE 8
CONVERSION OF CONVERTIBLE DEBENTURES
SECTION 8.01. CONVERSION RIGHTS...............................................................28
SECTION 8.02. CONVERSION PROCEDURES...........................................................28
SECTION 8.03. CERTAIN CONVERSION PRICE ADJUSTMENTS............................................31
SECTION 8.04. MERGER, CONSOLIDATION, OR SALE OF ASSETS........................................39
SECTION 8.05. SPECIAL PROVISIONS REGARDING ADJUSTMENT OF CONVERSION
PRICE OR OTHER PROVISIONS.......................................................40
SECTION 8.06. CERTAIN ADDITIONAL RIGHTS.......................................................41
SECTION 8.07. TRUSTEE NOT RESPONSIBLE FOR DETERMINING CONVERSION
PRICE OR ADJUSTMENTS............................................................42
SECTION 8.08. DEFEASANCE......................................................................42
ARTICLE 9
EVENTS OF DEFAULT
SECTION 9.01. EVENTS OF DEFAULT...............................................................42
ARTICLE 10
FORM OF CONVERTIBLE DEBENTURE
SECTION 10.01. FORM OF CONVERTIBLE DEBENTURE..................................................43
ARTICLE 11
ORIGINAL ISSUE OF CONVERTIBLE DEBENTURES
SECTION 11.01. ORIGINAL ISSUE OF CONVERTIBLE DEBENTURES.......................................43
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. RATIFICATION OF BASE INDENTURE; SUPPLEMENTAL INDENTURE
CONTROLS.......................................................................43
SECTION 12.02. TRUSTEE NOT RESPONSIBLE FOR RECITALS...........................................44
SECTION 12.03. GOVERNING LAW..................................................................44
SECTION 12.04. SEPARABILITY...................................................................44
SECTION 12.05. COUNTERPARTS...................................................................44
SECTION 12.06. MERGER.........................................................................44
ANNEX I
FORM OF CONVERTIBLE DEBENTURE........................................................A-1
FORM OF FACE OF CONVERTIBLE DEBENTURE................................................A-1
FORM OF CERTIFICATE OF AUTHENTICATION................................................A-7
FORM OF REVERSE OF DEBENTURE.........................................................A-8
FORM OF ELECTION TO CONVERT.........................................................A-15
ASSIGNMENT FORM.....................................................................A-16
FORM OF SCHEDULE FOR ENDORSEMENTS ON
GLOBAL DEBENTURES TO REFLECT CHANGES
IN PRINCIPAL AMOUNT.................................................................A-19
</TABLE>
iii
<PAGE> 5
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of June 17, 1998 (the
"SUPPLEMENTAL INDENTURE"), is between SERVICO, INC., a Florida corporation (the
"COMPANY"), LODGIAN, INC., a Delaware corporation ("LODGIAN") and WILMINGTON
TRUST COMPANY, as trustee (the "TRUSTEE").
RECITALS
WHEREAS, the Company has executed and delivered the Base Indenture (as
defined herein) to the Trustee to provide for the issuance of the Company's
Securities from time to time in one or more series as might be determined by the
Company under the Base Indenture, in an unlimited aggregate principal amount as
may be authenticated and delivered as provided in the Base Indenture;
WHEREAS, pursuant to the terms of the Base Indenture, the Company
desires to provide for the establishment of a new series of its Securities to be
known as its 7% Convertible Junior Subordinated Debentures Due 2010 (the
"CONVERTIBLE DEBENTURES"), the form and substance of such Convertible
Debentures, and the terms, provisions and conditions thereof to be set forth as
provided in the Base Indenture and this Supplemental Indenture;
WHEREAS, Lodgian Capital Trust I, a Delaware statutory business trust
(the "TRUST"), intends to issue up to $175,000,000 aggregate liquidation amount
of its 7% Convertible Redeemable Equity Structured Trust Securities ("CRESTS")
(and may issue up to an additional $26,250,000 aggregate liquidation amount of
CRESTS solely to cover over-allotments) and $5,412,400 aggregate liquidation
amount of common securities, having a liquidation amount of $50 per security and
designated the 7% Common Securities of the Trust (and may issue up to an
additional $811,850 aggregate liquidation amount of Common Securities if
additional CRESTS are issued) (the "TRUST COMMON SECURITIES" and, together with
the CRESTS, the "TRUST SECURITIES"), representing undivided beneficial ownership
interests in the assets of the Trust; and
WHEREAS, the Trust proposes to purchase Convertible Debentures in an
aggregate principal amount equal to the aggregate liquidation amount of the
Trust Securities issued;
NOW, THEREFORE, in consideration of the purchase of the Convertible
Debentures by the Trust, and for the purpose of setting forth, as provided in
the Base Indenture, the form and substance of the Convertible Debentures and the
terms, provisions and conditions thereof, the Company covenants and agrees with
the Trustee as follows:
<PAGE> 6
ARTICLE 1
DEFINITIONS
SECTION 1.01. DEFINITION OF TERMS. For all purposes of this
Supplemental Indenture, except as otherwise expressly provided or unless the
context otherwise requires:
(a) unless otherwise defined herein, the capitalized terms used herein
that are defined in the Base Indenture have the same meanings when used in this
Supplemental Indenture;
(b) the terms defined in this Article 1 have the meanings assigned to
them in this Article 1 and include the plural as well as the singular;
(c) all other terms used herein which are defined in the Trust
Indenture Act. either directly or by reference therein, have the meanings
assigned to them therein;
(d) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles in the United States of America, and, except as otherwise herein
expressly provided, the term "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" with
respect to any computation required or permitted hereunder shall mean such
accounting principles as are generally accepted in the United States of America
at the date of such computation;
(e) a reference to a Section or Article (or subdivision thereof) or
the Recitals is to a Section or Article (or subdivision thereof) or the Recitals
of this Supplemental Indenture;
(f) the words "HEREIN", "HEREOF" and "HEREUNDER" and other words of
similar import refer to this Supplemental Indenture as a whole and not to any
particular Article, Section or other subdivision;
(g) headings are for convenience of reference only and do not affect
interpretation;
(h) the following terms have the meanings given to them in the
Declaration: (i) "AUTHORIZED NEWSPAPER"; (ii) "BOARD OF DIRECTORS"; (iii)
"BUSINESS DAY"; (iv) "CLOSING DATE"; (v) "COMMON STOCK"; (vi) "DATE OF
NON-COMPLETION"; (vii) "DELAWARE TRUSTEE"; (viii) "DISTRIBUTION"; (ix)
"GUARANTEE"; (x) "INVESTMENT COMPANY EVENT"; (xi) "MERGER"; (xii) "MERGER
AGREEMENT"; (xiii) "NASDAQ"; (xiv) "NO RECOGNITION OPINION"; (xv)
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<PAGE> 7
"PROPERTY TRUSTEE"; (xvi) "REDEMPTION TAX OPINION"; (xvii) "RESTRICTED
SECURITY"; and (xviii) "TAX EVENT";
(i) the terms defined as follows shall have the meanings assigned to
them as follows:
"ADJUSTED INTEREST RATE," with respect to any Reset Transaction, means
the rate per annum that is the arithmetic average of the rates quoted by two
Reference Dealers selected by the Company or its successor as the rate that the
Convertible Debentures should bear so that the fair market value, expressed in
dollars, of a Convertible Debenture immediately after the later of (i) public
announcement of such Reset Transaction and (ii) public announcement of a change
in dividend policy in connection with such Reset Transaction, but without giving
effect to the provisions of Section 8.03 applicable to such Reset Transaction,
shall equal the greater of (i) the average Trading Price of CRESTS or, if the
Convertible Debentures have been distributed in liquidation of the Trust, a
Convertible Debenture for the 20 Trading Days immediately preceding the date of
public announcement of such Reset Transaction and (ii) the sum of (A) the fair
market value of a Convertible Debenture immediately after such public
announcement and (B) the amount of the decrease, if any, in the fair market
value of a Convertible Debenture solely attributable to the increase in the
Dividend Yield (excluding the effect of any change in the Trading Price of the
common stock into which the Convertible Debentures are convertible that is
attributable solely to the increase in the Dividend Yield); PROVIDED that the
Adjusted Interest Rate shall not be less than 7% per annum.
"ADJUSTMENT TRIGGER DATE" has the meaning specified in Section
8.03(A)(III).
"ADMINISTRATIVE ACTION" means an official administrative pronouncement,
ruling, regulatory procedure, notice or announcement, including any notice or
announcement of intent to adopt such procedures or regulations.
"APPLICABLE PRICE" means (i) in the event of a Non-Stock Fundamental
Change in which the holders of the Common Stock receive only cash, the amount of
cash received by a holder of one share of Common Stock and (ii) in the event of
any other Fundamental Change, the average of the daily Closing Prices of one
share of Common Stock during the 10 Trading Days immediately prior to the record
date for the determination of the holders of Common Stock entitled to receive
cash, securities, property or other assets in connection with such Fundamental
Change or, if there is no such record date, prior to the date upon which the
holders of the Common Stock shall have the right to receive such cash,
securities, property or other assets, but the adjustment shall be based upon the
3
<PAGE> 8
consideration that the holders of Common Stock received in the transaction or
event as a result of which more than 50% of the Common Stock shall have been
exchanged for, converted into or acquired for, or shall constitute solely the
right to receive, such cash, securities, property or other assets.
"APPLICABLE RATE" means (i) from the Closing Date to but not including
the effective date of the first Reset Transaction, if any, 7% per annum and (ii)
from the effective date of any Reset Transaction (the "APPLICABLE RESET
TRANSACTION") to but not including the earlier of (x) the effective date of any
succeeding Reset Transaction or (y) the Maturity Date, the Adjusted Interest
Rate in respect of the Applicable Reset Transaction.
"BASE INDENTURE" means that Indenture dated as of even date hereof
between the Company, Lodgian and the Trustee, as it may be amended, restated,
supplemented and/or modified from time to time.
"BUSINESS DAY" means any day other than a Saturday, Sunday, or any
other day on which banking institutions in New York, New York or Wilmington,
Delaware are permitted or required by any applicable law to close.
"CERTIFICATE OF INCORPORATION" means the Company's Articles of
Incorporation, as amended from time to time.
"CLOSING PRICE" of any class of common stock of any Person on any date
of determination means (i) the closing sale price (or, if no closing price is
reported, the last reported sale price) of such common stock (regular way) on
the NYSE on such date, (ii) if such common stock is not listed for trading on
the NYSE on any such date, as reported in the composite transactions for the
principal United States securities exchange on which such common stock is so
listed, (iii) if such common stock is not so listed on a United States national
or regional securities exchange, as reported by the NASDAQ Stock Market, (iv) if
such common stock is not so reported, the last quoted bid price for such common
stock in the over-the-counter market as reported by the National Quotation
Bureau or similar organization, (v) if such common stock is not so quoted, the
average of the mid-point of the last bid and ask prices for such common stock
from at least three nationally recognized investment banking firms selected by
the board of directors of such Person or (vi) if not so available in such
manner, as otherwise determined in good faith by the Board.
"COMMON SECURITY CERTIFICATE" means a definitive certificate in fully
registered form representing a Trust Common Security substantially in the form
of Exhibit B to the Declaration.
4
<PAGE> 9
"COMMON STOCK FUNDAMENTAL CHANGE" means any Fundamental Change in which
more than 50% of the value (as determined in good faith by the board of
directors of the Company) of the consideration received by holders of Common
Stock consists of common stock that, for the 10 Trading Days immediately prior
to such Fundamental Change, has been admitted for listing or admitted for
listing subject to notice of issuance on a national securities exchange or
quoted on The Nasdaq National Market System; PROVIDED, that a Fundamental Change
shall not be a Common Stock Fundamental Change unless either (i) the Company
continues to exist after the occurrence of such Fundamental Change and the
outstanding Convertible Debentures continue to exist as outstanding Convertible
Debentures or (ii) the outstanding Convertible Debentures continue to exist as
Convertible Debentures and are convertible into shares of the common stock of
the corporation succeeding to the business of the Company. The Merger shall be
deemed a Common Stock Fundamental Change.
"COMPANY" has the meaning specified in the first paragraph hereof.
"COMPOUNDED INTEREST" has the meaning specified in Section 5.01.
"CONVERSION AGENT" means the Property Trustee acting as Conversion
Agent for a Holder.
"CONVERSION DATE" has the meaning specified in Section 8.02(B).
"CONVERSION NOTICE" has the meaning specified in Section 8.02(A).
"CONVERSION PRICE" means $21.42, as of the date of this Supplemental
Indenture, as adjusted from time to time as set forth in Article 8.
"CONVERTIBLE DEBENTURES" has the meaning specified in the Recitals.
"CRESTS" has the meaning specified in the Recitals.
"CRESTS CERTIFICATE" means a certificate representing CRESTS
substantially in the form of Exhibit A to the Declaration.
"CURRENT MARKET PRICE" shall mean, with respect to any class of common
stock of the Company, the average of the daily Closing Prices of a share of such
common stock during the five consecutive Trading Days selected by the Company
commencing not more than 20 Trading Days before, and ending not later than, the
date in question; provided, however, that (i) if the "ex" date for any event
(other than the issuance or distribution requiring such computation) that
requires an adjustment to the Conversion Price pursuant to Sections 8.03(A)(II)
through
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<PAGE> 10
8.03(A)(V) occurs on or after the 20th Trading Day prior to the day in question
and prior to the "ex" date for the issuance or distribution requiring such
computation, the Closing Price for each Trading Day prior to the "ex" date for
such other event shall be adjusted by multiplying such Closing Price by the same
fraction by which the Conversion Price is so required to be adjusted as a result
of such other event, (ii) if the "ex" date for any event (other than the
issuance or distribution requiring such computation) that requires an adjustment
to the Conversion Price pursuant to Sections 8.03(A)(II) through 8.03(A)(V)
occurs on or after the "ex" date for the issuance or distribution requiring such
computation and on or prior to the day in question, the Closing Price for each
Trading Day on and after the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the reciprocal of the fraction by which the
Conversion Price is so required to be adjusted as a result of such other event,
and (iii) if the "ex" date for the issuance or distribution requiring such
computation is on or prior to the day in question, after taking into account any
adjustment required pursuant to clause (ii) of this proviso, the Closing Price
for each Trading Day on or after such "ex" date shall be adjusted by adding
thereto the amount of any cash and the fair market value on the day in question
(as determined by the Board of Directors in a manner consistent with any
determination of such value for purposes of Section 8.03(A)(III) or 8.03(A)(IV))
of the evidences of indebtedness, shares of capital stock or assets being
distributed applicable to one share of the applicable class of common stock of
the Company as of the close of business on the day before such "ex" date. For
purposes of this definition, the term "ex" date, with respect to any class of
common stock of the Company, (i) when used with respect to any issuance or
distribution, means the first date on which such common stock trades regular way
on such exchange or in the relevant market from which the Closing Price was
obtained without the right to receive such issuance or distribution, (ii) when
used with respect to any subdivision or combination of shares of such common
stock, means the first date on which such common stock trades regular way on
such exchange or in such market after the time at which such subdivision or
combination becomes effective, and (iii) when used with respect to any tender or
exchange offer means the first date on which such common stock trades regular
way on such exchange or in such market after the expiration time of such tender
or exchange offer.
"DECLARATION" means the Amended and Restated Declaration of Trust of
the Trust, dated as of June 17, 1998, as it may be amended, restated,
supplemented and/or modified from time to time.
"DEFERRED INTEREST" has the meaning specified in Section 5.01.
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<PAGE> 11
"DEPOSITARY" means a clearing agency registered under the Securities
Exchange Act of 1934 that is designated as Depositary for the Convertible
Debentures.
"DISSOLUTION EVENT" means that, as a result of the occurrence and
continuation of a Trust Special Event, the Trust is to be dissolved in
accordance with the Declaration, and the Convertible Debentures held by the
Property Trustee are to be distributed to the holders of the Trust Securities
issued by the Trust PRO RATA in accordance with the Declaration.
"DIVIDEND YIELD," on any security for any period, means the dividends
paid or proposed to be paid pursuant to an announced dividend policy on such
security for such period divided by, if with respect to dividends paid on such
security, the average Closing Price of such security during such period and, if
with respect to dividends so proposed to be paid on such security, the Closing
Price of such security on the effective date of the related Reset Transaction.
"EXCESS PURCHASE PAYMENT" means the excess, if any, of (A) the
aggregate of the cash and the value (as determined by the Board of Directors) of
all other consideration paid by the Company or any of its Subsidiaries with
respect to the shares of the class of Common Stock acquired in a tender or
exchange offer, respectively, over (B) the product of the Current Market Price
per share of such common stock times the number of shares of such Common Stock
acquired in such tender or exchange offer.
"EXERCISE TRIGGER DATE" has the meaning specified in Section
8.03(A)(III).
"EXTENSION PERIOD" has the meaning specified in Section 5.01.
"FUNDAMENTAL CHANGE" means the occurrence of any transaction or event
or series of transactions or events pursuant to which all or substantially all
of the Common Stock shall be exchanged for, converted into, acquired for or
shall constitute solely the right to receive cash, securities, property or other
assets (whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise); PROVIDED, in the case of any such series of transactions or events,
for purposes of adjustment of the Conversion Price, such Fundamental Change
shall be deemed to have occurred when substantially all of the Common Stock
shall have been exchanged for, converted into or acquired for, or shall
constitute solely the right to receive, such cash, securities, property or other
assets.
"GLOBAL DEBENTURE" has the meaning specified in Section 2.04.
7
<PAGE> 12
"IDC" means Interactive Data Corporation.
"INTEREST PAYMENT DATE" has the meaning specified in Section 2.05.
"LODGIAN" has the meaning specified in the first paragraph hereof.
"MATURITY DATE" means the date on which the Convertible Debentures
mature and on which the principal shall be due and payable, together with any
accrued and unpaid interest thereon, including Compounded Interest, if any.
"MINISTERIAL ACTION" has the meaning specified in Section 3.01.
"90-DAY PERIOD" has the meaning specified in Section 3.01.
"NON-COMPLETION OFFER" has the meaning specified in Section 4.01.
"NON-COMPLETION PAYMENT" has the meaning specified in Section 4.01.
"NON-COMPLETION PAYMENT DATE" has the meaning specified in Section
4.01.
"NON-COMPLETION PAYMENT NOTICE" has the meaning specified in Section
4.01.
"NON-STOCK FUNDAMENTAL CHANGE" means any Fundamental Change other than
a Common Stock Fundamental Change.
"NYSE" means the New York Stock Exchange, Inc. or any successor
thereto.
"OID" means original issue discount.
"PAYING AGENT" means any Paying Agent with respect to the Convertible
Debentures under the Base Indenture.
"PRICE TRIGGER DATE" has the meaning specified in Section 8.03(A)(III).
"PURCHASE DATE" shall have the meaning specified in Section 8.03(A)(V).
"PURCHASE AGREEMENT" means the Purchase Agreement dated June 9, 1998,
among NationsBanc Montgomery Securities LLC, the Trust and the Company, as it
may be amended, restated, supplemented and/or modified from time to time.
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"PURCHASER STOCK PRICE" means, with respect to any Common Stock
Fundamental Change, the average of the daily Closing Prices for one share of the
common stock received by holders of Common Stock in such Common Stock
Fundamental Change during the 10 Trading Days immediately prior to the date
fixed for the determination of the holders of Common Stock entitled to receive
such common stock or, if there is no such date, prior to the date upon which the
holders of Common Stock shall have the right to receive such common stock.
"REDEMPTION PRICE" has the meaning specified in Section 3.02.
"REFERENCE DEALER" means a dealer engaged in the trading of convertible
securities.
"REFERENCE MARKET PRICE" initially means $11.22 and, in the event of
any adjustment to the Conversion Price other than as a result of a Fundamental
Change, the Reference Market Price shall also be adjusted so that the ratio of
the Reference Market Price to the Conversion Price after giving effect to any
such adjustment shall always be the same as the ratio of the initial Reference
Market Price to the initial Conversion Price of $21.42 per share.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated the date hereof, among the Company, Lodgian, NationsBanc
Montgomery Securities LLC and the Trust for the benefit of themselves and the
Holders, as the same may be amended from time to time in accordance with the
terms thereof.
"REGULAR RECORD DATE" has the meaning specified in Section 2.05(A).
"REGULAR TRUSTEE" means the Regular Trustee of the Trust.
"RESALE RESTRICTION TERMINATION DATE" has the meaning specified in
Section 2.04.
"RESET TRANSACTION" means (i) a merger, consolidation or statutory
share exchange to which the Person that is the issuer of the common stock into
which the Convertible Debentures are then convertible is a party, (ii) a sale of
all or substantially all assets of such Person, (iii) a recapitalization of such
common stock or a distribution described in Section 8.03(A)(III) or (iv) the
election by the Person that is the issuer of the common stock into which the
Convertible Debentures are then convertible to be a real estate investment trust
(as defined in Section 856 of the Internal Revenue Code of 1986, as amended),
after the effective date of which transaction or distribution or election
described in clauses (i) through (iv) above the Convertible Debentures are
convertible into shares of a
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Person (x) the common stock of which had a Dividend Yield for the four fiscal
quarters of such Person immediately preceding the public announcement thereof
which was, or (y) that announces a dividend policy prior to the effective date
thereof which policy, if implemented, would result in a Dividend Yield on such
common stock for the next four fiscal quarters of such Person which would be,
more than 250 basis points higher than the Dividend Yield on the common stock
into which the Convertible Debentures are convertible prior to such transaction,
distribution or election for the four fiscal quarters immediately preceding the
public announcement of such transaction or distribution or election.
"SECURITIES" has the meaning set forth in Section 8.03(A)(III).
"SPECIAL EVENT REDEMPTION PRICE" has the meaning specified in Section
3.01.
"STATED MATURITY" has the meaning specified in the Base Indenture.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation at
least a majority of whose outstanding Voting Stock shall at the time be owned,
directly or indirectly, by such Person or by one or more of its Subsidiaries or
by such Person and one or more of its Subsidiaries, (ii) any general
partnership, joint venture, business trust or similar entity, at least a
majority of whose outstanding partnership or similar interests shall at the time
be owned by such Person or by one or more of its Subsidiaries or by such Person
and one or more of its Subsidiaries and (iii) any limited partnership of which
such Person or any of its Subsidiaries is a general partner.
"SUPPLEMENTAL INDENTURE" has the meaning specified in the first
paragraph hereof.
"TRADING DAY" means, with respect to any class of common stock of any
Person, any day on which such common stock is traded on the NYSE, or if such
common stock is not listed or admitted to trading on the NYSE, on the principal
national securities exchange on which such common stock is listed or admitted,
or if not listed or admitted to trading on any national securities exchange, on
the NASDAQ Stock Market, or if such common stock is not quoted on the NASDAQ
Stock Market, in the applicable securities market in which such common stock is
traded.
"TRADING PRICE" of a security on any date of determination means (i)
the closing sale price (or, if no closing price is reported, the last reported
sale price) of a security (regular way) on the NYSE on such date, (ii) if such
security is not listed for trading on the NYSE on any such date, as reported in
the composite
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transactions for the principal United States securities exchange on which such
security is so listed, (iii) if such security is not so listed on a United
States national or regional securities exchange, as reported by the NASDAQ Stock
Market, (iv) if such security is not so reported, the price quoted by IDC for
such security or, if IDC is not quoting such price, a similar quotation service
selected by the Company, (v) if such security is not so quoted, the average of
the mid-point of the last bid and ask prices for such security from at least two
dealers recognized as market-makers for such security, or (vi) if such security
is not so quoted, the average of the last bid and ask prices for such security
from a Reference Dealer.
"TRUST" has the meaning specified in the first paragraph hereof.
"TRUST COMMON SECURITIES" has the meaning specified in the Recitals.
"TRUSTEE" has the meaning specified in the Recitals.
"TRUST SECURITIES" has the meaning specified in the Recitals.
"TRUST SPECIAL EVENT" means a Tax Event or an Investment Company
Event.
"VOTING STOCK", as applied to stock of any Person, means shares,
interests, participations or other equivalents in the equity interest (however
designated) in such Person having ordinary voting power for the election of a
majority of the directors (or the equivalent) of such Person, other than shares,
interests, participations or other equivalents having such power only by reason
of the occurrence of a contingency.
ARTICLE 2
GENERAL TERMS AND CONDITIONS OF THE CONVERTIBLE DEBENTURES
SECTION 2.01. DESIGNATION AND PRINCIPAL AMOUNT. There is hereby
authorized a series of Debentures designated the 7% Convertible Junior
Subordinated Debentures Due 2010, limited in aggregate principal amount to the
sum of (a) $180,412,400 and (b) such aggregate principal amount (which may not
exceed $207,474,300 aggregate principal amount) of Convertible Debentures as
shall be purchased by the Trust as a consequence of the exercise of an
over-allotment option in accordance with the terms of the Purchase Agreement,
except for Convertible Debentures authenticated and delivered upon registration
of transfer of, or in exchange for, or in lieu of, other Convertible Debentures
under the terms of this Supplemental Indenture and the Base Indenture, which
amount
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shall be as set forth in one or more Company Orders for the
authentication and delivery of Convertible Debentures pursuant to Section 2.04
of the Base Indenture.
SECTION 2.02. MATURITY. The Maturity Date is June 30, 2010.
SECTION 2.03. FORM AND PAYMENT. Except as provided in Section 2.04, the
Convertible Debentures shall be issued in fully registered certificated form
without Coupons with appropriate legends as set forth on Annex I hereto, in
denominations of $50 and integral multiples thereof. Principal, premium, if any,
and interest on the Convertible Debentures issued in certificated form shall be
payable, the transfer of such Convertible Debentures shall be registrable, and
such Convertible Debentures shall be exchangeable for Convertible Debentures
bearing identical terms and provisions, at the office or agency of the Trustee;
provided, however, that payment of interest may be made at the option of the
Company by check mailed to the Holder at such address as shall appear in the
Debenture Register. Notwithstanding the foregoing, so long as the Holder of any
Convertible Debentures is the Property Trustee, the payment of the principal of,
premium, if any, and interest (including Compounded Interest, if any) on such
Convertible Debentures held by the Property Trustee shall be made at such place
and to such account as may be designated by the Property Trustee.
SECTION 2.04. GLOBAL DEBENTURE. (a) So long as Convertible Debentures
are eligible for book-entry settlement with the Depositary, or unless otherwise
required by law, all Convertible Debentures that are so eligible shall be
represented by one or more global Convertible Debentures ("GLOBAL DEBENTURES").
The transfer and exchange of beneficial interests in any such Global Debenture
shall be effected through the Depositary in accordance with the Indenture and
the procedures of the Depositary therefor. If distributed to holders of CRESTS
in connection with the involuntary or voluntary dissolution, winding-up, or
liquidation of the Trust as a result of the occurrence of a Trust Special Event,
the Convertible Debentures shall be issued in the form of one or more global
certificates registered in the name of the Depositary or its nominee. If the
Convertible Debentures are so distributed to holders of CRESTS in liquidation of
such holders' interests in the Trust, the Depositary shall act as securities
depositary for the Convertible Debentures.
None of the Company, the Trust, the Property Trustee, any Paying Agent
and any other agent of the Company or the Trustee shall have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in a Global Debenture for such
Convertible Debentures or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
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Beneficial owners of a Convertible Debenture represented by a Global
Debenture shall not be entitled to have certificates registered in their names,
shall not receive or be entitled to receive physical delivery of certificates in
definitive form and shall not be considered Holders of such Convertible
Debenture.
(b) Each Global Debenture and Convertible Debentures not represented
by a Global Debenture that constitutes a Restricted Security shall bear the
following legend on the face thereof until two years after the later of the date
of original issue and the last date on which the Company or any affiliate of the
Company was the owner of such Convertible Debentures (or any predecessor
thereto) (the "RESALE RESTRICTION TERMINATION DATE"), unless otherwise agreed by
the Company and the Holder thereof:
THIS SECURITY, THE COMMON STOCK ISSUABLE UPON CONVERSION THEREOF, THE
GUARANTEE AND THE CRESTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAW. NEITHER THESE SECURITIES NOR ANY INTEREST OR PARTICIPATION IN
THESE SECURITIES MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT
TO, REGISTRATION.
THE HOLDER OF THESE SECURITIES BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITIES, PRIOR TO THE DATE
(THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH
THE COMPANY OR ANY "AFFILIATE" OF THE COMPANY WAS THE OWNER OF SUCH
SECURITIES (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE
COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT,
(C) FOR SO LONG AS SUCH SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT
THAT
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PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF
RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING SUCH SECURITIES FOR
ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED
INVESTOR, OR AS FIDUCIARY FOR THE ACCOUNT OF ONE OR MORE TRUSTS, EACH
OF WHICH IS AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH
(a) (7) OF RULE 501 UNDER THE SECURITIES ACT, FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (E) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT UPON THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO THE COMPANY,
SUBJECT IN EACH OF THE FOREGOING CASES, TO A CERTIFICATE OF TRANSFER IN
THE FORM APPEARING ON THE OTHER SIDE OF THESE SECURITIES BEING
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY. EACH
PURCHASER OR HOLDER OF THE SECURITY EVIDENCED HEREBY WILL BE DEEMED TO
HAVE REPRESENTED EITHER THAT (A) IT IS NOT AN EMPLOYEE BENEFIT PLAN
SUBJECT TO PART 4 OF SUBTITLE B OF TITLE 1 OF ERISA OR A PLAN DESCRIBED
IN SECTION 4975 OF THE CODE OR AN ENTITY WHOSE UNDERLYING ASSETS
INCLUDE THE ASSETS OF ANY SUCH ERISA PLAN OR OTHER PLAN OR (B) BY
REASON OF THE APPLICATION OF ONE OR MORE STATUTORY OR ADMINISTRATIVE
EXEMPTIONS FROM THE PROHIBITED TRANSACTION RULES OF SECTION 406 OF
ERISA AND SECTION 4975 OF THE CODE, ITS PURCHASE AND HOLDING OF CRESTS
WILL NOT CONSTITUTE, CAUSE OR RESULT IN THE OCCURRENCE OF A NON-EXEMPT
PROHIBITED TRANSACTION WITHIN THE MEANING OF SECTION 406 OF ERISA OR
SECTION 4975 OF THE CODE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST
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OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
THE HOLDER OF THESE SECURITIES BY ITS ACCEPTANCE HEREOF AGREES TO BE
BOUND BY THE PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT RELATING
TO THE SECURITIES.
(c) A Global Debenture may be transferred, in whole but not in part,
only to another nominee of the Depositary, or to a successor Depositary selected
or approved by the Company or to a nominee of such successor Depositary.
Any Convertible Debentures (or security issued in exchange or
substitution therefor) as to which such restrictions on transfer shall have
expired in accordance with their terms may, upon surrender of such Convertible
Debentures for exchange to the Trustee in accordance with the provisions of this
Section 2.04(B), be exchanged for new Convertible Debentures of like tenor and
aggregate liquidation amount, which shall not bear the restrictive legend
required by this Section 2.04(B).
Upon any sale or transfer of any Restricted Security (including any
interest in a Global Debenture) (i) that is effected pursuant to an effective
registration statement under the Securities Act or (ii) in connection with which
the Trustee receives certificates and other information (including an opinion of
counsel, if requested) reasonably acceptable to the Company and the Trustee to
the effect that such security shall no longer be subject to the resale
restrictions under federal and state securities laws, then (A) in the case of a
Restricted Security in definitive form the Trustee shall permit the holder
thereof to exchange such Restricted Security for a security that does not bear
the legend set forth in Section 2.04(B), and shall rescind any such restrictions
on transfer and (B) in the case of Restricted Securities represented by a Global
Debenture, such Convertible Debentures shall no longer be subject to the
restrictions contained in the legend set forth in Section 2.04(B) (but still
subject to the other provisions hereof). In addition, any Convertible Debentures
(or security issued in exchange or substitution therefor) as to which the
restrictions on transfer described in the legend set forth in Section 2.04(B)
have expired by their terms, may, upon surrender thereof (in accordance with
terms of this Indenture) together with such certifications and other information
(including an opinion of counsel having substantial experience in practice under
the Securities Act and otherwise reasonably acceptable to the Company, addressed
to the Company and the Trustee and in form acceptable to the Company, to the
effect that the transfer of such Restricted Security may be made in compliance
with Rule 144(k) or such successor provision) acceptable to the Company and the
Trustee as either of them may reasonably require, be
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exchanged for a new Convertible Debenture or Convertible Debentures of like
tenor and aggregate principal amount, which shall not bear the restrictive
legends set forth in Section 2.04(B).
SECTION 2.05. INTEREST. (a) Each Convertible Debenture shall bear
interest at the Applicable Rate per annum from and including the Closing Date
until the principal thereof becomes due and payable, and on any overdue
principal and (to the extent that payment of such interest is enforceable under
applicable law) on any overdue installment of interest at the Applicable Rate,
compounded quarterly, payable (subject to the provisions of Article 5) quarterly
in arrears on March 31, June 30, September 30 and December 31, of each year
(each, an "INTEREST PAYMENT DATE"), commencing September 30, 1998 to the Holder
of such Convertible Debenture, at the close of business on the record date for
such Interest Payment Date, which record date (the "REGULAR RECORD DATE"), (i)
shall be the close of business on the Business Day next preceding that Interest
Payment Date, in respect of (A) Convertible Debentures of which the Property
Trustee is the only Holder and the related CRESTS are in book-entry only form or
(B) a Global Debenture, and (ii) shall be any date selected by the Company but
in any event at least one Business Day before that Interest Payment Date in
respect of Convertible Debentures other than as set forth in (i).
(b) The amount of interest payable for any full quarterly interest
period shall be computed on the basis of a 360-day year of twelve 30-day months.
Except as provided in the following sentence, the amount of interest payable for
any period shorter than a full quarterly period for which interest is computed,
shall be computed on the basis of 30-day months and, for periods of less than a
month, on the basis of the actual number of days elapsed. In the event that any
date on which interest is payable on the Convertible Debentures is not a
Business Day, then payment of interest payable on such date shall be made on the
next succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
ARTICLE 3
REDEMPTION OF THE CONVERTIBLE DEBENTURES
SECTION 3.01. TRUST SPECIAL EVENT REDEMPTION. If a Trust Special Event
has occurred and is continuing and (a) the Company has received a Redemption Tax
Opinion or (b) the Regular Trustees have been informed by independent tax
counsel experienced in such matters that, for substantive reasons, it cannot
deliver
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a No Recognition Opinion to the Trust, then, notwithstanding Sections 3.02 and
3.03, the Company shall have the right upon not less than 30 days' nor more than
60 days' notice to the Holders of the Convertible Debentures to redeem the
Convertible Debentures, in whole or in part, for cash, within 90 days following
the occurrence of such Trust Special Event (the "90-DAY PERIOD"), at a
redemption price equal to 100% of the principal amount to be redeemed, together
with accrued and unpaid interest (including Compounded Interest, if any) thereon
to, but excluding, the date of such redemption (the "SPECIAL EVENT REDEMPTION
PRICE"), PROVIDED that, if at the time there is available to the Company or the
Trust the opportunity to eliminate, which elimination shall be complete within
the 90- Day Period, such Trust Special Event by taking some ministerial action
(such as filing a form or making an election, or pursuing some other similar
reasonable measure) that has no adverse effect on the Company, the Trust or the
Holders of the Trust Securities, or does not subject any of them to more than DE
MINIMIS regulatory requirements ("MINISTERIAL ACTION"), the Company or the Trust
shall pursue such Ministerial Action in lieu of redemption. and, provided,
further, that the Company shall have no right to redeem the Convertible
Debentures while the Trust is pursuing any Ministerial Action pursuant to its
obligations under the Declaration; provided such Ministerial Action can
eliminate such Trust Special Event during the 90-Day Period. On the date notice
of redemption is given by mail pursuant to Section 3.05, the Company shall issue
a press release announcing such redemption and that such redemption shall result
in the redemption of the CRESTS. The Special Event Redemption Price shall be
paid prior to 12:00 noon, New York time, on the date fixed by the Company for
such redemption or at such earlier time as the Company determines, provided that
the Company shall deposit with the Trustee an amount sufficient to pay the
Special Event Redemption Price by 10:00 a.m., New York time, on the date such
Special Event Redemption Price is to be paid.
SECTION 3.02. OPTIONAL REDEMPTION. (a) Subject to the provisions of
Section 3.03 and Section 3.04 of this Supplemental Indenture and to the
provisions of Article 10) of the Base Indenture, the Company shall have the
right to redeem the Convertible Debentures, in whole or in part, for cash, from
time to time on and after July 3, 2002, upon not less than 30 days' nor more
than 60 days' notice to the Holders, at the following prices (expressed as
percentages of the principal amount of the Convertible Debentures) (the
"REDEMPTION PRICE"), together with any accrued and unpaid interest (including
Compounded Interest, if any) thereon to, but excluding, the date of such
redemption, if redeemed during the period beginning July 3, 2002 and ending on
June 27, 2003, the redemption price shall be 104.2% and if redeemed thereafter
during the 12-month period beginning on June 30 of the following years:
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YEAR REDEMPTION PRICE
---- ----------------
2003 103.5%
2004 102.8%
2005 102.1%
2006 101.4%
2007 100.7%
2008 and thereafter 100.0%
The Company may exercise its redemption right pursuant to this Section
3.02 provided that the redemption price (other than the portion thereof
consisting of accrued and unpaid interest (including Compounded Interest, if
any)) is payable solely out of the sale proceeds of other equity securities of
the Company, and from no other source. For purposes of the preceding sentence,
"EQUITY SECURITIES" means (i) any equity securities, including common stock and
preferred stock, of the Company, (ii) any securities, which by their terms, are
mandatorily convertible or exchangeable for, or require the purchase of, such
common stock or preferred stock and (iii) preferred securities issued by a
business trust, partnership or limited liability company, all of the common
equity of which is owned, directly or indirectly by, the Company and the sole
assets of which are subordinated debt securities with interest payments
deferrable at the Company's option.
On the date notice of redemption pursuant to this Section 3.02(A) is
given by mail pursuant to Section 3.05, the Company shall issue a press release
announcing such redemption which shall set forth the aggregate principal amount
of Convertible Debentures that the Company intends to redeem and, if the
Property Trustee is the Holder of the Debentures, that such redemption shall
result in the redemption of an equal liquidation amount of CRESTS.
(b) Subject to the provisions of Section 3.03 and Section 3.04 of this
Supplemental Indenture and to the provisions of Article 10 of the Base
Indenture, the Company shall have the right to redeem the Convertible
Debentures, in whole or in part, for cash from time to time after July 3, 2002,
upon not less than 30 days' nor more than 60 days' notice to the Holders, at a
redemption price equal to 100% of the principal amount of the Convertible
Debentures to be redeemed, together with any accrued and unpaid interest
(including Compounded Interest, if any) thereon to, but excluding the date of
such redemption. The Company may exercise its redemption right pursuant to this
Section 3.02(B) by notice given on any date only (i) if for 20 Trading Days
within any period of 30 consecutive Trading Days ending on such date, including
the last day of such period, the Closing Price of the shares of Common Stock
exceeds $25.71 per share, subject to adjustment, under the circumstances
described in Section 8.03, with respect to the Conversion Price and (ii) on or
prior to the date of the notice of redemption required by Section 3.05, the
Company shall have entered into an agreement,
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subject to customary terms and conditions, with a nationally recognized
investment banking firm pursuant to which such firm shall have agreed to
purchase from the Company such number of whole shares of Common Stock as would
have been issuable upon conversion of Convertible Debentures that are not
surrendered for conversion prior to the close of business on the redemption
date. To exercise its redemption right pursuant to this Section 3.02(B), the
Company shall issue a press release announcing the redemption prior to the
opening of business on the second Trading Day after the conditions described in
the preceding sentences have, from time to time, been met but shall not issue
such press release prior to July 3, 2002. Such press release shall announce the
redemption and set forth the aggregate principal amount of Convertible
Debentures that the Company intends to redeem and, if the Property Trustee is
the holder of the Debentures, that such redemption shall result in the
redemption of an equal liquidation amount of CRESTS.
SECTION 3.03. DEPOSIT OF REDEMPTION PRICE; PAYMENT OF INTEREST ON
CONVERTIBLE DEBENTURES TO BE REDEEMED. The redemption price of Debentures to be
redeemed, together with any accrued and unpaid interest (including Compounded
Interest, if any) thereon required to be paid, shall be paid prior to 12:00
noon, New York time, on the date fixed by the Company for redemption or at such
earlier time as the Company determines, PROVIDED that the Company shall deposit
with the Trustee an amount sufficient to pay such redemption price, plus such
accrued and unpaid interest, by 10:00 a.m., New York time, on the date such
redemption price is to be paid; PROVIDED, FURTHER, that if Convertible
Debentures are redeemed pursuant to this Article 3 on March 31, June 30,
September 30, or December 31, accrued and unpaid interest (including Compounded
Interest, if any) shall be payable to Holders on the relevant record date. The
Company may not redeem any Convertible Debentures unless all accrued and unpaid
interest (including Compounded Interest, if any) has been paid on all of the
outstanding Convertible Debentures for all quarterly interest periods
terminating on or prior to the last Interest Payment Date before the date of
redemption.
SECTION 3.04. REDEMPTION OF LESS THAN ALL CONVERTIBLE DEBENTURES. If
the Convertible Debentures are only partially redeemed, the Convertible
Debentures shall be redeemed pro rata by the Trustee.
SECTION 3.05. NOTICE OF REDEMPTION. Notice of any redemption of the
Convertible Debentures shall be given by the Company by mail to each Holder of
Convertible Debentures to be redeemed not fewer than 30 nor more than 60 days
before the date fixed for redemption of the Convertible Debentures, provided
that notice of redemption by mail pursuant to Section 3.02(B) shall be given on
the date on which the Company issues the press release referred to in Section
3.02(B). If the Convertible Debentures have been distributed to Holders in
liquidation of
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the Trust, notice of any redemption shall also be given by
publication made once a week for two successive weeks commencing not less than
30 nor more than 60 days prior to the redemption date in an Authorized
Newspaper.
For purposes of the calculation of the date of redemption and the dates
on which notices are given pursuant to this Section 3.05, a notice shall be
deemed to be given on the day such notice is first mailed by first-class mail,
postage prepaid, or by such other means suitable to assure delivery of such
written notice, to Holders of Convertible Debentures. Each notice given by mail
shall be addressed to the Holders of Convertible Debentures at the address of
each such Holder appearing in the books and records of the Company. No defect in
the notice or in the mailing of either thereof with respect to any Holder shall
affect the validity of the redemption or exchange proceedings with respect to
any other Holder. Any notice which was mailed in the manner herein provided
shall be conclusively presumed to have been duly given on the date mailed
whether or not the holder receives the notice. Each notice, whether given by
mail or publication, shall state, as appropriate: (A) the redemption date; (B)
the aggregate principal amount of Convertible Debentures to be redeemed,
including CUSIP numbers, and, if less than all the Convertible Debentures held
by such Holder are to be redeemed, the aggregate principal amount of such
Convertible Debentures to be redeemed from such Holder; (C) the redemption price
to be paid in respect of the redemption; (D) the then current Conversion Price
and, if any event then known to the Company shall result in an adjustment to the
Conversion Price on or prior to the redemption date, such adjusted conversion
price and the date of such adjustment; (E) the last date on which the
Convertible Debentures may be converted prior to the redemption date; (F) any
Holder who wishes to convert his or her Convertible Debentures must comply with
and satisfy all the terms, conditions and requirements for conversion as set
forth in the Convertible Debentures and the Supplemental Indenture; (G) that
interest on the Convertible Debentures to be redeemed shall cease to accrue on
the redemption date; and (H) a place for the Convertible Debentures to be
redeemed.
SECTION 3.06. NO SINKING FUND. The Convertible Debentures are not
entitled to the benefit of any sinking fund.
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ARTICLE 4
OPTIONAL REPURCHASE
SECTION 4.01. REPURCHASE OF CONVERTIBLE DEBENTURES UPON NON- COMPLETION
OF MERGER. (a) If the Merger Agreement is terminated or the Merger has not been
consummated by December 31, 1998, the Company shall make an offer (the
"NON-COMPLETION OFFER") to each Holder of Convertible Debentures to repurchase
all or any part (equal to $50 or an integral multiple thereof) of such Holder's
Convertible Debentures at a purchase price equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest thereon to the date of
purchase (the "NON-COMPLETION PAYMENT").
(b) Within 20 days following the Date of Non-Completion, the Company
shall mail a notice to each Holder of Convertible Debentures stating:
(i) that a Non-Completion Offer is being made pursuant to
Section 4.01 and that all Convertible Debentures properly tendered
shall be accepted for payment;
(ii) the purchase price and the purchase date, which shall be
no earlier than 30 days nor later than 60 days from the date such
notice is mailed (the "NON-COMPLETION PAYMENT DATE");
(iii) that any Convertible Debentures not properly tendered
shall continue to accrue interest in accordance with the terms of this
Supplemental Indenture and the Base Indenture;
(iv) that, unless the Company defaults in the payment of the
Non- Completion Payment, all Convertible Debentures accepted for
payment pursuant to a Non-Completion Offer shall cease to accrue
interest after the Non-Completion Payment Date;
(v) that Holders of Convertible Debentures electing to have
any Convertible Debentures purchased pursuant to a Non-Completion Offer
shall be required to surrender the Convertible Debentures, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of
such Convertible Debentures completed, or transfer by book-entry, to
the Paying Agent at the address specified in the notice prior to the
close of business on the third Business Day preceding the
Non-Completion Payment Date;
(vi) that Holders of Convertible Debentures shall be entitled
to withdraw their election if the Paying Agent receives, not later than
the
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close of business on the third Business Day prior to the Non-Completion
Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of
Convertible Debentures delivered for purchase, and a statement that
such Holder is withdrawing his election to have such Convertible
Debentures purchased; and
(vii) that Holders of Convertible Debentures whose Convertible
Debentures are being purchased only in part shall be issued new
Convertible Debentures equal in principal amount to the unpurchased
portion of the Convertible Debentures surrendered, which unpurchased
portion must be equal to $50 in principal amount or an integral
multiple thereof.
(c) A Holder may exercise its rights specified in Section 4.01(A) by
complying with the terms of the notice in Section 4.01(B) or upon (1) delivery
to any Paying Agent of a written notice (a "NON-COMPLETION PAYMENT NOTICE") at
any time prior to the close of business on the Non-Completion Payment Date,
stating (A) the certificate number of the Convertible Debenture that the Holder
shall deliver to be purchased and (B) the portion of the principal amount of the
Convertible Debenture that the Holder shall deliver to be purchased, which
portion must be $50 or an integral multiple thereof and (2) delivery of such
Convertible Debenture to such Paying Agent at such office prior to, on or after
the Non-Completion Payment Date (together with all necessary endorsements), such
delivery being a condition to receipt by the Holder of the Non-Completion
Payment therefor. If a Holder has elected to deliver to the Company for purchase
a portion of a Convertible Debenture, and if the principal amount of such
portion is $50 or an integral multiple of $50, the Company shall purchase such
portion from the Holder thereof pursuant to Section 4.01. Provisions of this
Supplemental Indenture and the Base Indenture that apply to the purchase of all
of a Convertible Debenture also apply to the purchase of a portion of such
Convertible Debenture. Each Paying Agent shall promptly notify the Company of
the receipt by the former of any and all Non-Completion Payment Notices and any
and all written notices of withdrawal thereof.
(d) Upon receipt by any Paying Agent of a Non-Completion Payment
Notice, the Holder of the Convertible Debenture in respect of which such Non-
Completion Payment Notice was given shall thereafter be entitled to receive
solely the Non-Completion Payment with respect to such Convertible Debenture
(unless such Non-Completion Payment Notice is withdrawn pursuant to Section
4.01(I)). Such Non-Completion Payment shall be paid to such Holder promptly
following the later of the Business Day following the Non-Completion Payment
Date (provided the conditions in Section 4.01(C) have been satisfied) and the
time
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of delivery of such Convertible Debenture to the relevant Paying Agent at
the office of such Paying Agent by the Holder thereof in the manner required by
Section 4.01(B).
(e) On or prior to the Non-Completion Payment Date, the Company shall,
to the extent lawful, (i) accept for payment all Convertible Debentures or
portions thereof properly tendered pursuant to a Non-Completion Offer, (ii)
deposit with the Paying Agent an amount of money in same-day funds (or New York
Clearing House funds if such deposit is made prior to the Non-Completion
Payment Date) sufficient to pay the Non-Completion Payment with respect to all
the Convertible Debentures or portions thereof so tendered and (iii) deliver or
cause to be delivered to the Trustee the Convertible Debentures so tendered
together with a certification setting forth the aggregate principal amounts of
Convertible Debentures or portions thereof being purchased by the Company.
(f) Upon a Non-Completion Payment Notice having been given as
aforesaid, Convertible Debentures to be purchased shall, on the Non-Completion
Payment Date, become due and payable at the Non-Completion Payment and from and
after such date (unless the Company shall default in the payment of the Non-
Completion Payment) such Convertible Debentures shall cease to bear interest.
Upon surrender of any such Convertible Debenture for purchase in accordance with
the foregoing provisions, such Convertible Debenture shall be purchased by the
Company for an amount equal to the Non-Completion Payment with respect to such
Convertible Debenture. If any Convertible Debenture tendered for purchase shall
not be so paid upon surrender thereof, the principal thereof (and premium, if
any, thereon) shall, until paid, bear interest from the Non-Completion Payment
Date at the rate borne by such Convertible Debenture.
(g) Any Convertible Debenture that is to be purchased only in part
shall be surrendered to a Paying Agent at the office of such Paying Agent (with,
if the Company or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or such Holder's attorney duly authorized in
writing), and the Company shall execute and the Trustee shall authenticate and
deliver to the Holder of such Convertible Debenture, without service charge, one
or more new Convertible Debentures of any authorized denomination as requested
by such Holder in an aggregate principal amount equal to, and in exchange for,
the portion of the principal amount of the Convertible Debenture so surrendered
that is not purchased; PROVIDED that each such new Convertible Debenture shall
be in a principal amount of $50 or an integral multiple thereof.
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(h) The Company shall comply with applicable tender offer rules,
including Rule 14e-1 under the Exchange Act, in connection with a Non-
Completion Offer and may modify a Non-Completion Offer to so comply.
(i) A Non-Completion Payment Notice may be withdrawn before or after
delivery by the Holder to the relevant Paying Agent at the office of such Paying
Agent of the Convertible Debenture to which such Non-Completion Payment Notice
relates, by means of a written notice of withdrawal (by facsimile transmission
or letter) received by such Paying Agent at such office not later than three
Business Days prior to the Non-Completion Payment Date, specifying, as
applicable:
(i) the certificate number of the Convertible Debenture in
respect of which such notice of withdrawal is being submitted;
(ii) the principal amount of the Convertible Debenture with
respect to which such notice of withdrawal is being submitted; and
(iii) the principal amount, if any, of the Convertible
Debenture that remains subject to the original Non-Completion Payment
Notice and that has been or shall be delivered for purchase by the
Company.
Each Paying Agent shall promptly return to the prospective Holders
thereof any Convertible Debentures with respect to which a Non-Completion
Payment Notice has been withdrawn in compliance with this Indenture.
ARTICLE 5
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 5.01. EXTENSION OF INTEREST PAYMENT PERIOD. As long as an Event
of Default under Section 4.01(a) of the Base Indenture shall not have occurred
and be continuing, the Company shall have the right, at any time and from time
to time during the term of the Convertible Debentures, to defer payments of
interest by extending the interest payment period of such Convertible Debentures
for a period not exceeding 20 consecutive quarters nor extending beyond the
Stated Maturity of the Convertible Debentures (an "EXTENSION PERIOD"), during
which Extension Period no interest shall be due and payable on the Convertible
Debentures. To the extent permitted by applicable law, interest, the payment of
which has been deferred during an Extension Period, shall bear interest thereon
at the Applicable Rate compounded quarterly for each quarter of the Extension
Period ("COMPOUNDED INTEREST"). Before the termination of any such Extension
Period the Company may further extend such Extension Period, provided that such
Extension
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Period, together with all such previous and further extensions thereof, shall
not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date.
At the end of the Extension Period, the Company shall pay all interest accrued
and unpaid on the Convertible Debentures, including any Compounded Interest
(together, "DEFERRED INTEREST") that shall be payable to the Holders of
Convertible Debentures in whose names the Convertible Debentures are registered
in the Debenture Register on the first record date after the termination of the
Extension Period. Upon the termination of any Extension Period and upon the
payment of all Deferred Interest then due, the Company may commence a new
Extension Period, subject to the foregoing requirements. No interest shall be
due and payable during an Extension Period, except at the end thereof, but the
Company may pay at any time all or any portion of the interest accrued during an
Extension Period.
SECTION 5.02. NOTICE OF EXTENSION. (a) If the Property Trustee shall be
the only Holder of the Convertible Debentures at the time the Company selects an
Extension Period, the Company shall give written notice to the Regular Trustees,
the Property Trustee and the Trustee of its selection of such Extension Period
one Business Day before the earlier of (i) the date on which Distributions on
the Trust Securities are payable and (ii) the date the Regular Trustees are
required to give notice of the record date or the date such Distributions are
payable to any national stock exchange or other organization on which the CRESTS
may be listed or quoted, if any, or to holders of CRESTS, but in any event at
least one Business Day before such record date or such payment date.
(b) If the Property Trustee shall not be the Holder of the Convertible
Debentures at the time the Company selects an Extension Period, the Company
shall give the Holders of Convertible Debentures written notice of its selection
of such Extension Period at least 10 Business Days before the earlier of (i) the
Interest Payment Date for the first quarter of such Extension Period and (ii)
the date the Company is required to give notice of the record date or the date
of such interest payment to Holders of Convertible Debentures.
(c) The quarter in which any notice is given pursuant to subsections
(a) or (b) of this Section 5.02 shall be, and shall be counted as, one of the 20
quarters permitted in the maximum Extension Period permitted under Section 5.01.
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ARTICLE 6
EXPENSES
SECTION 6.01. PAYMENT OF EXPENSES. Because the Trust is being formed
solely to facilitate an investment in the Convertible Debentures, the Company,
in its capacity as borrower with respect to the Convertible Debentures, shall:
(a) pay all costs and expenses relating to the offering, sale,
issuance and/or exchange of the Convertible Debentures and the Trust
Securities, including fees payable pursuant to the Purchase Agreement
and compensation, expenses and indemnification of the Trustee under the
Base Indenture in accordance with the provisions of Section 5.06 of the
Base Indenture;
(b) pay all costs and expenses of the Trust (including, but
not limited to, costs and expenses relating to the organization,
maintenance and dissolution of the Trust, the fees and expenses of the
Regular Trustees, Property Trustee and the Delaware Trustee and the
fees and expenses of the Guarantee Trustee under the Guarantee, the
costs and expenses relating to the operation of the Trust, including,
without limitation, costs and expenses of accountants, attorneys,
statistical or bookkeeping services, expenses for printing and
engraving and computing or accounting equipment, paying agent(s),
registrar(s), transfer agent(s), duplicating, travel and telephone and
other telecommunications expenses and costs and expenses incurred in
connection with the acquisition, financing, and disposition of Trust
assets);
(c) pay all costs and expenses related to the enforcement by
the Property Trustee of its rights as a Holder of Convertible
Debentures;
(d) be responsible for all debts and obligations of the Trust
(other than with respect to the Trust Securities);
(e) pay any and all taxes, duties, assessments or governmental
charges of whatever nature (other than United States withholding taxes)
directly imposed on the Trust, in its capacity as a legal entity or as
a holder of the Convertible Debentures, by the United States, or any
other taxing authority;
so that the net amounts received and retained by such Trust and the
Property Trustee after paying such taxes, duties, assessments, governmental
charges, expenses, debts and obligations shall be equal to the amounts such
Trust and the Property Trustee would have received had no such taxes, duties,
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assessments, governmental charges, expenses, debts and obligations been incurred
by or imposed on such Trust.
The foregoing obligations of the Company are for the benefit of, and
shall be enforceable by, any person to whom any such fees, debts, obligations,
costs, expenses, taxes, duties, assessments or other governmental charges are
owed (each a "CREDITOR") whether or not such Creditor has received notice
thereof. Any Creditor may enforce such obligations of the Company directly
against the Company, and the Company irrevocably waives any right or remedy to
require that any such Creditor take any action against the Trust or any other
person before proceeding against the Company. The Company shall execute such
additional agreements as may be necessary or desirable to give full effect to
the foregoing.
SECTION 6.02. PAYMENT UPON RESIGNATION OR REMOVAL. Upon termination of
this Supplemental Indenture or the Base Indenture or the removal or resignation
of the Trustee pursuant to Section 5.07 of the Base Indenture, the Company shall
pay to the Trustee all amounts owed to the Trustee accrued to the date of such
termination, removal or resignation. Upon termination of the Declaration or
removal or resignation of the Delaware Trustee or the Property Trustee, as the
case may be, pursuant to Section 6.06 of the Declaration or the Guarantee
Trustee pursuant to the Guarantee, the Company shall pay to the Delaware
Trustee, the Property Trustee or the Guarantee Trustee, and their respective
counsel, as the case may be, all amounts accrued to the date of such
termination, removal or resignation.
ARTICLE 7
COVENANTS
SECTION 7.01. COVENANTS AS TO THE TRUST. If the Property Trustee is the
Holder of the Convertible Debentures, the Company shall (a) maintain, directly
or indirectly, ownership of all of the Trust Common Securities; PROVIDED,
however, that any permitted successor of the Company under the Base Indenture
may succeed to the Company's ownership of the Trust Common Securities, (b) cause
the Trust to remain a statutory business trust, except in connection with a
distribution of Convertible Debentures to the holders of Trust Securities, the
redemption or conversion of all of the Trust Securities, or certain mergers,
consolidations or amalgamations, each as permitted by the Declaration, and not
to voluntarily dissolve, wind-up, liquidate or to be terminated, except as
permitted by the Declaration, (c) use its commercially reasonable efforts to
ensure that the Trust shall not be an "investment company" for purposes of the
Investment Company Act of 1940, as amended, and (d) take no action that would be
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reasonably likely to cause the Trust to be classified as an association or a
publicly traded partnership taxable as a corporation for United States federal
income tax purposes.
ARTICLE 8
CONVERSION OF CONVERTIBLE DEBENTURES
SECTION 8.01. CONVERSION RIGHTS. (a) Subject to and upon compliance
with the provisions of this Article 8, the Convertible Debentures are
convertible, at the option of the Holder thereof, at any time beginning 90 days
following the last date of original issuance of any CRESTS and prior to the
close of business, New York time, on June 28, 2010 (or earlier as provided in
Section 8.01(B)) into that number of fully paid and nonassessable shares of
Common Stock obtained by dividing the principal amount of the Convertible
Debentures to be converted by the Conversion Price (as in effect on the date
provided for in Section 8.02(B)). The initial Conversion Price is $21.42 per
share of Common Stock. The Conversion Price is subject to adjustment as
described in this Article 8.
(b) The right to convert Convertible Debentures shall terminate prior
to the close of business (i) on June 28, 2010 or (ii) in the case of Convertible
Debentures called for redemption, on the second Business Day prior to the
related redemption date, unless the Company shall default in making payment of
any moneys or shares of Common Stock payable upon such redemption under Article
3.
SECTION 8.02. CONVERSION PROCEDURES. (a) In order to convert all or a
portion of the Convertible Debentures, the Holder thereof shall (i) sign and
deliver to the Conversion Agent an irrevocable notice of election to convert
("CONVERSION NOTICE") setting forth the principal amount of Convertible
Debentures to be converted (which shall equal $50 or any integral multiple
thereof), together with the name or names, if other than the Holder, in which
the shares of Common Stock should be issued upon conversion together with any
payment required by the following paragraph, (ii) if such Convertible Debentures
are definitive Convertible Debentures, surrender to the Conversion Agent the
Convertible Debentures to be converted, with such endorsements or transfer
documents as requested by the Conversion Agent, and (iii) pay any transfer or
similar tax, if required. In addition, a holder of Trust Securities may exercise
its right under the Declaration to convert such Trust Securities into Common
Stock by delivering to the Conversion Agent an irrevocable conversion request
setting forth the information called for by the preceding sentence and directing
the Conversion Agent (A) to exchange such Trust Securities for a portion of the
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Convertible Debentures held by the Trust (at an exchange rate of $1 of principal
amount of Convertible Debentures for each $1 liquidation amount of Trust
Securities) and (B) to immediately convert such Convertible Debentures, on
behalf of such holder, into Common Stock pursuant to this Article 8 and, if such
Trust Securities are in definitive form, surrendering such Convertible Preferred
Security Certificates or Common Security Certificates, as the case may be, duly
endorsed or assigned to the Trust or in blank. So long as any CRESTS are
outstanding, the Trust shall not convert any Convertible Debentures except
pursuant to a conversion request delivered to the Conversion Agent by a holder
of Trust Securities.
Except as provided below, accrued but unpaid interest shall not be paid
in cash on Convertible Debentures that are converted by a Holder into Common
Stock, nor shall such accrued interest be converted into additional shares of
Common Stock. Holders of Convertible Debentures at the close of business on a
Regular Record Date shall be entitled to receive the interest payable on such
Convertible Debentures (except that holders of Convertible Debentures called for
redemption on a redemption date between such Regular Record Date and the
Interest Payment Date shall not be entitled to receive such interest on such
Interest Payment Date) on the corresponding Interest Payment Date
notwithstanding the conversion of such Convertible Debentures following such
Regular Record Date and prior to such Interest Payment Date. However,
Convertible Debentures surrendered for conversion during the period between the
close of business on any Regular Record Date and the opening of business on the
corresponding Interest Payment Date (except Convertible Debentures called for
redemption on a redemption date during such period) shall be accompanied by
payment of an amount equal to the interest payable on such Convertible
Debentures on such Interest Payment Date. A Holder of Convertible Debentures on
a Regular Record Date who (or whose transferee) tenders any such Convertible
Debentures for conversion into shares of Common Stock on such Interest Payment
Date shall receive the interest payable by the Company on such Convertible
Debentures on such date, and the converting Holder need not include payment of
the amount of such interest upon surrender of Convertible Debentures for
conversion. The Company shall make no payment or allowance for dividends on the
shares of Common Stock issued upon conversion.
(b) Each conversion shall be deemed to have been effected immediately
prior to the close of business on the day on which the Conversion Notice was
received (the "CONVERSION DATE") by the Conversion Agent from the Holder or from
a holder of the Trust Securities effecting a conversion thereof pursuant to its
conversion rights under the Declaration, as the case may be. The Person or
Persons entitled to receive Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such Common Stock as
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of the Conversion Date. As promptly as practicable on or after the Conversion
Date, the Company shall issue and deliver at the office of the Conversion Agent,
unless otherwise directed by the Holder in the Conversion Notice, a certificate
or certificates for the number of full shares of Common Stock and any other
shares of common stock of the Company issuable upon such conversion, together
with the cash payment, if any, in lieu of any fraction of any share to the
Person or Persons entitled to receive the same. The Conversion Agent shall
deliver such certificate or certificates to such Person or Persons.
(c) The Company's delivery upon conversion of the fixed number of
shares of Common Stock into which the Convertible Debentures are convertible
(together with the cash payment, if any, in lieu of fractional shares) shall be
deemed to satisfy the Company's obligation to pay the principal amount at the
Maturity Date of the portion of Convertible Debentures so converted and any
unpaid interest (including Compounded Interest, if any) accrued on such
Convertible Debentures at the time of such conversion.
(d) No fractional shares or scrip representing fractions of shares of
Common Stock shall be issued upon conversion of the Convertible Debentures.
Instead of any fractional interest in a share of Common Stock that would
otherwise be deliverable upon the conversion of the Convertible Debentures, the
Company shall pay to the Conversion Agent an amount in cash (and the Conversion
Agent in turn shall pay such cash amount to the Holder of such Convertible
Debentures or the holder of the Trust Securities so converted, as appropriate)
based upon the Closing Price of Common Stock on the Trading Day immediately
preceding the date of conversion. If more than one Convertible Debenture shall
be surrendered for conversion at any one time by the same Holder, the number of
full shares of Common Stock issuable upon conversion thereof shall be computed
on the basis of the aggregate principal amount of Convertible Debentures so
surrendered.
(e) In the event of the conversion of any Convertible Debenture in
part only, a new Convertible Debenture or Convertible Debentures for the
unconverted portion thereof shall be issued in the name of the Holder thereof
upon the cancellation thereof in accordance with Section 12.02 of the Base
Indenture.
(f) In effecting the conversion transactions described in this Section
8.02, the Conversion Agent is acting as agent of the holders of Trust Securities
(in the exchange of Trust Securities for Convertible Debentures) and as agent of
the Holders of Convertible Debentures (in the conversion of Convertible
Debentures into Common Stock), as the case may be. The Conversion Agent is
hereby authorized (i) to exchange Convertible Debentures held by the Trust from
time to time for Trust Securities in connection with the conversion of such
Trust
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Securities in accordance with this Article 8 and (ii) to convert all or a
portion of the Convertible Debentures into Common Stock and thereupon to deliver
such shares of Common Stock of the Company in accordance with the provisions of
this Article 8 and to deliver to the Trust a new Convertible Debenture or
Convertible Debentures for any resulting unconverted principal amount.
SECTION 8.03. CERTAIN CONVERSION PRICE ADJUSTMENTS. (a) The
Conversion Price per share of Common Stock shall be adjusted from time to time
as follows:
(i) If the Company shall after the date on which Convertible
Debentures are initially issued (A) pay a dividend or make a
distribution on any class of its capital stock in shares of Common
Stock, (B) subdivide the outstanding Common Stock into a greater number
of shares or (C) combine the outstanding Common Stock into a smaller
number of shares, then the Conversion Price in effect at the opening of
business on the day next following the date fixed for the determination
of stockholders entitled to receive such dividend or distribution or at
the opening of business on the day next following the day on which such
subdivision or combination becomes effective, as the case may be, shall
be adjusted so that the Holder of any Convertible Debenture thereafter
surrendered for conversion shall be entitled to receive the number of
shares of Common Stock that such Holder would have owned or have been
entitled to receive after the happening of any of the events described
above had such Convertible Debenture been converted immediately prior
to the record date in the case of a dividend or distribution or the
effective date in the case of a subdivision or combination. An
adjustment made pursuant to this Section 8.03(A)(I) shall become
effective immediately after the opening of business on the day next
following the record date (except as provided in Section 8.03) below)
in the case of a dividend or distribution and shall become effective
immediately after the opening of business on the day next following the
effective date in the case of a subdivision or combination.
(ii) If the Company shall issue after the date on which
Convertible Debentures are initially issued rights, options or warrants
(other than any rights, options or warrants referred to in Section
8.03(A)(III) below) to all holders of Common Stock entitling them (for
a period expiring within 45 days after the record date mentioned below)
to subscribe for or purchase Common Stock at a price per share less
than the Current Market Price per share of Common Stock on the record
date for the determination of stockholders entitled to receive such
rights, options or warrants, then the Conversion Price in effect at the
opening of business on
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the day next following such record date shall be adjusted to equal the
price determined by multiplying (A) the Conversion Price in effect
immediately prior to the opening of business on the day next following
the date fixed for such determination by (B) a fraction, the numerator
of which shall be the sum of (1) the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination and (2) the number of shares that the aggregate proceeds
to the Company from the exercise of such rights, options or warrants
for Common Stock would purchase at such Current Market Price, and the
denominator of which shall be the sum of (x) the number of shares of
Common Stock outstanding on the close of business on the date fixed for
such determination and (y) the number of additional shares of Common
Stock offered for subscription or purchase pursuant to such rights,
options or warrants. Such adjustment shall become effective immediately
after the opening of business on the day next following such record
date (except as provided in Section 8.03(E)). In determining whether
any rights, options or warrants entitle the holders of Common Stock to
subscribe for or purchase shares of Common Stock at less than the
Current Market Price thereof, there shall be taken into account any
consideration received by the Company upon issuance and upon exercise
of such rights, options or warrants, the value of such consideration,
if other than cash, to be determined by the Board of Directors.
(iii) If the Company shall distribute to all holders of the
Common Stock any shares of capital stock (other than common stock of
the Company), evidences of indebtedness, cash or other assets of the
Company (including securities, but excluding (w) any dividend or
distribution referred to in Section 8.03(A)(I), (x) any rights, options
or warrants referred to in Section 8.03(A)(II)) or in the second
paragraph of this Section 8.03(A)(III), (y) any dividend or
distribution paid exclusively in cash or (z) any stocks, securities or
other property received as a result of a transaction referred to in
Section 8.04) (any of the foregoing being hereinafter referred to in
this Section 8.03(A)(III) as the "SECURITIES"), then in each such case
the Conversion Price shall be adjusted so that it shall equal the price
determined by multiplying (I) the Conversion Price in effect
immediately prior to the close of business on the date fixed for the
determination of stockholders entitled to receive such distribution by
(II) a fraction, the numerator of which shall be the Current Market
Price per share of Common Stock on the record date mentioned below less
the then fair market value (as determined by the Board of Directors) of
the portion of the Securities so distributed to one share of Common
Stock, and the denominator of which shall be the Current Market Price
per share of Common Stock on the record date mentioned below.
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Such adjustment shall become effective immediately at the opening of
business on the day next following the record date for the
determination of stockholders entitled to receive such distribution
(except as provided in Section 8.03(E)).
In case the Company shall distribute rights or warrants to
purchase Common Stock pro rata to all holders of Common Stock which
rights, options or warrants are not at such time immediately
exercisable but, upon the occurrence of a specified event or events
("EXERCISE TRIGGER DATE") shall become exercisable and once they become
exercisable shall entitle, or upon the occurrence of an additional
specified event or events ("PRICE TRIGGER DATE") shall entitle, the
Holder thereof to purchase Common Stock at a price per share of Common
Stock less than the Current Market Price of the Common Stock on the
Trading Day next succeeding the later of the Exercise Trigger Date or
the Price Trigger Date ("ADJUSTMENT TRIGGER DATE") and there shall have
occurred such Adjustment Trigger Date, thus permitting the holders of
such rights, options or warrants irrevocably to exercise any exchange,
subscription or purchase rights conferred by such rights, options or
warrants at a price per share of Common Stock less than such Current
Market Price, then the Conversion Price in effect at the opening of
business on the Adjustment Trigger Date shall be adjusted by
multiplying (I) such Conversion Price by (II) a fraction, the numerator
of which shall be equal to the Current Market Price per share of the
Common Stock on the Trading Day immediately prior to the Adjustment
Trigger Date less an amount equal to the quotient of (x) the aggregate
fair market value on the Adjustment Trigger Date of the rights, options
or warrants so distributed (as determined by the Board of Directors)
divided by (y) the number of shares of Common Stock outstanding on such
day prior to the Adjustment Trigger Date and the denominator of which
shall be equal to such Current Market price per share of the Common
Stock. Such adjustment shall become effective immediately after the
opening of business on the day next following such Adjustment Trigger
Date.
(iv) If the Company shall, by dividend or otherwise, at any
time distribute to all holders of the Common Stock cash (excluding any
cash that is distributed as part of a distribution requiring a
Conversion Price adjustment pursuant to Section 8.03(A)(III) and cash
that is distributed in a merger or consolidation to which Section 8.05
applies) in an aggregate amount that, together with (A) the aggregate
amount of any other distributions to all holders of the Common Stock
made exclusively in cash (to which this Section 8.03(A)(IV) would
otherwise apply) within the 12 months preceding the date of payment of
such distribution and in respect
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<PAGE> 38
of which no Conversion Price adjustment has been made and (B) all
Excess Purchase Payments in respect of each tender offer or exchange
offer for Common Stock concluded by the Company or any of its
Subsidiaries within the 12 months preceding the date of payment of such
distribution and in respect of which no Conversion Price adjustment has
been made, exceeds an amount equal to 10% of the product of the Current
Market Price per share of Common Stock on the date fixed for
determination of holders of Common Stock entitled to receive such
distribution times the number of shares of Common Stock outstanding on
such date, then the Conversion Price shall be adjusted so that it shall
equal the price determined by multiplying (I) such Conversion Price in
effect immediately prior to the Conversion Price adjustment
contemplated by this Section 8.03(A)(IV) by (II) a fraction the
numerator of which shall be the Current Market Price per share of the
Common Stock on the date fixed for determination of holders of Common
Stock entitled to receive such distribution less the combined amount of
such cash and such Excess Purchase Payments so distributed applicable
to one share of Common Stock and the denominator of which shall be such
Current Market Price per share of the Common Stock on such date of
determination. Such adjustment shall become effective immediately prior
to the opening of business on the day next following the date fixed for
such determination.
(v) In case a tender offer or exchange offer (other than an
odd-lot offer) made by the Company or any of its Subsidiaries for all
or any portion of the Common Stock shall be consummated, if the
aggregate amount of any Excess Purchase Payment, together with (A) the
aggregate amount of any distributions made to all holders of Common
Stock made exclusively in cash (excluding any cash that is distributed
as part of a distribution requiring a Conversion Price adjustment
pursuant to Section 8.03(A)(III) and cash that is distributed in a
merger or consolidation to which Section 8.04 applies) within the 12
months preceding the consummation of such tender or exchange offer and
in respect of which no Conversion Price adjustment has been made, and
(B) all other Excess Purchase Payments in respect of each tender or
exchange offer for Common Stock concluded by the Company or any of its
Subsidiaries within the 12 months preceding the consummation of such
tender or exchange offer and in respect of which no Conversion Price
adjustment has been made, exceeds an amount equal to 10% of the product
of the Current Market Price per share of Common Stock on the
consummation date of such tender or exchange offer (any such date, the
"PURCHASE DATE") times the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) on such Purchase Date,
then the Conversion Price shall be adjusted so that it shall equal the
price
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<PAGE> 39
determined by multiplying (I) such Conversion Price in effect
immediately prior to such Purchase Date by (II) a fraction, the
numerator of which shall be the Current Market Price per share of the
Common Stock on such Purchase Date less the combined amount of Excess
Purchase Payments and such cash so distributed applicable to one share
of Common Stock and the denominator of which shall be such Current
Market Price per share on such Purchase Date. Such adjustment shall
become effective immediately prior to the opening of business on the
day next following such Purchase Date.
(vi) The Company from time to time may reduce the Conversion
Price by any amount for any period of at least 20 Business Days (or
such other period as may then be required by applicable law), provided
that the Board of Directors shall have determined that such reduction
is in the best interests of the Company. No reduction in the Conversion
Price pursuant to this Section 8.03(A)(VI) shall become effective
unless the Company shall have mailed a notice, at least 15 days prior
to the date on which such reduction is scheduled to become effective,
to each Holder of Convertible Debentures and to each holder of the
Trust Securities. Such notice shall be given by first class mail,
postage prepaid, at such Holder's address as the same appears on the
records of the Company. Such notice shall state the amount per share by
which the Conversion Price shall be reduced and the period for which
such reduction shall be in effect.
(vii) The Company may make such reductions in the Conversion
Price, in addition to those required by Sections 8.03(A)(I) through
8.03(A)(V), as the Board determines to be necessary in order that any
event treated for Federal income tax purposes as a dividend of stock or
stock rights shall not be taxable to the recipients; PROVIDED that any
such reduction shall not be effective until written evidence of the
action of the Board authorizing such reduction shall be filed with the
Secretary of the Company and notice thereof shall have been given by
first class mail, postage prepaid, to each Holder of Convertible
Debentures and to each holder of the Trust Securities at such Holder's
address as the same appears on the stock transfer books of the Company.
(b) No adjustment in the Conversion Price shall be required unless
such adjustment would require a cumulative increase or decrease of at least 1%
in such price; provided, however, that any adjustments that by reason of this
Section 8.03(B) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment until made; and provided, further,
that any adjustment shall be required and made in accordance with the provisions
of this Article 8 (other than this Section 8.03(B)) not later than such time as
may be
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<PAGE> 40
required in order to preserve the tax-free nature of a distribution to
the holders of shares of Common-Stock into which Convertible Debentures are
convertible. Notwithstanding any other provisions of this Article 8, the Company
shall not be required to make any adjustment of any Conversion Price established
hereunder for the issuance of any shares of common stock of the Company
(including Common Stock) pursuant to any plan providing for the reinvestment of
dividends or interest payable on securities of the Company and the investment of
additional optional amounts in shares of Common Stock under such plan. All
calculations under this Article 8 shall be made to the nearest 1/100 of a cent
(with $.00005 being rounded upward) or to the nearest 1/10,000 of a share (with
.00005 of a share being rounded upward), as the case may be.
(c) The reclassification of Common Stock into which Convertible
Debentures are then convertible into securities which include securities other
than Common Stock (other than any reclassification upon a consolidation or
merger to which Section 8.04 applies), shall be deemed to involve (i) a
distribution of such securities other than Common Stock to all holders of such
Common Stock (and the effective date of such reclassification shall be deemed to
be "the date fixed for the determination of stockholders entitled to receive
such distribution") and (ii) a subdivision or combination, as the case may be,
of the number of shares of such Common Stock outstanding immediately prior to
such reclassification into the number of shares of such Common Stock outstanding
immediately thereafter (and the effective date of such reclassification shall be
deemed to be the effective date of such subdivision or combination).
(d) If:
(i) the Company takes any action that would require an
adjustment of the Conversion Price pursuant to this Section 8.03 or
8.04; or
(ii) there shall be any consolidation or merger to which the
Company is a party and for which approval of any stockholders of the
Company is required; or
(iii) there shall occur the voluntary or involuntary
liquidation, dissolution or winding up of the Company; or
(iv) the Company or any of its Subsidiaries shall commence a
tender offer or exchange offer for all or a portion of the outstanding
shares of Common Stock (or shall amend any such tender or exchange
offer),
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<PAGE> 41
then the Company shall cause to be filed with the Trustee and the transfer agent
for the CRESTS and the Convertible Debentures, and shall cause to be mailed to
the Holders of Convertible Debentures and the holders of the Trust Securities at
their addresses as shown on the securities transfer records of the Company, as
promptly as possible, but at least 15 days prior to the earliest applicable date
hereinafter specified, a notice stating, as applicable, (A) the proposed record
date for a dividend or distribution or the proposed effective date of a
consolidation, merger, sale, transfer, liquidation, dissolution, or winding up,
(B) the date as of which it is expected that holders of Common Stock of record
shall be entitled to exchange their shares of Common Stock for securities or
other property, if any, deliverable upon such consolidation, merger, sale,
transfer, liquidation, dissolution or winding up or (C) the date on which such
tender or exchange offer is scheduled to expire unless extended, the
consideration offered and the other material terms thereof (or the material
terms of any amendment thereto). Failure to give or receive such notice or any
defect therein shall not affect the legality or validity of the related
transaction.
(e) In any case in which Section 8.03(A) provides that an adjustment
shall become effective on the day next following a record date for an event, the
Company may defer until the occurrence of such event (i) issuing to the holder
of any Convertible Debenture converted after such record date and before the
occurrence of such event the additional shares of Common Stock issuable upon
such conversion by reason of the adjustment required by such event over and
above the number of shares of Common Stock issuable upon such conversion before
giving effect to such adjustment and (ii) paying to such holder any amount in
cash in lieu of any fraction thereof pursuant to Section 8.02(D).
(f) For purposes of this Article 8, the number of shares of Common
Stock at any time outstanding shall not include any shares of Common Stock or
such other common stock then owned or held by or for the account of Company. The
Company shall not pay a dividend or make any distribution on, or issue any
rights or warrants in respect of, shares of Common Stock held in the treasury of
the Company.
(g) The Company shall at all times reserve and keep available, free
from preemptive rights, out of the aggregate of its authorized but unissued
shares of Common Stock or its issued shares of Common Stock held in its
treasury, for the purpose of effecting conversion of the Convertible Debentures,
the full number of shares of Common Stock deliverable upon the conversion of all
the Convertible Debentures then outstanding and not theretofore converted. Any
shares of Common Stock of the Company issued upon conversion of the Convertible
Debentures shall be duly authorized, validly issued and fully paid and
nonassessable. The Company shall deliver the shares of Common Stock received
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<PAGE> 42
upon conversion of the Convertible Debentures to the converting Holder free and
clear of all liens. charges, security interests and encumbrances, except for
United States withholding taxes. The Company shall endeavor to list the shares
of Common Stock to be delivered upon conversion of the Convertible Debentures,
prior to such delivery, upon each national securities exchange or with each
national securities association, if any, upon which the outstanding Common Stock
is listed at the time of such delivery. Prior to the delivery of any securities
that the Company shall be obligated to deliver upon conversion of Convertible
Debentures, the Company shall endeavor to comply with all federal and state laws
and regulations thereunder requiring the registration of such securities with,
or any approval of or consent to the delivery thereof by, any governmental
authority. For purposes of this Section 8.03(G), the number of shares of Common
Stock that shall be deliverable upon the conversion of all outstanding
Convertible Debentures shall be computed as if at the time of computation all
such outstanding Convertible Debentures were held by a single Holder.
(h) The Company shall pay any and all documentary, stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of shares of
Common Stock or other securities or property on conversion of Convertible
Debentures pursuant hereto; provided, however, that the Company shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issue or delivery of shares of Common Stock or other securities or
property in a name other than that of the holder of such shares to be converted
and no such issue or delivery shall be made unless and until the person
requesting such issue or delivery has paid to the Company the amount of any such
tax or established, to the reasonable satisfaction of the Company, that such tax
has been paid.
(i) Whenever the Conversion Price is adjusted as herein provided, the
Company shall promptly file with the Property Trustee for the Trust an officer's
certificate setting forth the Conversion Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment, which
certificate shall be prima facie evidence of the correctness of such adjustment.
Promptly after delivery of such certificate, the Company shall prepare a notice
of such adjustment of the Conversion Price setting forth the adjusted Conversion
Price and the effective date of such adjustment and shall send such notice of
such adjustment of the Conversion Price by first class mail, postage prepaid, to
the Holders of the Convertible Debentures, at such Holders' address as the same
appears on the records of the Company.
SECTION 8.04. MERGER, CONSOLIDATION, OR SALE OF ASSETS. (a) In the
event that the Company shall be a party to any Fundamental Change, then
appropriate provision shall be made as part of the terms of such transaction
whereby
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the Holder of each Convertible Debenture then outstanding shall have the
right thereafter to convert such Convertible Debenture only into:
(i) in the case of any such transaction that does not
constitute a Common Stock Fundamental Change and subject to funds being
legally available for such purpose under applicable law at the time of
such conversion, the kind and amount of the securities, cash or other
property that would have been receivable upon such recapitalization,
reclassification, consolidation, merger, sale, transfer or share
exchange by a holder of the number of shares of Common Stock issuable
upon conversion of such Convertible Debenture immediately prior to such
recapitalization, reclassification, consolidation, merger, sale,
transfer or share exchange, after giving effect, in the case of any
Non-Stock Fundamental Change, to any adjustment in the Conversion Price
in accordance with Section 8.04(C)(I); and
(ii) in the case of any such transaction that constitutes a
Common Stock Fundamental Change, common stock of the kind received by
holders of Common Stock as a result of such Common Stock Fundamental
Change in an amount determined in accordance with Section 8.04(C)(II).
(b) The company formed by such consolidation or resulting from such
merger or that acquires such assets or that acquires the Company's shares, as
the case may be, shall enter into a supplemental indenture with the Trustee,
satisfactory in form to the Trustee and executed and delivered to the Trustee,
the provisions of which shall establish such conversion right specified in
Section 8.04(A). Such supplemental indenture shall provide for adjustments that,
for events subsequent to the effective date of such supplemental indenture,
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Article. The above provisions shall similarly apply to successive
transactions of the foregoing type.
(c) Notwithstanding any other provision of this Section to the
contrary, if any Fundamental Change occurs, then the Conversion Price in effect
shall be adjusted immediately after such Fundamental Change as follows:
(i) in the case of a Non-Stock Fundamental Change, the
Conversion Price of the Convertible Debentures immediately following
such Non-Stock Fundamental Change shall be the lower of (A) the
Conversion Price in effect immediately prior to such Non-Stock
Fundamental Change, but after giving effect to any other prior
adjustments effected pursuant to Section 8.03, and (B) the product of
the greater of the Applicable Price and the then applicable Reference
Market Price and a
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fraction, the numerator of which is $50 and the denominator of which is
(x) the amount of the Optional Redemption Price set forth in Section
3.02 for $50 in principal amount of Convertible Debentures if the
redemption date were the date of such Non- Stock Fundamental Change
(or, for the period commencing June 17, 1998 and ending June 29, 1999,
and the twelve-month periods beginning June 30, 1999 and June 30, 2000
and the period beginning June 30, 2001 and ending July 2, 2002, the
product of 107%, 106.3%, 105.6% and 104.9 % respectively), times $50
plus (y) any then-accrued and unpaid interest on $50 principal amount
of Convertible Debentures; and
(ii) in the case of a Common Stock Fundamental Change, the
Conversion Price of the Convertible Debentures immediately following
such Common Stock Fundamental Change shall be the Conversion Price in
effect immediately prior to such Common Stock Fundamental Change, but
after giving effect to any other prior adjustments effected pursuant to
Section 8.03, multiplied by a fraction, the numerator of which is the
Purchaser Stock Price and the denominator of which is the Applicable
Price; PROVIDED, that in the event of a Common Stock Fundamental Change
in which (A) 100% of the value of the consideration received by a
holder of Common Stock is common stock of the successor, acquirer or
other third party (and cash, if any, paid with respect to any
fractional interests in such common stock resulting from such Common
Stock Fundamental Change) and (B) all of the Common Stock (other than
treasury shares and shares held by subsidiaries of the Company) shall
have been exchanged for, converted into or acquired for, common stock
of the successor, acquirer or other third party (and any cash with
respect to fractional interests in such common stock resulting from
such Common Stock Fundamental Change), the Conversion Price of the
Convertible Debentures immediately following such Common Stock
Fundamental Change shall be the Conversion Price in effect immediately
prior to such Common Stock Fundamental Change multiplied by a fraction,
the numerator of which is one (1) and the denominator of which is the
number of shares of common stock of the successor, acquirer or other
third party received by a holder of one share of Common Stock as a
result of such Common Stock Fundamental Change.
SECTION 8.05. SPECIAL PROVISIONS REGARDING ADJUSTMENT OF CONVERSION
PRICE OR OTHER PROVISIONS. In the event that the provisions of this Article 8
specifying the methods by which the Conversion Price or other provisions are
adjusted would require an adjustment that is determined in good faith by the
Board of Directors to be inconsistent with the purposes of the provisions hereof
providing for Conversion Price or other adjustments (generally, to place the
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<PAGE> 45
holders of the Convertible Debenture and the Trust Securities in a position
equivalent to the position they were in prior to the event requiring an
adjustment to the Conversion Price or other adjustments), the Board of Directors
may make an adjustment (in lieu of that required pursuant to such provisions)
that it determines in good faith to place the Holders of the Convertible
Debentures in a position at least equivalent to the position they were in prior
to such event, which determination shall be described in a Board Resolution.
There shall be no adjustment of the Conversion Price in case of the issuance of
any stock of the Company in a reorganization, acquisition or other similar
transaction except as specifically set forth in this Article 8. If any action or
transaction would require adjustment of any Conversion Price established
hereunder pursuant to more than one paragraph of this Article 8, only the
adjustment which would result in the largest reduction of such Conversion Price
shall be made.
SECTION 8.06. CERTAIN ADDITIONAL RIGHTS. In case the Company shall, by
dividend or otherwise, declare or make a distribution on the Common Stock
referred to in Section 7.01(C) or 7.01(D), the Holder of the Convertible
Debentures, upon the conversion thereof subsequent to the close of business on
the date fixed for the determination of stockholders entitled to receive such
distribution and prior to the effectiveness of the Conversion Price adjustment
in respect of such distribution, shall also be entitled to receive for each
share of Common Stock into which the Convertible Debentures are converted, the
portion of the shares of Common Stock, rights, warrants, evidences of
indebtedness, shares of capital stock, cash and assets so distributed applicable
to one share of Common Stock; provided, that, at the election of the Company
(whose election shall be evidenced by a resolution of the Board of Directors)
with respect to all Holders so converting, the Company may, in lieu of
distributing to such Holder any portion of such distribution not consisting of
cash or securities of the Company, pay such Holder an amount in cash equal to
the fair market value thereof (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and described in a resolution
of the Board of Directors). If any conversion of Convertible Debentures
described in the immediately preceding sentence occurs prior to the payment date
for a distribution to holders of Common Stock that the Holder of Convertible
Debentures so converted is entitled to receive in accordance with the
immediately preceding sentence, the Company may elect (such election to be
evidenced by a resolution of the Board of Directors) to distribute to such
Holder a due bill for the shares of Common Stock, rights, warrants, evidences of
indebtedness, shares of capital stock, cash or assets to which such Holder is so
entitled; provided, that such due bill (a) meets any applicable requirements of
the principal national securities exchange or other market on which the Common
Stock is then traded and (b) requires payment or delivery of such shares of
Common Stock, rights, warrants, evidences of indebtedness, shares of capital
stock, cash or assets no later than the
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date of payment or delivery thereof to holders of shares of Common Stock
receiving such distribution.
SECTION 8.07. TRUSTEE NOT RESPONSIBLE FOR DETERMINING CONVERSION PRICE
OR ADJUSTMENTS. Neither the Trustee nor any Conversion Agent shall at any time
be under any duty or responsibility to any Holder of any Convertible Debenture
to determine whether any facts exist which may require any adjustment of the
Conversion Price, or with respect to the nature or extent of any such adjustment
when made, or with respect to the method employed, or whether this supplemental
indenture need be entered into. Neither the Trustee nor any Conversion Agent
shall be accountable with respect to the validity or value (or the kind of
account) of any shares of Common Stock or of any securities or property, which
may at any time be issued or delivered upon the conversion of any Convertible
Debenture; and neither the Trustee nor any Conversion Agent makes any
representation with respect thereto. Neither the Trustee nor any Conversion
Agent shall be responsible for any failure of the Company to make any cash
payment or to issue, transfer or deliver any shares of Common Stock or stock
certificates or other securities or property upon the surrender of any
Convertible Debenture for the purpose of conversion.
SECTION 8.08. DEFEASANCE. The Convertible Debentures are subject to
Section 3.04 of the Base Indenture. If the Company exercises its right of
defeasance in accordance with Section 3.04 of the Base Indenture, the conversion
rights of the Holders of the Convertible Debentures under the Base Indenture and
the Supplemental Indenture and the holders of the Trust Securities under the
Declaration shall survive until the Convertible Debentures are no longer
outstanding.
ARTICLE 9
EVENTS OF DEFAULT
SECTION 9.01. EVENTS OF DEFAULT. A default in the payment of Liquidated
Damages Amounts (as defined in the Registration Rights Agreement) shall be a
default under Section 4.01(b) of the Base Indenture. Notwithstanding any other
provision to the contrary, a valid extension of the interest payment period of
the Convertible Debentures pursuant to Section 5.01 shall not constitute a
default in the payment of an installment of interest under Section 4.01(a) of
the Base Indenture.
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ARTICLE 10
FORM OF CONVERTIBLE DEBENTURE
SECTION 10.01. FORM OF CONVERTIBLE DEBENTURE. The Convertible
Debentures and the Trustee's Certificate of Authentication to be endorsed
thereon shall be substantially in the form set forth as Annex I to this
Supplemental Indenture.
ARTICLE 11
ORIGINAL ISSUE OF CONVERTIBLE DEBENTURES
SECTION 11.01. ORIGINAL ISSUE OF CONVERTIBLE DEBENTURES. Convertible
Debentures in the aggregate principal amount of up to the sum of (a)
$180,412,400 and (b) such aggregate principal amount (which may not exceed
$207,474,250 aggregate principal amount) of Convertible Debentures as shall be
purchased by the Trust as a consequence of the exercise of an over-allotment
option in accordance with the terms of the Purchase Agreement, may, upon or
following execution of this Supplemental Indenture, be executed by the Company
and delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and make available for delivery said Convertible Debentures to or
upon the written order of the Company, signed by its Chairman, its Vice
Chairman, its President, or any Vice President, without any further action by
the Company.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. RATIFICATION OF BASE INDENTURE; SUPPLEMENTAL INDENTURE
CONTROLS. The Base Indenture, as supplemented by this Supplemental Indenture, is
in all respects ratified and confirmed, and this Supplemental Indenture shall be
deemed part of the Base Indenture in the manner and to the extent herein and
therein provided. The provisions of this Supplemental Indenture shall supersede
the provisions of the Base Indenture to the extent the Base Indenture is
inconsistent herewith.
SECTION 12.02. TRUSTEE NOT RESPONSIBLE FOR RECITALS. The recitals
herein contained are made by the Company and not by the Trustee, and the Trustee
assumes no responsibility for the correctness thereof. The Trustee makes no
representation as to the validity or sufficiency of this Supplemental Indenture.
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<PAGE> 48
SECTION 12.03. GOVERNING LAW. This Supplemental Indenture and each
Convertible Debenture shall be deemed to be a contract made under the internal
laws of the State of New York, and for all purposes shall be construed in
accordance with the laws of said State.
SECTION 12.04. SEPARABILITY. In case any one or more of the provisions
contained in this Supplemental Indenture or in the Convertible Debentures 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
provisions of this Supplemental Indenture or of the Convertible Debentures, but
this Supplemental Indenture and the Convertible Debentures shall be construed as
if such invalid or illegal or unenforceable provision had never been contained
herein or therein.
SECTION 12.05. COUNTERPARTS. This Supplemental Indenture may be
executed in any number of counterparts each of which shall be an original; but
such counterparts shall together constitute but one and the same instrument.
SECTION 12.06. MERGER. The provisions of Article 7 of the Base
Indenture shall govern the obligations of Servico, Inc. and Lodgian following
the Merger.
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<PAGE> 49
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed on the date or dates indicated in the
acknowledgments and as of the day and year first above written.
SERVICO, INC.
By: /s/ Charles M. Diaz
-----------------------------------
Name: Charles M. Diaz
Title: Vice President and Secretary
WILMINGTON TRUST COMPANY,
as Trustee
By: /s/ W. Christopher Sponenberg
-----------------------------------
Name: W. Christopher Sponenberg
Title: Senior Financial Services Officer
LODGIAN, INC.
By: /s/ Charles M. Diaz
-----------------------------------
Name: Charles M. Diaz
Title: Vice President and Secretary
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ANNEX I
FORM OF CONVERTIBLE DEBENTURE
FORM OF FACE OF CONVERTIBLE DEBENTURE
THIS SECURITY, THE COMMON STOCK ISSUABLE UPON CONVERSION THEREOF, THE
GUARANTEE AND THE CRESTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAW. NEITHER THESE SECURITIES NOR ANY INTEREST OR PARTICIPATION IN
THESE SECURITIES MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT
TO, REGISTRATION.
THE HOLDER OF THESE SECURITIES BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITIES, PRIOR TO THE DATE
(THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH
THE COMPANY OR ANY "AFFILIATE" OF THE COMPANY WAS THE OWNER OF SUCH
SECURITIES (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE
COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT,
(C) FOR SO LONG AS SUCH SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT
THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR' WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF
RULE 501 UNDER THE SECURITIES ACT THAT IS
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<PAGE> 51
ACQUIRING SUCH SECURITIES FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF
SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, OR AS FIDUCIARY FOR THE
ACCOUNT OF ONE OR MORE TRUSTS, EACH OF WHICH IS AN "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a) (7) OF RULE 501 UNDER
THE SECURITIES ACT, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR
FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT UPON THE DELIVERY
OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO THE COMPANY, SUBJECT IN EACH OF THE FOREGOING CASES, TO
A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF
THESE SECURITIES BEING COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
COMPANY. EACH PURCHASER OR HOLDER OF THE SECURITY EVIDENCED HEREBY WILL
BE DEEMED TO HAVE REPRESENTED EITHER THAT (A) IT IS NOT AN EMPLOYEE
BENEFIT PLAN SUBJECT TO PART 4 OF SUBTITLE B OF TITLE 1 OF ERISA OR A
PLAN DESCRIBED IN SECTION 4975 OF THE CODE OR AN ENTITY WHOSE
UNDERLYING ASSETS INCLUDE THE ASSETS OF ANY SUCH ERISA PLAN OR OTHER
PLAN OR (B) BY REASON OF THE APPLICATION OF ONE OR MORE STATUTORY OR
ADMINISTRATIVE EXEMPTIONS FROM THE PROHIBITED TRANSACTION RULES OF
SECTION 406 OF ERISA AND SECTION 4975 OF THE CODE, ITS PURCHASE AND
HOLDING OF CRESTS WILL NOT CONSTITUTE, CAUSE OR RESULT IN THE
OCCURRENCE OF A NON-EXEMPT PROHIBITED TRANSACTION WITHIN THE MEANING OF
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE. THE HOLDER OF THESE SECURITIES BY ITS ACCEPTANCE
HEREOF AGREES TO BE BOUND BY THE PROVISIONS OF THE REGISTRATION RIGHTS
AGREEMENT RELATING TO THE SECURITIES.
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<PAGE> 52
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK
NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE
HEREOF.
No. CUSIP No. 817648AA6
SERVICO, INC.
7% CONVERTIBLE JUNIOR SUBORDINATED DEBENTURE
DUE 2010
Servico, Inc., a Florida corporation (the "COMPANY", which term
includes any successor corporation under the Indenture hereinafter referred to),
for value received, hereby promises to pay to Wilmington Trust Company, as
Property Trustee for Lodgian Capital Trust I, or registered assigns, the
principal sum set forth on Schedule A hereto on June 30, 2010, and to pay
interest on said principal sum from June 17, 1998, or from the most recent date
on which interest has been paid to which interest has been paid or duly provided
for, quarterly (subject to deferral as set forth herein) in arrears on March 31,
June 30, September 30 and December 31 of each year (each, an "INTEREST PAYMENT
DATE") commencing September 30, 1998, at the rate of Applicable Rate per annum
until the principal hereof shall have become due and payable, and on any overdue
principal and
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<PAGE> 53
premium, if any, and overdue installment of interest at the same rate per annum
compounded quarterly (without duplication and to the extent that payment of such
interest is enforceable under applicable law). The amount of interest payable on
any Interest Payment Date for any full quarterly interest period shall be
computed on the basis of a 360-day year of twelve 30-day months. Except as
provided in the following sentence, the amount of interest payable for any
period shorter than a full quarterly period for which interest is computed shall
be computed on the basis of 30-day months and, for periods of less than a month,
on the basis of the actual number of days elapsed. In the event that any date on
which interest is payable on this Convertible Debenture is not a Business Day,
then payment of interest payable on such date shall be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date. The interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date shall, as provided in the Indenture
(referred to on the reverse hereof), be paid to the person in whose name this
Convertible Debenture is registered on the Regular Record Date for such interest
installment. Any such interest installment not punctually paid or duly provided
for shall forthwith cease to be payable to the registered Holders on such
Regular Record Date and may be paid to the Person in whose name this Convertible
Debenture is registered at the close of business on a special record date to be
fixed by the Trustee for the payment of such defaulted interest, notice whereof
shall be given to the registered Holders of the Convertible Debentures not less
than 10 days prior to such special record date, or may be paid at anytime in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Convertible Debentures may be listed, and upon such notice
as may be required by such exchange, all as more fully provided in the
Indenture. The principal of (and premium, if any) and the interest on this
Convertible Debenture shall be payable at the office or agency of the Trustee
maintained for that purpose in any coin or currency of the United States of
America that at the time of payment is legal tender for payment of public and
private debts; PROVIDED, however, that payment of interest may be made at the
option of the Company by check mailed to the registered Holder at such address
as shall appear in the Debenture Register. Notwithstanding the foregoing, so
long as the Holder of this Convertible Debenture is the Property Trustee, the
payment of the principal of (and premium, if any) and interest on this
Convertible Debenture shall be made at such place and to such account as may be
designated by the Property Trustee.
The indebtedness evidenced by this Convertible Debenture is, to the
extent provided in the Indenture, subordinate and junior in right of payment to
the prior payment in full of all Senior Indebtedness, and this Convertible
Debenture is
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<PAGE> 54
issued subject to the provisions of the Indenture with respect thereto. Each
Holder of this Convertible Debenture, by accepting the same, (a) agrees to and
shall be bound by such provisions, (b) authorizes and directs the Trustee on his
or her behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination so provided and (c) appoints the
Trustee his or her attorney-in-fact for any and all such purposes. Each Holder
hereof, by his or her acceptance hereof, hereby waives all notice of the
acceptance of the subordination provisions contained herein and in the Indenture
by each holder of Senior Indebtedness, whether now outstanding or hereafter
incurred, and waives reliance by each such Holder upon said provisions.
This Convertible Debenture shall not be entitled to any benefit under
the Indenture hereinafter referred to, be valid or become obligatory for any
purpose until the Certificate of Authentication hereon shall have been signed by
or on behalf of the Trustee. The provisions of this Convertible Debenture are
continued on the reverse side hereof and such continued provisions shall for all
purposes have the same effect as though fully set forth at this place.
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<PAGE> 55
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
SERVICO, INC.
By:
--------------------------------
Name:
Title:
A-6
<PAGE> 56
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This is one of the Convertible Debentures of the series of Convertible
Debentures issued under the within-mentioned Indenture.
Dated:
Wilmington Trust Company,
as Trustee
By:
------------------------------
Authorized Signatory
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<PAGE> 57
[FORM OF REVERSE OF DEBENTURE]
This Convertible Debenture is one of a duly authorized series of
Securities of the Company specified in the Indenture, all issued or to be issued
in one or more series under and pursuant to an Indenture (the "BASE INDENTURE"),
dated as of June 17, 1998, duly executed and delivered between the Company and
Wilmington Trust Company, as Trustee (the "TRUSTEE"), as supplemented by the
Supplemental Indenture dated as of June 17, 1998, between the Company and the
Trustee (the "SUPPLEMENTAL INDENTURE" and such Supplemental Indenture, as it
supplements the Base Indenture, the "INDENTURE"), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the rights, limitations of rights, obligations, duties and immunities thereunder
of the Trustee, the Company and the Holders of Convertible Debentures. By the
terms of the Indenture, the Securities are issuable thereunder in series that
may vary as to amount, date of maturity, rate of interest and in other respects
as provided in the Indenture. This series of Securities is limited in aggregate
principal amount as specified in said Supplemental Indenture and is herein
sometimes referred to as the "CONVERTIBLE DEBENTURES."
Because of the occurrence and continuation of a Trust Special Event, in
certain circumstances, this Convertible Debenture may become due and payable, in
whole or in part, at 100% of the principal amount to be redeemed together with
any interest accrued thereon, including Compounded Interest, if any, to, but
excluding, the redemption date.
In addition, the Company shall have the right to redeem this
Convertible Debenture at the option of the Company, upon not less than 30 nor
more than 60 days notice, in whole or in part, for cash at any time on and after
July 30, 2002 at the following prices (expressed as percentages of the principal
amount of the Convertible Debentures), together with accrued and unpaid interest
(including Compounded Interest, if any) thereon to, but excluding, the
redemption date, if redeemed during the period beginning July 30, 2002 and
ending on June 27, 2003, the redemption price shall be 104.2% and if redeemed
thereafter during the 12- month period beginning on June 30 of the following
years:
YEAR REDEMPTION PRICE
---- ----------------
2003 103.5%
2004 102.8%
2005 102.1%
2006 101.4%
2007 100.7%
2008 and thereafter 100.0%
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<PAGE> 58
The Company may exercise its redemption right provided that the
redemption price (other than the portion thereof consisting of accrued and
unpaid interest (including Compounded Interest, if any)) is payable solely out
of the sale proceeds of other equity securities of the Company, and from no
other source. For purposes of the preceding sentence, "equity securities" means
(i) any equity securities, including common stock and preferred stock, of the
Company, (ii) any securities. which by their terms, are mandatory convertible or
exchangeable for, or require the purchase of, such common stock or preferred
stock and (iii) preferred securities issued by a business trust, partnership or
limited liability company, all of the common equity of which is owned, directly
or indirectly by, the Company and the sole assets of which are subordinated debt
securities with interest payments deferrable at the Company's option.
In addition, the Company shall have the right to redeem the Convertible
Debentures, in whole or in part, for cash from time to time after July 3, 2002,
upon not less than 30 days' nor more than 60 days' notice to the Holders, at a
redemption price equal to 100% of the principal amount of the Convertible
Debentures to be redeemed, together with any accrued and unpaid interest
(including Compounded Interest, if any) thereon to, but excluding the date of
such redemption. The Company may exercise its redemption night only if (i) for
20 Trading Days within any period of 30 consecutive Trading Days, including the
last day of such period, the Closing Price of the shares of Common Stock exceeds
$25.71 per share, subject to adjustment, under the circumstances described in
the Supplemental Indenture with respect to the Conversion Price and (ii) on or
prior to the date of the notice of redemption required by Section 3.05 of the
Supplemental Indenture, the Company shall have entered into an agreement,
subject to customary terms and conditions, with a nationally recognized
investment banking firm pursuant to which such firm shall have agreed to
purchase from the Company such number of whole shares of Common Stock as would
have been issuable upon conversion of Convertible Debentures that are not
surrendered for conversion prior to the close of business on the redemption
date. To exercise such redemption right, the Company shall issue a press release
announcing the redemption prior to the opening of business on the second Trading
Day after the conditions described in the preceding sentences have, from time to
time, been met but shall not issue such press release prior to July 3, 2002.
The Company may not redeem any Convertible Debentures unless all
accrued and unpaid interest has been paid on all outstanding Convertible
Debentures for all quarterly interest payment periods terminating on or prior to
the last Interest Payment Date before the date of redemption. If Convertible
Debentures are redeemed on March 31, June 30, September 30 and December 31,
accrued and unpaid interest shall be payable to Holders on the relevant record
date for such interest payment date.
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<PAGE> 59
If the Convertible Debentures are only partially redeemed by the
Company pursuant to an optional redemption, the Convertible Debentures shall be
redeemed PRO RATA.
In the event of redemption of this Convertible Debenture in part only,
a new Convertible Debenture or Convertible Debentures of this series for the
unredeemed portion hereof shall be issued in the name of the Holder hereof upon
the cancellation hereof.
In the event that the Merger Agreement is terminated or the Merger has
not been consummated by December 31, 1998, the Company shall make an offer to
each Holder of Convertible Debentures to repurchase all or any portion of such
Holder's Convertible Debentures in integral multiples of $50 at a purchase price
in cash in an amount equal to 101% of the principal amount thereof plus accrued
and unpaid interest, if any, to the date of purchase.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Convertible Debentures
may be declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not less than a majority in
aggregate principal amount of the Convertible Debentures of each series affected
at the time outstanding, as defined in the Indenture, to execute supplemental
indentures for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of the Indenture or of any supplemental
indenture or of modifying in any manner the rights of the Holders of the
Convertible Debentures of such series; PROVIDED, however, that no such
supplemental indenture shall (a) extend the stated maturity of any Convertible
Debentures of any series, or reduce the principal amount thereof, or reduce the
rate or extend the time of payment of interest thereon, or reduce any premium
payable upon the redemption thereof, or make any change that adversely affects
the right to convert any Convertible Debentures of any series or make any change
in the subordination provisions that adversely affects the rights of any Holders
of any Convertible Debentures of any series, without the consent of the Holder
of each Debenture so affected, or (b) reduce the aforesaid percentage in
aggregate principal amount of Convertible Debentures of such series, the Holders
of which are required to consent to any such supplemental indenture, without the
consent of the Holders of each Convertible Debenture of any series then
outstanding and affected thereby. The Indenture also contains provisions
permitting the Holders of a majority in aggregate principal amount of the
Convertible Debentures of any series at the time outstanding affected thereby,
on behalf of all of the Holders of the Convertible
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<PAGE> 60
Debentures of such series, to waive any past default in the performance of any
of the covenants contained in the Indenture, or established pursuant to the
Indenture with respect to such series, and its consequences, except a default in
the payment of the principal of or premium, if any, or interest on any
Convertible Debentures of such series; PROVIDED that a failure to convert any
Convertible Debentures of such series in accordance with its terms may only be
waived by the Holders affected thereby. Any such consent or waiver by the
registered Holder of this Convertible Debenture (unless revoked as provided in
the Indenture) shall be conclusive and binding upon such Holder and upon all
future Holders and owners of this Convertible Debenture and of any Convertible
Debenture issued in exchange herefor or in place hereof (whether by registration
of transfer or otherwise), irrespective of whether or not any notation of such
consent or waiver is made upon this Convertible Debenture.
No reference herein to the Indenture and no provision of this
Convertible Debenture or of the Indenture, but subject to Article 13 of the Base
Indenture, shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and premium, if any, and
interest on this Convertible Debenture at the time and place and at the rate and
in the money to the extent herein prescribed.
As long as an Event of Default under Section 4.01 of the Base Indenture
or Section 9.01 of the Supplemental Indenture shall not have occurred and be
continuing, the Company shall have the right, at any time and from time to time
during the term of the Convertible Debentures, to defer payments of interest by
extending the interest payment period of the Convertible Debentures for a period
not exceeding 20 consecutive quarterly periods (an "EXTENSION PERIOD") during
which Extension Period no interest shall be due and payable on the Convertible
Debentures; PROVIDED, that no Extension Period may extend beyond the Maturity
Date. To the extent permitted by applicable law, interest, the payment of which
has been deferred during an Extension Period, shall bear interest thereon at the
rate specified for these Convertible Debentures, compounded quarterly for each
quarter of the Extension Period ("COMPOUNDED INTEREST"). Before the termination
of any such Extension Period, the Company may further extend such Extension
Period, PROVIDED, that such Extension Period together with all such previous and
further extensions thereof shall not exceed 20 consecutive quarterly periods, or
extend beyond the Maturity Date. At the end of the Extension Period, the Company
shall pay all interest then accrued and unpaid on the Convertible Debentures,
including Compounded Interest, if any, that shall be payable to the Holders of
Convertible Debentures on the first record date after the termination of the
Extension Period. Upon the termination of any such Extension Period and upon the
payment of all accrued and unpaid interest (including Compounded Interest to the
extent permitted by applicable law), the Company may commence a
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<PAGE> 61
new Extension Period. The Company may pay at any time all or any portion of the
interest accrued during an Extension Period, subject to the requirements set
forth in the Indenture.
As provided in the Indenture and subject to certain limitations therein
set forth, this Convertible Debenture is transferable by the registered Holder
hereof on the Debenture Register of the Company, upon surrender of this
Convertible Debenture for registration of transfer at the office or agency of
the Trustee in the City and State of New York accompanied by a written
instrument or instruments of transfer in form satisfactory to the Company or the
Trustee duly executed by the registered Holder hereof or his or her attorney
duly authorized in writing, and thereupon one or more new Convertible Debentures
of authorized denominations and for the same aggregate principal amount and
series shall be issued to the designated transferee or transferees. No service
charge shall be made for any such transfer, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
relation thereto.
Prior to due presentment for registration of transfer of this
Convertible Debenture, the Company, the Trustee, any paying agent and the
Debenture Registrar may deem and treat the registered holder hereof as the
absolute owner hereof (whether or not this Convertible Debenture shall be
overdue and notwithstanding any notice of ownership or writing hereon made by
anyone other than the Debenture Registrar) for the purpose of receiving payment
of or on account of the principal hereof and premium, if any, and interest due
hereon and for all other purposes, and neither the Company nor the Trustee nor
any paying agent nor any Debenture Registrar shall be affected by any notice to
the contrary. No recourse shall be had for the payment of the principal of or
the interest on this Convertible Debenture, or for any claim based hereon, or
otherwise in respect hereof, or based on or in respect of the Indenture, against
any in corporation, stockholder, officer or director, past, present or future,
as such, of the Company or of any predecessor or successor corporation, whether
by virtue of any constitution, statute or rule of law, or by the enforcement of
any assessment or penalty or otherwise, all such liability being, by the
acceptance hereof and as part of the consideration for the issuance hereof,
expressly waived and released.
Subject to and upon compliance with Article 8 of the Supplemental
Indenture, the Holder of this Convertible Debenture has the right, exercisable
at any time beginning 90 days following the last date of original issuance of
any CRESTS and prior to the close of business on (i) June 28, 2010 or (ii) in
the event this Convertible Debenture is called for redemption, the second
Business Day prior to the related redemption date, subject to limited exceptions
specified in the Supplemental Indenture, to convert the principal amount hereof
(or any portion thereof that is an integral multiple of $50) into that number of
fully paid and
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<PAGE> 62
nonassessable shares of Common Stock obtained by dividing the principal amount
of the Convertible Debentures to be converted by the Conversion Price in effect
on the Conversion Date. The initial Conversion Price is $21.42 per share of
Common Stock. The Conversion Price is subject to adjustment as described in the
Indenture. All Conversion Price and conversion provision calculations shall be
made to the nearest 1/100 of a cent (with $.00005 being rounded upward) or to
the nearest 1/10,000 of a share (with .00005 of a share being rounded upward),
as the case may be.
To convert all or a portion of this Convertible Debenture, a Holder
must (a) complete and sign an irrevocable notice of election to convert
substantially in the form attached hereto and deliver such Conversion Notice to
the Conversion Agent, together with any payment required by the fourth sentence
of this paragraph, (b) surrender the Convertible Debenture to the Conversion
Agent, (c) furnish appropriate endorsements or transfer documents if required by
the Conversion Agent and (d) pay any transfer or similar tax, if required.
Except as provided below, accrued but unpaid interest shall not be paid in cash
on Convertible Debentures that are converted by a Holder into Common Stock, nor
shall such accrued interest be converted into additional shares of Common Stock.
Holders of Convertible Debentures at the close of business on a Regular Record
Date shall be entitled to receive the interest payable on such Convertible
Debentures (except that holders of Convertible Debentures called for redemption
on a redemption date between such Regular Record Date and the Interest Payment
Date shall not be entitled to receive such interest on such Interest Payment
Date) on the corresponding Interest Payment Date notwithstanding the conversion
of such Convertible Debentures following such Regular Record Date and prior to
such Interest Payment Date. However, Convertible Debentures surrendered for
conversion during the period between the close of business on any Regular Record
Date and the opening of business on the corresponding Interest Payment Date
(except Convertible Debentures called for redemption on a redemption date during
such period) must be accompanied by payment of an amount equal to the interest
payable on such Convertible Debentures on such Interest Payment Date. A Holder
of Convertible Debentures on a Regular Record Date who (or whose transferee)
tenders any such Convertible Debentures for conversion into shares of Common
Stock on such Interest Payment Date shall receive the interest payable by the
Company on such Convertible Debentures on such date, and the converting Holder
need not include payment of the amount of such interest upon surrender of
Convertible Debentures for conversion. The Company shall make no payment or
allowance for dividends on the shares of Common Stock issued upon conversion.
No fractional shares shall be issued upon conversion but a cash payment
shall be made by the Company in lieu of such fractional interest. The
outstanding principal amount of any Convertible Debenture shall be reduced by
the principal
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<PAGE> 63
amount thereof converted into shares of Common Stock or other shares of common
stock of the Company.
The Company's delivery upon conversion of the fixed number of shares of
Common Stock or other shares of common stock of the Company into which the
Convertible Debentures are convertible (together with cash in lieu of fractional
shares) shall be deemed to satisfy the Company's obligation to pay the principal
amount at the Maturity Date of the portion of Convertible Debentures so
converted and any unpaid interest (including Compounded Interest) accrued on
such Convertible Debentures at the time of such conversion.
The Convertible Debentures of this series are issuable only in
registered form without coupons in denominations of $50 and any integral
multiple thereof. IF THE CONVERTIBLE DEBENTURE IS TO BE A GLOBAL DEBENTURE,
SUBSTITUTE THE FOLLOWING FOR THE PREVIOUS SENTENCE: This Global Debenture is
exchangeable for Convertible Debentures in definitive form only under certain
limited circumstances set forth in the Indenture. Convertible Debentures of this
series so issued are issuable only in registered form without coupons in
denominations of $50 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Convertible
Debentures of this series are exchangeable for a like aggregate principal amount
of Convertible Debentures of this series of a different authorized denomination,
as requested by the Holder surrendering the same.
All terms used in this Convertible Debenture that are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE
AND THE CONVERTIBLE DEBENTURES WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS
THEREOF.
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<PAGE> 64
FORM OF ELECTION TO CONVERT
To: [Servico, Inc.] [Lodgian, Inc.]
The undersigned Holder of this Convertible Debenture hereby irrevocably
exercises the option to convert this Convertible Debenture, or the portion below
designated, into Common Stock of [SERVICO, INC.] [LODGIAN, INC.](the "COMPANY"),
or any other class of common stock of the Company, as permitted by the Articles
of Incorporation of the Company, in accordance with the terms of the Indenture
referred to in this Convertible Debenture, and directs that the shares issuable
and deliverable upon conversion, together with any check in payment for
fractional shares, be issued in the name of and delivered to the undersigned,
unless a different name has been indicated in the assignment below. If shares
are to be issued in the name of a person other than the undersigned, the
undersigned shall pay all transfer taxes payable with respect thereto. However,
Convertible Debentures surrendered for conversion during the period between the
close of business on any Regular Record Date and the opening of business on the
corresponding Interest Payment Date (except Convertible Debentures called for
redemption on a redemption date during such period) must be accompanied by
payment of an amount equal to the interest payable on such Interest Payment
Date.
Date:
in whole in part
Portion of principal amount
of the Convertible Debenture
to be converted ($50 or
integral multiples thereof):
$
Signature (for conversion only)
Please Print or Typewrite Name and Address, Including Zip Code, and Social
Security or Other Identifying Number
Signature Guarantee:(1)
- --------
(1) The signature(s) should be guaranteed by an eligible guarantor
institution
(continued...)
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<PAGE> 65
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and
zip code)
(Insert assignee's soc. sec. or tax I.D.
No.)
and irrevocably appoint agent to transfer this Security on the books of the
Company. The agent may substitute another to act for him.
- -------------------------------------------------------------------------------
Date:
---------------------------------------
Your Signature:
------------------------
Signature Guarantee:
------------------------
- --------------------------------------------
(Signature must be guaranteed)(2)
- -------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer or exchange of any of the Securities evidenced
by this certificate occurring prior to the date that is two years after the
later of the date of original issuance of such Securities and the last date, if
any, on which such Securities were owned by the Company or any Affiliate of the
Company, the undersigned confirms that such Securities are being:
CHECK ONE BOX BELOW:
- -------------
(1) (...continued)
(banks, stockbrokers, savings and loan associations and credit
unions with membership in an approved signature guarantee medallion program),
pursuant to SEC Rule 17Ad-15.
(2) The signature(s) should be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and credit
unions with membership in an approved signature guarantee medallion program),
pursuant to SEC Rule 17Ad-15.
A-16
<PAGE> 66
1/ / acquired for the undersigned's own account, without transfer; or
2/ / transferred to the Company or a subsidiary thereof; or
3/ / transferred pursuant to an effective registration statement under
the Securities Act of 1933, as amended (the "SECURITIES ACT"); or
4/ / for so long as the Securities are eligible for resale pursuant
to Rule 144A under the Securities Act, to a person the
undersigned reasonably believes is a "qualified institutional
buyer" as defined in Rule 144A that purchases for its own account
or for the account of a qualified institutional buyer to whom
notice is give that the transfer is being made in reliance on
Rule 144A; or
5/ / to an institutional "accredited investor" within the meaning of
subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the
Securities Act, that is acquiring such securities for its own
account, or for the account of such an institutional Accredited
Investor, or as fiduciary for the account of one or more trusts,
each of which is an "accredited investor" within the meaning of
subparagraph (a)(7) of Rule 501 under the Securities Act, for
investment purposes and not with a view to, or for offer or sale
in connection with any distribution in violation of the
Securities Act; or
6/ / transferred pursuant to another available exemption from the
registration requirements of the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee shall refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered holder thereof; PROVIDED, HOWEVER, that if box (6) is
checked, the Trustee or the Company may require, prior to registering any such
transfer of the Securities, in their sole discretion, such legal opinions,
certifications and other information as the Trustee or the Company may
reasonably request to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, such as the exemption provided by
Rule 144 under such Act.
------------------------------
Signature
Signature Guarantee:
A-17
<PAGE> 67
- --------------------------------- ------------------------------
(Signature must be guaranteed)(3) Signature
- ------------------------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (4) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Convertible Debenture for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
- ------------------------
Dated:
- --------
(3) The signature(s) should be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and credit
unions with membership in an approved signature guarantee medallion program),
pursuant to SEC Rule 17Ad-15.
A-18
<PAGE> 68
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Convertible Debenture purchased by the Company
pursuant to Section 4.01 of the Indenture, check the Box: / /
If you wish to have a portion of this Convertible Debenture purchased
by the Company pursuant to Section 4.01 of the Indenture, state the amount:
maturity): $______________.
Date:
---------------------
Your Signature:
------------------------------------------------------------
(Sign exactly as your name appears on
the other side of this Convertible Debenture)
Signature Guarantee:
-----------------------------------------
A-19
<PAGE> 69
[FORM OF SCHEDULE FOR ENDORSEMENTS ON GLOBAL
DEBENTURES TO REFLECT CHANGES IN PRINCIPAL AMOUNT]
Schedule A
Changes to Principal Amount of Global Debentures
The initial principal amount of this Global Debenture shall be $[ ].
The following increases or decreases in the principal amount of this Global
Debenture have been made:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
SECURITIES BY WHICH
THIS GLOBAL DEBENTURE SIGNATURE
IS TO BE REDUCED OR OF
INCREASED, AND REASON REMAINING PRINCIPAL AUTHORIZED
FOR REDUCTION OR AMOUNT OF THIS OFFICIAL OF
DATE INCREASE GLOBAL DEBENTURE THE TRUSTEE
- ---- --------------------- ------------------- -----------
<S> <C> <C> <C>
- -------- -------------------- ------------------ ---------
- -------- -------------------- ------------------ ---------
- -------- -------------------- ------------------ ---------
- -------- -------------------- ------------------ ---------
- -------- -------------------- ------------------ ---------
- -------- -------------------- ------------------ ---------
- -------- -------------------- ------------------ ---------
- -------- -------------------- ------------------ ---------
</TABLE>
A-20
<PAGE> 1
Exhibit 10.3
- -------------------------------------------------------------------------------
GUARANTEE AGREEMENT
LODGIAN CAPITAL TRUST I
Dated as of June 17, 1998
- -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
----------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1
INTERPRETATION AND DEFINITIONS
SECTION 1.01. INTERPRETATION AND DEFINITIONS...................................................2
ARTICLE 2
TRUST INDENTURE ACT
SECTION 2.01. TRUST INDENTURE ACT; APPLICATION.................................................6
SECTION 2.02. LISTS OF HOLDERS OF SECURITIES...................................................6
SECTION 2.03. REPORTS BY GUARANTEE TRUSTEE.....................................................7
SECTION 2.04. PERIODIC REPORTS TO GUARANTEE TRUSTEE............................................7
SECTION 2.05. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.................................7
SECTION 2.06. GUARANTEE EVENT OF DEFAULT; WAIVER...............................................7
SECTION 2.07. GUARANTEE EVENT OF DEFAULT; NOTICE...............................................7
SECTION 2.08. CONFLICTING INTERESTS............................................................8
SECTION 2.09. DISCLOSURE OF INFORMATION........................................................8
SECTION 2.10. GUARANTEE TRUSTEE MAY FILE PROOFS OF CLAIM.......................................8
ARTICLE 3
POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE
SECTION 3.01. POWERS AND DUTIES OF GUARANTEE TRUSTEE...........................................8
SECTION 3.02. CERTAIN RIGHTS OF GUARANTEE TRUSTEE.............................................10
SECTION 3.03. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE...........................12
ARTICLE 4
GUARANTEE TRUSTEE
SECTION 4.01. GUARANTEE TRUSTEE; ELIGIBILITY..................................................12
SECTION 4.02. APPOINTMENT, REMOVAL AND RESIGNATION OF GUARANTEE
TRUSTEE.........................................................................13
ARTICLE 5
GUARANTEE
SECTION 5.01. GUARANTEE.......................................................................14
SECTION 5.02. WAIVER OF NOTICE AND DEMAND.....................................................14
SECTION 5.03. OBLIGATIONS NOT AFFECTED........................................................15
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 5.04. RIGHTS OF HOLDERS...............................................................16
SECTION 5.05. GUARANTEE OF PAYMENT............................................................16
SECTION 5.06. SUBROGATION.....................................................................16
SECTION 5.07. INDEPENDENT OBLIGATIONS.........................................................17
ARTICLE 6
LIMITATION OF TRANSACTIONS; RANKING
SECTION 6.01. LIMITATION OF TRANSACTIONS......................................................17
SECTION 6.02. RANKING.........................................................................17
ARTICLE 7
TERMINATION
SECTION 7.01. TERMINATION.....................................................................18
ARTICLE 8
INDEMNIFICATION
SECTION 8.01. EXCULPATION.....................................................................18
SECTION 8.02. INDEMNIFICATION.................................................................19
ARTICLE 9
ASSUMPTION
SECTION 9.01. MERGER WITH IMPAC...............................................................19
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. SUCCESSORS AND ASSIGNS.........................................................19
SECTION 10.02. AMENDMENTS.....................................................................19
SECTION 10.03. NOTICES........................................................................20
SECTION 10.04. BENEFIT........................................................................21
SECTION 10.05. GOVERNING LAW..................................................................21
</TABLE>
ii
<PAGE> 4
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW, NEITHER THESE
SECURITIES NOR ANY INTEREST OR PARTICIPATION IN THESE SECURITIES MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THESE SECURITIES BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITIES, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY "AFFILIATE" OF THE COMPANY
WAS THE OWNER OF SUCH SECURITIES (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A)
TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS SUCH SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7)
OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING SUCH SECURITIES FOR ITS
OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, OR
AS FIDUCIARY FOR THE ACCOUNT OF ONE OR MORE TRUSTS, EACH OF WHICH IS AN
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a) (7) OF RULE 501
UNDER THE SECURITIES ACT, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT UPON THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO THE COMPANY,
SUBJECT IN EACH OF THE FOREGOING CASES, TO A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THE SECURITIES BEING COMPLETED AND DELIVERED BY THE TRANSFEROR TO
THE
<PAGE> 5
COMPANY. EACH PURCHASER OR HOLDER OF THE SECURITY EVIDENCED HEREBY WILL BE
DEEMED TO HAVE REPRESENTED EITHER THAT (A) IT IS NOT AN EMPLOYEE BENEFIT PLAN
SUBJECT TO PART 4 OF SUBTITLE B OF TITLE 1 OF ERISA OR A PLAN DESCRIBED IN
SECTION 4975 OF THE CODE OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE THE ASSETS
OF ANY SUCH ERISA PLAN OR OTHER PLAN OR (B) BY REASON OF THE APPLICATION OF ONE
OR MORE STATUTORY OR ADMINISTRATIVE EXEMPTIONS FROM THE PROHIBITED TRANSACTION
RULES OF SECTION 406 OF ERISA AND SECTION 4975 OF THE CODE, ITS PURCHASE AND
HOLDING OF CRESTS WILL NOT CONSTITUTE, CAUSE OR RESULT IN THE OCCURRENCE OF A
NON-EXEMPT PROHIBITED TRANSACTION WITHIN THE MEANING OF SECTION 406 OF ERISA OR
SECTION 4975 OF THE CODE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE
HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
THE HOLDER OF THESE SECURITIES BY ITS ACCEPTANCE HEREOF AGREES TO BE BOUND BY
THE PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT RELATING TO THE SECURITIES.
<PAGE> 6
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "GUARANTEE"), dated as of June 17, 1998,
is executed and delivered by Servico, Inc., a Florida corporation (the
"GUARANTOR"), Wilmington Trust Company, as trustee (the "GUARANTEE TRUSTEE"),
and Lodgian, Inc., a Delaware corporation ("LODGIAN") for the benefit of the
Holders (as defined herein) from time to time of the Securities (as defined
herein) of Lodgian Capital Trust I, a Delaware statutory business trust (the
"TRUST").
W I T N E S S E T H:
WHEREAS, pursuant to the Declaration (as defined herein), the Trust is
issuing up to $175,000,000 aggregate liquidation amount of convertible preferred
securities, having a liquidation amount of $50 per security and designated the
7% Convertible Redeemable Equity Structured Trust Securities of the Trust (and
may issue up to an additional $26,250,000 aggregate liquidation amount of 7%
Convertible Redeemable Equity Structured Trust Securities solely to cover
over-allotments) (the "CRESTS") and $5,412,400 aggregate liquidation amount of
common securities, having a liquidation amount of $50 per security and
designated the 7% Common Securities of the Trust (and may issue up to an
additional $811,850 of aggregate liquidation amount of Common Securities if
additional CRESTS are issued) (the "COMMON SECURITIES" and, together with the
CRESTS, the "SECURITIES");
WHEREAS, as incentive for the Holders to purchase the Securities, the
Guarantor desires irrevocably and unconditionally to agree, to the extent set
forth in this Guarantee, to pay to the Holders of the Securities the Guarantee
Payments (as defined herein) and to make certain other payments on the terms and
conditions set forth herein; and that if a Trust Enforcement Event (as defined
herein) has occurred and is continuing, the rights of Holders of the Common
Securities to receive Guarantee Payments under this Guarantee are subordinated
to the rights of Holders of CRESTS to receive Guarantee Payments under this
Guarantee.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Securities, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Guarantee for the benefit of
the Holders.
<PAGE> 7
ARTICLE 1
INTERPRETATION AND DEFINITIONS
SECTION 1.01. INTERPRETATION AND DEFINITIONS. In this Guarantee, unless
the context otherwise requires:
(a) capitalized terms used in this Guarantee but not defined in the
preamble above have the respective meanings assigned to them in this Section
1.01;
(b) a term defined anywhere in this Guarantee has the same meaning
throughout;
(c) all references to "the Guarantee" or "this Guarantee" are to this
Guarantee as modified, supplemented or amended from time to time;
(d) all references in this Guarantee to Articles, Sections and
Recitals are to Articles, Sections and Recitals of this Guarantee, unless
otherwise specified;
(e) unless otherwise defined in this Guarantee, a term defined in the
Trust Indenture Act has the same meaning when used in this Guarantee;
(f) a reference to the singular includes the plural and vice versa and
a reference to any masculine form of a term shall include the feminine form of a
term, as applicable; and
(g) the following terms have the following meanings:
"AFFILIATE" has the same meaning as given to that term in Rule 405 of
the Securities Act of 1933, as amended, or any successor rule thereunder.
"BUSINESS DAY" has the meaning specified in the Declaration.
"COMMON SECURITIES" has the meaning specified in the Recitals hereto.
"COMMON STOCK" means the common stock of the Guarantor, $.01 par value
per share, or any other class of common stock of the Guarantor.
"CORPORATE TRUST OFFICE" means the principal office of the Guarantee
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of execution of this Guarantee is located
at Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890, Attn: Corporate Trust Administration.
2
<PAGE> 8
"COVERED PERSON" means a Holder or beneficial owner of Securities.
"CRESTS" has the meaning specified in the Recitals hereto.
"DEBENTURES" means the series of convertible junior subordinated
deferrable interest debentures to be issued by the Guarantor designated the 7%
Convertible Junior Subordinated Debentures Due 2010 held by the Property Trustee
(as defined in the Declaration) of the Trust.
"DECLARATION" means the Amended and Restated Declaration of Trust,
dated as of June 17, 1998, as amended, modified or supplemented from time to
time, among the trustees of the Trust named therein, the Guarantor, as sponsor,
Lodgian and the Holders, from time to time, of undivided beneficial ownership
interests in the assets of the Trust.
"GLOBAL SECURITY" means a fully registered, global CRESTS.
"GUARANTEE EVENT OF DEFAULT" means a default by the Guarantor on any of
its payment or other obligations under this Guarantee.
"GUARANTEE PAYMENTS" means the following payments or distributions,
without duplication, with respect to the CRESTS or the Common Securities, as the
case may be, to the extent not paid by or on behalf of the Trust: (i) any
accumulated and unpaid Distributions (as defined in the Declaration) that are
required to be paid on such CRESTS or the Common Securities, as the case may be,
to the extent the Trust has sufficient funds available therefor at the time,
(ii) the Redemption Price and all accumulated and unpaid Distributions to the
date of redemption, with respect to any CRESTS or Common Securities, as the case
may be, called for redemption by the Trust, to the extent the Trust shall have
sufficient funds available therefor at the time or (iii) upon a voluntary or
involuntary dissolution, winding-up or termination of the Trust (other than in
connection with the exchange of all of the Securities for Debentures and the
conversion thereof into Common Stock or the distribution of Debentures to the
Holders in exchange for CRESTS or Common Securities, as the case may be, as
provided in the Declaration or a redemption of all of the CRESTS or the Common
Securities, as the case may be), the lesser of (A) the aggregate of the
liquidation amount and all accumulated and unpaid Distributions on the CRESTS or
the Common Securities, as the case may be, to the date of payment, to the extent
the Trust has sufficient funds available therefor and (B) the amount of assets
of the Trust remaining available for distribution to Holders in liquidation of
the Trust (in either case, the "LIQUIDATION DISTRIBUTION"). If an event of
default under the Indenture has occurred and is continuing, the rights of
Holders of the Common Securities to
3
<PAGE> 9
receive Guarantee Payments are subordinated to the rights of Holders of CRESTS
to receive Guarantee Payments.
"GUARANTEE TRUSTEE" means Wilmington Trust Company, until a Successor
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee and thereafter means each such Successor
Guarantee Trustee.
"HOLDER" means any holder of CRESTS or Common Securities, as the case
may be, as registered on the books and records of the Trust; PROVIDED, however,
that, in determining whether the Holders of the requisite liquidation amount of
CRESTS have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any Affiliate of the Guarantor or any other
obligor on the CRESTS; and PROVIDED FURTHER, that in determining whether the
Holders of the requisite liquidation amount of CRESTS have voted on any matter
provided for in this Guarantee, then for the purpose of such determination only
(and not for any other purpose hereunder), if the CRESTS remain in the form of
one or more Global Certificates (as defined in the Declaration), the term
"Holders" shall mean the holder of the Global Certificate acting at the
direction of the Beneficial Owners (as defined in the Declaration).
"INDEMNIFIED PERSON" means the Guarantee Trustee, any Affiliate of the
Guarantee Trustee, or any officers, directors, shareholders, members, partners,
employees, representatives, nominees, custodians or agents of the Guarantee
Trustee.
"INDENTURE" means the Indenture, dated as of June 17, 1998, among the
Guarantor, Lodgian and Wilmington Trust Company, as trustee, as amended and
supplemented by the First Supplemental Indenture dated as of June 17, 1998, and
by any other indenture supplemental thereto pursuant to which the Debentures are
to be issued to the Property Trustee of the Trust.
"MAJORITY IN LIQUIDATION AMOUNT" means, except as provided in the terms
of the CRESTS or by the Trust Indenture Act, Holder(s) of outstanding
Securities, voting together as a single class, or, as the context may require,
Holders of outstanding CRESTS or Holders of outstanding Common Securities,
voting separately as a class, who are the record owners of more than 50% of the
aggregate liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accumulated and unpaid Distributions
to the date upon which the voting percentages are determined) of all outstanding
Securities of the relevant class. In determining whether the Holders of the
requisite amount of CRESTS have voted, CRESTS which are owned by the
4
<PAGE> 10
Guarantor or any Affiliate of the Guarantor or any other obligor on the CRESTS
shall be disregarded for the purpose of any such determination.
"MERGER" has the meaning specified in Section 9.01.
"OFFICERS' CERTIFICATE" means, with respect to any Person, a
certificate signed on behalf of such Person by two Authorized Officers (as
defined in the Declaration) of such Person. Any Officers' Certificate delivered
with respect to compliance with a condition or covenant provided for in this
Guarantee shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer on behalf of such Person in rendering
the Officers' Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
on behalf of such Person to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer
acting on behalf of such Person, such condition or covenant has been complied
with.
"PERSON" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"PROPERTY TRUSTEE" has the meaning specified in the Declaration.
"REDEMPTION PRICE" has the meaning specified in the Declaration.
"RESPONSIBLE OFFICER" means, with respect to the Guarantee Trustee, any
officer with direct responsibility for the administration of this Guarantee and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of that officer's knowledge of
and familiarity with the particular subject.
"SECURITIES" has the meaning specified in the Recitals hereto.
5
<PAGE> 11
"SUCCESSOR GUARANTEE TRUSTEE" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.01.
"TRUST ENFORCEMENT EVENT" in respect of the Securities means an
Indenture Event of Default (as defined in the Indenture) has occurred and is
continuing in respect of the Debentures.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as amended
from time to time, or any successor legislation.
ARTICLE 2
TRUST INDENTURE ACT
SECTION 2.01. TRUST INDENTURE ACT; APPLICATION. (a) This Guarantee is
subject to the provisions of the Trust Indenture Act that are required to be
part of this Guarantee and shall, to the extent applicable, be governed by such
provisions.
(b) If and to the extent that any provision of this Guarantee limits,
qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
SECTION 2.02. LISTS OF HOLDERS OF SECURITIES. (a) The Guarantor shall
provide the Guarantee Trustee (i) except while the CRESTS are represented by one
or more Global Securities at least one Business Day prior to the date for
payment of Distributions, a list, in such form as the Guarantee Trustee may
reasonably require, of the names and addresses of the Holders of the CRESTS
("LIST OF HOLDERS") as of the record date relating to the payment of such
Distributions, and (ii) at any other time, within 30 days of receipt by the
Guarantor of a written request from the Guarantee Trustee for a List of Holders
as of a date no more than 15 days before such List of Holders is given to the
Guarantee Trustee; PROVIDED that the Guarantor shall not be obligated to provide
such List of Holders at any time the List of Holders does not differ from the
most recent List of Holders given to the Guarantee Trustee by the Guarantor. The
Guarantee Trustee shall preserve, in as current a form as is reasonably
practicable, all information contained in Lists of Holders given to it, PROVIDED
that the Guarantee Trustee may destroy any List of Holders previously given to
it on receipt of a new List of Holders.
(b) The Guarantee Trustee shall comply with its obligations under
Sections 311 (a), 311 (b) and 312(b) of the Trust Indenture Act.
6
<PAGE> 12
SECTION 2.03. REPORTS BY GUARANTEE TRUSTEE. Within 60 days after May 15
of each year (commencing with the year of the first anniversary of the issuance
of the Securities), the Guarantee Trustee shall provide to the Holders of the
CRESTS such reports as are required by Section 313 of the Trust Indenture Act
(if any) in the form and in the manner provided by Section 313 of the Trust
Indenture Act. The Guarantee Trustee shall also comply with the requirements of
Section 313(d) of the Trust Indenture Act.
SECTION 2.04. PERIODIC REPORTS TO GUARANTEE TRUSTEE. The Guarantor
shall provide to the Guarantee Trustee such documents, reports and information
as required by Section 314(a) (if any) of the Trust Indenture Act and the
compliance certificate required by Section 314(a) of the Trust Indenture Act in
the form, in the manner and at the times required by Section 314(a) of the Trust
Indenture Act.
SECTION 2.05. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. The
Guarantor shall provide to the Guarantee Trustee such evidence of compliance
with any conditions precedent, if any, provided for in this Guarantee that
relate to any of the matters set forth in Section 314(c) of the Trust Indenture
Act. Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(1) may be given in the form of an Officers' Certificate.
SECTION 2.06. GUARANTEE EVENT OF DEFAULT; WAIVER. The Holders of a
Majority in Liquidation Amount of the CRESTS or Common Securities, as the case
may be, may, by vote or written consent, on behalf of the Holders of all of the
CRESTS or Common Securities, as the case may be, waive any past Guarantee Event
of Default and its consequences. Upon such waiver, any such Guarantee Event of
Default shall cease to exist, and any Guarantee Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this
Guarantee, but no such waiver shall extend to any subsequent or other default or
Guarantee Event of Default or impair any right consequent thereon.
SECTION 2.07. GUARANTEE EVENT OF DEFAULT; NOTICE. (a) The Guarantee
Trustee shall, within 90 days after the occurrence of a Guarantee Event of
Default, transmit by mail, first class postage prepaid, to the Holders of the
CRESTS or Common Securities, as the case may be, notices of all Guarantee Events
of Default actually known to a Responsible Officer of the Guarantee Trustee,
unless such defaults have been cured before the giving of such notice; PROVIDED,
that the Guarantee Trustee shall be protected in withholding such notice if and
so long as a Responsible Officer of the Guarantee Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders of the CRESTS or the Common Securities, as the case may be.
7
<PAGE> 13
(b) The Guarantee Trustee shall not be deemed to have knowledge of any
Guarantee Event of Default unless the Guarantee Trustee shall have received
written notice thereof or a Responsible Officer of the Guarantee Trustee charged
with the administration of the Declaration shall have obtained actual knowledge
thereof.
SECTION 2.08. CONFLICTING INTERESTS. The Declaration shall be deemed to
be specifically described in this Guarantee for the purposes of clause (i) of
the first proviso contained in Section 310(b) of the Trust Indenture Act.
SECTION 2.09. DISCLOSURE OF INFORMATION. The disclosure of information
as to the names and addresses of the Holders of the CRESTS in accordance with
Section 312 of the Trust Indenture Act, regardless of the source from which such
information was derived, shall not be deemed to be a violation of any existing
law, or any law hereafter enacted which does not specifically refer to Section
312 of the Trust Indenture Act, nor shall the Guarantee Trustee be held
accountable by reason of mailing any material pursuant to a request made under
Section 312(b) of the Trust Indenture Act.
SECTION 2.10. GUARANTEE TRUSTEE MAY FILE PROOFS OF CLAIM. Upon the
occurrence of a Guarantee Event of Default, the Guarantee Trustee is hereby
authorized to (a) recover judgment, in its own name and as trustee of an express
trust, against the Guarantor for the whole amount of any Guarantee Payments
remaining unpaid and (b) file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have its claims and those of the
Holders of the Securities allowed in any judicial proceedings relative to the
Guarantor, its creditors or its property.
ARTICLE 3
POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE
SECTION 3.01. POWERS AND DUTIES OF GUARANTEE TRUSTEE. (a) This
Guarantee shall be held by the Guarantee Trustee on behalf of the Trust for the
benefit of the Holders of the Securities and the Guarantee Trustee shall not
transfer this Guarantee to any Person except a Holder of Securities exercising
his or her rights pursuant to Section 5.03(b) or to a Successor Guarantee
Trustee on acceptance by such Successor Guarantee Trustee of its appointment to
act as Successor Guarantee Trustee. The right, title and interest of the
Guarantee Trustee in and to this Guarantee shall automatically vest in any
Successor Guarantee Trustee, and such vesting and succession of title shall be
effective whether or not
8
<PAGE> 14
conveyance documents have been executed and delivered pursuant to the
appointment of such Successor Guarantee Trustee.
(b) If a Guarantee Event of Default actually known to a Responsible
Officer of the Guarantee Trustee has occurred and is continuing, the Guarantee
Trustee shall enforce this Guarantee for the benefit of the Holders of the
Securities.
(c) The Guarantee Trustee, before the occurrence of any Guarantee
Event of Default and after the curing of all Guarantee Events of Default that
may have occurred, shall undertake to perform only such duties as are
specifically set forth in this Guarantee, and no implied covenants shall be read
into this Guarantee against the Guarantee Trustee. In case a Guarantee Event of
Default has occurred (that has not been cured or waived pursuant to Section
2.06) and is actually known to a Responsible Officer of the Guarantee Trustee,
the Guarantee Trustee shall exercise such of the rights and powers vested in it
by this Guarantee, and use the same degree of care and skill in its exercise
thereof, as a prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs.
(d) No provision of this Guarantee shall be construed to relieve the
Guarantee Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of any Guarantee Event of Default and
after the curing or waiving of all such Guarantee Events of Default
that may have occurred:
(A) the duties and obligations of the Guarantee Trustee
shall be determined solely by the express provisions of this
Guarantee, and the Guarantee Trustee shall not be liable
except for the performance of such duties and obligations as
are specifically set forth in this Guarantee, and no implied
covenants or obligations shall be read into this Guarantee
against the Guarantee Trustee; and
(B) in the absence of bad faith on the part of the
Guarantee Trustee, the Guarantee Trustee may conclusively
rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or
opinions furnished to the Guarantee Trustee and conforming to
the requirements of this Guarantee; but in the case of any
such certificates or opinions that by any provision hereof are
specifically required to be furnished to the Guarantee
Trustee, the Guarantee Trustee shall be under a duty
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<PAGE> 15
to examine the same to determine whether or not they conform
to the requirements of this Guarantee;
(ii) the Guarantee Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer of the
Guarantee Trustee, unless it shall be proved that the Guarantee Trustee
was negligent in ascertaining the pertinent facts upon which such
judgment was made;
(iii) the Guarantee Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a
Majority in Liquidation Amount of the CRESTS or Common Securities, as
the case may be, relating to the time, method and place of conducting
any proceeding for any remedy available to the Guarantee Trustee, or
exercising any trust or power conferred upon the Guarantee Trustee
under this Guarantee; and
(iv) no provision of this Guarantee shall require the
Guarantee Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or
in the exercise of any of its rights or powers, if the Guarantee
Trustee shall have reasonable grounds for believing that the repayment
of such funds or liability is not reasonably assured to it under the
terms of this Guarantee or if the Guarantee Trustee shall have
reasonable grounds for believing that an indemnity, reasonably
satisfactory to the Guarantee Trustee, against such risk or liability
is not reasonably assured to it.
SECTION 3.02. CERTAIN RIGHTS OF GUARANTEE TRUSTEE. (a) Subject to the
provisions of Section 3.01:
(i) The Guarantee Trustee may conclusively rely, and shall be
fully protected in acting or refraining from acting upon, any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document believed by
it to be genuine and to have been signed, sent or presented by the
proper party or parties;
(ii) Any direction or act of the Guarantor contemplated by
this Guarantee shall be sufficiently evidenced by an Officers'
Certificate;
(iii) Whenever, in the administration of this Guarantee, the
Guarantee Trustee shall deem it desirable that a matter be proved or
established before taking, suffering or omitting any action hereunder,
the Guarantee Trustee (unless other evidence is herein specifically
prescribed)
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<PAGE> 16
may, in the absence of bad faith on its part, request and conclusively
rely upon an Officers' Certificate which, upon receipt of such request,
shall be promptly delivered by the Guarantor;
(iv) The Guarantee Trustee shall have no duty to see to any
recording, filing or registration of any instrument (or any
rerecording, refiling or re-registration thereof);
(v) The Guarantee Trustee may consult with counsel, and the
advice or opinion of such counsel with respect to legal matters shall
be full and complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in good faith and in
accordance with such advice or opinion. Such counsel may be counsel to
the Guarantor or any of its Affiliates and may include any of its
employees. The Guarantee Trustee shall have the right at any time to
seek instructions concerning the administration of this Guarantee from
any court of competent jurisdiction;
(vi) The Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Guarantee at
the request or direction of any Holder, unless such Holder shall have
provided to the Guarantee Trustee such security and indemnity,
reasonably satisfactory to the Guarantee Trustee, against the costs,
expenses (including attorneys' fees and expenses and the expenses of
the Guarantee Trustee's agents, nominees or custodians) and liabilities
that might be incurred by it in complying with such request or
direction, including such reasonable advances as may be requested by
the Guarantee Trustee; provided, that nothing contained in this Section
3.02(a)(vi) shall be taken to relieve the Guarantee Trustee, upon the
occurrence of a Guarantee Event of Default, of its obligation to
exercise the rights and powers vested in it by this Guarantee;
(vii) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Guarantee Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit;
(viii) The Guarantee Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents, nominees, custodians or attorneys, and the Guarantee
Trustee shall not be responsible for any misconduct or negligence on
the part of any agent or attorney appointed with due care by it
hereunder;
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(ix) Any action taken by the Guarantee Trustee or its agents
hereunder shall bind the Holders, and the signature of the Guarantee
Trustee or its agents alone shall be sufficient and effective to
perform any such action. No third party shall be required to inquire as
to the authority of the Guarantee Trustee to so act or as to its
compliance with any of the terms and provisions of this Guarantee, both
of which shall be conclusively evidenced by the Guarantee Trustee's or
its agent's taking such action; and
(x) Whenever in the administration of this Guarantee the
Guarantee Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action
hereunder, the Guarantee Trustee (A) may request written instructions
from the Holders of a Majority in Liquidation Amount of the CRESTS or
the Common Securities, as the case may be, (B) may refrain from
enforcing such remedy or right or taking such other action until such
written instructions are received, and (C) shall be protected in
conclusively relying on or acting in accordance with such written
instructions.
(b) No provision of this Guarantee shall be deemed to impose any duty
or obligation on the Guarantee Trustee to perform any act or acts or exercise
any right, power, duty or obligation conferred or imposed on it in any
jurisdiction in which it shall be illegal, or in which the Guarantee Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty.
SECTION 3.03. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE.
The recitals contained in this Guarantee shall be taken as the statements of the
Guarantor, and the Guarantee Trustee does not assume any responsibility for
their correctness. The Guarantee Trustee makes no representations as to the
validity or sufficiency of this Guarantee.
ARTICLE 4
GUARANTEE TRUSTEE
SECTION 4.01. GUARANTEE TRUSTEE; ELIGIBILITY. (a) There shall be at all
times a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
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<PAGE> 18
(ii) be a corporation organized and doing business under the
laws of the United States of America or any state or territory thereof
or of the District of Columbia, or a corporation or other Person
permitted by the Securities and Exchange Commission to act as an
institutional trustee under the Trust Indenture Act, authorized under
such laws to exercise corporate trust powers, having a combined capital
and surplus of at least 50 million U.S. dollars ($50,000,000), and
subject to supervision or examination by federal, state, territorial or
District of Columbia authority. If such corporation publishes reports
of condition at least annually, pursuant to law or to the requirements
of the supervising or examining authority referred to above, then, for
the purposes of this Section 4.01(a)(ii), the combined capital and
surplus of such corporation shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so
published.
(b) If at any time the Guarantee Trustee shall cease to be eligible to
so act under Section 4.01(a), the Guarantee Trustee shall immediately resign in
the manner and with the effect set out in Section 4.02(c).
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Guarantee Trustee and Guarantor shall in all respects comply with the provisions
of Section 310(b) of the Trust Indenture Act.
SECTION 4.02. APPOINTMENT, REMOVAL AND RESIGNATION OF GUARANTEE
TRUSTEE. (a) Subject to Section 4.02(b), unless a Guarantee Event of Default
shall have occurred and be continuing, the Guarantee Trustee may be appointed or
removed with or without cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed in accordance with
Section 4.02(a) until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by written instrument executed by such Successor
Guarantee Trustee and delivered to the Guarantor.
(c) The Guarantee Trustee appointed to office shall hold such office
until a Successor Guarantee Trustee shall have been appointed or until its
removal or resignation. The Guarantee Trustee may resign from office (without
need for prior or subsequent accounting) by an instrument in writing executed by
the Guarantee Trustee and delivered to the Guarantor, which resignation shall
not take effect until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.
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(d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.02 within 60 days after
delivery to the Guarantor of an instrument of removal or resignation, the
removed or resigning Guarantee Trustee may petition any court of competent
jurisdiction for appointment of a Successor Guarantee Trustee. Such court may
thereupon, after prescribing such notice, if any, as it may deem proper, appoint
a Successor Guarantee Trustee.
(e) No Guarantee Trustee shall be liable for the acts or omissions to
act of any Successor Guarantee Trustee.
(f) Upon termination of this Guarantee or removal or resignation of
the Guarantee Trustee pursuant to this Section 4.02, the Guarantor shall pay to
the Guarantee Trustee all amounts owing for fees and reimbursement of expenses
which have accrued to the date of such termination, removal or resignation.
ARTICLE 5
GUARANTEE
SECTION 5.01. GUARANTEE. The Guarantor irrevocably and unconditionally
agrees to pay in full to the Holders the Guarantee Payments (without duplication
of amounts theretofore paid by the Trust), as and when due, regardless of any
defense, right of set-off or counterclaim that the Trust may have or assert. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Trust to pay such amounts to the Holders. Notwithstanding anything to the
contrary herein, the Guarantor retains all of its rights under the Indenture to
(i) extend the interest payment period on the Debentures and the Guarantor shall
not be obligated hereunder to make any Guarantee Payments during any Extension
Period (as defined in the certificate evidencing the Debentures) with respect to
the Distributions (as defined in the Declaration) on the Securities, and (ii)
change the maturity date of the Debentures to the extent permitted by the
Indenture.
SECTION 5.02. WAIVER OF NOTICE AND DEMAND. The Guarantor hereby
waives notice of acceptance of this Guarantee and of any liability to which it
applies or may apply, presentment, demand for payment, any right to require a
proceeding first against the Trust or any other Person before proceeding against
the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
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SECTION 5.03. OBLIGATIONS NOT AFFECTED. The obligations, covenants,
agreements and duties of the Guarantor under this Guarantee shall in no way be
affected or impaired by reason of the happening from time to time of any event,
including without limitation, the following, whether or not with notice to, or
the consent of, the Guarantor:
(a) The release or waiver, by operation of law or otherwise, of the
performance or observance by the Trust of any express or implied agreement,
covenant, term or condition relating to the Securities to be performed or
observed by the Trust;
(b) The extension of time for the payment by the Trust of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or any
other sum payable under the terms of the Securities or the extension of time for
the performance of any other obligation under, arising out of, or in connection
with the Securities (other than an extension of time for payment of
Distributions, Redemption Price, Liquidation Distribution or other sum payable
that results from the extension of any interest payment period on the Debentures
or any change to the maturity date of the Debentures permitted by the
Indenture);
(c) Any failure, omission, delay or lack of diligence on the part of
the Property Trustee or the Holders to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Property Trustee or the Holders
pursuant to the terms of the Securities, or any action on the part of the Trust
granting indulgence or extension of any kind;
(d) The voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Trust or any of the assets of the
Trust;
(e) Any invalidity of, or defect or deficiency in, the Securities;
(f) The settlement or compromise of any obligation guaranteed hereby
or hereby incurred; or
(g) Any other circumstance whatsoever that might otherwise constitute
a legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.02 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.
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There shall be no obligation of the Guarantee Trustee or the Holders to
give notice to, or obtain consent of the Guarantor or any other Person with
respect to the happening of any of the foregoing.
SECTION 5.04. RIGHTS OF HOLDERS. (a) The Holders of at least a Majority
in Liquidation Amount of the CRESTS or Common Securities, as the case may be,
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Guarantee Trustee in respect of this Guarantee
or to direct the exercise of any trust or power conferred upon the Guarantee
Trustee under this Guarantee.
(b) If the Guarantee Trustee fails to enforce this Guarantee, then any
Holder of Securities may, subject to the subordination provisions of Section
6.02, institute a legal proceeding directly against the Guarantor to enforce the
Guarantee Trustee's rights under this Guarantee without first instituting a
legal proceeding against the Trust, the Guarantee Trustee or any other person or
entity. In addition, if the Guarantor has failed to make a Guarantee Payment, a
Holder of Securities may, subject to the subordination provisions of Section
6.02, directly institute a proceeding against the Guarantor for enforcement of
the Guarantee for such payment to the Holder of the Securities of the principal
of or interest on the Debentures on or after the respective due dates specified
in the Debentures, and the amount of the payment will be based on the Holder's
pro rata share of the amount due and owing on any of the Securities. The
Guarantor hereby waives any right or remedy to require that any action on this
Guarantee be brought first against the Trust, the Guarantee Trustee or any other
person or entity before proceeding directly against the Guarantor.
SECTION 5.05. GUARANTEE OF PAYMENT. This Guarantee creates a guarantee
of payment and not of collection.
SECTION 5.06. SUBROGATION. The Guarantor shall be subrogated to all (if
any) rights of the Holders of Securities against the Trust in respect of any
amounts paid to such Holders by the Guarantor under this Guarantee; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any right that
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee, if at the
time of any such payment, any amounts are due and unpaid under this Guarantee.
If any amount shall be paid to the Guarantor in violation of the preceding
sentence, the Guarantor agrees to hold such amount in trust for the Holders and
to pay over such amount to the Guarantee Trustee for the benefit of the Holders.
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SECTION 5.07. INDEPENDENT OBLIGATIONS. The Guarantor acknowledges that
its obligations hereunder are independent of the obligations of the Trust with
respect to the Securities, and that the Guarantor shall be liable as principal
and as debtor hereunder to make Guarantee Payments pursuant to the terms of this
Guarantee notwithstanding the occurrence of any event referred to in subsections
5.03(a) through 5.03(g), inclusive, hereof.
ARTICLE 6
LIMITATION OF TRANSACTIONS; RANKING
SECTION 6.01. LIMITATION OF TRANSACTIONS. So long as any Securities
remain outstanding, if (i) there shall have occurred an event of default under
the Indenture with respect to the Debentures, (ii) there shall be a Guarantee
Event of Default or (iii) the Guarantor shall have given notice of its election
of an Extension Period as provided in the certificate evidencing the Debentures
and shall not have rescinded such notice, or such Extension Period or any
extension thereof shall be continuing, then the Guarantor shall not, and shall
not permit any subsidiary of the Guarantor, to (x) declare or pay any dividends
or distributions on, or redeem, purchase, acquire or make a liquidation payment
with respect to, any of the Guarantor's capital stock or (y) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Guarantor that rank on a parity with or junior in
interest to the Debentures or make any guarantee payments with respect to any
guarantee by the Guarantor of the debt securities of any subsidiary of the
Guarantor if such guarantee ranks on a parity with or junior in interest to the
Debentures (other than (a) dividends or distributions in common stock of the
Guarantor, (b) payments under this Guarantee and (c) any declaration of a
dividend in connection with the implementation of a shareholders' rights plan,
or the issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto, and (d) purchases of common
stock related to the issuance of common stock or rights under any of the
Guarantor's benefit plans).
SECTION 6.02. RANKING. This Guarantee will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right of
payment to all other liabilities of the Guarantor, (ii) on a parity with the
most senior preferred or preference stock now or hereafter issued by the
Guarantor and with any guarantee previously, now or hereafter entered into by
the Guarantor in respect of any preferred securities of any Affiliate of the
Guarantor and (iii) senior to the Guarantor's common stock.
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ARTICLE 7
TERMINATION
SECTION 7.01. TERMINATION. This Guarantee shall terminate as to each
Holder upon (i) full payment of the Redemption Price of all Securities, (ii)
distribution of the Common Stock to all Holders in respect of the conversion of
all the Securities or upon the distribution of the Debentures to the Holders of
all the Securities, (iii) full payment of the amounts payable in accordance with
the Declaration or (iv) liquidation of the Trust. Notwithstanding the foregoing,
this Guarantee will continue to be effective or will be reinstated, as the case
may be, if at any time any Holder of Securities must restore payment of any sums
paid under the Securities or under this Guarantee.
ARTICLE 8
INDEMNIFICATION
SECTION 8.01. EXCULPATION. (a) No Indemnified Person shall be liable,
responsible or accountable in damages or otherwise to the Guarantor or any
Covered Person for any loss, damage, liability, expense or claim incurred by
reason of any act or omission performed or omitted by such Indemnified Person in
good faith in accordance with this Guarantee and in a manner that such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Guarantee or by law, except that an
Indemnified Person shall be liable for any such loss, damage or claim incurred
by reason of such Indemnified Person's negligence or willful misconduct with
respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information, opinions,
reports or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Guarantor, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Securities might properly be paid.
SECTION 8.02. INDEMNIFICATION. The Guarantor agrees to indemnify each
Indemnified Person for, and to hold each Indemnified Person harmless against any
loss, liability or expense incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of the
trust or
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<PAGE> 24
trusts hereunder, including the costs and expenses (including reasonable legal
fees and expenses) of defending itself against, or investigating, any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder. The obligation to indemnify as set forth in this Section 8.02
shall survive the termination of this Guarantee.
ARTICLE 9
ASSUMPTION
SECTION 9.01. MERGER WITH IMPAC. In the event the merger (the "MERGER")
pursuant to the Agreement and Plan of Merger dated as of March 20, 1998, among
Lodgian, the Guarantor, Impac Hotel Group, L.L.C., SHG-S Sub, Inc. and SHG-I
Sub, L.L.C. is consummated, Lodgian, the successor corporation in the Merger,
shall assume the Company's obligations under the Guarantee and shall execute and
deliver such documents as may be necessary to carry out the intent of this
Section. From and after the Merger and the assumption by Lodgian of Servico,
Inc.'s obligations hereunder, Servico, Inc. shall be released from its
obligations under this Guarantee as Guarantor or otherwise. Following the
Merger, all references to the Guarantor herein shall instead refer to Lodgian.
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. SUCCESSORS AND ASSIGNS. All guarantees and agreements
contained in this Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of the Guarantor and shall inure to the benefit of
the Holders of the Securities then outstanding.
SECTION 10.02. AMENDMENTS. Except with respect to any changes that do
not materially adversely affect the rights of the Holders (in which case no
consent of the Holders will be required), this Guarantee may not be amended
without the prior approval of the Holders of not less than a Majority in
Liquidation Amount of the Securities. The provisions of Section 11.02 of the
Declaration with respect to meetings of, and action by written consent of, the
Holders of the Securities apply to the giving of such approval. Except in
connection with any permitted merger or consolidation of the Guarantor with or
into another entity (which shall include the Merger) or any permitted sale,
transfer or lease of the Guarantor's assets to another entity (as described in
Article 7 of the Indenture), the Guarantor may not assign its rights or delegate
its obligations under this Guarantee without the prior approval
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of the Holders of at least a Majority in Liquidation Amount of the CRESTS then
outstanding.
SECTION 10.03. NOTICES. All notices provided for in this Guarantee
shall be in writing, duly signed by the party giving such notice, and shall be
delivered by hand, telecopied or mailed by registered or certified mail, as
follows:
(a) If given to the Guarantee Trustee, at the Guarantee Trustee's
mailing address set forth below (or such other address as the Guarantee Trustee
may give notice of to the Guarantor and the Holders of the Securities):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
Telecopy no.: (302) 651-8882
(b) If given to the Guarantor or Lodgian, at the Guarantor's mailing
addresses set forth below (or such other address as the Guarantor may give
notice of to the Guarantee Trustee and the Holders of the Securities):
Servico, Inc.
1601 Belvedere Road
West Palm Beach, Florida 33406
Attention: Chief Executive Officer
Telecopy no.: (561) 689-9970
(c) If given to any Holder of Securities, at the address set forth on
the books and records of the Trust.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 10.04. BENEFIT. This Guarantee is solely for the benefit of the
Holders of the Securities and, subject to Section 3.01(a), is not separately
transferable from the Securities.
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SECTION 10.05. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF.
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IN WITNESS WHEREOF, this Guarantee is executed as of the day and year
first above written.
SERVICO, INC., as Guarantor
By: /s/ Charles M. Diaz
-----------------------------------
Name: Charles M. Diaz
Title: Vice President and Secretary
WILMINGTON TRUST COMPANY,
as Guarantee Trustee
By: /s/ W. Christopher Sponenberg
-----------------------------------
Name: W. Christopher Sponenberg
Title: Senior Financial Services Officer
LODGIAN, INC.
By: /s/ Charles M. Diaz
-----------------------------------
Name: Charles M. Diaz
Title: Vice President and Secretary
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<PAGE> 1
Exhibit 10.4
===============================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of June 17, 1998
Among
LODGIAN CAPITAL TRUST I,
SERVICO, INC.,
LODGIAN, INC.
and
NATIONSBANC MONTGOMERY SECURITIES LLC
as Initial Purchaser
===============================================================================
<PAGE> 2
This REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and
entered into as of June 17, 1998 by and among LODGIAN CAPITAL TRUST I, a
Delaware statutory business trust (the "TRUST"), SERVICO, INC., a Florida
corporation (the "COMPANY"), LODGIAN, INC., a Delaware corporation ("LODGIAN"),
and NATIONSBANC MONTGOMERY SECURITIES LLC (the "INITIAL PURCHASER").
The Company, Lodgian and the Trust agree with the Initial Purchaser,
(i) for its benefit as Initial Purchaser and (ii) for the benefit of the
beneficial owners (including the Initial Purchaser) from time to time of the
CRESTS (as defined herein) and the beneficial owners from time to time of the
Underlying Common Stock (as defined herein) issued upon conversion of the
Convertible Debentures (as defined herein) (each of the foregoing a "HOLDER" and
together the "HOLDERS"), as follows:
The parties hereby agree as follows:
1. INTERPRETATION AND DEFINITIONS. In this Agreement, unless the
context otherwise requires:
(a) capitalized terms used in this Agreement but not defined
in the preamble above have the respective meanings assigned to them in
this Section 1;
(b) a term defined anywhere in this Agreement has the same
meaning throughout;
(c) all references to "the Agreement" or "this Agreement" are
to this Agreement as modified, supplemented or amended from time to
time;
(d) all references in this Agreement to Sections are to
Sections of this Agreement, unless otherwise specified;
(e) capitalized terms not defined herein shall have the
meaning given to such terms in the Declaration or, if the Convertible
Debentures have been distributed to the Holders of CRESTS in
liquidation of the Trust, the Indenture;
(f) a reference to the singular includes the plural and vice
versa and a reference to the masculine form of a term includes the
feminine form of a term, as applicable; and
(g) the following terms have the following meanings:
"AMENDMENT EFFECTIVENESS DEADLINE DATE": As defined in Section 4(a).
"APPLICABLE CONVERSION PRICE": The Applicable Conversion Price as of
any date of
<PAGE> 3
determination means the Conversion Price in effect as of such date of
determination or, if no Convertible Debentures are then outstanding, the
Conversion Price that would be in effect were Convertible Debentures then
outstanding.
"CLOSING DATE": The first date of original issuance of the Convertible
Debentures, Guarantees, CRESTS and Common Securities.
"COMMISSION": The Securities and Exchange Commission.
"COMMON SECURITIES": The beneficial ownership interest represented by
the common securities of the Trust.
"COMMON STOCK": The common stock, par value $.01 per share, of the
Company and any other shares of common stock as may constitute "Common Stock"
for purposes of the Indenture, including the Underlying Common Stock.
"CONVERTIBLE DEBENTURES": The 7% Convertible Junior Subordinated
Debentures of the Company to be purchased by the Trust pursuant to the Debenture
Purchase Agreement dated as of the date hereof between the Company and the
Trust.
"CRESTS": The 7% Convertible Redeemable Equity Structured Trust
Securities of the Trust.
"DAMAGES ACCRUAL PERIOD": As defined in Section 4(a).
"DAMAGES PAYMENT DATE": Each payment date under the Declaration, in the
case of CRESTS, each Interest Payment Date (as defined in the Indenture), in the
case of Convertible Debentures, and each March 31, June 30, September 30 and
December 31, in the case of Underlying Common Stock.
"DECLARATION": The Amended and Restated Declaration of Trust, dated as
of June 17, 1998, among the Company, Lodgian, Wilmington Trust Company, as
Property Trustee, Wilmington Trust Company, as Delaware Trustee and the other
trustees named therein, pursuant to which the CRESTS are being issued, as
amended or supplemented from time to time in accordance with the terms thereof.
"DEFERRAL DATE": As defined in Section 5(b)(v).
"DEFERRAL NOTICE": As defined in Section 5(b)(v).
"DEFERRAL PERIOD": As defined in Section 5(b)(v).
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<PAGE> 4
"EFFECTIVENESS DEADLINE DATE": As defined in Section 3(a)(ii).
"EFFECTIVENESS PERIOD": The period commencing with the date hereof and
ending on the date that all CRESTS, Convertible Debentures and Underlying Common
Stock and the Guarantee have ceased to be Transfer Restricted Securities.
"EXCHANGE ACT": The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"FILING DEADLINE DATE": As defined in Section 3(a).
"GUARANTEE AGREEMENT": The Guarantee Agreement, dated as of June 17,
1998, among the Company, Lodgian and Wilmington Trust Company, as Guarantee
Trustee, pursuant to which the Guarantee is being issued, as amended or
supplemented from time to time in accordance with the terms thereof.
"GUARANTEE": The guarantee by the Company of the CRESTS pursuant to the
Guarantee Agreement.
"HOLDERS": As defined in the second paragraph of this Agreement.
"IMPAC": Impac Hotel Group, L.L.C.
"INDENTURE": The Indenture, dated as of June 17, 1998, among the
Company, Lodgian and Wilmington Trust Company, as trustee, as amended or
supplemented, pursuant to which the Convertible Debentures are to be issued, as
such Indenture is further amended or supplemented from time to time in
accordance with the terms thereof.
"INITIAL PURCHASER": As defined in the preamble hereto.
"INSPECTOR": As defined in Section 5(b)(vi).
"LIQUIDATED DAMAGES AMOUNTS": As defined in Section 4(a).
"LODGIAN": As defined in the preamble of this Agreement.
"MATERIAL EVENT": As defined in Section 5(b)(v).
"MERGER" has the meaning specified in Section 12(m).
"NASD": National Association of Securities Dealers, Inc.
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<PAGE> 5
"NOTICE AND QUESTIONNAIRE": A written notice delivered to the Company
and the Trust containing substantially the information called for by the Notice
and Questionnaire attached as Appendix A to the Offering Memorandum of the
Company and the Trust dated June 15, 1998 relating to the CRESTS.
"NOTICE HOLDER": On any date, a Holder that has delivered a Notice and
Questionnaire to the Company or the Trust on or prior to such date.
"PARTICIPANT": As defined in Section 8(a).
"PERSON": An individual, partnership, corporation. trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
"PRINCIPAL HOLDER" means any Notice Holder, or any group of Notice
Holders acting together through a single representative, having at least
$75,000,000 in aggregate principal amount or aggregate liquidation amount of
Transfer Restricted Securities.
"PROSPECTUS": The prospectus included in the Shelf Registration
Statement, 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.
"PURCHASE AGREEMENT": As defined in the second paragraph of this
Agreement.
"RECORD HOLDER": (i) With respect to any Damages Payment Date relating
to any Convertible Preferred Security or Convertible Debenture as to which any
such Liquidated Damages Amount has accrued, the Registered Holder of such
Convertible Preferred Security or Convertible Debenture on the record date with
respect to the distribution payment date under the Declaration or the interest
payment date under the Indenture, as the case may be, on which such Damages
Payment Date shall occur and (ii) with respect to any Damages Payment Date
relating to any Underlying Common Stock as to which any such Liquidated Damages
Amount has accrued, the registered holder of such Underlying Common Stock 15
days prior to the next succeeding Damages Payment Date.
"REGISTERED HOLDER": The holder of a Convertible Preferred Security
that is registered as such on the books of the Trust.
"REGISTRANTS": The Trust and the Company or, if the Convertible
Debentures have been distributed to the Holders of the CRESTS in liquidation of
the Trust, the Company only.
"REGISTRATION DEFAULT": As defined in Section 4(a).
"REGISTRATION DEFAULT DATE": (A) The Filing Deadline Date in the case
of Section
4
<PAGE> 6
4(a)(i), (B) the Effectiveness Deadline Date in the case of Section 4(a)(ii),
(C) the date by which the Registrants are required to perform their obligations
set forth in Section 3(b) in the case of Section 4(a)(iii), (D) the date on
which the aggregate duration of Deferral Periods in any period exceeds the
number of days permitted by Section 5(b)(v) in the case of Section 4(a)(iv), (E)
the date of the commencement of a Deferral Period that causes the limit on the
number of Deferral Periods in any period under Section 5(b)(v) to be exceeded in
the case of Section 4(a)(v) and (F) the date on which the Shelf Registration
Statement ceases to be effective or shall fail to be usable by a Notice Holder
with respect to such Shelf Registration Statement, in the case of Section
4(a)(vi). Notwithstanding the foregoing, a Registration Default Date shall not
exist with respect to any Security on the date on which such Security ceases to
be a Transfer Restricted Security.
"RULE 144": Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission.
"RULE 144A": Rule 144A under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission.
"SECURITIES": The Convertible Debentures, the CRESTS, the Common
Securities and the Guarantee.
"SECURITIES ACT": The Securities Act of 1933, as amended, and the rules
and regulations of the Commission promulgated thereunder.
"SHELF REGISTRATION STATEMENT": Any shelf registration statement of the
Registrants pursuant to Rule 415 under the Securities Act relating to the
registration for resale of Transfer Restricted Securities, which is filed
pursuant to the provisions of this Agreement including the Prospectus included
therein, all amendments and supplements thereto (including post-effective
amendments) and all exhibits and material incorporated by reference therein.
"SPECIAL COUNSEL": As defined in Section 5(b)(vi).
"TIA": The Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb), as amended.
"TRANSFER RESTRICTED SECURITIES": The CRESTS, the Guarantee, the
Convertible Debentures and the Underlying Common Stock, until such securities
have been converted or exchanged, and, at all times subsequent to any such
conversion or exchange, any securities into or for which such securities have
been converted or exchanged, and any security issued with respect thereto upon
any stock dividend, split or similar event until, in the case of any such
security, (A) the earliest of (i) its effective registration under the
Securities Act and resale in accordance with the Shelf Registration Statement
covering it, (ii) expiration of the holding period that would be applicable
thereto under Rule 144(k) were it not held by an Affiliate of the Registrants or
(iii) its sale to the public pursuant to Rule 144, and (B) as a result of the
event or
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<PAGE> 7
circumstance described in any of the foregoing clauses (i) through (iii), the
legends with respect to transfer restrictions required under the Declaration and
the Indenture are removed or removable in accordance with the terms of the
Declaration or the Indenture, as the case may be.
"TRUSTEE": Wilmington Trust Company (or any successor entity), the
Property Trustee under the Declaration and the Trustee under the Indenture.
"UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING": A registration in
which securities of the Registrants are sold to an underwriter for reoffering to
the public.
2. SECURITIES SUBJECT TO THIS AGREEMENT. The securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
3. SHELF REGISTRATION.
(a) SHELF REGISTRATION. The Registrants shall:
(i) cause to be filed a Shelf Registration Statement,
on or prior to the 120th day after the Closing Date (the
"FILING DEADLINE DATE"), which Shelf Registration Statement
shall provide for resales of all Transfer Restricted
Securities the Holders of which shall have provided the
information required pursuant to Section 3(b) hereof, and
(ii) use their respective best efforts to cause such
Shelf Registration Statement or any successor Shelf
Registration Statement to be declared effective by the
Commission on or before the 180th day after the Closing Date
(the "EFFECTIVENESS DEADLINE DATE").
The Registrants shall use their respective best
efforts to keep a Shelf Registration Statement continuously
effective, supplemented and amended as required by the
provisions of Sections 5(a) and (b) hereof to the extent
necessary to ensure that it is available for resales of
Securities by the Holders of Transfer Restricted Securities
entitled to the benefit of this Section 3(a), and to ensure
that it conforms with the requirements of this Agreement, the
Securities Act and the policies, rules and regulations of the
Commission as announced from time to time, until the end of
the Effectiveness Period.
(b) Each Holder of Transfer Restricted Securities agrees that
if such Holder wishes to sell Transfer Restricted Securities pursuant
to a Shelf Registration Statement and related Prospectus, it shall do
so only in accordance with this Section 3(b). Each Holder of Transfer
Restricted Securities wishing to sell Transfer Restricted Securities
pursuant to a Shelf Registration Statement and related Prospectus
agrees to deliver a
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<PAGE> 8
Notice and Questionnaire to the Registrants at least three (3) business
days prior to any intended distribution of Transfer Restricted
Securities under the Shelf Registration Statement. From and after the
date the initial Shelf Registration Statement becomes effective, the
Registrants shall, as promptly as is practicable after the date a
Notice and Questionnaire is delivered, and in any event within five (5)
business days after such date, (i) if required by applicable law, file
with the Commission a post-effective amendment to the Shelf
Registration Statement or prepare and, if required by applicable law,
file a supplement to the related Prospectus or a supplement or
amendment to any document incorporated therein by reference or file any
other required document so that the Holder delivering such Notice and
Questionnaire is named as a selling security holder in the Shelf
Registration Statement and the related Prospectus in such a manner as
to permit such Holder to deliver such Prospectus to purchasers of the
Transfer Restricted Securities in accordance with applicable law and,
if the Registrants shall file a post-effective amendment to the Shelf
Registration Statement, use their best efforts to cause such
post-effective amendment to become effective under the Securities Act
as promptly as is practicable; (ii) provide such Holder copies of any
documents filed pursuant to Section 3(b)(i); and (iii) notify such
Holder as promptly as practicable after the effectiveness under the
Securities Act of any post-effective amendment filed pursuant to
Section 3(b)(i); PROVIDED, that if such Notice and Questionnaire is
delivered during a Deferral Period, the Registrants shall so inform the
Holder delivering such Notice and Questionnaire and shall take the
actions set forth in clauses (i), (ii) and (iii) above upon expiration
of the Deferral Period in accordance with Section 5(b)(v). The
Registrants shall be under no obligation to name any Holder that is not
a Notice Holder as a selling security holder in any Transfer Restricted
Statement or related Prospectus.
(c) The Registrants shall supplement and amend the Shelf
Registration Statement or file a new Shelf Registration Statement if
required by the Securities Act to permit registered resale of the
Transfer Restricted Securities or, to the extent to which the
Registrants do not reasonably object, as reasonably requested by the
Initial Purchaser or by the Trustee on behalf of the Registered
Holders.
4. LIQUIDATED DAMAGES AMOUNT.
(a) The parties hereto agree that the Holders of Transfer
Restricted Securities shall suffer damages, and that it would not be
feasible to ascertain the extent of such damages with precision if (i)
the Shelf Registration Statement required by this Agreement
is not filed with the Commission on or prior to the date specified for
such filing in this Agreement; (ii) a Shelf Registration Statement has
not been declared effective by the Commission on or prior to the date
specified for such effectiveness in this Agreement, (iii) the
Registrants have failed to perform their obligations set forth in
Section 3(b)(i) within the time period specified; (iv) the aggregate
duration of the Deferral Periods in any period exceeds the number of
days permitted in respect of such period pursuant to Section
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<PAGE> 9
5(b)(v); (v) the number of Deferral Periods in any period exceeds the
number permitted in respect of such period pursuant to Section 5(b)(v);
or (vi) a Shelf Registration Statement required by this Agreement is
filed and declared effective but shall thereafter cease to be
effective, except during a Deferral Period in compliance with Section
5(b)(v), or fail to be usable by a Notice Holder with respect to such
Shelf Registration Statement without being succeeded within five
business days by a post-effective amendment to such Shelf Registration
Statement or a new Shelf Registration Statement that cures such failure
and that is itself promptly, and in any event no later than five
business days, declared effective (each such event referred to in
clauses (i) through (vi), a "REGISTRATION DEFAULT"), accordingly,
commencing on (and including) any Registration Default Date and ending
on (but excluding) the next date on which there are no Registration
Defaults that have occurred and are continuing (a "DAMAGES ACCRUAL
PERIOD"), the Registrants agree to pay, as liquidated damages and not
as a penalty, an amount (the "LIQUIDATED DAMAGES AMOUNT"), payable on
the Damages Payment Dates, (i) prior to the conversion thereof, to
Record Holders (as set forth in the succeeding paragraph) of (x) CRESTS
that are Transfer Restricted Securities or (y) in the event that the
Convertible Debentures are distributed to holders of CRESTS upon
dissolution of the Trust in accordance with the Declaration,
Convertible Debentures that are Transfer Restricted Securities,
accruing at a rate per annum equal to one-quarter of one percent (.25%)
of the liquidation amount of such CRESTS or of the principal amount of
such Convertible Debentures, as the case may be with respect to the
first 90 day period immediately following the occurrence of such
Registration Default, and (ii) to Record Holders (as set forth in the
succeeding paragraph) of shares of Underlying Common Stock issued upon
conversion of CRESTS or Convertible Debentures that are Transfer
Restricted Securities, accruing, for each portion of such Damages
Accrual Period beginning on and including a Damages Payment Date (or,
in respect of the first such portion, the Event Date) and ending on but
excluding the next subsequent Damages Payment Date with respect to the
first 90 day period immediately following the occurrence of such
Registration Default, at a rate per annum equal to one-quarter of one
percent (.25%) of the aggregate Applicable Conversion Price of such
shares of Underlying Common Stock as of the Business Day immediately
preceding such next subsequent Damages Payment Date, and the Liquidated
Damages Amount shall increase to 0.5% of such liquidation amount,
principal amount or Applicable Conversion Price after such 90 day
period; PROVIDED, that in the case of a Damages Accrual Period that is
in effect solely as a result of a Registration Default of the type
described in clause (iii) of the preceding paragraph, such Liquidated
Damages Amount shall be paid only to the Holders (as set forth in
Section 3(b)) that have delivered Notice and Questionnaires that caused
the Registrants to incur the obligations set forth in Section 3(b) the
non-performance of which is the basis of such Registration Default. The
rate of accrual of the Liquidated Damages Amount with respect to any
period shall not exceed the rate provided for in this paragraph
notwithstanding the occurrence of multiple concurrent Registration
Defaults.
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<PAGE> 10
The Registrants shall pay on each Damages Payment Date that
portion of the Liquidated Damages Amount payable pursuant to this
Section in respect of any Damages Accrual Period that has accrued from
and including the next preceding Damages Payment Date during such
Damages Accrual Period (or, in respect of the first such portion, the
Registration Default Date with respect to such Damages Accrual Period)
to but excluding such Damages Payment Date on any Convertible Preferred
Security, Convertible Debenture or share of Underlying Common Stock to
the Record Holders thereof; PROVIDED, that any Liquidated Damages
Amount accrued with respect to any Convertible Preferred Security or
Convertible Debenture or portion thereof called for redemption on a
redemption date or converted into Underlying Common Stock on a
conversion date prior to the Damages Payment Date, shall, in any such
event, be paid instead to the holder who submitted such Convertible
Preferred Security or Convertible Debenture or portion thereof for
redemption or conversion on the applicable redemption date or
conversion date, as the case may be, on such date (or promptly
following the conversion date, in the case of conversion); PROVIDED
FURTHER, that, in the case of a Registration Default of the type
described in clause (iii) of the first paragraph of this Section, such
Liquidated Damages Amount shall be paid only to the Holders entitled
thereto pursuant to such first paragraph by check mailed to the address
set forth in the Notice and Questionnaire delivered by such Holder. The
Trustee shall be entitled, on behalf of Registered Holders of CRESTS,
Convertible Debentures or Underlying Common Stock, to seek any
available remedy for the enforcement of this Agreement, including for
the payment of such Liquidated Damages Amount. Notwithstanding the
foregoing, the parties agree that the sole damages payable for a
violation of the terms of this Agreement with respect to which
liquidated damages are expressly provided shall be such liquidated
damages. Nothing shall preclude a Holder of Transfer Restricted
Securities from pursuing or obtaining specific performance or other
equitable relief with respect to this Agreement.
All of the Registrants' obligations set forth in this Section
that are outstanding with respect to any Transfer Restricted Security
at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to
such security have been satisfied in full (notwithstanding termination
of this Agreement pursuant to Section 12(l).
The parties hereto agree that the liquidated damages provided
for in this Section constitute a reasonable estimate of the damages
that may be incurred by Holders of Transfer Restricted Securities by
reason of the failure of the Shelf Registration Statement to be filed
or declared effective or available (absolutely or as a practical
matter) for effecting resales of Transfer Restricted Securities in
accordance with the provisions hereof.
(b) The Registrants shall notify the Trustee, as the Property
Trustee under the Declaration (or, if the Convertible Debentures shall
have been distributed to the Holders
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<PAGE> 11
of the CRESTS in liquidation of the Trust, the Trustee, as Trustee
under the Indenture) within two business days after each and every date
on which an event occurs in respect of which Liquidated Damages Amounts
are required to be paid.
5. REGISTRATION PROCEDURES.
(a) SHELF REGISTRATION STATEMENT. In connection with the Shelf
Registration Statement, the Registrants shall comply with all the
provisions of Section 5(b) below and shall use their best efforts to
effect such registration to permit the sale of the Transfer Restricted
Securities being sold in accordance with the intended method or methods
of distribution thereof, and pursuant thereto the Registrants shall as
expeditiously as possible prepare and file with the Commission a Shelf
Registration Statement relating to the registration on the appropriate
form under the Securities Act, which form shall be available for the
sale of the Transfer Restricted Securities in accordance with the
intended method or methods of distribution thereof.
(b) GENERAL PROVISIONS. In connection with the Shelf
Registration Statement and any Prospectus required by this Agreement to
permit the sale or resale of Transfer Restricted Securities, the
Registrants shall:
(i) use their best efforts to keep such Shelf
Registration Statement continuously effective and provide all
requisite financial statements for the Effectiveness Period;
upon the occurrence of any event that would cause any such
Shelf Registration Statement or the Prospectus contained
therein (A) to contain a material misstatement or omission or
(B) not to be effective and usable for resale of Transfer
Restricted Securities during the period required by this
Agreement, the Registrants shall file promptly an appropriate
amendment to such Shelf Registration Statement or a new Shelf
Registration Statement, in the case of clause (A), correcting
any such misstatement or omission, and, in the case of either
clause (A) or (B), use their best efforts to cause such
amendment or new Shelf Registration Statement to be declared
effective and such Shelf Registration Statement and the
related Prospectus to become usable for their intended
purpose(s) as soon as practicable thereafter;
(ii) prepare and file with the Commission such
amendments and post-effective amendments to the Shelf
Registration Statement as may be necessary to keep the Shelf
Registration Statement effective for the Effectiveness Period;
cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 under the Securities Act, and to comply
fully with the applicable provisions of Rules 424 and 430A
under the Securities Act in a timely manner, and comply with
the provisions of the Securities Act with respect to the
disposition of all securities covered by such
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<PAGE> 12
Shelf Registration Statement during the applicable period in
accordance with the intended method or methods of distribution
by the sellers thereof set forth in such Shelf Registration
Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, the Initial
Purchaser and Notice Holders promptly and, if requested by
such Persons, to confirm such advice in writing, (A) when the
Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to the Shelf
Registration Statement or any post-effective amendment
thereto, when the same has become effective, (B) of any
request by the Commission for amendments to the Shelf
Registration Statement or amendments or supplements to the
Prospectus or for additional information relating thereto, (C)
of the issuance by the Commission of any stop order suspending
the effectiveness of the Shelf Registration Statement under
the Securities Act or of the suspension by any state
securities commission of the qualification of the Transfer
Restricted Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of
the preceding purposes, (D) of the occurrence of (but not the
nature of or details concerning) a Material Event and (E) of
the determination by the Registrants that a post-effective
amendment to a Shelf Registration Statement would be
appropriate, which notice may, at the discretion of the
Registrants (or as required by Section 5(b)(v)), state that it
constitutes a Deferral Notice, in which event the provisions
of Section 5(b)(v) shall apply. If at any time the Commission
shall issue any stop order suspending the effectiveness of the
Shelf Registration Statement, or any state securities
commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification
of the Transfer Restricted Securities under state securities
or Blue Sky laws, the Registrants shall use their best efforts
to obtain the withdrawal or lifting of such order at the
earliest possible time;
(iv) furnish to each of the Notice Holders, the
Initial Purchaser and each of the underwriter(s), if any,
before filing with the Commission, copies of the Shelf
Registration Statement or any Prospectus included therein or
any amendments or supplements to any such Shelf Registration
Statement or Prospectus (excluding all documents incorporated
by reference after the initial filing of such Shelf
Registration Statement and any such amendments or supplements
required to be filed as a consequence of the filing of reports
or other documents pursuant to Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended),
which documents shall be subject to the review of such Holders
and underwriter(s), if any, for a period of at least five
business days, and the Registrants shall not file any such
Shelf Registration Statement or Prospectus or any amendment or
supplement to any such Shelf Registration Statement or
Prospectus (excluding any documents incorporated by
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<PAGE> 13
reference and any such amendments or supplements required to
be filed as a consequence of the filing of reports or other
documents pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended) to which a Notice
Holder of Transfer Restricted Securities covered by such Shelf
Registration Statement or the underwriter(s), if any, shall
reasonably object within five business days after the receipt
thereof;
(v) upon (A) the issuance by the Commission of a stop
order suspending the effectiveness of the Shelf Registration
Statement or the initiation of proceedings with respect to the
Shelf Registration Statement under Section 8(d) or 8(e) of the
Securities Act, (B) the occurrence of any event or the
existence of any fact (a "MATERIAL EVENT") as a result of
which any Shelf Registration Statement shall contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading, or any Prospectus
shall contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or
(C) the occurrence or existence of any pending corporate
development that, in the discretion of the Registrants, makes
it appropriate to suspend the availability of the Shelf
Registration Statement and the related Prospectus, (i) in the
case of clause (B) above, subject to the next sentence, as
promptly as practicable prepare and file, if necessary
pursuant to applicable law, a post-effective amendment to such
Shelf Registration Statement or a supplement to the related
Prospectus or a new Shelf Registration Statement or any
document incorporated therein by reference or file any other
required document that would be incorporated by reference into
such Shelf Registration Statement and Prospectus so that such
Shelf Registration Statement does not contain any untrue
statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading, and such Prospectus does
not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, as
thereafter delivered to the purchasers of the Transfer
Restricted Securities being sold thereunder, and, in the case
of a new Shelf Registration Statement or a post-effective
amendment to a Shelf Registration Statement, subject to the
next sentence, use their best efforts to cause it to become
effective as promptly as is practicable, and (ii) give notice
to the Notice Holders that the availability of the Shelf
Registration Statement is suspended (a "DEFERRAL NOTICE") and,
upon receipt of any Deferral Notice, each Notice Holder shall
not sell any Transfer Restricted Securities pursuant to the
Shelf Registration Statement until such Notice Holder's
receipt of copies of the supplemented or amended Prospectus
provided for in clause (i) above, or until it is advised in
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<PAGE> 14
writing by the Company that the Prospectus may be used, and
has received copies of any additional or supplemental filings
that are incorporated or deemed incorporated by reference in
such Prospectus. The Registrants, shall use their best efforts
to ensure that the use of the Prospectus may be resumed (x) in
the case of clause (A) or (B) above, as promptly as is
practicable and (y) in the case of clause (C) above, as soon
as, in the discretion of the Registrants, such suspension is
no longer appropriate. The Registrants shall be entitled to
exercise their right under this Section to suspend the
availability of the Shelf Registration Statement or any
Prospectus, without incurring any obligation to pay liquidated
damages pursuant to Section 4(a), no more than one (1) time in
any three (3) month period or three (3) times in any twelve
(12) month period, and the period during which the
availability of the Shelf Registration Statement and any
Prospectus is suspended (the "DEFERRAL PERIOD") shall, without
incurring any obligation to pay liquidated damages pursuant to
Section 4(a), not exceed thirty (30) days; PROVIDED, that in
the case of a Material Event relating to an acquisition or a
probable acquisition meeting the significance test of Rule
3-05(b)(2)(ii) of Regulation S-X under the Securities Act, the
Registrants may, without incurring any obligation to pay
liquidated damages pursuant to Section 4(a), deliver to Notice
Holders a second certificate to the effect set forth above,
which shall have the effect of extending the Deferral Period
by up to an additional thirty (30) days, or such shorter
period of time as is specified in such second notice;
PROVIDED, that the aggregate duration of any Deferral Periods
shall not, without incurring any obligation to pay liquidated
damages pursuant to Section 4(a), exceed sixty (60) days in
any three (3) month period or ninety (90) days in any twelve
(12) month period;
(vi) make available at reasonable times for
inspection by a representative of the Principal Holder (the
"INSPECTOR"), any underwriter participating in any disposition
pursuant to such Shelf Registration Statement, and any
attorney or accountant retained by such Principal Holder (the
"SPECIAL COUNSEL") or any of the underwriter(s), all financial
and other records, pertinent corporate documents, other
relevant documents and properties of the Registrants and use
its reasonable best efforts to cause the Registrants'
officers, trustees, directors, managers and employees to
supply all relevant information reasonably requested by any
such underwriter, Inspector or Special Counsel in connection
with such Shelf Registration Statement subsequent to the
filing thereof and prior to its effectiveness, in each case as
is customary for similar "due diligence" examinations;
(vii) if requested by any Notice Holders, the Initial
Purchaser or the underwriter(s), if any, promptly incorporate
in the Shelf Registration Statement or Prospectus, pursuant to
a supplement or post-effective amendment if necessary, such
information as such Notice Holders and underwriter(s), if any,
may
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<PAGE> 15
reasonably request to have included therein, including,
without limitation, information relating to the "Plan of
Distribution" of the Transfer Restricted Securities,
information with respect to the liquidation or principal
amount of Transfer Restricted Securities being sold to such
underwriter(s), the purchase price being paid therefor and any
other terms of the offering of the Transfer Restricted
Securities to be sold in such offering; and make all required
filings of such Prospectus supplement or post-effective
amendment as soon as practicable after the Registrants are
notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendment;
(viii) furnish to each Notice Holder, the Initial
Purchaser and each of the underwriter(s), if any, without
charge, at least one copy of the Shelf Registration Statement,
as first filed with Commission, and of each amendment thereto,
including all documents incorporated by reference therein and
all exhibits (including exhibits incorporated therein by
reference);
(ix) deliver to each Notice Holder, the Initial
Purchaser and each of the underwriter(s), if any, without
charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement
thereto as such Persons reasonably may request; the
Registrants hereby consent to the use of the Prospectus and
any amendment or supplement thereto by each of the Notice
Holders, the Initial Purchaser and each of the underwriter(s),
if any, in connection with the offering and the sale of the
Transfer Restricted Securities covered by the Prospectus or
any amendment or supplement thereto;
(x) enter into such customary agreements (including
an underwriting agreement in customary form), and make such
representations and warranties, and take all such other
actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted
Securities pursuant to the Shelf Registration Statement
contemplated by this Agreement, all to such extent as may be
requested by any Principal Holder of Transfer Restricted
Securities or underwriter in connection with any sale or
resale pursuant to the Shelf Registration Statement
contemplated by this Agreement, PROVIDED, however, that the
Company shall not be obligated to enter into an underwriting
agreement or to facilitate such disposition in an underwritten
offering pursuant to the Shelf Registration Statement unless a
Principal Holder elects to dispose of such Transfer Restricted
Securities in such an underwritten offering, and in connection
with an Underwritten Registration, the Registrants shall:
(A) upon request of any Principal Holder,
furnish to each Notice Holder, the Initial Purchaser
and each underwriter, if any, in such substance and
scope as such Principal Holder may request and as are
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<PAGE> 16
customarily made by issuers to underwriters in
primary underwritten offerings, upon the closing of
the Underwritten Registration:
(1) a certificate in customary
form, dated the date of the closing of the
Underwritten Registration signed by (y) its
Chairman of the Board, its President, a Vice
President or trustee and (z) its Chief
Financial Officer confirming, as of such
date, such matters as such parties may
reasonably request;
(2) an opinion in customary form,
dated the date of the closing of the
Underwritten Registration, of counsel for
the Registrants, covering such matters as
such parties may reasonably request, and in
any event including a statement to the
effect that such counsel has participated in
conferences with officers and other
representatives of the Registrants,
representatives of the independent public
accountants for the Registrants in
connection with the preparation of such
Shelf Registration Statement and the related
Prospectus and have considered the matters
required to be stated therein and the
statements contained therein, although such
counsel has not independently verified the
accuracy, completeness or fairness of such
statements; and that such counsel advises
that, on the basis of the foregoing, no
facts came to such counsel's attention that
caused such counsel to believe that the
Shelf Registration Statement, at the time
such Shelf Registration Statement or any
post-effective amendment thereto became
effective, contained an untrue statement of
a material fact or omitted to state a
material fact required to be stated therein
or necessary to make the statements therein
not misleading, or that the Prospectus
contained in such Shelf Registration
Statement, as of its date, contained an
untrue statement of a material fact or
omitted to state a material fact necessary
in order to make the statements therein, in
light of the circumstances under which they
were made, not misleading. Without limiting
the foregoing, such counsel may state
further that such counsel assumes no
responsibility for, and has not
independently verified, the accuracy,
completeness or fairness of the financial
statements, notes and schedules and other
financial data included in the Shelf
Registration Statement contemplated by this
Agreement or the related Prospectus; and
(3) if permitted by Statement of
Accounting Standards No. 72, customary
comfort letters, dated the date of the
closing of the Underwritten Registration
from the Registrants' and, in the
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<PAGE> 17
event the Merger has not been completed or
terminated, Impac's independent accountants,
in the customary form and covering matters
of the type customarily covered in comfort
letters by underwriters in connection with
primary underwritten offerings.
(B) set forth in full or incorporate by
reference in the underwriting agreement, if any, the
indemnification provisions and procedures of Section
8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) deliver such other customary documents
and certificates as may be reasonably requested by
such parties to evidence compliance with clause (A)
above and with any customary conditions contained in
the underwriting agreement or other agreement entered
into by the Registrants pursuant to this clause
(xii), if any.
(xi) prior to any public offering of Transfer
Restricted Securities, cooperate with the Notice Holders, the
Initial Purchaser, the underwriter(s), if any, and their
respective counsel in connection with the registration and
qualification of the Transfer Restricted Securities under the
securities or Blue Sky laws of such jurisdictions as the
Notice Holders, the Initial Purchaser or underwriter(s) may
reasonably request and do any and all other acts or things
necessary or advisable to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by
the Shelf Registration Statement; PROVIDED, HOWEVER, that no
Registrant shall be required to register or qualify as a
foreign corporation where it is not now so qualified or to
take any action that would subject it to the service of
process in suits or to taxation, other than as to matters and
transactions relating to the Shelf Registration Statement, in
any jurisdiction where it is not now so subject;
(xii) cooperate with the Notice Holders, the Initial
Purchaser and the underwriter(s), if any, to facilitate the
timely preparation and delivery of certificates representing
Transfer Restricted Securities to be sold and to the extent
applicable not bearing any restrictive legends; and enable
such Transfer Restricted Securities to be in such
denominations and registered in such names as the Holders or
the underwriter(s), if any, may request at least one business
day prior to any sale of Transfer Restricted Securities made
by such underwriter(s);
(xiii) use its reasonable best efforts to cause the
Transfer Restricted Securities covered by the Shelf
Registration Statement to be registered with or approved by
such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the
underwriter(s), if any, to consummate
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<PAGE> 18
the disposition of such Transfer Restricted Securities,
subject to the proviso contained in clause (xiii) above;
(xiv) provide CUSIP numbers for all Transfer
Restricted Securities not later than the effective date of the
Shelf Registration Statement and provide certificates for the
Transfer Restricted Securities;
(xv) cooperate and assist in any filings required to
be made with the NASD and in the performance of any due
diligence investigation by any underwriter (including any
"qualified independent underwriter") that is required to be
retained in accordance with the rules and regulations of the
NASD;
(xvi) otherwise use its reasonable best efforts to
comply with all applicable rules and regulations of the
Commission, and make generally available to its security
holders, as soon as practicable, a consolidated earning
statement meeting the requirements of Rule 158 (which need not
be audited) for the twelve-month period (A) commencing at the
end of any fiscal quarter in which Transfer Restricted
Securities are sold to underwriters in a firm or best efforts
Underwritten Offering or (B) if not sold to underwriters in
such an offering, beginning with the first month of the
Registrants' first fiscal quarter commencing after the
effective date of the Shelf Registration Statement;
(xvii) cause the Indenture and, if the Convertible
Debentures shall not have been distributed to the Holders of
the CRESTS in liquidation of the Trust, the Declaration and
the Guarantee to be qualified under the TIA not later than the
effective date of the first Shelf Registration Statement
required by this Agreement, and, in connection therewith,
cooperate with the Trustee and the Holders of Securities to
effect such changes to the Indenture, the Declaration and the
Guarantee as may be required for the Indenture, the
Declaration and the Guarantee to be so qualified in accordance
with the terms of the TIA; and execute and use their best
efforts to cause the Indenture Trustee, Guarantee Trustee and
the Property Trustee to execute all documents that may be
required to effect such changes and all other forms and
documents required to be filed with the Commission to enable
such Indenture and Declaration and Guarantee to be so
qualified in a timely manner; and
(xviii) provide promptly to each Holder upon request
each document filed with the Commission pursuant to the
requirements of Section 13 and Section 15 of the Exchange Act;
and
6. HOLDER'S OBLIGATIONS. Each Holder agrees, by acquisition of the
Transfer Restricted Securities, that no Holder of Transfer Restricted Securities
shall be entitled to sell any of such
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<PAGE> 19
Transfer Restricted Securities pursuant to a Shelf Registration Statement or to
receive a Prospectus relating thereto, unless such Holder has furnished the
Registrants with a Notice and Questionnaire as required pursuant to Section 3(b)
hereof (including the information required to be included in such Notice and
Questionnaire) and the information set forth in the next sentence. Each Notice
Holder agrees promptly to furnish to the Registrants all information required to
be disclosed in order to make the information previously furnished to the
Registrants by such Notice Holder not misleading and any other information
regarding such Notice Holder and the distribution of such Transfer Restricted
Securities as the Registrants may from time to time reasonably request. Any sale
of any Transfer Restricted Securities by any Holder shall constitute a
representation and warranty by such Holder that the information relating to such
Holder and its plan of distribution is as set forth in the Prospectus delivered
by such Holder in connection with such disposition, that such Prospectus does
not as of the time of such sale contain any untrue statement of a material fact
relating to or provided by such Holder or its plan of distribution and that such
Prospectus does not as of the time of such sale omit to state any material fact
relating to or provided by such Holder or its plan of distribution necessary to
make the statements in such Prospectus, in the light of the circumstances under
which they were made, not misleading.
Each Holder further agrees that, upon receipt of any Deferral Notice
from the Company, such Holder shall forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Shelf Registration
Statement until (i) such Holder has received copies of the supplemented or
amended Prospectus contemplated by Section 5(b)(v) hereof, or (ii) such Holder
is advised in writing by the Company that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental filings that
are incorporated by reference in the Prospectus. Each Holder receiving a
Deferral Notice hereby agrees that it will either (i) destroy any Prospectuses,
other than permanent file copies, then in such Holder's possession which have
been replaced by the Company with more recently dated Prospectuses or (ii)
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such Holder's possession of the Prospectus
covering such Transfer Restricted Securities that was current at the time of
receipt of the Deferral Notice.
7. REGISTRATION EXPENSES.
All expenses incident to the Registrants' performance of or compliance with this
Agreement shall be borne by the Registrants, regardless of whether the Shelf
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses; (ii) all fees and expenses of
compliance with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing, messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for the Registrants; and (v) all fees and
disbursements of independent certified public accountants of the Registrants and
Impac (including the expenses of any special audit and comfort letters required
by or incident to such performance). In addition, the Registrants shall bear or
reimburse the Notice Holders for the reasonable fees and disbursements of one
firm of legal counsel for the Holders, which shall initially be Davis Polk &
Wardwell, but
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<PAGE> 20
which may, with the written consent of the Initial Purchaser (which shall not be
unreasonably withheld), be another nationally recognized law firm experienced in
securities law matters designated by the Registrants. Notwithstanding the
provisions of this Section, each seller of Transfer Restricted Securities shall
pay all registration expenses to the extent the Registrants are prohibited by
applicable Blue Sky laws from paying for or on behalf of such seller of Transfer
Restricted Securities. The Company shall not have any obligation to pay any
underwriting fees, discounts or commissions attributable to the sale of any
Transfer Restricted Securities pursuant to this Agreement.
The Registrants shall, in any event, bear their internal expenses (including,
without limitation, all salaries and expenses of their officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts and legal counsel,
retained by the Registrants.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) In connection with the Shelf Registration Statement, the
Registrants shall indemnify and hold harmless each Holder of Transfer
Restricted Securities included within any such Shelf Registration
Statement, and each person, if any, who controls any such person within
the meaning of the Securities Act (each, a "PARTICIPANT"), from and
against any loss, claim, damage or liability, joint or several, or any
action in respect thereof (including, but not limited to, any loss,
claim, damage, liability or action relating to purchases and sales of
Securities) to which such Participant or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss.
claim, damage, liability or action arises out of, or is based upon, (i)
any untrue statement or alleged untrue statement of a material fact
contained in any preliminary Prospectus, such Shelf Registration
Statement or any Prospectus or in any amendment or supplement thereto
or (ii) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse each Participant promptly
upon demand for any legal or other expenses reasonably incurred by such
Participant in connection with investigating or defending or preparing
to defend against any such loss, claim, damage, liability or action as
such expenses are incurred; PROVIDED, however, that (i) the Registrants
shall not be liable in any such case to the extent that any such loss,
claim, damage, liability or action arises out of, or is based upon, any
untrue statement or alleged untrue statement or omission or alleged
omission made in any such Shelf Registration Statement or any
prospectus forming part thereof or in any such amendment or supplement
in reliance upon and in conformity with written information furnished
to the Registrants by or on behalf of any Participant specifically for
inclusion therein; and provided further that as to any preliminary
Prospectus, the indemnity agreement contained in this Section 8(a)
shall not inure to the benefit of any such Participant or any
controlling person of such Participant on account of any loss, claim,
damage, liability or action arising from the sale of the
19
<PAGE> 21
Securities to any person by that Participant if (i) that Participant
failed to send or give a copy of the Prospectus, as the same may be
amended or supplemented, to that person within the time required by the
Securities Act and (ii) the untrue statement or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact in such preliminary Prospectus was corrected in the
Prospectus, unless, in each case, such failure resulted from
non-compliance by the Registrants with Section 5(b). The foregoing
indemnity agreement is in addition to any liability which the
Registrants may otherwise have to any Participant or to any controlling
person of that Participant.
(b) Each Participant, severally and not jointly, shall
indemnify and hold harmless the Registrants, each of its trustees,
directors, officers, employees or agents and each person, if any, who
controls the Registrants within the meaning of the Securities Act, from
and against any loss, claim, damage or liability, joint or several, or
any action in respect thereof, to which the Registrants or any such
director, officer, employees or agents or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i)
any untrue statement or alleged untrue statement of a material fact
contained in any preliminary Prospectus, Shelf Registration Statement
or Prospectus or in any amendment or supplement thereto or (ii) the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, but in each case only to the extent that the 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 Registrants by or on behalf of that Participant
specifically for inclusion herein, and shall reimburse the Registrants
and any such trustee, director, officer, employees or agents or
controlling person for any legal or other expenses reasonably incurred
by the Registrants or any such trustee, director, officer, employees or
agents or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage,
liability or action as such expenses are incurred. In no event shall
the liability of any selling Holder of Transfer Restricted Securities
hereunder be greater in amount than the dollar amount of the proceeds
received by such Holder upon the sale of the Transfer Restricted
Securities pursuant to the Shelf Registration Statement giving rise to
such indemnification obligation. The foregoing indemnity agreement is
in addition to any liability which any Participant may otherwise have
to the Registrants or any such trustee, director, officer or
controlling person.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under this Section 8, notify the
indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under
this Section 8 except to the extent it has been materially prejudiced
by such failure and, provided further, that the failure to notify the
20
<PAGE> 22
indemnifying party shall not relieve it from any liability which it may
have to an indemnified parry otherwise than under this Section 8. If
any such claim or action shall be brought against an indemnified party,
and it shall have notified the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the
extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel
satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume
the defense of such claim or action, the indemnifying party shall not
be liable to the indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, that any indemnified party shall have
the right to employ separate counsel in any such action and to
participate in the defense thereof but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (i)
the employment thereof has been specifically authorized by the
indemnifying party in writing, (ii) such indemnified party shall have
been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to
those available to the indemnifying party and in the reasonable
judgment of such counsel it is advisable for such indemnified party to
employ separate counsel or (iii) the indemnifying party has failed to
assume the defense of such action and employ counsel reasonably
satisfactory to the indemnified party, in which case, if such
indemnified party notifies the indemnifying party in writing that it
elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the
defense of such action on behalf of such indemnified party, it being
understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the
same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys at any
time for all such indemnified parties, which firm shall be designated
in writing by the Initial Purchaser. No indemnifying party shall (i)
without the prior written consent of the indemnified parties (which
consent shall not be unreasonably withheld), settle or compromise or
consent to the entry of any judgment with respect to any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not
the indemnified parties are actual or potential parties to such claim
or action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding, or (ii) be
liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld), but
if settled with its written consent or if there be a final judgment of
the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any
loss of liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section shall
for any reason be
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<PAGE> 23
unavailable to or insufficient to hold harmless an indemnified party
under Section 8(a) or 8(b) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, then
each indemnifying party shall, in lieu of indemnifying such indemnified
party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action
in respect thereof, in such proportion as shall be appropriate to
reflect the relative fault of the Registrants on the one hand and the
Participants on the other with respect to the statements or omissions
which resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to
whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to
information supplied by the Registrants or the Participants. the intent
of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
Registrants and the Participants agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were to be
determined by pro rata allocation (even if the Participants were
treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an
indemnified party as a result of the loss, claim, damage or liability,
or action in respect thereof, referred to above in this Section 8(d)
shall be deemed to include, for purposes of this Section 8(d), any
legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 8(d), no Participant
shall be required to contribute any amount in excess of the amount by
which the total received by such Participant with respect to the sale
of its Securities exceeds the amount of any damages which such
Participant has otherwise paid or become liable to pay by reason of any
untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent
misrepresentation. The Participants' obligations to contribute as
provided in this Section 8(d) are several and not Joint.
The indemnity and contribution provisions contained in this Section 8 shall
remain operative and in full force and effect regardless of (i) any termination
of this Agreement, (ii) any investigation made by or on behalf of any Holder or
any person controlling any Holder, or any Registrant or its officers, directors
or trustees or any person controlling the Registrants and (iii) the sale of any
Transfer Restricted Securities by any Holder.
9. RULE 144A.
The Registrants hereby agree with each Holder, for so long as any Transfer
Restricted Securities remain outstanding, to make available to any Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer
22
<PAGE> 24
Restricted Securities from such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Securities Act in order to permit resales
of such Transfer Restricted Securities pursuant to Rule 144A.
10. Participation in Underwritten Registrations.
No Holder may participate in any Underwritten Registration hereunder unless such
Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the
basis provided in any underwriting arrangements approved by the Registrants and
(b) completes and executes all reasonable questionnaires, powers of attorney,
indemnities, underwriting agreements, lock-up letters and other documents
required under the terms of such underwriting arrangements.
11. Selection of Underwriters.
If any of the Transfer Restricted Securities covered by a Shelf Registration
Statement are to be sold in an Underwritten Offering, the investment banker or
investment bankers and manager or managers that shall administer the offering
shall be selected by the Holders of a majority in aggregate principal amount or
liquidation amount of the Transfer Restricted Securities included in such
offering; PROVIDED, that such investment bankers and managers must be reasonably
satisfactory to the Company and such Holders shall be responsible for all
underwriting commissions and discounts in connection therewith.
12. Miscellaneous.
(a) REMEDIES. The Registrants agree that monetary damages
(including the liquidated damages contemplated hereby) would not be
adequate compensation for any loss incurred by reason of a breach by it
of the provisions of this Agreement and hereby agree to waive the
defense in any action for specific performance that a remedy at law
would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Registrants shall not on
or after the date of this Agreement enter into any agreement with
respect to their securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with
the provisions hereof. The Registrants have not previously entered into
any agreement granting any Person the right to include securities of
the Company on any Shelf Registration Statement pursuant to this
Agreement. The rights granted to the Holders hereunder do not in any
way conflict with and are not inconsistent with the rights granted to
the holders of the Registrants' securities under any agreement in
effect on the date hereof.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents
to or departures from the
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<PAGE> 25
provisions hereof may not be given unless the Registrants have obtained
the written consent of Holders of a majority of the then outstanding
Underlying Common Stock constituting Transfer Restricted Securities
(with Holders of CRESTS (or Convertible Debentures issued upon
liquidation of the Trust) deemed to be the Holders, for purposes of
this Section, of the number of outstanding shares of Underlying Common
Stock into which such CRESTS (or Convertible Debentures) are or would
be convertible or exchangeable as of the date on which such consent is
requested). Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders of Transfer Restricted Securities
whose securities are being sold pursuant to a Shelf Registration
Statement and that does not directly or indirectly affect the rights of
other Holders of Transfer Restricted Securities may be given by Holders
of at least a majority of the Transfer Restricted Securities being sold
by such Holders pursuant to such Shelf Registration Statement;
PROVIDED, that the provisions of this sentence may not be amended,
modified, or supplemented except in accordance with the provisions of
the immediately preceding sentence.
(d) NOTICES. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery,
first-class mail (registered or certified, return receipt requested),
telex, telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the
records of the Trust; and
(ii) if to the Registrants:
Servico, Inc.
1601 Belvedere Road
West Palm Beach, Florida 33406
Attention: Chief Executive Officer
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally
delivered; five business days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when
receipt acknowledged, if telecopied; and on the next business day, if
timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the
Trustee at the address specified in the Indenture.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be
24
<PAGE> 26
binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities;
PROVIDED, HOWEVER, that this Agreement shall not inure to the benefit
of or be binding upon a successor or assign of a Holder unless and to
the extent such successor or assign acquired Transfer Restricted
Securities from such Holder; and PROVIDED, further, that nothing herein
shall be deemed to permit any assignment, transfer or other disposition
of Transfer Restricted Securities in violation of the terms hereof or
of the Purchase Agreement or the Indenture. If any transferee of any
Holder shall acquire Transfer Restricted Securities in any manner,
whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement,
and by taking and holding such Transfer Restricted Securities such
Person shall be conclusively deemed to have agreed to be bound by and
to perform all of the terms and provisions of this Agreement, including
the restrictions on resale set forth in this Agreement and, if
applicable, the Purchase Agreement, and such Person shall be entitled
to receive the benefits hereof.
(f) COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and
all of which taken together shall constitute one and the same
agreement.
(g) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE CONFLICT OF LAW RULES THEREOF.
(i) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity,
legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be
affected or impaired thereby.
(j) ENTIRE AGREEMENT. This Agreement together with the other
transaction documents is intended by the parties as a final expression
of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those
set forth or referred to herein with respect to the registration rights
granted by the Registrants with respect to the Transfer Restricted
Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
25
<PAGE> 27
(k) REQUIRED CONSENTS. Whenever the consent or approval of
Holders of a specified percentage of Transfer Restricted Securities is
required hereunder, Transfer Restricted Securities held by the
Registrants or their affiliates (as such term is defined in Rule 405
under the Securities Act) shall not be counted in determining whether
such consent or approval was given by the Holders of such required
percentage.
(l) TERMINATION. This Agreement and the obligations of the
parties hereunder shall terminate upon the end of the Effectiveness
Period, except for any liabilities or obligations under Sections 6, 7
or 8 hereof and the obligations to make payments of and provide for
liquidated damages under Section 4(a) hereof to the extent such damages
accrue prior to the end of the Effectiveness Period, each of which
shall remain in effect in accordance with their terms.
(m) MERGER. In the event the merger (the "MERGER") pursuant to
the Agreement and Plan of Merger, dated as of March 20, 1998 among
Lodgian, the Company, Impac Hotel Group, L.L.C., SHG-S Sub and SHG-I
Sub, L.L.C. is consummated, Lodgian, the successor corporation in the
Merger, shall assume the Company's obligations under this Agreement and
shall execute and deliver such documents as may be necessary to carry
out the intent of this Section. From and after the Merger and the
assumption by Lodgian of Servico, Inc.'s obligations hereunder,
Servico, Inc. shall be released from its obligations under this
Agreement. Following the Merger, all references to the Company
hereunder shall instead refer to Lodgian.
26
<PAGE> 28
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
SERVICO, INC.
By: /s/ Charles M. Diaz
-----------------------------------
Name: Charles M. Diaz
Title: Vice President and Secretary
LODGIAN CAPITAL TRUST I
By: /s/ Charles M. Diaz
-----------------------------------
Name: Charles M. Diaz
Title: Regular Trustee
LODGIAN, INC.
By: /s/ Charles M. Diaz
-----------------------------------
Name: Charles M. Diaz
Title: Vice President and Secretary
Accepted as of the date hereof
NATIONSBANC MONTGOMERY
SECURITIES LLC
By: /s/ Richard Smith
---------------------------------
Name: Richard Smith
Title: Senior Managing Director
27
<PAGE> 1
Exhibit 10.5
===============================================================================
AMENDED AND RESTATED DECLARATION OF TRUST
LODGIAN CAPITAL TRUST I
Dated as of June 17, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
----------------------
<TABLE>
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<S> <C> <C>
ARTICLE 1
INTERPRETATION AND DEFINITIONS
SECTION 1.01. INTERPRETATION AND DEFINITIONS...................................................2
ARTICLE 2
TRUST INDENTURE ACT
SECTION 2.01. TRUST INDENTURE ACT; APPLICATION................................................13
SECTION 2.02. LIST OF HOLDERS OF SECURITIES...................................................13
SECTION 2.03. REPORTS BY THE PROPERTY TRUSTEE.................................................14
SECTION 2.04. PERIODIC REPORTS TO THE PROPERTY TRUSTEE........................................14
SECTION 2.05. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT................................14
SECTION 2.06. TRUST ENFORCEMENT EVENTS; WAIVER................................................15
SECTION 2.07. TRUST ENFORCEMENT EVENT; NOTICE.................................................16
ARTICLE 3
ORGANIZATION
SECTION 3.01. NAME AND ORGANIZATION...........................................................17
SECTION 3.02. OFFICE..........................................................................17
SECTION 3.03. PURPOSE.........................................................................17
SECTION 3.04. AUTHORITY.......................................................................18
SECTION 3.05. TITLE TO PROPERTY OF THE TRUST..................................................18
SECTION 3.06. POWERS AND DUTIES OF THE REGULAR TRUSTEES.......................................19
SECTION 3.07. PROHIBITION OF ACTIONS BY THE TRUST AND THE TRUSTEES............................22
SECTION 3.08. POWERS AND DUTIES OF THE PROPERTY TRUSTEE.......................................23
SECTION 3.09. CERTAIN DUTIES AND RESPONSIBILITIES OF THE PROPERTY
TRUSTEE.........................................................................25
SECTION 3.10. CERTAIN RIGHTS OF PROPERTY TRUSTEE..............................................28
SECTION 3.11. DELAWARE TRUSTEE................................................................30
SECTION 3.12. EXECUTION OF DOCUMENTS..........................................................30
SECTION 3.13. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES..........................30
SECTION 3.14. DURATION OF TRUST...............................................................30
SECTION 3.15. MERGERS.........................................................................31
SECTION 3.16. PROPERTY TRUSTEE MAY FILE PROOFS OF CLAIM.......................................32
</TABLE>
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<TABLE>
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ARTICLE 4
SPONSOR
SECTION 4.01. RESPONSIBILITIES OF THE SPONSOR.................................................33
SECTION 4.02. INDEMNIFICATION AND EXPENSES OF THE TRUSTEES....................................34
ARTICLE 5
TRUST COMMON SECURITIES HOLDER
SECTION 5.01. DEBENTURE ISSUER'S PURCHASE OF COMMON SECURITIES................................34
SECTION 5.02. COVENANTS OF THE COMMON SECURITIES HOLDER.......................................35
SECTION 5.03. COVENANTS OF LODGIAN............................................................35
ARTICLE 6
TRUSTEES
SECTION 6.01. NUMBER OF TRUSTEES..............................................................36
SECTION 6.02. DELAWARE TRUSTEE; ELIGIBILITY...................................................36
SECTION 6.03. PROPERTY TRUSTEE; ELIGIBILITY...................................................36
SECTION 6.04. QUALIFICATIONS OF REGULAR TRUSTEES AND DELAWARE TRUSTEE
GENERALLY.......................................................................37
SECTION 6.05. INITIAL TRUSTEES................................................................37
SECTION 6.06. APPOINTMENT, REMOVAL AND RESIGNATION OF TRUSTEES................................38
SECTION 6.07. VACANCIES AMONG TRUSTEES........................................................39
SECTION 6.08. EFFECT OF VACANCIES.............................................................40
SECTION 6.09. MEETINGS........................................................................40
SECTION 6.10. DELEGATION OF POWER.............................................................40
SECTION 6.11. MERGERS, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS........................................................................41
ARTICLE 7
TERMS OF SECURITIES
SECTION 7.01. GENERAL PROVISIONS REGARDING SECURITIES.........................................41
SECTION 7.02. DISTRIBUTIONS...................................................................43
SECTION 7.03. REDEMPTION OF SECURITIES; DISTRIBUTION OF DEBENTURES............................46
SECTION 7.04. REDEMPTION PROCEDURES...........................................................47
SECTION 7.05. VOTING RIGHTS OF CRESTS.........................................................49
SECTION 7.06. VOTING RIGHTS OF COMMON SECURITIES..............................................52
SECTION 7.07. PAYING AGENT....................................................................53
SECTION 7.08. TRANSFER OF SECURITIES..........................................................54
</TABLE>
ii
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<TABLE>
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<S> <C> <C>
SECTION 7.09. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES...............................55
SECTION 7.10. DEEMED SECURITY HOLDERS.........................................................55
SECTION 7.11. GLOBAL SECURITIES...............................................................55
SECTION 7.12. RESTRICTIVE LEGEND..............................................................58
SECTION 7.13. CONVERSION RIGHTS...............................................................62
SECTION 7.14. MERGER..........................................................................65
SECTION 7.15. OPTIONAL REPURCHASE.............................................................65
ARTICLE 8
DISSOLUTION AND TERMINATION OF TRUST
SECTION 8.01. DISSOLUTION AND TERMINATION OF TRUST............................................67
SECTION 8.02. LIQUIDATION DISTRIBUTION UPON DISSOLUTION OF THE TRUST..........................68
ARTICLE 9
LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, DELAWARE TRUSTEES OR
OTHERS
SECTION 9.01. LIABILITY.......................................................................69
SECTION 9.02. EXCULPATION.....................................................................69
SECTION 9.03. FIDUCIARY DUTY..................................................................70
SECTION 9.04. INDEMNIFICATION.................................................................71
SECTION 9.05. OUTSIDE BUSINESS................................................................74
ARTICLE 10
ACCOUNTING
SECTION 10.01. FISCAL YEAR....................................................................75
SECTION 10.02. CERTAIN ACCOUNTING MATTER......................................................75
SECTION 10.03. BANKING........................................................................75
SECTION 10.04. WITHHOLDING....................................................................76
ARTICLE 11
AMENDMENTS AND MEETINGS
SECTION 11.01. AMENDMENTS.....................................................................76
SECTION 11.02. MEETINGS OF THE HOLDERS OF SECURITIES; ACTION BY WRITTEN
CONSENT........................................................................79
</TABLE>
iii
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<TABLE>
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<S> <C> <C>
ARTICLE 12
REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE
SECTION 12.01. REPRESENTATIONS AND WARRANTIES OF THE PROPERTY TRUSTEE.........................80
SECTION 12.02. REPRESENTATIONS AND WARRANTIES OF THE DELAWARE TRUSTEE.........................81
ARTICLE 13
MISCELLANEOUS
SECTION 13.01. NOTICES........................................................................82
SECTION 13.02. GOVERNING LAW..................................................................83
SECTION 13.03. INTENTION OF THE PARTIES.......................................................83
SECTION 13.04. HEADINGS.......................................................................83
SECTION 13.05. SUCCESSORS AND ASSIGNS.........................................................83
SECTION 13.06. PARTIAL ENFORCEABILITY.........................................................84
SECTION 13.07. COUNTERPARTS...................................................................84
</TABLE>
iv
<PAGE> 6
AMENDED AND RESTATED DECLARATION OF TRUST
THIS AMENDED AND RESTATED DECLARATION OF TRUST ("DECLARATION"), dated
as of June 17, 1998, by and among Servico, Inc., a Florida corporation, as
Sponsor, and David Buddemeyer, Phillip R. Hale and Charles M. Diaz as the
initial Regular Trustees, not in their individual capacities, but solely as
Trustees, Wilmington Trust Company as the initial Property Trustee and as the
initial Delaware Trustee, not in its individual capacity but solely as Trustee,
Lodgian, Inc. and the holders, from time to time, of undivided beneficial
ownership interests in the Trust to be issued pursuant to this Declaration.
WHEREAS, the Trustees and the Sponsor established Lodgian Capital Trust
I (the "TRUST"), a business trust under the Business Trust Act (as defined,
together with other capitalized terms, herein) pursuant to a Declaration of
Trust dated as of May 15, 1998 (the "ORIGINAL DECLARATION"), and a Certificate
of Trust (the "CERTIFICATE OF TRUST") filed with the Secretary of State of the
State of Delaware on May 15, 1998; and
WHEREAS, the sole purpose of the Trust shall be to issue and sell
certain securities representing undivided beneficial ownership interests in the
assets of the Trust, to invest the proceeds from such sales in the Debentures
issued by the Debenture Issuer (as defined herein) and to engage in only those
activities necessary or incidental thereto; and
WHEREAS, all of the Trustees and the Sponsor, by this Declaration,
amend and restate each and every term and provision of the Original Declaration.
NOW, THEREFORE, it being the intention of the parties hereto to
continue the Trust as a business trust under the Business Trust Act and that
this Declaration constitute the governing instrument of such business trust, the
Trustees hereby declare that all assets contributed to the Trust be held in
trust for the benefit of the Holders, from time to time, of the Securities
representing undivided beneficial ownership interests in the assets of the Trust
issued hereunder, subject to the provisions of this Declaration.
<PAGE> 7
ARTICLE 1
INTERPRETATION AND DEFINITIONS
SECTION 1.01. INTERPRETATION AND DEFINITIONS. Unless the context
otherwise requires:
(a) capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in this Section
1.01;
(b) a term defined anywhere in this Declaration has the same meaning
throughout;
(c) all references to "THE DECLARATION" or "THIS DECLARATION" are to
this Declaration as modified, supplemented or amended from time to time;
(d) all references in this Declaration to Articles, Sections, Recitals
and Exhibits are to Articles and Sections of, or Recitals and Exhibits to, this
Declaration unless otherwise specified;
(e) unless otherwise defined in this Declaration, a term defined in
the Trust Indenture Act has the same meaning when used in this Declaration; and
(f) a reference to the singular includes the plural and vice versa and
a reference to any masculine form of a term shall include the feminine form of a
term, as applicable.
(g) the following terms have the following meanings:
"AFFILIATE" has the same meaning as given to that term in Rule 405 of
the Securities Act or any successor rule thereunder.
"APPLICABLE RATE" has the meaning specified in Section 7.02.
"AUTHORIZED NEWSPAPER" means a leading newspaper customarily published
at least once a day for at least five days in each calendar week and of general
circulation in New York City. Such publication is expected to be made in The
Wall Street Journal (Eastern edition).
"AUTHORIZED OFFICER" of a Person means any Person that is authorized to
bind such Person.
2
<PAGE> 8
"BENEFICIAL OWNERS" means, for CRESTS represented by a Global Security,
the person who acquires an interest in the CRESTS which is reflected on the
records of the Depositary through the Depositary Participants.
"BOARD OF DIRECTORS" or "BOARD" means, at any time, the duly elected or
acting board of directors (or duly authorized committee thereof) of the
Debenture Issuer at such time.
"BUSINESS DAY" means any day, other than a Saturday or Sunday, that is
not a day on which banking institutions in the Borough of Manhattan, The City of
New York or Wilmington, Delaware are authorized or required by law, regulation
or executive order to close.
"BUSINESS TRUST ACT" means Chapter 38 of Title 12 of the Delaware Code,
12 Del. Code Section 3801 et seq., as it may be amended from time to time, or
any successor legislation.
"CEDEL" means Cedel Bank, SOCIETE ANONYME.
"CERTIFICATE" means a Common Security Certificate or a CRESTS
Certificate.
"CERTIFICATE OF TRUST" has the meaning specified in the Recitals
hereto.
"CLOSING DATE" means June 17, 1998, the date on which the CRESTS were
initially issued and sold.
"CLOSING PRICE" of any class of common stock of the Debenture Issuer on
any date of determination means (i) the closing sale price (or, if no closing
price is reported, the last reported sale price) of such common stock (regular
way) on the NYSE on such date, (ii) if such common stock is not listed for
trading on the NYSE on any such date, as reported in the composite transactions
for the principal United States securities exchange on which such common stock
is so listed, (iii) if such common stock is not so listed on a United States
national or regional securities exchange, as reported by The Nasdaq Stock
Market, (iv) if such common stock is not so reported, the last quoted bid price
for such common stock in the over-the-counter market as reported by the National
Quotation Bureau or similar organization or (v) if such common stock is not so
quoted, the average of the mid-point of the last bid and ask prices for such
common stock from at least three nationally recognized investment banking firms
selected by the Board of Directors.
3
<PAGE> 9
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation. A reference to a specific section of the
Code refers not only to such specific section but also to any corresponding
provision of any federal tax statute enacted after the date of this Declaration,
as such specific section or corresponding provision is in effect on the date of
application of the provisions of this Declaration containing such reference.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON SECURITIES HOLDER" means Servico, Inc., in its capacity as
purchaser and holder of all of the Common Securities issued by the Trust.
"COMMON SECURITY" has the meaning specified in Section 7.01.
"COMMON SECURITY CERTIFICATE" means a definitive certificate in fully
registered form representing a Common Security, substantially in the form of
Exhibit B.
"COMMON STOCK" means the Common Stock, $.01 par value per share, of the
Debenture Issuer or, from and after the date the Merger is consummated, the
Common Stock, $.01 par value per share, of Lodgian, and any other shares of
common stock as may constitute "Common Stock" under the Indenture.
"COMPOUNDED DISTRIBUTIONS" has the meaning specified in Section
7.02(b).
"CONVERSION AGENT" has the meaning specified in Section 7.13(d).
"CONVERSION DATE" has the meaning specified in Section 7.13(c).
"CONVERSION REQUEST" has the meaning specified in Section 7.13(c).
"CONVERSION PRICE" means the conversion price per share of Common
Stock, set forth in Section 7.13(a), as such Conversion Price may be adjusted
from time to time pursuant to the Supplemental Indenture.
"CORPORATE TRUST OFFICE" means the principal office of the Property
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of execution of this Declaration is
located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890, Attention: Corporate Trust Administration.
4
<PAGE> 10
"COVERED PERSON" mean (a) any officer, director, shareholder, partner,
member, representative, employee or agent of (i) the Trust or (ii) the Trust's
Affiliates; and (b) any Holder of Securities.
"CRESTS" has the meaning specified in Section 7.01.
"CRESTS CERTIFICATE" means a definitive certificate in fully registered
form representing a CRESTS, substantially in the form of Exhibit A.
"DATE OF NON-COMPLETION" means the earlier of (i) the date of
termination of the Merger Agreement and (ii) December 31, 1998 if the Merger has
not been consummated.
"DEBENTURE ISSUER" means Servico, Inc., in its capacity as issuer of
the Debentures under the Indenture.
"DEBENTURE ISSUER INDEMNIFIED PERSON" means (a) any Regular Trustee;
(b) any Affiliate of any Regular Trustee; (c) any officers, directors,
shareholders, members, partners, employees, representatives or agents of any
Regular Trustee or any Affiliate thereof; or (d) any officer, employee or agent
of the Trust or its Affiliates.
"DEBENTURE TRUSTEE" means Wilmington Trust Company, in its capacity as
trustee under the Indenture until a successor is appointed thereunder, and
thereafter means such successor trustee.
"DEBENTURES" means the 7% Convertible Junior Subordinated Debentures
Due 2010 to be issued by the Debenture Issuer under the Indenture and held by
the Property Trustee.
"DELAWARE TRUSTEE" has the meaning specified in Section 3.11.
"DEPOSITARY" means, with respect to Securities issuable in whole or in
part in the form of one or more Global Securities, a clearing agency registered
under the Exchange Act that is designated to act as Depositary for such
Securities.
"DEPOSITARY PARTICIPANT" means a member of, or participant in, the
Depositary.
"DIRECT ACTION" has the meaning specified in Section 3.08(e).
5
<PAGE> 11
"DISTRIBUTION" means a distribution payable to Holders of Securities in
accordance with Section 7.02.
"EUROCLEAR" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor legislation.
"EXTENSION PERIOD" has the meaning specified in Section 7.02(b).
"FIDUCIARY INDEMNIFIED PERSON" has the meaning specified in Section
9.04(b).
"FISCAL YEAR" has the meaning specified in Section 10.01.
"GLOBAL SECURITY" means a fully registered, global CRESTS Certificate.
"GUARANTEE" means the Guarantee Agreement, dated as of June 17, 1998,
of the Sponsor in respect of the Securities.
"HOLDER" means any holder of Securities, as registered on the books and
records of the Trust; PROVIDED, however, that in determining whether the Holders
of the requisite liquidation amount of CRESTS have voted on any matter provided
for in this Declaration, then for the purpose of such determination only (and
not for any other purpose hereunder), if the CRESTS remain in the form of one or
more Global Securities and if the Depositary which is the holder of such Global
Securities has sent an omnibus proxy to the Trust assigning voting rights to
Depositary Participants to whose accounts the CRESTS are credited on the record
date, the term "HOLDERS" shall mean such Depositary Participants acting at the
direction of the Beneficial Owners.
"INDEMNIFIED PERSON" means a Debenture Issuer Indemnified Person or a
Fiduciary Indemnified Person.
"INDENTURE" means the Indenture, dated as of June 17, 1998, between the
Debenture Issuer, Lodgian and Wilmington Trust Company, as Trustee, as the same
may be amended and supplemented from time to time pursuant to which the
Debentures are to be issued.
"INDENTURE EVENT OF DEFAULT" has the meaning given to the term "EVENT
OF DEFAULT" in the Indenture.
6
<PAGE> 12
"INITIAL PURCHASER" means NationsBanc Montgomery Securities LLC.
"INVESTMENT COMPANY" means an investment company as defined in the
Investment Company Act and the regulations promulgated thereunder.
"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940, as
amended from time to time, or any successor legislation.
"INVESTMENT COMPANY EVENT" means the receipt by the Trust of an opinion
of counsel, rendered by a law firm having a recognized national securities
practice, to the effect that, as a result of the occurrence of a change in law
or regulation or a change in interpretation or application of law or regulation
by any legislative body, court, governmental agency or regulatory authority (a
"CHANGE IN 1940 ACT LAW"), there is more than an insubstantial risk that the
Trust is or shall be considered an "INVESTMENT COMPANY" that is required to be
registered under the Investment Company Act, which Change in 1940 Act Law
becomes effective on or after the Closing Date.
"LEGAL ACTION" has the meaning specified in Section 3.06(g).
"LIQUIDATION" has the meaning specified in Section 8.02(a).
"LIQUIDATION DISTRIBUTION" has the meaning specified in Section
8.02(a).
"LIST OF HOLDERS" has the meaning specified in Section 2.02(a)(i).
"LODGIAN" has the meaning specified in Section 7.14.
"MAJORITY IN LIQUIDATION AMOUNT" means, except as provided in the terms
of the CRESTS or by the Trust Indenture Act, Holder(s) of outstanding
Securities, voting together as a single class, or, as the context may require,
Holders of outstanding CRESTS or Holders of outstanding Common Securities,
voting separately as a class, who are the record owners of more than 50% of the
aggregate liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accumulated and unpaid Distributions
to the date upon which the voting percentages are determined) of all outstanding
Securities of the relevant class.
"MERGER" has the meaning specified in Section 7.15.
"MERGER AGREEMENT" means the Agreement and Plan of Merger, dated as of
March 20, 1998 among Lodgian, the Company, Impac Hotel Group, L.L.C., SHG-S Sub,
Inc. and SHG-I Sub, L.L.C.
7
<PAGE> 13
"MINISTERIAL ACTION" has the meaning specified in Section 7.03(b).
"NASDAQ" means the National Association of Securities Dealers, Inc.
Automated Quotations System or any successor thereto.
"90-DAY PERIOD" has the meaning specified in Section 7.03(b).
"NO RECOGNITION OPINION" means an opinion of independent tax counsel
experienced in such matters (which opinion may rely on published revenue rulings
of the Internal Revenue Service) to the effect that the holders of the
Securities shall not recognize any gain or loss for United States federal income
tax purposes as a result of the dissolution of the Trust and the distribution of
Debentures.
"NON-COMPLETION NOTICE" has the meaning specified in Section 7.15(b).
"NON-COMPLETION OFFER" means the offer to repurchase CRESTS
described in Section 7.15.
"NON-COMPLETION PAYMENT" has the meaning specified in Section
7.15(a).
"NON-COMPLETION PAYMENT DATE" has the meaning specified in Section
7.15(c).
"NYSE" means the New York Stock Exchange, Inc. or any successor
thereto.
"OFFERING MEMORANDUM" means the confidential offering memorandum, dated
as of June 9, 1998, relating to the issuance by the Trust of CRESTS, as amended,
supplemented, superseded or reissued.
"OFFICERS' CERTIFICATE" means, with respect to any Person, a
certificate signed on behalf of such Person by two Authorized Officers of such
Person. Any Officers' Certificate delivered with respect to compliance with a
condition or covenant provided for in this Declaration shall include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer on behalf of such Person in rendering
the Officers' Certificate;
8
<PAGE> 14
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
on behalf of such Person to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer
acting on behalf of such Person, such condition or covenant has been complied
with; PROVIDED, that the term "OFFICERS' CERTIFICATE", when used with reference
to Regular Trustees who are natural persons shall mean a certificate signed by
two of the Regular Trustees which otherwise satisfies the foregoing
requirements.
"OPTION CLOSING DATE" means the date of closing of any sale of the
Option CRESTS (as defined in the Purchase Agreement).
"PAYING AGENT" has the meaning specified in Section 7.07.
"PAYMENT AMOUNT" has the meaning specified in Section 7.02(c).
"PERSON" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"PORTAL" has the meaning specified in Section 3.06(b)(i).
"PROPERTY ACCOUNT" has the meaning specified in Section 3.08(c)(i).
"PROPERTY TRUSTEE" means the Trustee meeting the eligibility
requirements set forth in Section 6.03.
"PRO RATA" means PRO RATA to each Holder of Securities according to the
aggregate liquidation amount of the Securities held by the relevant Holder in
relation to the aggregate liquidation amount of all Securities outstanding
unless, in relation to a payment, an Indenture Event of Default has occurred and
is continuing, in which case any funds available to make such payment shall be
paid first to each Holder of the CRESTS PRO RATA according to the aggregate
liquidation amount of CRESTS held by the relevant Holder relative to the
aggregate liquidation amount of all CRESTS outstanding, and only after
satisfaction of all amounts owed to the Holders of the CRESTS, to each Holder of
Common Securities PRO RATA according to the aggregate liquidation amount of
Common Securities held by the relevant Holder relative to the aggregate
liquidation amount of all Common Securities outstanding.
9
<PAGE> 15
"QUALIFIED INSTITUTIONAL BUYER" or "QIB" has the meaning specified in
Rule 144A under the Securities Act.
"QUORUM" means a majority of the Regular Trustees or, if them are only
two Regular Trustees, both of them.
"REDEMPTION/DISTRIBUTION NOTICE" has the meaning specified in Section
7.04.
"REDEMPTION PRICE" means the amount for which the Securities shall be
redeemed, which amount shall equal (i) the redemption price paid by the
Debenture Issuer to repay or redeem in whole or in part, the Debentures held by
the Trust plus an amount equal to accumulated and unpaid Distributions on such
Securities through the date of their redemption or (ii) such lesser amount as
shall be received by the Trust in respect of the Debentures so repaid or
redeemed.
"REDEMPTION TAX OPINION" means an opinion of independent tax counsel
experienced in such matters that, as a result of a Tax Event, there is more than
an insubstantial risk that the Debenture Issuer would be precluded from
deducting the interest on the Debentures for United States federal income tax
purposes even after the Debentures were distributed to the holders of Securities
in liquidation of such holders' interests in the Trust as described in the
Declaration.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated the date hereof, among the Sponsor, Lodgian, the Initial
Purchaser and the Trust for the benefit of themselves and the Holders, as the
same may be amended from time to time in accordance with the terms thereof.
"REGULAR TRUSTEE" means any Trustee other than the Property Trustee and
the Delaware Trustee.
"RELATED PARTY" means, with respect to the Sponsor, any direct or
wholly owned subsidiary of the Sponsor or any Person that owns, directly or
indirectly, 100% of the outstanding voting securities of the Sponsor.
"RESALE RESTRICTION TERMINATION DATE" has the meaning specified in
Section 7.12(a).
"RESPONSIBLE OFFICER" means, with respect to the Property Trustee, any
officer with direct responsibility for the administration of this Declaration
and also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of that officer's knowledge of
and familiarity with the particular subject.
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"RESTRICTED SECURITY" has the meaning assigned to such term in Rule
144(a)(3), as amended from time to time or any successor rule, under the
Securities Act.
"RULE 144A" means Rule 144A, as amended from time to time or any
successor rule, under the Securities Act.
"RULE 3A-5" means Rule 3a-5 under the Investment Company Act or any
successor rule thereunder.
"SECURITIES" means the Common Securities and the CRESTS.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time, or any successor legislation.
"SECURITY REGISTER" has the meaning specified in Section 7.08(b).
"SECURITY REGISTRAR" has the meaning specified in Section 7.08(b).
"SHELF REGISTRATION STATEMENT" has the meaning specified in the
Registration Rights Agreement.
"SPECIAL EVENT" means a Tax Event or an Investment Company Event.
"SPECIAL REDEMPTION PRICE" has the meaning specified in Section
7.03(b).
"SPONSOR" means Servico, Inc., a Florida corporation, or any successor
entity in a merger, consolidation, amalgamation or replacement by or conveyance,
transfer or lease of its properties substantially as an entirety, in its
capacity as sponsor of the Trust.
"SUCCESSOR DELAWARE TRUSTEE" has the meaning specified in Section
6.06(b).
"SUCCESSOR ENTITY" has the meaning specified in Section 3.15(b)(i).
"SUCCESSOR PROPERTY TRUSTEE" has the meaning specified in Section
6.06(b).
"SUCCESSOR SECURITY" has the meaning specified in Section
3.15(b)(vi)(B).
"SUPER MAJORITY" has the meaning specified in Section 2.06(a)(i).
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"SUPPLEMENTAL INDENTURE" means the First Supplemental Indenture, dated
as of June 17, 1998 between the Debenture Issuer, Lodgian and Wilmington Trust
Company, as Trustee.
"TAX EVENT" means the receipt by the Trust of an opinion of independent
tax counsel experienced in such matters, to the effect that, as a result of (a)
any amendment to, change in or announced proposed change in the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or (b) any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or proposed change,
pronouncement or decision is announced on or after the Closing Date, there is
more than an insubstantial risk that (i) the Trust is, or shall be within 90
days of the date of such opinion, subject to United States federal income tax
with respect to income received or accrued on the Debentures, (ii) interest
payable by the Debenture Issuer on the Debentures is not, or within 90 days of
the date of such opinion, shall not be, deductible by the Debenture Issuer, in
whole or in part, for United States federal income tax purposes, or (iii) the
Trust is, or shall be within 90 days of the date of such opinion, subject to
more than a DE MINIMIS amount of other taxes, duties or other governmental
charges; PROVIDED, however, that a Tax Event shall not be deemed to occur under
(ii) above if the Debenture Issuer is merely required to defer taking a
deduction for any interest or original issue discount ("OID") that accrues with
respect to the Debentures until such interest payment or OID is paid by the
Debenture Issuer in cash.
"10% IN LIQUIDATION AMOUNT" means, except as provided in the terms of
the CRESTS or by the Trust Indenture Act, Holder(s) of outstanding Securities,
voting together as a single class, or, as the context may require, Holders of
outstanding CRESTS or Holders of outstanding Common Securities, voting
separately as a class, who are the record owners of 10% or more of the aggregate
liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined) of all outstanding
Securities of the relevant class.
"TREASURY REGULATIONS" means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"TRUST" has the meaning specified in the Recitals hereto.
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"TRUST ENFORCEMENT EVENT" in respect of the Securities means an
Indenture Event of Default has occurred and is continuing in respect of the
Debentures.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as amended
from time to time, or any successor legislation.
"TRUST SPECIAL EVENT" has the meaning specified in Section 7.03(b).
"TRUSTEE" or "TRUSTEES" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as Trustees in accordance with the
provisions hereof, and references herein to a Trustee or the Trustees shall
refer to such Person or Persons solely in their capacity as trustees hereunder.
ARTICLE 2
TRUST INDENTURE ACT
SECTION 2.01. TRUST INDENTURE ACT; APPLICATION. (a) This Declaration is
subject to the provisions of the Trust Indenture Act that are required to be
part of this Declaration and shall, to the extent applicable, be governed by
such provisions.
(b) The Property Trustee shall be the only Trustee which is a Trustee
for the purposes of the Trust Indenture Act.
(c) If and to the extent that any provision of this Declaration
conflicts with the duties imposed by Sections 310 to 317, inclusive, of the
Trust Indenture Act, such imposed duties shall control.
(d) The application of the Trust Indenture Act to this Declaration
shall not affect the Trust's classification as a grantor trust for United States
federal income tax purposes and shall not affect the nature of the Securities as
equity securities representing undivided beneficial ownership interests in the
assets of the Trust.
SECTION 2.02. LIST OF HOLDERS OF SECURITIES. (a) At any time when the
Property Trustee is not also acting as the Securities Registrar, each of the
Sponsor and the Regular Trustees on behalf of the Trust shall provide the
Property Trustee (i), except while the CRESTS are represented by one or more
Global Securities, at
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least one Business Day prior to the date for payment of Distributions, a list,
in such form as the Property Trustee may reasonably require, of the names and
addresses of the Holders of the Securities ("LIST OF HOLDERS") as of the record
date relating to the payment of such Distributions and (ii) at any other time,
within 30 days of receipt by the Trust of a written request from the Property
Trustee for a List of Holders as of a date no more than 15 days before such List
of Holders is given to the Property Trustee; PROVIDED that neither the Sponsor
nor the Regular Trustees on behalf of the Trust shall be obligated to provide
such List of Holders at any time the List of Holders does not differ from the
most recent List of Holders given to the Property Trustee by the Sponsor and the
Regular Trustees on behalf of the Trust. The Property Trustee shall preserve, in
as current a form as is reasonably practicable, all information contained in
Lists of Holders given to it or which it receives in the capacity as Paying
Agent (if acting in such capacity), PROVIDED that the Property Trustee may
destroy any List of Holders previously given to it on receipt of a new List of
Holders.
(b) The Property Trustee shall comply with its obligations under, and
shall be entitled to the benefits of, Sections 311(a), 311(b) and 312(b) of the
Trust Indenture Act.
SECTION 2.03. REPORTS BY THE PROPERTY TRUSTEE. Within 60 days after May
15 of each year (commencing with the year of the first anniversary of the
issuance of the CRESTS), the Property Trustee shall provide to the Holders of
the CRESTS such reports as are required by Section 313 of the Trust Indenture
Act, if any, in the form and in the manner provided by Section 313 of the Trust
Indenture Act. The Property Trustee shall also comply with the requirements of
Section 313(d) of the Trust Indenture Act.
SECTION 2.04. PERIODIC REPORTS TO THE PROPERTY TRUSTEE. Each of the
Sponsor and the Regular Trustees on behalf of the Trust shall provide to the
Property Trustee such documents, reports and information as required by Section
314 of the Trust Indenture Act (if any) and the compliance certificate required
by Section 314 of the Trust Indenture Act in the form, in the manner and at the
times required by Section 314 of the Trust Indenture Act.
SECTION 2.05. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. Each of
the Sponsor and the Regular Trustees on behalf of the Trust shall provide to the
Property Trustee such evidence of compliance with any conditions precedent, if
any, provided for in this Declaration that relate to any of the matters set
forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) may be given in
the form of an Officers' Certificate.
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SECTION 2.06. TRUST ENFORCEMENT EVENTS; WAIVER. (a) The Holders of a
Majority in Liquidation Amount of the CRESTS may, by vote or written consent, on
behalf of the Holders of all of the CRESTS, waive any past Trust Enforcement
Event in respect of the CRESTS and its consequences, PROVIDED that, if the
underlying Indenture Event of Default:
(i) is not waivable under the Indenture, the Trust Enforcement
Event under the Declaration shall also not be waivable; or
(ii) requires the consent or vote of greater than a majority
in principal amount of the holders of the Debentures (a "SUPER
MAJORITY") to be waived under the Indenture, the related Trust
Enforcement Event under the Declaration may only be waived by the vote
or written consent of the Holders of at least the proportion in
liquidation amount of the CRESTS that the relevant Super Majority
represents of the aggregate principal amount of the Debentures
outstanding.
The foregoing provisions of this Section 2.06(a) shall be in lieu of
Section 316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of
the Trust Indenture Act is hereby expressly excluded from this Declaration and
the Securities, as permitted by the Trust Indenture Act. Upon such waiver, any
such default shall cease to exist, and any Trust Enforcement Event with respect
to the CRESTS arising therefrom shall be deemed to have been cured, for every
purpose of this Declaration and the CRESTS, but no such waiver shall extend to
any subsequent or other Trust Enforcement Event with respect to the CRESTS or
impair any right consequent thereon. Any waiver by the Holders of the CRESTS of
a Trust Enforcement Event with respect to the CRESTS shall also be deemed to
constitute a waiver by the Holders of the Common Securities of any such Trust
Enforcement Event with respect to the Common Securities for all purposes of this
Declaration without any further act, vote, or consent of the Holders of the
Common Securities.
(b) The Holders of a Majority in Liquidation Amount of the Common
Securities may, by vote or written consent, on behalf of the Holders of all of
the Common Securities, waive any past Trust Enforcement Event in respect of the
Common Securities and its consequences, PROVIDED that, if the underlying
Indenture Event of Default:
(i) is not waivable under the Indenture, except where the
Holders of the Common Securities are deemed to have waived such Trust
Enforcement Event under the Declaration as provided below in this
Section 2.06(b), the Trust Enforcement Event under the Declaration
shall also not be waivable; or
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(ii) requires the consent or vote of a Super Majority to be
waived under the Indenture, except where the Holders of the Common
Securities are deemed to have waived such Trust Enforcement Event under
the Declaration as provided below in this Section 2.06(b), the Trust
Enforcement Event under the Declaration may only be waived by the vote
or written consent of the Holders of at least the proportion in
liquidation amount of the Common Securities that the relevant Super
Majority represents of the aggregate principal amount of the Debentures
outstanding;
PROVIDED further, each Holder of Common Securities shall be deemed to have
waived any Trust Enforcement Event and all Trust Enforcement Events with respect
to the Common Securities and the consequences thereof until all Trust
Enforcement Events with respect to the CRESTS have been cured, waived or
otherwise eliminated, and until such Trust Enforcement Events with respect to
the CRESTS have been so cured, waived or otherwise eliminated, the Property
Trustee shall be deemed to be acting solely on behalf of the Holders of the
CRESTS and only the Holders of the CRESTS shall have the right to direct the
Property Trustee in accordance with the terms of the Securities. The foregoing
provisions of this Section 2.06(b) shall be in lieu of Sections 316(a)(1)(A) and
316(a)(1)(B) of the Trust Indenture Act and such Sections 316(a)(I)(A) and
316(a)(l)(B) of the Trust Indenture Act are hereby expressly excluded from this
Declaration and the Securities, as permitted by the Trust Indenture Act. Subject
to the foregoing provisions of this Section 2.06(b), upon such cure, waiver or
other elimination, any such default shall cease to exist and any Trust
Enforcement Event with respect to the Common Securities arising therefrom shall
be deemed to have been cured for every purpose of this Declaration, but no such
waiver shall extend to any subsequent or other Trust Enforcement Event with
respect to the Common Securities or impair any right consequent thereon.
(c) A waiver of an Indenture Event of Default by the Property Trustee
at the direction of the Holders of the CRESTS constitutes a waiver of the
corresponding Trust Enforcement Event with respect to the CRESTS under this
Declaration. The foregoing provisions of this Section 2.06(c) shall be in lieu
of Section 316(a)(l)(B) of the Trust Indenture Act and such Section 316(a)(1)(B)
of the Trust Indenture Act is hereby expressly excluded from this Declaration
and the Securities, as permitted by the Trust Indenture Act.
SECTION 2.07. TRUST ENFORCEMENT EVENT; NOTICE. (a) The Property Trustee
shall, within 90 days after the occurrence of a Trust Enforcement Event,
transmit by rail, first class postage prepaid, to the Holders of the Securities,
notices of all defaults with respect to the Securities actually known to a
Responsible Officer of
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the Property Trustee, unless such defaults have been cured before the giving of
such notice (the term "DEFAULTS" for the purposes of this Section 2.07(a) being
hereby defined to be an Indenture Event of Default, not including any periods of
grace provided for therein and irrespective of the giving of any notice provided
therein); PROVIDED that, except for a default in the payment of principal of (or
premium, if any) or interest on any of the Debentures, the Property Trustee
shall be protected in withholding such notice if and so long as a Responsible
Officer of the Property Trustee in good faith determines that the withholding of
such notice is in the interests of the Holders of the Securities.
(b) The Property Trustee shall not be deemed to have knowledge of any
default except:
(i) a default under Sections 4.01(a) and 4.01(b) of the
Indenture; or
(ii) any default as to which the Property Trustee shall have
received written notice or of which a Responsible Officer of the
Property Trustee charged with the administration of this Declaration
shall have actual knowledge.
ARTICLE 3
ORGANIZATION
SECTION 3.01. NAME AND ORGANIZATION. The Trust hereby continued is
named "Lodgian Capital Trust I" as such name may be modified from time to time
by the Regular Trustees following written notice to the Holders of Securities.
The Trust's activities may be conducted under the name of the Trust or any other
name deemed advisable by the Regular Trustees.
SECTION 3.02. OFFICE. The address of the principal office of the Trust
is c/o Servico, Inc., 1601 Belvedere Road, West Palm Beach, Florida 33406. On 10
Business Days' written notice to the Holders of Securities, the Regular Trustees
may designate another principal office.
SECTION 3.03. PURPOSE. The exclusive purposes and functions of the
Trust are (a) to issue and sell Securities and use the gross proceeds from such
sale to acquire the Debentures, and (b) except as otherwise limited herein, to
engage in only those other activities necessary or incidental thereto. The Trust
shall not borrow money, issue debt or reinvest proceeds derived from
investments, pledge any of its assets or otherwise undertake (or permit to be
undertaken) any activity
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that would cause the Trust not to be classified as a grantor trust for United
States federal income tax purposes.
By the acceptance of this Trust, none of the Trustees, the Sponsor, the
Holders of the CRESTS or Common Securities or the CRESTS Beneficial Owners shall
take any position for United States federal income tax purposes which is
contrary to the classification of the Trust as a grantor trust.
SECTION 3.04. AUTHORITY. Subject to the limitations provided in this
Declaration and to the specific duties of the Property Trustee, the Regular
Trustees shall have exclusive authority to carry out the purposes of the Trust.
An action taken by the Regular Trustees in accordance with their powers shall
constitute the act of and serve to bind the Trust and an action taken by the
Property Trustee on behalf of the Trust in accordance with its powers shall
constitute the act of and serve to bind the Trust. In dealing with the Trustees
acting on behalf of the Trust, no person shall be required to inquire into the
authority of the Trustees to bind the Trust. Persons dealing with the Trust are
entitled to rely conclusively on the power and authority of the Trustees as set
forth in this Declaration.
(a) Except as expressly set forth in this Declaration and except if a
meeting of the Regular Trustees is called with respect to any matter over which
the Regular Trustees have power to act, any power of the Regular Trustees may be
exercised by, or with the consent of, any one such Regular Trustee.
(b) Unless otherwise determined by the Regular Trustees, and except as
otherwise required by the Business Trust Act or applicable law, any Regular
Trustee is authorized to execute on behalf of the Trust any documents which the
Regular Trustees have the power and authority to cause the Trust to execute
pursuant to Section 3.06(b), PROVIDED, that the registration statements referred
to in Section 3.06(b)(ii), including any amendments thereto, shall be signed by
or on behalf of a majority of the Regular Trustees; and
(c) a Regular Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his or
her power for the purposes of signing any documents which the Regular Trustees
have power and authority to cause the Trust to execute pursuant to Section 3.06.
SECTION 3.05. TITLE TO PROPERTY OF THE TRUST. Except as provided in
Section 3.08 with respect to the Debentures and the Property Account or as
otherwise provided in this Declaration, legal title to all assets of the Trust
shall be vested in the Trust. The Holders shall not have legal title to any part
of the assets
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of the Trust, but shall have an undivided beneficial ownership interest in the
assets of the Trust.
SECTION 3.06. POWERS AND DUTIES OF THE REGULAR TRUSTEES. The Regular
Trustees shall have the exclusive power, duty and authority to cause the Trust
to engage in the following activities:
(a) to establish the terms and form of the CRESTS and the Common
Securities in the manner specified in Section 7.01 and issue and sell the CRESTS
and the Common Securities in accordance with this Declaration; PROVIDED,
however, that the Trust may issue no more than one series of CRESTS and no more
than one series of Common Securities, and, provided further, that there shall be
no interests in the Trust other than the Securities, and the issuance of
Securities shall be limited to the simultaneous issuance of both CRESTS and
Common Securities so that the Common Securities at all times constitute 3% of
the capital of the Trust;
(b) in connection with the issue and sale of the CRESTS, at the
direction of the Sponsor, to:
(i) if deemed necessary or desirable by the Sponsor, execute
and file an application, prepared by the Sponsor, to the Private
Offerings, Resale and Trading through Automated Linkages ("PORTAL")
Market for listing of any CRESTS, the Guarantee and the Debentures;
(ii) assist with an Offering Memorandum in preliminary and
final form prepared by the Sponsor, in relation to the offering and
sale of CRESTS, the Guarantee and the Debentures to Qualified
Institutional Buyers in reliance on Rule 144A and to execute and file
with the Commission a Shelf Registration Statement prepared by the
Sponsor, including any amendments thereto, pertaining to the CRESTS,
the Guarantee, the Debentures and the Common Stock issuable upon
conversion of the CRESTS;
(iii) if deemed necessary or desirable by the Sponsor, execute
and file with the Commission a registration statement on Form 8-A,
including any amendments thereto, prepared by the Sponsor, relating to
the registration of the CRESTS, the Guarantee, and the Debentures under
Section 12(b) or (g) of the Exchange Act;
(iv) execute and file any documents prepared by the Sponsor,
or take any acts as determined by the Sponsor to be necessary, in order
to
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qualify or register all or part of the CRESTS in any State in which the
Sponsor has determined to qualify or register such CRESTS for sale;
(v) negotiate the terms of and execute and enter into a
purchase agreement and other related agreements providing for the sale
of the CRESTS; and
(vi) negotiate the terms and execute and enter into the
Registration Rights Agreement.
(c) to acquire the Debentures with the proceeds of the sale of the
CRESTS and the Common Securities; PROVIDED, however, that the Regular Trustees
shall cause legal title to the Debentures to be held of record in the name of
the Property Trustee for the benefit of the Holders of the CRESTS and the
Holders of the Common Securities;
(d) to give the Sponsor and the Property Trustee prompt written notice
of the occurrence of a Special Event; PROVIDED that the Regular Trustees shall
consult with the Sponsor and the Property Trustee before taking or refraining
from taking any action in relation to any such Special Event;
(e) to establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including and with respect
to, for the purposes of Section 316(c) of the Trust Indenture Act,
Distributions, voting rights, redemptions and exchanges, and to issue relevant
notices to the Holders of CRESTS and Holders of Common Securities, and, to the
extent applicable, to any stock exchange or other organization on which CRESTS
are listed or quoted, as to such actions and applicable record dates;
(f) to take all actions and perform such duties as may be required of
the Regular Trustees pursuant to the terms of this Declaration and the
Securities;
(g) to bring or defend, pay, collect, compromise, arbitrate, resort to
legal action or otherwise adjust claims or demands of or against the Trust
("LEGAL ACTION"), unless pursuant to Section 3.08(e), the Property Trustee has
the exclusive power to bring such Legal Action;
(h) to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors and
consultants to conduct only those services that the Regular Trustees have
authority to conduct directly, and to pay reasonable compensation for such
services;
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(i) to cause the Trust to comply with the Trust's obligations under
the Trust Indenture Act;
(j) to give the certificate required by Section 314(a)(4) of the Trust
Indenture Act to the Property Trustee, which certificate may be executed by any
Regular Trustee;
(k) to incur expenses that are necessary or incidental to carry out
any of the purposes of the Trust;
(l) to act as, or appoint another Person to act as, registrar and
transfer agent for the Securities;
(m) to give prompt written notice to the Holders of the Securities of
any notice received from the Debenture Issuer of its election to defer payments
of interest on the Debentures by extending the interest payment period under the
Debentures as authorized by the Indenture;
(n) to take all action that may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of the
State of Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Holders of the CRESTS and the
Holders of the Common Securities or to enable the Trust to effect the purposes
for which the Trust was created;
(o) to take any action, not inconsistent with applicable law, that the
Regular Trustees determine in their discretion to be necessary or desirable in
carrying out the purposes and functions of the Trust as set out in Section 3.03
or the activities of the Trust as set out in this Section 3.06, including, but
not limited to:
(i) causing the Trust not to be deemed to be an Investment
Company required to be registered under the Investment Company Act;
(ii) causing the Trust to be classified as a grantor trust for
United States federal income tax purposes; and
(iii) cooperating with the Debenture Issuer to ensure that the
Debentures shall be treated as indebtedness of the Debenture Issuer for
United States federal income tax purposes.
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(p) to take all action necessary to cause all applicable tax returns
and tax information reports that are required to be filed with respect to the
Trust to be duly prepared and filed by the Regular Trustees, on behalf of the
Trust; and
(q) to execute all documents or instruments, perform all duties and
powers, and do all things for and on behalf of the Trust in all matters
necessary or incidental to the, foregoing.
The Regular Trustees shall exercise the powers set forth in this
Section 3.06 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 3.03, and the Regular Trustees shall have no power
to, and shall not, take any action that is inconsistent with the purposes and
functions of the Trust set forth in Section 3.03.
Subject to this Section 3.06, the Regular Trustees shall have none of
the powers or the authority of the Property Trustee set forth in Section 3.08.
Any expenses incurred by the Regular Trustees pursuant to this Section
3.06 shall be reimbursed by the Debenture Issuer pursuant to the Indenture.
SECTION 3.07. PROHIBITION OF ACTIONS BY THE TRUST AND THE TRUSTEES. (a)
The Trust shall not, and the Trustees (including the Property Trustee) shall
cause the Trust not to, engage in any activity other than as required or
authorized by this Declaration. In particular, the Trust shall not and the
Trustees (including the Property Trustee) shall cause the Trust not to:
(i) invest any proceeds received by the Trust from holding the
Debentures, but shall distribute all such proceeds to Holders of
Securities pursuant to the terms of this Declaration and of the
Securities;
(ii) acquire any assets other than as expressly provided
herein;
(iii) possess Trust property for other than a Trust purpose;
(iv) make any loans or incur any indebtedness;
(v) possess any power or otherwise act in such a way as to
vary the Trust assets;
(vi) possess any power or otherwise act in such a way as to
vary the terms of the Securities in any way whatsoever (except to the
extent expressly authorized in this Declaration or by the terms of the
Securities);
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(vii) issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the
Securities;
(viii) other than as provided in this Declaration or by the
terms of the Securities, (A) direct the time, method and place of
exercising any trust or power conferred upon the Debenture Trustee with
respect to the Debentures, (B) waive any past default that is waivable
under the Indenture, (C) exercise any right to rescind or annul any
declaration that the principal of all the Debentures shall be due and
payable, or (D) consent to any amendment, modification or termination
of the Indenture or the Debentures where such consent shall be required
unless the Trust shall have received an opinion of counsel to the
effect that such modification shall not cause more than an
insubstantial risk that the Trust shall be deemed an Investment Company
required to be registered under the Investment Company Act, or the
Trust shall not be classified as a grantor trust for United States
federal income tax purposes;
(ix) take any action inconsistent with the status of the Trust
as a grantor trust for United States federal income tax purposes; or
(x) revoke any action previously authorized or approved by
vote of the Holders of the CRESTS.
SECTION 3.08. POWERS AND DUTIES OF THE PROPERTY TRUSTEE.
(a) The legal title to the Debentures shall be owned by and held of
record in the name of the Property Trustee in trust for the benefit of the Trust
and the Holders of the Securities. The right, title and interest of the Property
Trustee to the Debentures shall vest automatically in each Person who may
hereafter be appointed as Property Trustee in accordance with Section 6.06. Such
vesting and cessation of title shall be effective whether or not conveyancing
documents with regard to the Debentures have been executed and delivered.
(b) The Property Trustee shall not transfer its right, title and
interest in the Debentures to the Regular Trustees or to the Delaware Trustee
(if the Property Trustee does not also act as Delaware Trustee).
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest bearing
trust account (the "PROPERTY ACCOUNT") in the name of and under the
exclusive control of the Property Trustee on behalf of the Holders of
the Securities and, upon the receipt of payments of funds made in
respect of the
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Debentures held by the Property Trustee, deposit such funds into the
Property Account and make payments to the Holders of the CRESTS and
Holders of the Common Securities from the Property Account in
accordance with Section 7.02. Funds in the Property Account shall be
held uninvested until disbursed in accordance with this Declaration.
The Property Account shall be an account that is maintained with a
banking institution the rating on whose long-term unsecured
indebtedness is at least equal to the rating assigned to the CRESTS by
a "nationally recognized statistical rating organization", within the
meaning of Rule 436(g)(2) under the Securities Act;
(ii) engage in such ministerial activities as shall be
necessary or appropriate to effect the redemption of the CRESTS and the
Common Securities to the extent the Debentures are redeemed or mature;
and
(iii) upon written notice of distribution issued by the
Regular Trustees in accordance with the terms of the Securities, engage
in such ministerial activities as so directed and as shall be necessary
or appropriate to effect the distribution of the Debentures to Holders
of Securities upon the occurrence of a Special Event.
(d) The Property Trustee shall take all actions and perform such
duties as may be specifically required of the Property Trustee pursuant to the
terms of this Declaration, and the Securities.
(e) The Property Trustee shall take any Legal Action which arises out
of or in connection with a Trust Enforcement Event of which a Responsible
Officer of the Property Trustee has actual knowledge or the Property Trustee's
duties and obligations under this Declaration or the Trust Indenture Act;
PROVIDED however, that if a Trust Enforcement Event has occurred and is
continuing and such event is attributable to the failure of the Debenture Issuer
to pay interest, principal, premium or other required payments on the Debentures
on the date such interest, principal, premium or other required payments are
otherwise payable (or in the case of redemption, on the redemption date), then a
Holder of CRESTS may directly institute a proceeding against the Debenture
Issuer for enforcement of payment to such Holder of the principal of or premium,
if any, or interest on Debentures having a principal amount equal to the
aggregate liquidation amount of the CRESTS of such Holder (a "DIRECT ACTION") on
or after the respective due date specified in the Debentures. Notwithstanding
any payments made to such holder of CRESTS by the Debenture Issuer in connection
with a Direct Action, the Debenture Issuer shall remain obligated to pay the
principal of or interest on the Convertible Debentures held by the Trust or the
Property Trustee of the Trust, and the Debenture Issuer shall be subrogated to
the rights of the holder of such
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CRESTS with respect to payments on the CRESTS to the extent of any payments made
by the Debenture Issuer to such holder in any Direct Action. The holders of
CRESTS shall not be able to exercise directly any other remedy available to the
holders of the Convertible Debentures.
(f) The Property Trustee shall continue to serve as a Trustee until
either:
(i) the Trust has been completely liquidated and the proceeds
of the liquidation distributed to the Holders of Securities pursuant to
the terms of the Securities; or
(ii) a Successor Property Trustee has been appointed and has
accepted that appointment in accordance with Section 6.06(g). The
Property Trustee shall have the legal power to exercise all of the
rights, powers and privileges of a holder of Debentures under the
Indenture and, if a Trust Enforcement Event actually known to a
Responsible Officer of the Property Trustee occurs and is continuing,
the Property Trustee shall, for the benefit of Holders of the
Securities, enforce its rights as holder of the Debentures subject to
the rights of the Holders pursuant to the terms of such Securities.
(g) The Property Trustee shall have the legal power to exercise all of
the rights, powers and privileges of a holder of Debentures under the Indenture
and, if a Trust Enforcement Event actually known to a Responsible Officer of the
Property Trustee occurs and is continuing, the Property Trustee shall, for the
benefit of Holders of the Securities, enforce its rights as holder of the
Debentures subject to the rights of the Holders pursuant to the terms of such
Securities.
(h) The Property Trustee may authorize one or more Paying Agents to
pay Distributions, redemption payments or liquidation payments on behalf of the
Trust with respect to all Securities and any such Paying Agent shall comply with
Section 317(b) of the Trust Indenture Act. Any Paying Agent may be removed by
the Property Trustee at any time and a successor Paying Agent or additional
Paying Agents may be appointed at any time by the Property Trustee.
(i) Subject to this Section 3.08, the Property Trustee shall have none
of the duties, liabilities, powers or the authority of the Regular Trustees set
forth in Section 3.06.
The Property Trustee shall exercise the powers set forth in this
Section 3.08 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 3.03, and the Property Trustee shall have no power
to, and shall
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not, take any action that is inconsistent with the purposes and functions of the
Trust set out in Section 3.03.
SECTION 3.09. CERTAIN DUTIES AND RESPONSIBILITIES OF THE PROPERTY
TRUSTEE.
(a) The Property Trustee, before the occurrence of any Trust
Enforcement Event and after the curing of all Trust Enforcement Events that may
have occurred, shall undertake to perform only such duties as are specifically
set forth in this Declaration and no implied covenants shall be read into this
Declaration against the Property Trustee. In case a Trust Enforcement Event has
occurred (that has not been cured or waived pursuant to Section 2.06) of which a
Responsible Officer of the Property Trustee has actual knowledge, the Property
Trustee shall exercise such of the rights and powers vested in it by this
Declaration, and use the same degree of care and skill in its exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
(b) No provision of this Declaration shall be construed to relieve the
Property Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct, except that:
(i) prior to the occurrence of a Trust Enforcement Event and
after the curing or waiving of all such Trust Enforcement Events that
may have occurred:
(A) the duties and obligations of the Property Trustee
shall be determined solely by the express provisions of this
Declaration and the Property Trustee shall not be liable
except for the performance of such duties and obligations as
are specifically set forth in this Declaration, and no implied
covenants or obligations shall be read into this Declaration
against the Property Trustee; and
(B) in the absence of bad faith on the part of the
Property Trustee, the Property Trustee may conclusively rely,
as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Property Trustee and conforming to the
requirements of this Declaration; but in the case of any such
certificates or opinions that by any provision hereof are
specifically required to be furnished to the Property Trustee,
the Property Trustee shall be under a duty to
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examine the same to determine whether or not they conform to
the requirements of this Declaration;
(ii) the Property Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Property
Trustee, unless it shall be proved that the Property Trustee was
negligent in ascertaining the pertinent facts;
(iii) the Property Trustee shall not be liable with respect to
any action taken or omitted to be taken by it without negligence, in
good faith in accordance with the direction of the Holders of not less
than a Majority in Liquidation Amount of the Securities relating to the
time, method and place of conducting any proceeding for any remedy
available to the Property Trustee, or exercising any trust or power
conferred upon the Property Trustee under this Declaration;
(iv) no provision of this Declaration shall require the
Property Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or
in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms of this
Declaration or indemnity reasonably satisfactory to the Property
Trustee against such risk or liability is not reasonably assured to it;
(v) the Property Trustee's sole duty with respect to the
custody, safe-keeping and physical preservation of the Debentures and
the Property Account shall be to deal with such property in a similar
manner as the Property Trustee deals with similar property for its own
account, subject to the protections and limitations on liability
afforded to the Property Trustee under this Declaration and the Trust
Indenture Act;
(vi) the Property Trustee shall have no duty or liability for
or with respect to the value, genuineness, existence or sufficiency of
the Debentures or the payment of any taxes or assessments levied
thereon or in connection therewith;
(vii) the Property Trustee shall not be liable for any
interest on any money received by it except as it may otherwise agree
with the Sponsor. Money held by the Property Trustee need not be
segregated from other funds held by it except in relation to the
Property Account maintained by the Property Trustee pursuant to Section
3.08(c)(i) and except to the extent otherwise required by law; and
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(viii) the Property Trustee shall not be responsible for
monitoring the compliance by the Regular Trustees or the Sponsor with
their respective duties under this Declaration, nor shall the Property
Trustee be liable for any default or misconduct of the Regular Trustees
or the Sponsor.
SECTION 3.10. CERTAIN RIGHTS OF PROPERTY TRUSTEE.
(a) Subject to the provisions of Section 3.09:
(i) the Property Trustee may conclusively rely and shall be
fully protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document believed by
it to be genuine and to have been signed, sent or presented by the
proper party or parties;
(ii) any direction or act of the Sponsor or the Regular
Trustees contemplated by this Declaration shall be sufficiently
evidenced by an Officers' Certificate;
(iii) whenever in the administration of this Declaration, the
Property Trustee shall deem it desirable that a matter be proved or
established before taking, suffering or omitting any action hereunder,
the Property Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and
conclusively rely upon an Officers' Certificate which, upon receipt of
such request, shall be promptly delivered by the Sponsor or the Regular
Trustees;
(iv) the Property Trustee shall have no duty to see filing or
registration of any instrument (including or continuation statement or
any filing under laws) or any rerecording, refiling or reregistration
thereof,
(v) the Property Trustee may consult with counsel other
experts and the advice or opinion of suck experts with respect to legal
matters or advice of such experts' area of expertise shall be full
authorization and protection in respect of any suffered or omitted by
it hereunder in good faith accordance with such advice or opinion, such
counsel to the Sponsor or any of its Affiliates, any of its employees.
The Property Trustee at any time to seek instructions concerning the
this Declaration from any court of competent jurisdiction;
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(vi) the Property Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Declaration
at the request or direction of any Holder, unless such Holder shall
have provided to the Property Trustee security and indemnity,
reasonably satisfactory to the Property Trustee, against the costs,
expenses (including attorneys' fees and expenses and the expenses of
the Property Trustee's agents, nominees or custodians) and liabilities
that might be incurred by it in complying with such request or
direction, including such reasonable advances as may be requested by
the Property Trustee; PROVIDED that, nothing contained in this Section
3.10(a) shall be taken to relieve the Property Trustee, upon the
occurrence of an Indenture Event of Default, of its obligation to
exercise the rights and powers vested in it by this Declaration;
(vii) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Property Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit;
(viii) the Property Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through agents, custodians, nominees or attorneys and the Property
Trustee shall not be responsible for any misconduct or negligence on
the part of any agent or attorney appointed with due care by it
hereunder;
(ix) any action taken by the Property Trustee or its agents
hereunder shall bind the Trust and the Holders of the Securities, and
the signature of the Property Trustee or its agents alone shall be
sufficient and effective to perform any such action and no third party
shall be required to inquire as to the authority of the Property
Trustee to so act or as to its compliance with any of the terms and
provisions of this Declaration, both of which shall be conclusively
evidenced by the Property Trustee's or its agent's taking such action;
(x) whenever in the administration of this Declaration the
Property Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action
hereunder, the Property Trustee (i) may request instructions from the
Holders of the Securities which instructions may only be given by the
Holders of the same proportion in liquidation amount of the Securities
as would be entitled to direct the Property Trustee under the terms of
the Securities in respect of such remedy, right or action, (ii) may
refrain from
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enforcing such remedy or right or taking such other action until such
instructions are received, and (iii) shall be protected in conclusively
relying on or acting in or accordance with such instructions;
(xi) except as otherwise expressly provided by this
Declaration, the Property Trustee shall not be under any obligation to
take any action that is discretionary under the provisions of this
Declaration; and
(xii) the Property Trustee shall not be liable for any action
taken, suffered or omitted to be taken by it without negligence, in
good faith and reasonably believed by it to be authorized or within the
discretion, rights or powers conferred upon it by this Declaration.
(b) No provision of this Declaration shall be deemed to impose any
duty or obligation on the Property Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Property Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Property Trustee
shall be construed to be a duty.
SECTION 3.11. DELAWARE TRUSTEE. Notwithstanding any other provision of
this Declaration other than Section 3.11, the Delaware Trustee shall not be
entitled to exercise any powers, nor shall the Delaware Trustee have any of the
duties and responsibilities of the Regular Trustees or the Property Trustee
described in this Declaration. Except as set forth in Section 3.11, the Delaware
Trustee shall be a Trustee for the sole and limited purpose of fulfilling the
requirements of Section 3807 of the Business Trust Act.
SECTION 3.12. EXECUTION OF DOCUMENTS. Unless otherwise determined by
the Regular Trustees, and except as otherwise required by the Business Trust
Act, any Regular Trustee is authorized to execute on behalf of the Trust any
documents that the Regular Trustees have the power and authority to execute
pursuant to Section 3.06; PROVIDED that, the registration statements referred to
in Section 3.06(b)(ii), including any amendments thereto, shall be signed by or
on behalf of a majority of the Regular Trustees.
SECTION 3.13. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained in this Declaration and the Securities shall be taken as
the statements of the Sponsor, and the Trustees do not assume any responsibility
for their correctness. The Trustees make no representations as to the value or
condition of the property of the Trust or any part thereof. The Trustees make no
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representations as to the validity or sufficiency of this Declaration, the
Securities, the Debentures or the Indenture.
SECTION 3.14. DURATION OF TRUST. The Trust shall exist until terminated
pursuant to the provisions of Article 8 hereof.
SECTION 3.15. MERGERS.
(a) The Trust may not consolidate, amalgamate, merge with or into, or
be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described in Section 3.15(b) and (c).
(b) The Trust may, at the request of the Sponsor and with the consent
of the Regular Trustees or, if there are more than two, a majority of the
Regular Trustees and without the consent of the Holders of the Securities, the
Delaware Trustee or the Property Trustee, consolidate, amalgamate, merge with or
into, or be replaced by or convey, transfer or lease its properties
substantially as an entirety to a trust organized as such under the laws of any
State; PROVIDED, that:
(i) if the Trust is not the successor, such successor entity
(the "SUCCESSOR ENTITY") either
(A) expressly assumes all of the obligations of the
Trust with respect to the Securities; or
(B) substitutes for the CRESTS other securities
having substantially the same terms as the CRESTS (the
"SUCCESSOR SECURITIES") so long as the Successor Securities
rank the same as the CRESTS rank with respect to Distributions
and payments upon liquidation, redemption and otherwise;
(ii) the Debenture Issuer expressly appoints a trustee of such
Successor Entity that possesses the same powers and duties as the
Property Trustee as the holder of the Debentures;
(iii) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not cause the CRESTS (including any
Successor Securities) to be downgraded by any nationally recognized
statistical rating organization;
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(iv) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the Holders of
the CRESTS (including any Successor Securities) in any material
respect;
(v) such Successor Entity has a purpose identical to that of
the Trust;
(vi) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease the Sponsor has received an
opinion of independent counsel to the Trust experienced in such matters
to the effect that:
(A) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the Holders
of the CRESTS (including any Successor Securities) in any
material respect;
(B) following such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease
neither the Trust nor the Successor Entity shall be required
to register as an Investment Company; and
(C) following such merger, consolidation,
amalgamation or replacement, the Trust (or the Successor
Entity) shall continue to be classified as a grantor trust for
United States federal income tax purposes;
(vii) the Sponsor or any permitted successor or assignee owns
all of the Common Securities and guarantees the obligations of such
Successor Entity under the Successor Securities at least to the extent
provided by the Securities Guarantee; and
(viii) such Successor Entity expressly assumes all of the
obligations of the Trust with respect to the Trustees.
(c) Notwithstanding Section 3.15(b), the Trust shall not, except with
the consent of Holders of 100% in aggregate liquidation amount of the
Securities, consolidate, amalgamate, merge with or into, or be replaced by or
convey, transfer or lease its properties and assets substantially as an entirety
to, any other entity or permit any other entity to consolidate, amalgamate,
merge with or into, or replace it, if such consolidation, amalgamation, merger,
replacement, conveyance, transfer or lease would cause the Trust or Successor
Entity to be classified as other than a
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grantor trust for United States federal income tax purposes and each Holder of
the Securities not to be treated as owning an undivided interest in the
Debentures.
SECTION 3.16. PROPERTY TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other similar judicial
proceeding relative to the Trust or any other obligor upon the Securities or the
property of the Trust or of such other obligor or their creditors, the Property
Trustee (irrespective of whether any Distributions on the Securities shall then
be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Property Trustee shall have made any demand on the
Trust for the payment of any past due Distributions) shall be entitled and
empowered, to the fullest extent permitted by law, by intervention in such
proceeding or otherwise:
(a) to file and prove a claim for the whole amount of any
Distributions owing and unpaid in respect of the Securities and to file such
other papers or documents as may be necessary or advisable in order to have the
claims of the Property Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Property Trustee, its
and counsel) and of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Property Trustee and, in the event the
Property Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Property Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Property Trustee, its
agents and counsel, and any other amounts due the Property Trustee.
Nothing herein contained shall be deemed to authorize the Property
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or compensation affecting
the Securities or the rights of any Holder thereof or to authorize the Property
Trustee to vote in respect of the claim of any Holder in any such proceeding.
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ARTICLE 4
SPONSOR
SECTION 4.01. RESPONSIBILITIES OF THE SPONSOR. In connection with the
issue and sale of the CRESTS, the Sponsor shall have the exclusive right and
responsibility to engage in the following activities:
(a) to prepare the Offering Memorandum and to prepare for filing by
the Trust with the Commission the Shelf Registration Statement, including any
amendments thereto, pertaining to the CRESTS, the Guarantee and the Debentures;
(b) to determine the States in which to take appropriate action to
qualify or register for sale all or part of the CRESTS and to do any and all
such acts, other than actions which must be taken by the Trust, and advise the
Trust of actions it must take, and prepare for execution and filing any
documents to be executed and filed by the Trust, as the Sponsor deems necessary
or advisable in order to comply with the applicable laws of any such States;
(c) to prepare for any filing by the Trust of an application to PORTAL
for listing, if such filing is determined to be necessary of desirable by the
Sponsor;
(d) to prepare any filing by the Trust with the Commission of a
registration statement on Form 8-A, including any amendments thereto, if such
filing is determined to be necessary or desirable by the Sponsor;
(e) to negotiate the terms of a purchase agreement and other related
agreements providing for the sale of the CRESTS to the Initial Purchaser; and
(f) to negotiate the terms of the Registration Rights Agreement.
SECTION 4.02. INDEMNIFICATION AND EXPENSES OF THE TRUSTEES. Pursuant to
Section 9.04(b) of this Agreement, the Sponsor, in its capacity as Debenture
Issuer, agrees to indemnify the Property Trustee and the Delaware Trustee for,
and to hold each of them harmless against, any loss, liability or expense
incurred without negligence or bad faith on the part of the Property Trustee or
the Delaware Trustee, as the case may be, arising out of or in connection with
the acceptance or administration of the trust or trusts hereunder, including the
costs and expenses of defending either of them against any claim or liability in
connection with the exercise or performance of any of their respective powers or
duties hereunder; the provisions of this Section 4.02 shall survive the
resignation or removal of the Delaware Trustee or the Property Trustee or the
termination of this Declaration.
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ARTICLE 5
TRUST COMMON SECURITIES HOLDER
SECTION 5.01. DEBENTURE ISSUER'S PURCHASE OF COMMON SECURITIES. On any
date on which the Trust issues CRESTS, the Debenture Issuer shall purchase
simultaneously Common Securities issued by the Trust so that the Common
Securities outstanding immediately after such issuance of CRESTS shall equal at
least 3% of the capital of the Trust.
The aggregate stated liquidation amount of Common Securities
outstanding at any time shall not be less than 3% of the capital of the Trust.
SECTION 5.02. COVENANTS OF THE COMMON SECURITIES HOLDER. For so long as
the CRESTS remain outstanding, the Common Securities Holder shall covenant (i)
to maintain, directly or indirectly, 100% ownership of the Common Securities
(other than a transfer to Lodgian following the Merger); PROVIDED, however, that
any permitted successor of the Common Securities Holder under the Indenture may
succeed to the Common Securities Holder's interest in the Common Securities,
(ii) to cause the Trust to remain a statutory business trust, except in
connection with a distribution of Convertible Debentures to the holders of
Securities, the redemption or conversion of all of the Securities, or certain
mergers, consolidations or amalgamations, each as permitted by the Declaration,
and not to voluntarily dissolve, wind up, liquidate or be terminated, except as
permitted by this Declaration, (iii) to use its commercially reasonable efforts
to ensure that the Trust shall not be an investment company for purposes of the
Investment Company Act, and (iv) to take no action which would be reasonably
likely to cause the Trust to be classified as an association or a publicly
traded partnership taxable as a corporation for United States federal income tax
purposes.
ARTICLE 6
TRUSTEES
SECTION 6.01. NUMBER OF TRUSTEES.
The number of Trustees initially shall be five, and:
(a) at any time before the issuance of any Securities, the Sponsor
may, by written instrument, increase or decrease the number of Trustees; and
(b) after the issuance of any Securities, the number of Trustees may
be increased or decreased by vote of the Holders of a Majority in Liquidation
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Amount of the Common Securities voting as a class at a meeting of the Holders of
the Common Securities or by written consent in lieu of such meeting; PROVIDED
that the number of Trustees shall be at least three; and PROVIDED further that
(1) the Delaware Trustee, in the case of a natural person, shall be a person who
is a resident of the State of Delaware or that, if not a natural person, is an
entity which has its principal place of business in the State of Delaware and
otherwise meets the requirements of applicable law; (2) at least one Regular
Trustee is an employee or officer of, or is affiliated with, the Sponsor, and
(3) one Trustee shall be the Property Trustee for so long as this Declaration is
required to qualify as an indenture under the Trust Indenture Act, and such
Trustee may also serve as Delaware Trustee if it meets the applicable
requirements.
SECTION 6.02. DELAWARE TRUSTEE; ELIGIBILITY. If required by the
Business Trust Act, one Trustee (which may be the Property Trustee) (the
"DELAWARE TRUSTEE") shall be:
(a) a natural person who is a resident of the State of Delaware; or
(b) if not a natural person, an entity which has its principal place of
business in the State of Delaware, and otherwise meets the requirements of
applicable law,
PROVIDED that, if the Property Trustee has its principal place of business in
the State of Delaware and otherwise meets the requirements of applicable law,
then the Property Trustee shall also be the Delaware Trustee and Section 3.11
shall have no application.
SECTION 6.03. PROPERTY TRUSTEE; ELIGIBILITY.
(a) There shall at all times be one Trustee (which may be the Delaware
Trustee) which shall act as Property Trustee which shall:
(i) not be an Affiliate of the Sponsor, and
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or Territory thereof
or of the District of Columbia, or a corporation or other Person
permitted by the Commission to act as an institutional trustee under
the Trust Indenture Act, authorized under such laws to exercise
corporate trust owners, having a combined capital and surplus of at
least 50 million U.S. dollars ($50,000,000), and subject to supervision
or examination by federal, State, Territorial or District of Columbia
authority. If such corporation publishes reports of condition at least
annually, pursuant to law or to the
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requirements of the supervising or examining authority referred to
above, then for the purposes of this Section 6.03(a)(ii), the combined
capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published.
(b) If at any time the Property Trustee shall cease to be eligible to
so act under Section 6.03(a), the Property Trustee shall immediately resign in
the manner and with the effect set forth in Section 6.06(c).
(c) If the Property Trustee has or shall acquire any "CONFLICTING
INTEREST" within the meaning of Section 310(b) of the Trust Indenture Act, the
Property Trustee and the Holder of the Common Securities (as if it were the
obligor referred to in Section 3 10(b) of the Trust Indenture Act) shall in all
respects comply with the provisions of Section 3.10(b) of the Trust Indenture
Act.
(d) The Guarantee shall be deemed to be specifically described in this
Declaration for purposes of clause (i) of the first proviso contained in Section
3.10(b) of the Trust Indenture Act.
SECTION 6.04. QUALIFICATIONS OF REGULAR TRUSTEES AND DELAWARE TRUSTEE
GENERALLY. Each Regular Trustee and the Delaware Trustee (unless the Property
Trustee also acts as Delaware Trustee) shall be either a natural person who is
at least 21 years of age or a legal entity that shall act through one or more
Authorized Officers.
SECTION 6.05. INITIAL TRUSTEES. (a) The initial Regular Trustees shall
be:
David Buddemeyer, Phillip R. Hale and Charles M. Diaz, the business
address of all of whom is Servico, Inc., 1601 Belvedere Road, West Palm Beach,
Florida 33406.
(b) The initial Property Trustee and the initial Delaware Trustee shall
be Wilmington Trust Company.
SECTION 6.06. APPOINTMENT, REMOVAL AND RESIGNATION OF TRUSTEES.
(a) Subject to Section 6.06(b), Trustees may be appointed or removed
without cause at any time:
(i) until the issuance of any Securities, by written
instrument executed by the Sponsor; and
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(ii) after the issuance of any Securities, by vote of the
Holders of a Majority in Liquidation Amount of the Common Securities
voting as a class at a meeting of the Holders of the Common Securities.
(b) The Trustee that acts as Property Trustee shall not be removed in
accordance with Section 6.06(a) until a successor Trustee possessing the
qualifications to act as Property Trustee under Section 6.03(a) (a "SUCCESSOR
PROPERTY TRUSTEE") has been appointed and has accepted such appointment by
written instrument executed by such Successor Property Trustee and delivered to
the Regular Trustees and the Sponsor. The Trustee that acts as Delaware Trustee
shall not be removed in accordance with Section 6.06(a) until a successor
Trustee possessing the qualifications to act as Delaware Trustee under Sections
6.02 and 6.04 (a "SUCCESSOR DELAWARE TRUSTEE") has been appointed and has
accepted such appointment by written instrument executed by such Successor
Delaware Trustee and delivered to the Regular Trustees and the Sponsor.
(c) A Trustee appointed to office shall hold office until his or its
successor shall have been appointed, until his death or its dissolution or until
his or its removal or resignation. Any Trustee may resign from office (without
need for prior or subsequent accounting) by an instrument in writing signed by
the Trustee and delivered to the Sponsor and the Trust, which resignation shall
take effect upon such delivery or upon such later date as is specified therein;
PROVIDED, however, that:
(i) No such resignation of the Trustee that acts as the
Property Trustee shall be effective:
(A) until a Successor Property Trustee has been
appointed and has accepted such appointment by instrument,
executed by such Successor Property Trustee and delivered to
the Trust, the Sponsor and the resigning Property Trustee; or
(B) until the assets of the Trust have been
completely liquidated and the proceeds thereof distributed to
the holders of the Securities; and
(ii) no such resignation of the Trustee that acts as the
Delaware Trustee shall be effective until a Successor Delaware Trustee
has been appointed and has accepted such appointment by instrument
executed by such Successor Delaware Trustee and delivered to the Trust,
the Sponsor and the resigning Delaware Trustee.
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(d) The Holders of the Common Securities shall use their best efforts
to promptly appoint a Successor Delaware Trustee or Successor Property Trustee,
as the case may be, if the Property Trustee or the Delaware Trustee delivers an
instrument of resignation in accordance with this Section 6.06.
(e) If no Successor Property Trustee or Successor Delaware Trustee, as
the case may be, shall have been appointed and accepted appointment as provided
in this Section 6.06 within 60 days after delivery to the Sponsor and the Trust
of an instrument of resignation or removal, the resigning or removed Property
Trustee or Delaware Trustee, as applicable, may petition any court of competent
jurisdiction for appointment of a Successor Property Trustee or Successor
Delaware Trustee, as applicable. Such court may thereupon, after prescribing
such notice, if any, as it may deem proper, appoint a Successor Property Trustee
or Successor Delaware Trustee, as the case may be.
(f) No Property Trustee or Delaware Trustee shall be liable for the
acts or omissions to act of any Successor Property Trustee or Successor Delaware
Trustee, as the case may be.
(g) The Holders of the CRESTS shall have no right to vote to appoint,
remove, replace or change the number of the Regular Trustees, which voting
rights are vested exclusively in the Holders of the Common Securities.
SECTION 6.07. VACANCIES AMONG TRUSTEES. If a Trustee ceases to hold
office for any reason and the number of Trustees is not reduced pursuant to
Section 6.01, or if the number of Trustees is increased pursuant to Section
6.01, a vacancy shall occur. A resolution certifying the existence of such
vacancy by the Regular Trustees or, if there are more than two, a majority of
the Regular Trustees shall be conclusive evidence of the existence of such
vacancy. The vacancy shall be filled with a Trustee appointed in accordance with
Section 6.06.
SECTION 6.08. EFFECT OF VACANCIES. The death, resignation, retirement,
removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to
perform the duties of a Trustee shall not operate to annul the Trust. Whenever a
vacancy in the number of Regular Trustees shall occur, until such vacancy is
filled by the appointment of a Regular Trustee in accordance with Section 6.06,
the Regular Trustees in office, regardless of their number, shall have all the
powers granted to the Regular Trustees and shall discharge all the duties
imposed upon the Regular Trustees by this Declaration.
SECTION 6.09. MEETINGS. If there is more than one Regular Trustee,
meetings of the Regular Trustees shall be held from time to time upon the call
of any Regular Trustee. Regular meetings of the Regular Trustees may be held at
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a time and place fixed by resolution of the Regular Trustees. Notice of any in-
person meetings of the Regular Trustees shall be hand delivered or otherwise
delivered in writing (including by facsimile, with a hard copy by overnight
courier) not less than 48 hours before such meeting. Notice of any telephonic
meetings of the Regular Trustees shall be hand delivered or otherwise delivered
in writing (including by facsimile, with a hard copy by overnight courier) not
less than 24 hours before a meeting. Notices shall contain a brief statement of
the time, place and anticipated purposes of the meeting. The presence (whether
in person or by telephone) of a Regular Trustee at a meeting shall constitute a
waiver of notice of such meeting except where a Regular Trustee attends a
meeting for the express purpose of objecting to the transaction of any activity
on the ground that the meeting has not been lawfully called or convened. Unless
provided otherwise in this Declaration, any action of the Regular Trustees may
be taken at a meeting by vote of a majority of the Regular Trustees present
(whether in person or by telephone) and eligible to vote with respect to such
matter, PROVIDED that a Quorum is present, or without a meeting by the unanimous
written consent of the Regular Trustees. In the event there is only one Regular
Trustee, any and all action of such Regular Trustee shall be evidenced by a
written consent of such Regular Trustee.
SECTION 6.10. DELEGATION OF POWER.
(a) Any Regular Trustee may, by power of attorney consistent with
applicable law, delegate to any natural person over the age of 21 his, her or
its power for the purpose of executing any documents contemplated in Section
3.06, including any registration statement or amendment thereto filed with the
Commission, or making any other governmental filing
(b) The Regular Trustees shall have power to delegate from time to
time to such of their number or to officers of the Trust the doing of such
things and the execution of such instruments either in the name of the Trust or
the names of the Regular Trustees or otherwise as the Regular Trustees may deem
expedient, to the extent such delegation is not prohibited by applicable law or
contrary to the provisions of the Trust, as set forth herein.
SECTION 6.11. MERGERS, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS. Any corporation into which the Property Trustee, the Delaware Trustee
or any Regular Trustee that is not a natural person may be merged or converted
or with such Trustee may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which such Trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of such Trustee shall be the successor of such Trustee hereunder,
PROVIDED such corporation shall be otherwise qualified and eligible under this
Article, without
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the execution or filing of any paper or any further act on the
part of any of the parties hereto.
ARTICLE 7
TERMS OF SECURITIES
SECTION 7.01. GENERAL PROVISIONS REGARDING SECURITIES.
(a) On June 9, 1998, the Sponsor, on behalf of the Trust and pursuant
to the Original Declaration, executed and delivered the Purchase Agreement. On
the Closing Date and contemporaneously with the execution and delivery of this
Declaration, the Regular Trustees, on behalf of the Trust, shall execute and
deliver to (i) the Initial Purchaser, a Global Security, registered in the name
of the nominee of the initial Depositary, in an aggregate amount of 3,500,000 7%
Convertible Redeemable Equity Structured Trust Securities ("CRESTS") having an
aggregate liquidation amount of $175,000,000, against receipt of the aggregate
purchase price of such CRESTS of $175,000,000, and (ii) the Sponsor, Common
Securities Certificates, registered in the name of the Sponsor, in an aggregate
amount of 108,248 7% Common Securities (the "COMMONS SECURITIES") having an
aggregate liquidation amount of $5,412,400, against receipt of the aggregate
purchase price of such Common Securities of $5,412,400. In the event and to the
extent the over-allotment option granted by the Trust pursuant to the Purchase
Agreement is exercised by such Initial Purchaser, on the Option Closing Date the
Regular Trustees, on behalf of the Trust, shall execute and deliver to (iii)
such Initial Purchaser a Global Security, registered in the name of the nominee
of the initial Depositary, in an aggregate amount of up to 525,000 CRESTS having
an aggregate liquidation amount of up to $26,250,000 against receipt of the
aggregate purchase price of such CRESTS of up to $26,250,000, and (iv) the
Sponsor, Common Security Certificates, registered in the name of the Sponsor, in
an aggregate amount of 16,237 Common Securities having an aggregate liquidation
amount of $811,850 against receipt of the aggregate purchase price of such
Common Securities of up to $811,850.
(b) Payment of Distributions on, and payment of the Redemption Price
upon a redemption of, the CRESTS and the Common Securities, as applicable, shall
be made Pro Rata based on the liquidation amount of such CRESTS and Common
Securities. The Trust shall issue no securities or other interests in the assets
of the Trust other than the CRESTS and the Common Securities.
(c) The Certificates, substantially in the forms of Exhibit A and
Exhibit B, shall be signed on behalf of the Trust by a Regular Trustee. Such
signature
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shall be the manual or facsimile signature of any Regular Trustee. In case a
Regular Trustee of the Trust who shall have signed any of the Certificates shall
cease to be such Regular Trustee before the Certificates so signed shall be
delivered by the Trust, such Certificates nevertheless may be delivered as
though the person who signed such Certificates had not ceased to be such Regular
Trustee; and any Certificate may be signed on behalf of the Trust by such
persons who, at the actual date of execution of such Certificate, shall be the
Regular Trustees of the Trust, although at the date of the execution and
delivery of the Declaration any such person was not such a Regular Trustee.
Certificates shall be printed, lithographed or engraved or may be produced in
any other manner as is reasonably acceptable to the Regular Trustees, as
evidenced by their execution thereof, and may have such letters, numbers or
other marks of identification or designation and such legends or endorsements as
the Regular Trustees may deem appropriate, or as may be required to comply with
any law or with any rule or regulation of any stock exchange on which Securities
may be listed, or to conform to usage.
A Certificate representing CRESTS shall not be valid until
authenticated by the manual signature of an authorized signatory of the Property
Trustee. Such signature shall be conclusive evidence that such Certificate has
been authenticated under this Declaration.
Upon a written order of the Trust signed by one Regular Trustee, the
Property Trustee shall authenticate the Certificates representing CRESTS for
original issue. The aggregate liquidation amount of CRESTS outstanding at any
time shall not exceed the liquidation amount set forth in Section 7.01(a).
The Property Trustee may appoint an authenticating agent acceptable to
the Trust to authenticate Certificates. An authenticating agent may authenticate
Certificates whenever the Property Trustee may do so. Each reference in this
Declaration to authentication by the Property Trustee includes authentication by
such agent. An authenticating agent has the same rights as the Property Trustee
to deal with the Sponsor or an Affiliate of the Sponsor.
(d) The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and shall
not constitute a loan to the Trust.
(e) Upon issuance of the Securities as provided in this Declaration,
the Securities so issued shall be deemed to be validly issued, fully paid and,
subject to Section 9.01(b), non-assessable beneficial ownership interests in the
assets of the Trust.
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(f) Every Person, by virtue of having become a Holder or a CRESTS
Beneficial Owner in accordance with the terms of this Declaration, shall be
deemed to have expressly assented and agreed to the terms of, and shall be bound
by, this Declaration and the terms of the Securities, the Guarantee, the
Indenture and the Debentures.
(g) The holders of the Securities shall have no preemptive rights.
SECTION 7.02. DISTRIBUTIONS.
(a) Holders of Securities shall be entitled to receive cumulative cash
Distributions at the rate per annum, of 7% of the stated liquidation amount of
$50 per Security, subject to increase if, and to the extent that, the interest
rate on the Debentures is increased pursuant to the Indenture (the "APPLICABLE
RATE"). The amount of Distributions payable for any period shall be computed (i)
for any full 90-day quarterly distribution period on the basis of a 360-day year
of twelve 30- day months, (ii) for any period shorter than a full 90-day
quarterly distribution period for which Distributions are computed, on the basis
of a 30-day month and (iii) for periods of less than a month, on the basis of
the actual number of days elapsed. Distributions shall be made on the CRESTS and
the Common Securities on a Pro Rata basis. Distributions on the Securities
shall, from and including the Closing Date, accrue and be cumulative and shall
be payable quarterly, in arrears, on March 31, June 30, September 30 and
December 31 of each year, commencing September 30, 1998, when, as and if
available for payment, by the Property Trustee, except as otherwise described
below. Distributions are payable only to the extent that payments are made in
respect of the Debentures held by the Property Trustee and to the extent that
the Trust has funds available for the payment of such Distributions in the
Property Account.
(b) Distributions not paid on the scheduled payment date shall
accumulate and compound quarterly, to the extent permitted by law at the
Applicable Rate per annum ("COMPOUNDED DISTRIBUTIONS"). "DISTRIBUTIONS" shall
mean ordinary cumulative distributions together with any Compounded
Distributions. So long as the Debenture Issuer shall not be in default in the
payment of interest on the Debentures, the Debenture Issuer has the right under
the Indenture to defer payments of interest by extending the interest payment
period from time to time on the Debenture for a period not exceeding 20
consecutive quarters (each an "EXTENSION PERIOD"), during which Extension Period
no interest shall be due and payable on the Debentures; PROVIDED, that no
Extension Period shall last beyond the date of maturity or any redemption date
of the Debentures. As a consequence of such deferral, Distributions shall also
be deferred. Despite such deferral, quarterly Distributions shall continue to
accrue with interest thereon (to the extent permitted by applicable law) at the
Applicable
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Rate compounded quarterly during any such Extension Period. Prior to the
termination of any such Extension Period, the Debenture Issuer may further
extend such Extension Period; PROVIDED, that such Extension Period together with
all such previous and further extensions thereof may not exceed 20 consecutive
quarters or extend beyond the maturity or any redemption date of the Debentures.
Upon the termination of any Extension Period and the payment of all amounts then
due, the Debenture Issuer may commence a new Extension Period, subject to the
above requirements.
(c) If and to the extent that the Debenture Issuer makes a payment of
interest, premium and/or principal on the Debentures held by the Property
Trustee (the amount of any such payment being a "PAYMENT AMOUNT"), the Property
Trustee shall and is directed, to the extent funds are available for that
purpose, to make a Pro Rata distribution of the Payment Amount to Holders.
(d) Distributions on the Securities shall be payable to the Holders
thereof as they appear on the register of the Trust as of the close of business
on the relevant record dates. While the CRESTS are represented by one or more
Global Securities, the relevant record dates shall be the close of business on
the Business Day next preceding such Distribution payment date, unless a
different regular record date is established or provided for the corresponding
interest payment date on the Debentures. The relevant record dates for the
Common Securities shall be the same as for the CRESTS. If the CRESTS shall not
continue to remain represented by one or more Global Securities, the relevant
record dates for the CRESTS shall be selected by the Regular Trustees and shall
be at least one Business Day prior to the relevant payment dates. At all times,
the Distribution payment dates shall correspond to the interest payment dates on
the Debentures. Distributions payable on any Securities that are not punctually
paid on any Distribution payment date, as a result of the Debenture Issuer
having failed to make a payment under the Debentures, shall cease to be payable
to the Person in whose name such Securities are registered on the relevant
record date, and such defaulted Distribution shall instead be payable to the
Person in whose name such Securities are registered on the special record date
or other specified date determined in accordance with this Declaration. If any
date on which Distributions are payable on the Securities is not a Business Day,
then payment of the Distribution payable on such date shall be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, with the same force and effect as if made on such
payment date.
(e) Except as provided below, accumulated but unpaid Distributions
shall not be paid in cash on Securities that are converted by the Holder into
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Common Stock pursuant to the terms of the Securities nor shall such accumulated
Distributions be converted into additional shares of Common Stock. Holders of
Securities at the close of business on a record date for determining Holders
entitled to receive a Distribution shall be entitled to receive the Distribution
payable on such shares on the corresponding distribution payment date (except
that Holders of Securities called for redemption on a redemption date between
such record date and the distribution payment date shall not be entitled to
receive such Distribution on such distribution payment date) notwithstanding the
conversion thereof following such distribution record date and prior to such
distribution payment date. However, Securities surrendered for conversion during
the period between the close of business on any distribution record date and the
opening of business on the corresponding distribution payment date (except
Securities called for redemption on a redemption date during such period) must
be accompanied by payment of an amount equal to the Distribution payable on such
shares on such distribution payment date. A Holder of Securities on a
distribution record date who (or whose transferee) tenders any such shares for
conversion into shares of Common Stock on a distribution payment date shall
receive the Distribution payable by the Trust on such Securities on such date,
and the converting Holder need not include payment of the amount of such
Distribution upon surrender of such Securities for conversion. The Debenture
Issuer shall make no payment or allowance for dividends on the shares of Common
Stock issued upon conversion.
(f) In the event that there is any money or other property held by or
for the Trust that is not accounted for hereunder, such property shall be
distributed Pro Rata among the Holders of the Securities.
SECTION 7.03. REDEMPTION OF SECURITIES; DISTRIBUTION OF DEBENTURES.
(a) Upon the repayment or redemption, in whole or in part, of the
Debentures held by the Trust, whether at the stated maturity of the Debentures
or upon earlier redemption as provided in the Indenture, the proceeds from such
repayment or redemption shall be simultaneously applied Pro Rata (subject to
Sections 7.01(b) and 7.15) to redeem Securities having an aggregate liquidation
amount equal to the aggregate principal amount of the Debentures so repaid or
redeemed at the Redemption Price. Holders shall be given not less than 30 days'
nor more than 60 days' notice of such redemption in accordance with Section
7.04.
(b) If, at any time, a Tax Event or an Investment Company Event (each,
a "TRUST SPECIAL EVENT") shall occur, the Regular Trustees may except in certain
limited circumstances described in this Section 7.03(b), dissolve the Trust and,
after satisfaction of liabilities to creditors, cause Debentures held by the
Property
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Trustee having an aggregate principal amount equal to the aggregate liquidation
amount of, with an interest rate identical to the interest rate of, and accrued
and unpaid interest equal to accumulated and unpaid Distributions on, and having
the same record date for payment as the Securities, to be distributed to the
Holders of the Securities in liquidation of such Holders' interests in the Trust
on a Pro Rata basis, within 90 days following the occurrence of such Trust
Special Event (the "90-DAY PERIOD"); PROVIDED, however, that in the case of a
Tax Event such dissolution and distribution shall be conditioned on (i) the
Regular Trustees' receipt of a No Recognition Opinion, (ii) the Debenture Issuer
or the Trust being unable to eliminate, which elimination shall be complete
within the 90-Day Period, such Trust Special Event by taking some ministerial
action (such as filing a form or making an election, or pursuing some other
reasonable measure) that has no adverse effect on the Trust, the Debenture
Issuer, the Sponsor or the Holders of the Securities or does not subject any of
them to more than DE MINIMIS regulatory requirements ("MINISTERIAL ACTION"), and
(iii) the Debenture Issuer's prior written consent to such dissolution and
distribution.
Furthermore, if a Trust Special Event occurs (i) that is a Tax Event
and the Debenture Issuer has received a Redemption Tax Opinion or (ii) that is a
Tax Event or an Investment Company Event and such Regular Trustees shall have
been informed, by independent tax counsel experienced in such matters that it,
for substantive reasons, cannot deliver a No Recognition Opinion to the Trust,
the Debenture Issuer shall have the right, upon not less than 30 days' nor more
than 60 days' notice, to redeem the Debentures, in whole or in part, at 100% of
the principal amount thereof, plus accrued and unpaid interest thereon to but
excluding the date of redemption (the "SPECIAL REDEMPTION PRICE"), for cash
within 90 days following the occurrence of such Trust Special Event. Following
such redemption, Securities with an aggregate initial liquidation amount equal
to the aggregate principal amount of the Debentures so redeemed shall be
redeemed by the Trust at a redemption price equal to 100% of the liquidation
amount to be redeemed on a Pro Rata basis, plus accumulated but unpaid
Distributions thereon to but excluding such redemption date; PROVIDED, however,
that if at the time there is available to the Debenture Issuer or the Trust the
opportunity to eliminate, which elimination shall be complete within the 90-Day
period, such Trust Special Event by taking some Ministerial Action, the Trust or
the Debenture Issuer shall pursue such Ministerial Action in lieu of redemption.
(c) On the date fixed for any distribution of Debentures, upon
dissolution of the Trust, (i) the Securities shall no longer be deemed to be
outstanding and (ii) certificates representing Securities shall be deemed to
represent the Debentures having an aggregate principal amount equal to the
stated liquidation amount of, and bearing accrued and unpaid distributions equal
to
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accrued and unpaid distributions on, such Securities until such certificates
are presented to the Sponsor or its agent for transfer or reissuance.
SECTION 7.04. REDEMPTION PROCEDURES.
(a) Notice of any redemption of, or notice of distribution of
Debentures in exchange for, the Securities (a "REDEMPTION/DISTRIBUTION NOTICE"),
which notice shall be irrevocable, shall be given by the Property Trustee by
mail to each Holder of Securities to be redeemed or exchanged not fewer than 30
nor more than 60 days before the date fixed for redemption or exchange thereof
which, in the case of a redemption, shall be the date fixed for redemption of
the Debentures. Notice of redemption shall also be given by publication made
once a week for two successive weeks commencing not less than 30 nor more than
60 days prior to the redemption date in an Authorized Newspaper. Notice of
redemption of Securities shall be given on the same date as the related notice
of redemption of the Debentures is given pursuant to the Indenture. For purposes
of the calculation of the date of redemption or exchange and the dates on which
notices are given pursuant to this Section 7.04(a), a Redemption/ Distribution
Notice shall be deemed to be given on the day such notice is first mailed by
first-class mail, postage prepaid, to Holders of Securities. Each
Redemption/Distribution Notice shall be addressed to the Holders of Securities
at the address of each such Holder appearing in the register of the Trust. No
defect in the Redemption/Distribution Notice or in the mailing of either thereof
with respect to any Holder shall affect the validity of the redemption or
exchange proceedings with respect to any other Holder. Each notice, whether
given by mail or publication, shall state, as appropriate: (A) the redemption
date; (B) the aggregate principal amount of Securities to be redeemed, including
CUSIP numbers, and, if less than all the Securities held by such Holder are to
be redeemed, the aggregate principal amount of such Securities to be redeemed
from such Holder, (C) the redemption price to be paid in respect of the
redemption; (D) the then current Conversion Price and, if any event then known
to the Debenture Issuer shall result in an adjustment to the Conversion Price on
or prior to the redemption date, such adjusted conversion price and the date of
such adjustment; (F) the last date on which the Securities may be converted
prior to the redemption date; (G) that any Holder who wishes to convert his or
her Securities must comply with and satisfy all the terms, conditions and
requirements for conversion as set forth in the Securities and the Declaration;
(H) that distribution on the Securities to be redeemed shall cease to accrue on
the redemption date; and (F) a place for the Securities to be redeemed.
(b) If fewer than all the outstanding Securities are to be so
redeemed, the Common Securities and the CRESTS shall be redeemed Pro Rata and
the CRESTS to be redeemed shall be redeemed Pro Rata from each Holder of CRESTS,
it being understood that, in respect of CRESTS registered in the name
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of and held of record by the Depositary or its nominee, the distribution of the
proceeds of such redemption shall be made to each Depositary Participant (or
Person on whose behalf such nominee holds such securities) in accordance with
the procedures applied by such Depositary or nominee. The Trust may not redeem
the Securities in part unless all accumulated and unpaid Distributions to the
date of redemption have been paid in full on all Securities then outstanding.
For all purposes of this Declaration, unless the context otherwise requires, all
provisions relating to the redemption of CRESTS shall relate, in the case of any
CRESTS redeemed or to be redeemed only in part to the portion of the aggregate
liquidation amount of CRESTS which has been or is to be redeemed.
(c) Subject to the Trust's fulfillment of the notice requirements set
forth in Section 7.04(a) above, if Securities are to be redeemed, then (i) with
respect to CRESTS represented by one or more Global Securities, by 12:00 noon,
New York City time, on the redemption date (PROVIDED that the Debenture Issuer
has paid the Property Trustee a sufficient amount of cash in connection with the
related redemption or maturity of the Debentures), the Property Trustee shall
deposit irrevocably with the Depositary or its nominee (or successor Depositary
or its nominee) funds sufficient to pay the applicable Redemption Price with
respect to the CRESTS and shall give the Depositary irrevocable instructions and
authority to pay the Redemption Price to the Holders of the CRESTS and (ii) with
respect to Securities not represented by one or more Global Securities (PROVIDED
that the Debenture Issuer has paid the Property Trustee a sufficient amount of
cash in connection with the related redemption or maturity of the Debentures),
the Paying Agent shall pay the relevant Redemption Price to the Holders of such
Securities upon surrender of their certificates representing such Securities. If
any date fixed for redemption of Securities is not a Business Day, then payment
of the Redemption Price payable on such date shall be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay) except that, if such Business Day falls in the
next calendar year, such payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date fixed for redemption. If payment of the Redemption Price in respect of any
Securities is improperly withheld or refused and not paid either by the Property
Trustee or by the Sponsor as guarantor pursuant to the Guarantee, Distributions
on such Securities shall continue to accrue at the then applicable rate from the
original redemption date to the actual date of payment in which case the actual
payment date shall be considered the date fixed for redemption for purposes of
calculating the Redemption Price. For these purposes, the applicable Redemption
Price shall not include Distributions which are being paid to Holders who were
Holders on a relevant record date. If a Redemption/Distribution Notice shall
have been given and funds deposited or paid as required, then immediately prior
to the close of business on the date of such deposit or payment, Distributions
shall cease to
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accrue on the Securities called for redemption and all rights of Holders of such
Securities so called for redemption shall cease, except the right of the Holders
to receive the Redemption Price, but without interest on such Redemption Price,
and from and after the date fixed for redemption, such Securities shall cease to
be outstanding.
Neither the Regular Trustees nor the Trust shall be required to
register or cause to be registered the transfer of any Securities that have been
called for redemption, except in the case of any Securities being redeemed in
part, any portion thereof not to be redeemed.
(d) Subject to the foregoing and applicable law (including, without
limitation, United States federal securities laws), the Debenture Issuer or its
subsidiaries may at any time and from time to time purchase outstanding CRESTS
by tender, in the open market or by private agreement.
SECTION 7.05. VOTING RIGHTS OF CRESTS.
(a) Except as provided under Sections 2.06(a) and 11.01 and this
Article 7 and as otherwise required by the Business Trust Act, the Trust
Indenture Act and other applicable law, the Holders of the CRESTS shall have no
voting rights.
(b) Subject to the requirement of the Property Trustee obtaining a tax
opinion in certain circumstances set forth in Section 7.05(d) below, the Holders
of a Majority in Liquidation Amount of the CRESTS voting separately as a class
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Property Trustee, or to direct the exercise of
any trust or power conferred upon the Property Trustee under the Declaration,
including the right to direct the Property Trustee, as Holder of the Debentures,
to (i) exercise the remedies available to it under the Indenture as a Holder of
the Debentures; (ii) consent to any amendment or modification of the Indenture
or the Debentures where such consent shall be required or (iii) waive any past
default and its consequences that is waivable under Section 4.13 of the
Indenture; PROVIDED, however, that if an Indenture Event of Default has occurred
and is continuing, then the Holders of 25% of the aggregate liquidation amount
of the CRESTS may direct the Property Trustee to declare the principal of and
interest on the Debentures due and payable; PROVIDED, further, that where a
consent or action under the Indenture would require the consent or act of the
Holders of more than a majority of the aggregate principal amount of Debentures
affected thereby, only the Holders of the percentage of the aggregate
liquidation amount of the CRESTS which is at least equal to the percentage
required under the Indenture may direct the Property Trustee to give such
consent to take such action.
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(c) If the Property Trustee fails to enforce its rights under the
Debentures after a Holder of CRESTS has made a written request, such Holder of
CRESTS may, to the extent permitted by applicable law, institute a legal
proceeding directly against the Debenture Issuer to enforce the Property
Trustee's rights under the Indenture without first instituting any legal
proceeding against the Property Trustee or any other person or entity. In
addition, if a Trust Enforcement Event has occurred and is continuing and such
event is attributable to the failure of the Debenture Issuer to make any
interest, principal or other required payments when due under the Indenture,
then a Holder of CRESTS may directly institute a Direct Action against the
Debenture Issuer on or after the respective due date specified in the
Debentures.
(d) The Property Trustee shall notify all Holders of the CRESTS of any
notice of any Indenture Event of Default received from the Debenture Issuer with
respect to the Debentures. Such notice shall state that such Indenture Event of
Default also constitutes a Trust Enforcement Event. Except with respect to
directing the time, method, and place of conducting a proceeding for a remedy,
the Property Trustee shall be under no obligation to take any of the actions
described in Section 7.05(b)(i) and (ii) above unless the Property Trustee has
received an opinion of independent tax counsel to the effect that the Trust
shall not fail to be classified as a grantor trust for United States federal
income tax purposes as a result of such action, and each Holder shall be treated
as owning an undivided beneficial ownership interest in the Debentures.
(e) In the event the consent of the Property Trustee, as the Holder of
the Debentures, is required under the Indenture with respect to any amendment or
modification of the Indenture, the Property Trustee shall request the direction
of the Holders of the Securities with respect to such amendment or modification
and shall vote with respect to such amendment or modification as directed by not
less than a 662/3% of the aggregate liquidation amount of the CRESTS; PROVIDED,
however, that where a consent under the Indenture would require the consent of
the Holders of more than 662/3% of the aggregate principal amount of the
Debentures, the Property Trustee may only give such consent at the direction of
the Holders of at least the same proportion in aggregate stated liquidation
amount of the CRESTS. The Property Trustee shall not take any such action in
accordance with the directions of the Holders of the CRESTS unless the Property
Trustee has received an opinion of independent tax counsel to the effect that
the Trust shall not be classified as other than a grantor trust for United
States federal income tax purposes as a result of such action, and each Holder
shall be treated as owning an undivided beneficial ownership interest in the
Debentures.
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(f) A waiver of an Indenture Event of Default with respect to the
Debentures shall constitute a waiver of the corresponding Trust Enforcement
Event.
(g) Any required approval or direction of Holders of CRESTS may be
given at a separate meeting of Holders of CRESTS convened for such purpose, at a
meeting of all of the Holders of Securities or pursuant to written consent. The
Regular Trustees shall cause a notice of any meeting at which Holders of CRESTS
are entitled to vote, or of any matter upon which action by written consent of
such Holders is to be taken, to be mailed to each Holder of record of CRESTS.
Each such notice shall include a statement setting forth the following
information: (i) the date of such meeting or the date by which such action is to
be taken; (ii) a description of any resolution proposed for adoption at such
meeting on which such Holders are entitled to vote or of such matter upon which
written consent is sought; and (iii) instructions for the delivery of proxies or
consents.
(h) No vote or consent of the Holders of CRESTS shall be required for
the Trust to redeem and cancel CRESTS or distribute Debentures in accordance
with the Declaration and the terms of the Securities.
(i) Notwithstanding that Holders of CRESTS are entitled to vote or
consent under any of the circumstances described above, any of the Securities
that are owned at such time by the Debenture Issuer, the Trustees or any entity
directly or indirectly controlled by, or under direct or indirect common control
with, the Debenture Issuer or any Trustee, shall not be entitled to vote or
consent and shall, for purposes of such vote or consent, be treated as if such
Securities were not outstanding.
(j) Holders of the CRESTS shall have no rights to appoint or remove
the Trustees, who may be appointed, removed or replaced solely by the Common
Securities Holder.
(k) If an Indenture Event of Default has occurred and is continuing,
the Property Trustee and the Delaware Trustee may be removed at such time by a
Majority in Liquidation Amount of the CRESTS.
SECTION 7.06. VOTING RIGHTS OF COMMON SECURITIES.
(a) Except as provided under Sections 2.06(b) and 6.01(b), this
Section 7.06 or Section 11.01 or as otherwise required by the Business Trust
Act, the Trust Indenture Act or other applicable law or provided by the
Declaration, the Holders of the Common Securities shall have no voting rights.
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(b) The Holders of the Common Securities shall be entitled, in
accordance with Article 6, to vote to appoint, remove or replace any Trustee or
to increase or decrease the number of Trustees.
(c) Subject to Section 2.06 and only after all Trust Enforcement
Events with respect to the CRESTS have been cured, waived, or otherwise
eliminated and subject to the requirement of the Property Trustee obtaining a
tax opinion in certain circumstances set forth in this paragraph (c), the
Holders of a Majority in Liquidation Amount of the Common Securities have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Property Trustee, or direct the exercise of any trust or
power conferred upon the Property Trustee under the Declaration, including the
right to direct the Property Trustee, as Holder of the Debentures, to (i)
exercise the remedies available to it under the Indenture as a Holder of the
Debentures, (ii) consent to any amendment or modification of the Indenture or
the Debentures where such consent shall be required or (iii) waive any past
default and its consequences that is waivable under Section 4.13 of the
Indenture; PROVIDED, however, that where a consent or action under the Indenture
would require the consent or act of the Holders of more than a majority of the
aggregate principal amount of Debentures affected thereby, only the Holders of
the percentage of the aggregate stated liquidation amount of the Common
Securities which is at least equal to the percentage required under the
Indenture may direct the Property Trustee to have such consent or take such
action. Except with respect to directing the time, method, and place of
conducting a proceeding for a remedy, the Property Trustee shall be under no
obligation to take any of the actions described in Section 7.06(c)(i) and (ii)
above unless the Property Trustee has received an opinion of independent tax
counsel to the effect that, as a result of such action, for United States
federal income tax purposes the Trust shall not fail to be classified as a
grantor trust and each Holder shall be treated as owning an undivided beneficial
ownership interest in the Debentures.
(d) If the Property Trustee fails to enforce its rights under the
Debentures after a Holder of Common Securities has made a written request, such
Holder of Common Securities may, to the extent permitted by applicable law,
directly institute a legal proceeding directly against the Debenture Issuer to
enforce the Property Trustee's rights under the Debentures without first
instituting any legal proceeding against the Property Trustee or any other
person or entity.
(e) A waiver of an Indenture Event of Default with respect to the
Debentures shall constitute a waiver of the corresponding Trust Enforcement
Event.
(f) Any required approval or direction of Holders of Common Securities
may be given at a separate meeting of Holders of Common Securities convened
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for such purpose, at a meeting of all of the Holders of Securities or pursuant
to written consent. The Regular Trustees shall cause a notice of any meeting at
which Holders of Common Securities are entitled to vote, or of any matter on
which action by written consent of such Holders is to be taken, to be mailed to
each Holder of record of Common Securities. Each such notice shall include a
statement setting forth the following information: (i) the date of such meeting
or the date by which such action is to be taken; (ii) a description of any
resolution proposed for adoption at such meeting on which such Holders are
entitled to vote or of such matter upon which written consent is sought; and
(iii) instructions for the delivery of proxies or consents.
(g) No vote or consent of the Holders of the Common Securities shall
be required for the Trust to redeem and cancel Common Securities or to
distribute Debentures in accordance with the Declaration and the terms of the
Securities.
SECTION 7.07. PAYING AGENT. In the event that any CRESTS are not in
book-entry only form, the Trust shall maintain in the Borough of Manhattan, City
of New York, State of New York, an office or agency where the CRESTS may be
presented for payment ("PAYING AGENT"). The Trust may appoint the paying agent
and may appoint one or more additional paying agents in such other locations as
it shall determine. The term "PAYING AGENT" includes any additional paying
agent. The Trust may change any Paying Agent without prior notice to the
Holders. The Trust shall notify the Property Trustee of the name and address of
any Paying Agent not a party to this Declaration. If the Trust fails to appoint
or maintain another entity as Paying Agent, the Property Trustee shall act as
such. The Trust or any of its Affiliates may act as Paying Agent. Wilmington
Trust Company shall initially act as Paying Agent for the Securities. In the
event Wilmington Trust Company shall no longer be the Paying Agent, the Regular
Trustees shall appoint a successor (which shall be a bank or trust company
acceptable to the Debenture Issuer) to act as Paying Agent. The Paying Agent
shall be permitted to resign as Paying Agent upon 30 days' written notice to the
Property Trustees and the Debenture Issuer.
SECTION 7.08. TRANSFER OF SECURITIES.
(a) Securities may only be transferred, in whole or in part, in
accordance with the terms and conditions set forth in this Declaration and in
the terms of the Securities. Any transfer or purported transfer of any Security
not made in accordance with this Declaration shall be null and void.
(b) The Trust shall cause to be kept at the Corporate Trust Office of
the Property Trustee a register (the register maintained in such office being
herein sometimes referred to as the "SECURITY REGISTER") in which, subject to
such
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reasonable regulations as it may prescribe, the Trust shall provide for the
registration of CRESTS and of transfers of CRESTS. The Property Trustee is
hereby appointed "SECURITY REGISTRAR" for the purpose of registering CRESTS and
transfers of CRESTS as herein provided.
(c) Upon surrender for registration of transfer of any Security at an
office or agency of the Trust designated for such purpose, the Trust shall
execute, and the Property Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Securities of any
authorized denominations and of a like aggregate principal amount.
(d) At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denominations and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Trust shall
execute, and in the case of CRESTS the Property Trustee shall authenticate and
deliver, the Securities which the Holder making the exchange is entitled to
receive.
(e) Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Trust or the Property
Trustee) be duly endorsed, or be accompanied by a written instrument of transfer
in form satisfactory to the Trust and the Security Registrar duly executed, by
the Holder thereof or his attorney duly authorized in writing.
(f) No service charge shall be made for any registration of transfer
or exchange of Securities, but the Trust may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities.
(g) If the Securities are to be redeemed in part, the Trust shall not
be required (A) to issue, register the transfer of or exchange any Securities
during a period beginning at the opening of business 15 days before the day of
the mailing of a notice of redemption of any such Securities selected for
redemption under Section 7.04 and ending at the close of business on the day of
such mailing, or (B) to register the transfer or exchange of any Security so
selected for redemption, except the unredeemed portion of any Security being
redeemed in part.
SECTION 7.09. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If:
(a) any mutilated Certificates should be surrendered to the Regular
Trustees, or if the Regular Trustees shall receive evidence to their
satisfaction of the destruction, loss or theft of any Certificate; and
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(b) there shall be delivered to the Regular Trustees such security or
indemnity as may be required by them to keep each of them, the Sponsor and the
Trust harmless, then, in the absence of notice that such Certificate shall have
been acquired by a bona fide purchaser, any Regular Trustee on behalf of the
Trust shall execute and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
denomination. In connection with the issuance of any new Certificate under this
Section 7.09, the Regular Trustees may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith. Any duplicate Certificate issued pursuant to this Section shall
constitute conclusive evidence of an ownership interest in the relevant
Securities, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
SECTION 7.10. DEEMED SECURITY HOLDERS. The Trustees may treat the
Person in whose name any Certificate shall be registered on the register of the
Trust as the sole holder of such Certificate and of the Securities represented
by such Certificate for purposes of receiving Distributions and for all other
purposes whatsoever and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such Certificate or in the Securities
represented by such Certificate on the part of any Person, whether or not the
Trust shall have actual or other notice thereof.
SECTION 7.11. GLOBAL SECURITIES. The CRESTS shall be issued in the
form of one or more Global Securities. The Regular Trustee on behalf of the
Trust shall execute and the Property Trustee shall authenticate and deliver one
or more Global Securities that (i) shall represent and shall be denominated in
an amount equal to the aggregate liquidation amount of all of the CRESTS to be
issued and not yet canceled, (ii) shall be registered in the name of the
Depositary for such Global Security or CRESTS or the nominee of such Depositary,
and (iii) shall be delivered by the Property Trustee to such Depositary or
pursuant to such Depositary's instructions. Global Securities shall bear a
legend substantially to the following effect:
"This CRESTS is a Global Security within the meaning of the Declaration
hereinafter referred to and is registered in the name of The Depository Trust
Company, a New York corporation (the "DEPOSITARY"), or a nominee of the
Depositary. This CRESTS is exchangeable for CRESTS registered in the name of a
person other than the Depositary or its nominee only in the limited
circumstances described in the Declaration and no transfer of this CRESTS (other
than a transfer of this CRESTS as a whole by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary) may be registered except in limited circumstances.
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Unless this CRESTS Certificate is presented by an authorized
representative of the Depositary to the Property Trustee or its agent for
registration of transfer, exchange or payment, and any CRESTS Certificate issued
is registered in the name of Cede & Co. or such other name as registered by an
authorized representative of the Depositary (and any payment hereon is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of the Depositary), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner
hereof, Cede & Co., has an interest herein."
CRESTS not represented by a Global Security issued in exchange for all
or a part of a Global Security pursuant to this Section 7.11 shall be registered
in such names and in such authorized denominations as the Depositary, pursuant
to instructions from its direct or indirect participants or otherwise, shall
instruct the Property Trustee. Upon execution and authentication, the Property
Trustee shall deliver such CRESTS not represented by a Global Security to the
persons in whose names such definitive CRESTS are so registered.
At such time as all interests in Global Securities have been redeemed,
repurchased or canceled, such Global Securities shall be, upon receipt thereof,
canceled by the Property Trustee in accordance with standing procedures of the
Depositary. At any time prior to such cancellation, if any interest in Global
Securities is exchanged for CRESTS not represented by a Global Security,
redeemed, canceled or transferred to a transferee who receives CRESTS not
represented by a Global Security therefor or any CRESTS not represented by a
Global Security is exchanged or transferred for part of Global Securities, the
principal amount of such Global Securities shall, in accordance with the
standing procedures of the Depositary, be reduced or increased, as the case may
be, and an endorsement shall be made on such Global Securities by the Property
Trustee to reflect such reduction or increase.
The Trust and the Property Trustee may for all purposes, including the
making of payments due on the CRESTS, deal with the Depositary as the authorized
representative of the Holders for the purposes of exercising the rights of
Holders hereunder. The rights of the owner of any beneficial interest in a
Global Security shall be limited to those established by law and agreements
between such owners and depository participants or Euroclear and Cedel;
PROVIDED, that no such agreement shall give any rights to any person against the
Trust or the Property Trustee without the written consent of the parties so
affected. Multiple requests and directions from and votes of the Depositary as
holder of CRESTS in global form with respect to any particular matter shall not
be deemed inconsistent to the extent they do not represent an amount of CRESTS
in excess of those held in the name of the Depositary or its nominee.
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If at any time the Depositary for any CRESTS represented by one or more
Global Securities notifies the Trust that it is unwilling or unable to continue
as Depositary for such CRESTS or if at any time the Depositary for such CRESTS
shall no longer be eligible under this Section 7.11, the Trust shall appoint a
successor Depositary with respect to such CRESTS. If a successor Depositary for
such CRESTS is not appointed by the Trust within 90 days after the Trust
receives such notice or becomes aware of such ineligibility, the Trust's
election that such CRESTS be represented by one or more Global Securities shall
no longer be effective and the Trust shall execute, and the Property Trustee
shall authenticate and deliver, CRESTS definitive registered form, in any
authorized denominations, in an aggregate liquidation amount equal to the
principal amount of the Global Security or CRESTS representing such CRESTS in
exchange for such Global Security or CRESTS.
The Trust may at any time and in its sole discretion determine that the
CRESTS issued in the form of one or more Global Securities shall no longer be
represented by a Global Security or CRESTS. In such event the Trust shall
execute, and the Property Trustee, shall authenticate and deliver, CRESTS in
definitive registered form, in any authorized denominations, in an aggregate
liquidation amount equal to the principal amount of the Global Security or
CRESTS representing such CRESTS, in exchange for such Global Security or CRESTS.
Notwithstanding any other provisions of this Declaration (other than
the provisions set forth in Section 7.08), Global Securities may not be
transferred as a whole except by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor Depositary or
a nominee of such successor Depositary.
Interests of beneficial owners in a Global Security may be transferred
or exchanged for CRESTS not represented by a Global Security and CRESTS not
represented by a Global Security may be transferred or exchanged for Global
Securities in accordance with rules of the Depositary and the provisions of
Section 7.13.
Any CRESTS in global form may be endorsed with or have incorporated in
the text thereof such legends or recitals or changes not inconsistent with the
provisions of this Declaration as may be required by the Depositary or by the
National Association of Securities Dealers, Inc. in order for the CRESTS to be
tradeable on the PORTAL Market or as may be required for the CRESTS to be
tradeable on any other market developed for trading of securities pursuant to
Rule 144A or required to comply with any applicable law or any regulation
thereunder
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or with the rules and regulations of any securities exchange upon which the
CRESTS may be listed or traded or to conform with any usage with respect
thereto, or to indicate any special limitations or restrictions to which any
particular CRESTS are subject.
SECTION 7.12. RESTRICTIVE LEGEND.
(a) Each Global Security and CRESTS not represented by a Global
Security that constitutes a Restricted Security shall bear the following legend
on the face thereof until two years after the later of the date of original
issue and the last date on which the Sponsor or any affiliate of the Sponsor was
the owner of such CRESTS (or any predecessor thereto) (the "RESALE RESTRICTION
TERMINATION DATE"), unless otherwise agreed by the Trust and the Holder thereof:
THIS SECURITY, THE COMMON STOCK ISSUABLE UPON CONVERSION THEREOF, THE
GUARANTEE AND THE CONVERTIBLE DEBENTURES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAW. NEITHER THESE SECURITIES NOR ANY INTEREST OR
PARTICIPATION IN THESE SECURITIES MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM,
OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THESE SECURITIES BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITIES, PRIOR TO THE DATE
(THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH
THE COMPANY OR ANY "AFFILIATE" OF THE COMPANY WAS THE OWNER OF SUCH
SECURITIES (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE
COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT,
(C) FOR SO LONG AS SUCH SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT
THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS
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GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO
AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES
ACT THAT IS ACQUIRING SUCH SECURITIES FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, OR AS FIDUCIARY
FOR THE ACCOUNT OF ONE OR MORE TRUSTS, EACH OF WHICH IS AN "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a) (7) OF RULE 501 UNDER
THE SECURITIES ACT, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR
FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT UPON THE DELIVERY
OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO THE COMPANY, SUBJECT IN EACH OF THE FOREGOING CASES, TO
A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF
THESE SECURITIES BEING COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
COMPANY. EACH PURCHASER OR HOLDER OF THE SECURITY EVIDENCED HEREBY WILL
BE DEEMED TO HAVE REPRESENTED EITHER THAT (A) IT IS NOT AN EMPLOYEE
BENEFIT PLAN SUBJECT TO PART 4 OF SUBTITLE B OF TITLE 1 OF ERISA OR A
PLAN DESCRIBED IN SECTION 4975 OF THE CODE OR AN ENTITY WHOSE
UNDERLYING ASSETS INCLUDE THE ASSETS OF ANY SUCH ERISA PLAN OR OTHER
PLAN OR (B) BY REASON OF THE APPLICATION OF ONE OR MORE STATUTORY OR
ADMINISTRATIVE EXEMPTIONS FROM THE PROHIBITED TRANSACTION RULES OF
SECTION 406 OF ERISA AND SECTION 4975 OF THE CODE, ITS PURCHASE AND
HOLDING OF CRESTS WILL NOT CONSTITUTE, CAUSE OR RESULT IN THE
OCCURRENCE OF A NON-EXEMPT PROHIBITED TRANSACTION WITHIN THE MEANING OF
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE. THIS LEGEND SHALL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
THE HOLDER OF THESE SECURITIES BY ITS ACCEPTANCE HEREOF AGREES TO BE
BOUND BY THE PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT RELATING
TO THE SECURITIES.
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Prior to the Resale Restriction Termination Date, any certificate
representing Common Stock issued upon conversion of the Debentures shall bear
the following legend (unless such Common Stock has been sold pursuant to a
registration statement that has been declared effective under the Securities
Act):
THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER HEREOF BY ITS ACCEPTANCE HEREOF AGREES NOT TO OFFER, SELL OR
OTHERWISE TRANSFER THE COMMON STOCK EVIDENCED HEREBY UNTIL THE
EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY
EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY
SUCCESSOR PROVISION) ONLY (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF,
(B) TO A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT), (C) TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) or (7) OF RULE 501
UNDER THE SECURITIES ACT THAT IS ACQUIRING THE COMMON STOCK FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED
INVESTOR, OR AS FIDUCIARY FOR THE ACCOUNT OF ONE OR MORE TRUSTS, EACH
OF WHICH IS AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH
(a)(7) OF RULE 501 UNDER THE SECURITIES ACT, FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (D) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, OR (E) PURSUANT TO A REGISTRATION STATEMENT THAT HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT (AND THAT CONTINUES TO
BE EFFECTIVE AT THE TIME OF SUCH TRANSFER) AND (2) IT SHALL DELIVER TO
EACH PERSON TO WHOM THE COMMON STOCK EVIDENCED HEREBY IS TRANSFERRED
(OTHER THAN A TRANSFER PURSUANT TO CLAUSE (E) ABOVE) A NOTICE
SUBSTANTIALLY TO THE
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EFFECT OF THIS LEGEND. THIS LEGEND SHALL BE REMOVED UPON THE EARLIER OF
THE TRANSFER OF THE COMMON STOCK EVIDENCED HEREBY PURSUANT TO CLAUSE
(E) ABOVE OR UPON ANY TRANSFER OF COMMON STOCK EVIDENCED HEREBY AFTER
THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE COMMON
STOCK EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR
ANY SUCCESSOR PROVISION).
Any CRESTS (or security issued in exchange or substitution therefor) as
to which such restrictions on transfer shall have expired in accordance with
their terms may, upon surrender of such CRESTS for exchange to the Security
Registrar in accordance with the provisions of this Section 7.12(a), be
exchanged for a new CRESTS or CRESTS, of like tenor and aggregate liquidation
amount, which shall not bear the restrictive legend required by this Section
7.12(a).
Upon any sale or transfer of any Restricted Security (including any
interest in a Global Security) (i) that is effected pursuant to an effective
registration statement under the Securities Act or (ii) in connection with which
the Property Trustee receives certificates and other information (including an
opinion of counsel, if requested) reasonably acceptable to the Sponsor and the
Property Trustee to the effect that such security shall no longer be subject to
the resale restrictions under federal and state securities laws, then (A) in the
case of a Restricted Security in definitive form the Security Registrar shall
permit the holder thereof to exchange such Restricted Security for a security
that does not bear the legend set forth in Section 7.12(a), and shall rescind
any such restrictions on transfer and (B) in the case of Restricted Securities
represented by a Global Security, such CRESTS shall no longer be subject to the
restrictions contained in the legend set forth in Section 7.12(a) (but still
subject to the other provisions hereof). In addition, any CRESTS (or security
issued in exchange or substitution therefor) as to which the restrictions on
transfer described in the legend set forth in Section 7.12(a) have expired by
their terms, may, upon surrender thereof (in accordance with terms of this
Declaration) together with such certifications and other information (including
an opinion of counsel having substantial experience in practice under the
Securities Act and otherwise reasonably acceptable to the Sponsor, addressed to
the Sponsor and the Property Trustee and in form acceptable to the Sponsor, to
the effect that the transfer of such Restricted Security has been made in
compliance with Rule 144 or such successor provision) acceptable to the Sponsor
and the Property Trustee as either of them may reasonably require, be exchanged
for a new CRESTS or CRESTS of like tenor and aggregate liquidation amount, which
shall not bear the restrictive legends set forth in Section 7.12(a).
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SECTION 7.13. CONVERSION RIGHTS. The Holder of Securities shall have
the right at any time, beginning 90 days following the last date of original
issuance of any CRESTS and prior to the close of business (New York time) on
June 28, 2010 (or earlier as described in Section 7.13(b)), at their option, to
cause the Conversion Agent, to convert Securities in whole or in part (but only
in whole Securities), on behalf of the converting Holders, into shares of Common
Stock in the manner described herein on and subject to the following terms and
conditions:
(a) The Securities shall be convertible at the office of the Conversion
Agent into fully paid and nonassessable shares of Common Stock pursuant to the
Holder's direction to the Conversion Agent to exchange such Securities for a
portion of the Debentures theretofore held by the Trust on the basis of $1 in
liquidation amount of a Security per $1 in principal amount of Debentures, and
immediately convert such amount of Debentures into that number of fully paid and
nonassessable shares of Common Stock obtained by dividing the principal amount
of such Debentures to be converted by the conversion price of the Debentures.
The initial conversion price of the Debentures is $21.42 per share of Common
Stock (equivalent to a conversion ratio of 2.334 shares of Common Stock for each
Security). The conversion price and the securities into which the Securities are
convertible are subject to certain adjustments and the conversion price is
subject to a reset provision set forth in Article 8 of the Supplemental
Indenture. Such initial conversion price, as so adjusted from time to time, is
herein referred to as the "CONVERSION PRICE." Any Holder of Securities may only
convert whole Securities and the Trust shall not be obligated to issue any
fractional Securities.
(b) The right to convert Securities shall terminate prior to the close
of business (i) on June 28, 2010 or (ii) in the case of Securities called for
redemption, on the second Business Day prior to related redemption date, unless
the Property Trustee shall default in making payment of any moneys payable upon
such redemption under Section 7.03.
(c) In order to convert Securities into Common Stock, the Holder shall
deliver to the Conversion Agent at the office referred to above an irrevocable
request to convert Securities on behalf of such Holder (the "CONVERSION
REQUEST"), together, if the Securities are in certificated form, with such
certificates. The Conversion Request shall (i) set forth the number of
Securities to be converted and the name or names, if other than the Holder, in
which the shares of Common Stock should be issued together with any payment
required by Section 7.02(e) and (ii) direct the Conversion Agent (A) to exchange
such Securities for a portion of the Debentures held by the Trust and (B) to
immediately convert such Debentures on behalf of such Holder, into Common Stock
(at the conversion rate specified in Section 7.03). The Conversion Agent shall
notify the Trust of the Holder's election to exchange Securities for a portion
of the Debentures held by the Trust and the Trust shall, upon receipt of such
notice, deliver to the Conversion Agent the appropriate principal amount of
Debentures for exchange in accordance with this Section 7.13(c). The Conversion
Agent
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shall thereupon notify the Debenture Issuer of the Holder's election to convert
such Debentures into shares of Common Stock at the conversion price specified in
Section 7.03. Except as provided in Section 7.02(e), neither the Trust nor the
Sponsor shall make, or be required to make, any payment, allowance or adjustment
upon any conversion on account of any accumulated and unpaid Distributions
accumulated on the Securities (including Compounded Distributions accumulated
thereon) surrendered for conversion, or on account of any accumulated and unpaid
dividends on the shares of Common Stock issued upon such conversion.
Securities shall be deemed to have been converted immediately prior to
the close of business on the day on which a Conversion Request relating to such
Securities is received by the Trust in accordance with the foregoing provision
(the "CONVERSION DATE"). The Person or Persons entitled to receive Common Stock
issuable upon conversion of the Debentures shall be treated for all purposes as
the record holder or holders of such Common Stock at such time. As promptly as
practicable on or after the Conversion Date, the Debenture Issuer shall issue
and deliver at the office of the Conversion Agent a certificate or certificates
for the number of full shares of Common Stock issuable upon such conversion,
together with the cash payment, if any, in lieu of any fraction of any share to
the Person or Persons entitled to receive the same, unless otherwise directed by
the Holder in the notice of conversion and the Conversion Agent shall distribute
such certificate or certificates and cash payments, if any, to such Person or
Persons.
(d) Each Holder of a Security by his acceptance thereof appoints the
Property Trustee as "CONVERSION AGENT" for the purpose of effecting the
conversion of Securities in accordance with this Section 7.13. In effecting the
conversion and transactions described in this Section, the Conversion Agent
shall be acting as agent of the Holders of Securities directing it to effect
such conversion transactions. The Conversion Agent is hereby authorized (i) to
exchange Securities from time to time for Debentures held by the Trust in
connection with the conversion of such Securities in accordance with this
Section and (ii) to convert all or a portion of the Debentures into Common Stock
or other common stock of the Debenture Issuer and thereupon to deliver such
shares of Common Stock or other common stock in accordance with the provisions
of this Section 7.13 and to deliver to the Trust a new Debenture or Debentures
for any resulting unconverted principal amount.
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(e) No fractional shares or scrip representing fractions of shares of
Common Stock or any other common stock of the Debenture Issuer shall be issued
upon conversion of any Securities. Instead of any fractional interest in a share
of Common Stock or such other common stock that would otherwise be deliverable
upon the conversion of any Securities, the Debenture Issuer shall pay to the
holder of such share an amount in cash based upon the Closing Price of Common
Stock or such other common stock on the Trading Day immediately preceding the
date of conversion. If more than one Security shall be surrendered for
conversion at one time by the same holder, the number of full shares of Common
Stock or such other common stock issuable upon conversion thereof shall be
computed on the basis of the aggregate number of Securities so surrendered.
(f) Upon conversion of the Securities, Distributions shall only be
payable in accordance with Section 7.02(e). Shares of Common Stock or shares of
such other common stock received upon conversion of the Debentures shall be
delivered to the converting Holder free and clear of all liens, charges,
security interests and encumbrances, except for United States withholding taxes.
Each of the Debenture Issuer and the Trust shall endeavor to list the shares of
Common Stock or other common stock of the Debenture Issuer required to be
delivered upon conversion of the Debentures and the Securities, prior to such
delivery, upon each national securities exchange or with each national
securities association, if any, upon which the outstanding Common Stock or such
other common stock is listed or quoted at the time of such delivery. Prior to
the delivery of any securities that the Debenture Issuer shall be obligated to
deliver upon conversion of the Debentures and the Securities, the Debenture
Issuer shall endeavor to comply with all federal and state laws and regulations
thereunder requiring the registration of such securities with, or any approval
of or consent to the delivery thereof by, any governmental authority. For
purposes of this Section 7.13 the number of shares of Common Stock or such other
shares of common stock that shall be deliverable upon the conversion of all
outstanding Securities shall be computed as if at the time of computation all
such outstanding Securities were held by a single Holder.
(g) The Debenture Issuer shall pay any and all taxes that may be
payable in respect of the issue or delivery of shares of Common Stock or other
securities or property on conversion of Debentures and the delivery of the
shares of Common Stock or other securities or property upon conversion of the
Securities. The Debenture issuer shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock or other securities or property in a name
other than that in which the Securities so converted were registered, and no
such issue or delivery shall be made unless and until the person requesting such
issue has paid to the Trust the
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amount of any such tax, or has established to the satisfaction of the Trust that
such tax has been paid.
(h) Nothing in the preceding Section 7.13(g) shall limit the
requirement of the Trust to withhold taxes pursuant to the terms of the
Securities or set forth in this Declaration or otherwise require the Property
Trustee or the Trust to pay any amounts on account of such withholdings.
(i) Notwithstanding the foregoing, no holder of Common Securities may
convert such number of Common Securities which, after giving effect to such
conversion, would result in the holders of Common Securities in the aggregate
holding less then 3% of the capital of the Trust.
SECTION 7.14. MERGER. In the event the Merger (the "MERGER") pursuant
to the Merger Agreement is consummated, Lodgian, Inc. ("LODGIAN"), the successor
corporation in the Merger, shall assume the Sponsor's obligations under the
Declaration and shall execute and deliver such documents as may be necessary to
carry out the intent of this Section. From and after the Merger and the
assumption by Lodgian of Servico, Inc.'s obligations hereunder, Servico, Inc.
shall be released from its obligations under this Declaration as Sponsor or
otherwise. Following the Merger, all references to Servico, Inc., the Sponsor,
the Common Securities Holder and the Debenture Issuer herein shall instead refer
to Lodgian.
SECTION 7.15. OPTIONAL REPURCHASE. (a) In the event that the Merger
Agreement is terminated or the Merger has not been consummated by December 31,
1998, each Holder of a CRESTS shall have the right to require the Debenture
Issuer to repurchase Debentures in aggregate principal amount equal to the
aggregate liquidation amount of CRESTS that a Holder elects to cause the Trust
to repurchase pursuant to the Non-Completion Offer, at an offer price in cash
(the "NON-COMPLETION PAYMENT") equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid Distributions thereon, to the date of
repurchase.
(b) Within 20 days after the Date of Non-Completion, the Regular
Trustees shall cause the Trust to issue a press release and mail a notice (the
"NON-COMPLETION NOTICE") to each Holder offering to repurchase the CRESTS, on
the date specified in the Non-Completion Notice (the "NON-COMPLETION PAYMENT
DATE"), which date shall be not earlier than 30 days and not later than 60 days
from the date such Non-Completion Notice is mailed, pursuant to the procedures
required in the Indenture and described in such Notice. The Debenture Issuer
shall, and the Regular Trustees shall cause the Trust to, comply with the
requirements of Rule 13e-4 under the Exchange Act and any other securities laws
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and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Debentures and the CRESTS.
(c) On the Non-Completion Payment Date, the Debenture Issuer shall, to
the extent lawful, (i) deposit with the Property Trustee an amount equal to the
Non-Completion Payment in respect of the aggregate amount of Debentures tendered
by the Property Trustee and (ii) deliver or cause to be delivered to the
Debenture Trustee the Debentures so tendered together with a certification
setting forth the aggregate principal amount of Debentures or portions thereof
being purchased by the Debenture Issuer.
(d) On the Non-Completion Payment Date, the Property Trustee shall, to
the extent lawful and to the extent that funds are available, (i) tender to the
Debenture Issuer an aggregate principal amount of Debentures equal to the
aggregate liquidation amount of CRESTS properly tendered by Holders pursuant to
the Non-Completion Offer, (ii) accept for payment all CRESTS or portions thereof
properly tendered pursuant to the Non-Completion Offer, (iii) deposit
irrevocably with the Depositary an amount equal to the Non-Completion Payment in
respect of all CRESTS or portions thereof so tendered which were represented by
one or more Global Securities and give the Depositary irrevocable instructions
and authority to pay the Non-Completion Payment to the relevant accounts at the
Depositary or, if any CRESTS so tendered are not represented by one or more
Global Securities, deposit irrevocably with the Paying Agent for such CRESTS an
amount equal to the Non-Completion Payment in respect of such CRESTS and give
such Paying Agent irrevocable instructions and authority to pay the
Non-Completion Payment to the holders thereof.
(e) The Trust shall promptly authenticate and deliver (or cause to be
transferred by book-entry) to each Holder a new CRESTS equal in liquidation
amount to any unpurchased portion of the CRESTS surrendered, if any.
ARTICLE 8
DISSOLUTION AND TERMINATION OF TRUST
SECTION 8.01. DISSOLUTION AND TERMINATION OF TRUST.
(a) The Trust shall dissolve upon the earliest of:
(i) the bankruptcy of the Holder of the Common Securities or
the Sponsor;
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(ii) (other than in connection with a merger, consolidation or
similar transaction not prohibited by the Indenture, this Declaration
or the Guarantee) the filing of a certificate of dissolution or its
equivalent with respect to the Sponsor, the filing of a certificate of
cancellation with respect to the Trust after obtaining the consent of
the Holders of at least a Majority in Liquidation Amount of the
Securities to the filing of a certificate of cancellation with respect
to the Trust or the revocation of the Sponsor's charter and the
expiration of 90 days after the date of revocation without a
reinstatement thereof;
(iii) the entry of a decree of judicial dissolution of the
Sponsor or the Trust;
(iv) the time when all of the Securities shall have been
called for redemption and the amounts then due shall have been paid to
the Holders in accordance with the terms of the Securities;
(v) upon the election of the Regular Trustees, following the
occurrence and continuation of a Special Event pursuant to which the
Trust shall have been dissolved in accordance with the terms of the
Securities, and all of the Debentures shall have been distributed to
the Holders of Securities in exchange for all of the Securities;
(vi) the time when all of the Regular Trustees and the Sponsor
shall have consented to dissolution of the Trust PROVIDED such action
is taken before the issuance of any Securities;
(vii) upon the distribution of the Common Stock to all Holders
of CRESTS upon conversion of all outstanding CRESTS; or
(viii) the expiration of the term of the Trust on June 30,
2020.
(b) As soon as is practicable after the occurrence of an event
referred to in Section 8.01(a) and upon completion of the winding up and
liquidation of the Trust, the Trustees shall terminate the Trust by filing a
certificate of cancellation with the Secretary of State of the State of
Delaware.
(c) The provisions of Section 4.02 and Article 9 shall survive the
termination of the Trust.
SECTION 8.02. LIQUIDATION DISTRIBUTION UPON DISSOLUTION OF THE TRUST.
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(a) In the event of any voluntary or involuntary liquidation,
dissolution, or winding-up of the Trust (each a "LIQUIDATION"), the Holders of
the CRESTS on the date of the Liquidation shall be entitled to receive, out of
the assets of the Trust available for distribution to Holders of Securities
after satisfaction of the Trust's liabilities to creditors, if any,
distributions in cash or other immediately available funds in an amount equal to
the aggregate of the stated liquidation amount of $50 per Security plus
accumulated and unpaid Distributions thereon to the date of payment (such amount
being the "LIQUIDATION DISTRIBUTION"), unless, in connection with such
Liquidation, Debentures in an aggregate stated principal amount equal to the
aggregate stated liquidation amount of, with an interest rate identical to the
distribution rate of, and accrued and unpaid interest equal to accumulated and
unpaid Distributions on, such Securities shall be distributed on a Pro Rata
basis to the Holders of the Securities in exchange for such Securities.
(b) If, upon any such Liquidation, the Liquidation Distribution can be
paid only in part because the Trust has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then the amounts payable directly
by the Trust on the Securities shall be paid on a Pro Rata basis. The Holders of
the Common Securities shall be entitled to receive distributions upon any such
Liquidation Pro Rata with the Holders of the CRESTS except that if an Indenture
Event of Default has occurred and is continuing, the CRESTS shall have a
preference over the Common Securities with regard to such distributions.
ARTICLE 9
LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, DELAWARE TRUSTEES OR
OTHERS
SECTION 9.01. LIABILITY.
(a) Except as expressly set forth in this Declaration, the Guarantee
and the terms of the Securities, the Sponsor:
(i) shall not be personally liable for the return of any
portion of the capital contributions (or any return thereon) of the
Holders of the Securities which shall be made solely from assets of the
Trust; and
(ii) shall not be required to pay to the Trust or to any
Holder of Securities any deficit upon dissolution of the Trust or
otherwise.
(b) Pursuant to Section 3803(a) of the Business Trust Act, the Holder
of the Common Securities shall be entitled to the same limitation of personal
liability
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extended to stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware; PROVIDED, however, the Holders
of the Common Securities shall be liable for all of the debts and obligations of
the Trust (other than with respect to the Securities) to the extent not
satisfied out of the Trust's assets.
(c) Pursuant to Section 3803(a) of the Business Trust Act, the Holders
of the CRESTS shall be entitled to the same limitation of personal liability
extended to stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware.
SECTION 9.02. EXCULPATION.
(a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Trust or any Covered Person for any loss, damage
or claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Declaration or by law, except that
an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's negligence or willful misconduct
with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Trust and upon such information, opinions, reports
or statements presented to the Trust by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Trust, including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, profits, losses or any other facts
pertinent to the existence and amount of assets from which Distributions to
Holders of Securities might properly be paid.
SECTION 9.03. FIDUCIARY DUTY.
(a) To the extent that, at law or in equity, an Indemnified Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an Indemnified Person acting under this
Declaration shall not be liable to the Trust or to another Covered Person for
its good faith reliance on the provisions of this Declaration. The provisions of
this Declaration, to the extent that they restrict the duties and liabilities of
an Indemnified Person otherwise existing at law or in equity (other than the
duties imposed on the
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Property Trustee under the Trust Indenture Act), are agreed by the parties
hereto to replace such other duties and liabilities of such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises between
any Covered Persons; or
(ii) whenever this Declaration or any other agreement
contemplated herein or therein provides that an Indemnified Person
shall act in a manner that is, or provides terms that are, fair and
reasonable to the Trust or any Holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such action
or provide such terms, considering in each case the relative interest of each
party (including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices and any applicable generally accepted accounting
practices or principles. In the absence of bad faith by the Indemnified Person,
the resolution, action or term so made, taken or provided by the Indemnified
Person shall not constitute a breach of this Declaration or any other agreement
contemplated herein or of any duty or obligation of the Indemnified Person at
law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person is permitted or
required to make a decision:
(i) in its "DISCRETION" or under a grant of similar authority,
the Indemnified Person shall be entitled to consider such interests and
factors as it desires, including its own interests, and shall have no
duty or obligation to give any consideration to any interest of or
factors affecting the Trust or any other Person; or
(ii) in its "GOOD FAITH" or under another express standard,
the Indemnified Person shall act under such express standard and shall
not be subject to any other or different standard imposed by this
Declaration or by applicable law.
SECTION 9.04. INDEMNIFICATION.
(a) (i) The Debenture Issuer shall indemnify, to the full extent
permitted by law, any Debenture Issuer Indemnified Person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit
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or proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the Trust) by reason of the fact that he is
or was a Debenture Issuer Indemnified Person against expenses (including
attorney 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 Trust, 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, conviction or upon a plea of NOLO CONTENDERE or its equivalent,
shall not, of itself, create a presumption that the Debenture Issuer Indemnified
Person 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 Trust, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
(ii) The Debenture Issuer shall indemnify, to the full extent
permitted by law, any Debenture Issuer Indemnified 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 Trust to procure
a judgment in its favor by reason of the fact that he is or was a
Debenture Issuer Indemnified Person 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 Trust and except that no such
indemnification shall be made in respect of any claim issue or matter
as to which such Debenture Issuer Indemnified Person shall have been
adjudged to be liable to the Trust unless and only to the extent that
the Court of Chancery 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 such Court of Chancery or such other court shall
deem proper.
(iii) Any indemnification under paragraphs (i) and (ii) of
this Section 9.04(a) (unless ordered by a court) shall be made by the
Debenture Issuer only as authorized in the specific case upon a
determination that indemnification of the Debenture Issuer Indemnified
Person is proper in the circumstances because he has met the applicable
standard of conduct set forth in paragraphs (i) and (ii). Such
determination shall be made (1) by the Regular Trustees by a majority
vote of a quorum consisting of such Regular Trustees who were not
parties to such action, suit or proceeding, (2) if such a quorum is not
obtainable, or, even if obtainable, if a quorum
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of disinterested Regular Trustees so directs, by independent legal
counsel in a written opinion, or (3) by the Common Security Holder of
the Trust.
(iv) Expenses (including attorneys' fees) incurred by a
Debenture Issuer Indemnified Person in defending a civil criminal,
administrative or investigative action, suit or proceeding referred to
in paragraphs (i) and (ii) of this Section 9.04(a) shall be paid by the
Debenture Issuer in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of
such Debenture Issuer Indemnified Person to repay such amount if it
shall ultimately be determined that he is not entitled to be
Indemnified by the Debenture Issuer as authorized in this Section
9.04(a). Notwithstanding the foregoing, no advance shall be made by the
Debenture Issuer if a determination is reasonably and promptly made (i)
by the Regular Trustees by a majority vote of a quorum of disinterested
Regular Trustees, (ii) if such a quorum is not obtainable, or, even if
obtainable, if a quorum of disinterested Regular Trustees so directs,
by independent legal counsel in a written opinion or (iii) the Common
Security Holder of the Trust, that, based upon the facts known to the
Regular Trustees, counsel or the Common Security Holder at the time
such determination is made, such Debenture Issuer Indemnified Person
acted in bad faith or in a manner that such person did not believe to
be in or not opposed to the best interests of the Trust, or, with
respect to any criminal proceeding, that such Debenture Issuer
Indemnified Person believed or had reasonable cause to believe his
conduct was unlawful. In no event shall any advance be made in
instances where the Regular Trustees, independent legal counsel or
Common Security Holder reasonably determine that such person
deliberately breached his duty to the Trust or its Common or CRESTS
Holders.
(v) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other paragraphs of this Section
9.04(a) shall not be deemed exclusive of any other rights to which
those seeking indemnification and advancement of expenses may be
entitled under any agreement, vote of stockholders or disinterested
directors of the Debenture Issuer or CRESTS Holders of the Trust or
otherwise, both as to action in his official capacity and as to action
in another capacity while holding such office. All rights to
indemnification under this Section 9.04(a) (a) shall be deemed to be
provided by a contract between the Debenture Issuer and each Debenture
Issuer Indemnified Person who serves in such capacity at any time while
this Section 9.04(a) is in effect. Any repeal or modification of this
Section 9.04(a) shall not affect any rights or obligations then
existing.
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(vi) The Debenture Issuer or the Trust may purchase and
maintain insurance on behalf of any person who is or was a Debenture
Issuer Indemnified Person 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 Debenture Issuer would have the power to
indemnify him against such liability under the provisions of this
Section 9.04(a).
(vii) For purposes of this Section 9.04(a), references to "THE
TRUST" shall include, in addition to the resulting or surviving entity,
any constituent entity (including any constituent of a constituent)
absorbed in a consolidation or merger, so that any person who is or was
a director, trustee, officer or employee of such constituent entity, or
is or was serving at the request of such constituent entity as a
director, trustee, officer, employee or agent of another entity, shall
stand in the same position under the provisions of this Section 9.04(a)
with respect to the resulting or surviving entity as he would have with
respect to such constituent entity if its separate existence had
continued.
(viii) The indemnification and advancement of expenses
provided by, or granted pursuant to, this Section 9.04(a) shall, unless
otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a Debenture Issuer Indemnified Person and shall
inure to the benefit of the heirs, executors and administrators of such
a person. The obligation to indemnify as set forth in this Section
9.04(a) shall survive the resignation or removal of the Delaware
Trustee or the Property Trustee or the termination of this Declaration.
(b) The Debenture Issuer agrees to indemnify the (i) Property Trustee,
(ii) the Delaware Trustee, (iii) any Affiliate of the Property Trustee and the
Delaware Trustee, and (iv) any officers, directors, shareholders, members,
partners, employees, representatives, custodians, nominees or agents of the
Property Trustee and the Delaware Trustee (each of the Persons in (i) through
(iv) being referred to as a "FIDUCIARY INDEMNIFIED PERSON") for, and to hold
each Fiduciary Indemnified Person harmless against, any loss, liability or
expense incurred without negligence or bad faith on its part, arising out of or
in connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of defending itself against or investigating any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder. The obligation to indemnify as set forth in this Section 9.04(a)
shall survive the satisfaction and discharge of this Declaration.
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SECTION 9.05. OUTSIDE BUSINESS. Any Covered Person, the Sponsor, the
Delaware Trustee and the Property Trustee may engage in or possess an interest
in other business ventures of any nature or description, independently or with
others, similar or dissimilar to the activities of the Trust, and the Trust and
the Holders of Securities shall have no rights by virtue of this Declaration in
and to such independent ventures or the income or profits derived therefrom and
the pursuit of any such venture, even if competitive with the activities of the
Trust, shall not be deemed wrongful or improper. No Covered Person, the Sponsor,
the Delaware Trustee or the Property Trustee shall be obligated to present any
particular investment or other opportunity to the Trust even if such opportunity
is of a character that, if presented to the Trust, could be taken by the Trust,
and any Covered Person, the Sponsor, the Delaware Trustee and the Property
Trustee shall have the right to take for its own account (individually or as a
partner or fiduciary) or to recommend to others any such particular investment
or other opportunity. Any Covered Person, the Delaware Trustee and the Property
Trustee may engage or be interested in any financial or other transaction with
the Sponsor or any Affiliate of the Sponsor, or may act as depositary for,
trustee or agent for, or act on any committee or body of holders of, securities
or other obligations of the Sponsor or its Affiliates.
ARTICLE 10
ACCOUNTING
SECTION 10.01. FISCAL YEAR. The fiscal year ("FISCAL YEAR") of the
Trust shall be the calendar year, or such other year as is required by the Code.
SECTION 10.02. CERTAIN ACCOUNTING MATTER.
(a) At all times during the existence of the Trust, the Regular
Trustees shall keep, or cause to be kept, full books of account, records and
supporting documents, which shall reflect in reasonable detail, each transaction
of the Trust. The books of account shall be maintained on the accrual method of
accounting, in accordance with generally accepted accounting principles,
consistently applied. The Trust shall use the accrual method of accounting for
United States federal income tax purposes. The books of account and the records
of the Trust shall be examined by and reported upon as of the end of each Fiscal
Year of the Trust by a firm of independent certified public accountants selected
by the Regular Trustees.
(b) The Regular Trustees shall cause to be prepared and delivered to
each of the Holders of Securities, within 90 days after the end of each Fiscal
Year of the Trust, annual financial statements of the Trust, including a balance
sheet of
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the Trust as of the end of such Fiscal Year, and the related statements
of income or loss.
(c) The Regular Trustees shall cause to be duly prepared and delivered
to each of the Holders of Securities, an annual United States federal income tax
information statement, required by the Code, containing such information with
regard to the Securities held by each Holder as is required by the Code and the
Treasury Regulations. Notwithstanding any right under the Code to deliver any
such statement at a later date, the Regular Trustees shall endeavor to deliver
all such statements within 30 days after the end of each Fiscal Year of the
Trust.
(d) The Regular Trustees shall cause to be duly prepared and filed
with the appropriate taxing authority, an annual United States federal income
tax return, on a Form 1041 or such other form required by United States federal
income tax law, and any other annual income tax returns required to be filed by
the Regular Trustees on behalf of the Trust with any state or local taxing
authority.
SECTION 10.03. BANKING. The Trust shall maintain one or more bank
accounts in the name and for the sole benefit of the Trust; PROVIDED, however,
that all payments of funds in respect of the Debentures held by the Property
Trustee shall be made directly to the Property Account and no other funds of the
Trust shall be deposited in the Property Account. The sole signatories for such
accounts shall be designated by the Regular Trustees, PROVIDED, however, that
the Property Trustee shall designate the signatories for the Property Account.
SECTION 10.04. WITHHOLDING. The Trust and the Regular Trustees shall
comply with all withholding requirements under United States federal, state and
local law. The Trust shall request, and the Holders shall provide to the Trust,
such forms or certificates as are necessary to establish an exemption from
withholding with respect to each Holder, and any representations and forms as
shall reasonably be requested by the Trust to assist it in determining the
extent of, and in fulfilling, its withholding obligations. The Regular Trustees
shall file required forms with applicable jurisdictions and, unless an exemption
from withholding is properly established by a Holder, shall remit amounts
withheld with respect to the Holder to applicable jurisdictions. To the extent
that the Trust is required to withhold and pay over any amounts to any authority
with respect to distributions or allocations to any Holder, the amount withheld
shall be deemed to be a distribution in the amount of the withholding to the
Holder. In the event of any claimed over withholding, Holders shall be limited
to an action against the applicable jurisdiction. If the amount required to be
withheld was not withheld from actual Distributions made, the Trust may reduce
subsequent Distributions by the amount of such withholding.
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ARTICLE 11
AMENDMENTS AND MEETINGS
SECTION 11.01. AMENDMENTS.
(a) Except as otherwise provided in this Declaration or by any
applicable terms of the Securities, this Declaration may only be amended by a
written instrument approved and executed by the Sponsor and (i) the Regular
Trustees (or, if there are more than two Regular Trustees, a majority of the
Regular Trustees) and (ii) the Property Trustee if the amendment affects the
rights, powers, duties, obligations or immunities of the Property Trustee and
(iii) by the Delaware Trustee if the amendment affects the rights, powers,
duties, obligations or immunities of the Delaware Trustee.
(b) No amendment shall be made, and any such purported amendment shall
be void and ineffective:
(i) unless, in the case of any proposed amendment, the
Property Trustee shall have first received an Officers' Certificate
from each of the Trust and the Sponsor that such amendment is permitted
by, and conforms to, the terms of this Declaration (including the terms
of the Securities);
(ii) unless, in the case of any proposed amendment which
affects the rights, powers, duties, obligations or immunities of the
Property Trustee, the Property Trustee shall have first received:
(A) an Officers' Certificate from each of the Trust
and the Sponsor that such amendment is permitted by, and
conforms to, the terms of this Declaration (including the
terms of the Securities); and
(B) an opinion of counsel (who may be counsel to the
Sponsor or the Trust) that such amendment is permitted by, and
conforms to, the terms of this Declaration (including the
terms of the Securities); and
(iii) to the extent the result of such amendment would be to:
(A) cause the Trust to be classified other than as a
grantor trust for United States federal income tax purposes;
(B) reduce or otherwise adversely affect the powers
of the Property Trustee in contravention of the Trust
Indenture Act; or
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<PAGE> 82
(C) cause the Trust to be deemed to be an Investment
Company required to be registered under the Investment Company
Act.
(c) At such time after the Trust has issued any Securities that remain
outstanding, any amendment that would (i) change the amount or timing of any
distribution of the Securities or otherwise adversely affect the amount of any
distribution required to be made in respect of the Securities as of a specified
date or (ii) restrict the right of a Holder of Securities to institute suit for
the enforcement of any such payment on or after such date, then the holders of
the Securities voting together as a single class shall be entitled to vote on
such amendment or proposal and such amendment or proposal shall not be effective
except with the approval of each of the Holders of the Securities affected
thereby; PROVIDED that, if any amendment or proposal that would adversely affect
the powers, preferences or special rights of only the CRESTS or the Common
Securities, whether by amendment to the Declaration or otherwise, then only the
affected class shall be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of 662/3%
in liquidation amount of such class of Securities affected thereby.
(d) This Section 11.01 shall not be amended without the consent of all
of the Holders of the Securities.
(e) Article 4 shall not be amended without the consent of the Holders
of a Majority in Liquidation Amount of the Common Securities.
(f) The rights of the Holders of the Common Securities under Article 6
to increase or decrease the number of, and appoint and remove Trustees shall not
be amended without the consent of the Holders of a Majority in Liquidation
Amount of the Common Securities.
(g) Notwithstanding Section 11.01(c), this Declaration may be amended
without the consent of the Holders of the Securities to:
(i) cure any ambiguity;
(ii) correct or supplement any provision in this Declaration
that may be defective or inconsistent with any other provision of this
Declaration or to make any other provisions with respect to matters or
questions arising under this Declaration which are not inconsistent
with the other provisions of this Declaration;
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<PAGE> 83
(iii) add to the covenants, restrictions or obligations of the
Sponsor,
(iv) to conform to any change in Rule 3a-5 or written change
in interpretation or application of Rule 3a-5 by any legislative body,
court, government agency or regulatory authority which amendment does
not have a material adverse effect on the rights, preferences or
privileges of the Holders; or
(v) to modify, eliminate and add to any provision of this
Declaration to ensure that the Trust shall be classified as a grantor
trust for United States federal income tax purposes at all times that
any Securities are outstanding or to ensure that the Trust shall not be
required to register as an Investment Company under the Investment
Company Act; PROVIDED, however, that such modification, elimination or
addition would not adversely affect in any material respect the rights,
privileges or preferences of any Holder of the Securities.
SECTION 11.02. MEETINGS OF THE HOLDERS OF SECURITIES; ACTION BY WRITTEN
CONSENT.
(a) Meetings of the Holders of any class of Securities may be called
at any time by the Regular Trustees to consider and act on any matter on which
Holders of such class of Securities are entitled to act under the terms of this
Declaration, the terms of the Securities or the rules of any stock exchange on
which the CRESTS are listed or admitted for trading. The Regular Trustees shall
call a meeting of the Holders of such class if directed to do so by the Holders
of at least 10% in Liquidation Amount of such class of Securities. Such
direction shall be given by delivering to the Regular Trustees one or more calls
in a writing stating that the signing Holders of Securities wish to call a
meeting and indicating the general or specific purpose for which the meeting is
to be called. Any Holders of Securities calling a meeting shall specify in
writing the Certificates held by the Holders of Securities exercising the right
to call a meeting and only those Securities specified shall be counted for
purposes of determining whether the required percentage set forth in the second
sentence of this paragraph has been met.
(b) Except to the extent otherwise provided in the terms of the
Securities, the following provisions shall apply to meetings of Holders of
Securities:
(i) notice of any such meeting shall be given to all the
Holders of Securities having a right to vote thereat at least 7 days
and not more than
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<PAGE> 84
60 days before the date of such meeting. Whenever a vote, consent or
approval of the Holders of Securities is permitted or required under
this Declaration or the rules of any stock exchange on which the CRESTS
are listed or admitted for trading, such vote, consent or approval may
be given at a meeting of the Holders of Securities. Any action that may
be taken at a meeting of the Holders of Securities may be taken without
a meeting if a consent in writing setting forth the action so taken is
signed by the Holders of Securities owning not less than the minimum
amount of Securities in liquidation amount that would be necessary to
authorize or take such action at a meeting at which all Holders of
Securities having a right to vote thereon were present and voting.
Prompt notice of the taking of action without a meeting shall be given
to the Holders of Securities entitled to vote who have not consented in
writing. The Regular Trustees may specify that any written ballot
submitted to the Security Holders for the purpose of taking any action
without a meeting shall be returned to the Trust within the time
specified by the Regular Trustees;
(ii) each Holder of a Security may authorize any Person to act
for it by proxy on all matters in which a Holder of Securities is
entitled to participate, including waiving notice of any meeting, or
voting or participating at a meeting. No proxy shall be valid after the
expiration of 11 months from the date thereof unless otherwise provided
in the proxy. Every proxy shall be revocable at the pleasure of the
Holder of Securities executing such proxy. Except as otherwise provided
herein, all matters relating to the giving, voting or validity of
proxies shall be governed by the General Corporation Law of the State
of Delaware relating to proxies, and judicial interpretations
thereunder, as if the Trust were a Delaware corporation and the Holders
of the Securities were stockholders of a Delaware corporation;
(iii) each meeting of the Holders of the Securities shall be
conducted by the Regular Trustees or by such other Person that the
Regular Trustees may designate; and
(iv) unless the Business Trust Act, this Declaration, the
terms of the Securities, the Trust Indenture Act or the listing rules
of any stock exchange on which the CRESTS are then listed for trading,
otherwise provides, the Regular Trustees, in their sole discretion,
shall establish all other provisions relating to meetings of Holders of
Securities, including notice of the time, place or purpose of any
meeting at which any matter is to be voted on by any Holders of
Securities, waiver of any such notice, action by consent without a
meeting, the establishment of a record date,
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<PAGE> 85
quorum requirements, voting in person or by proxy or any other matter
with respect to the exercise of any such right to vote.
ARTICLE 12
REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE
SECTION 12.01. REPRESENTATIONS AND WARRANTIES OF THE PROPERTY TRUSTEE.
The Trustee that acts as initial Property Trustee represents and warrants to the
Trust and to the Sponsor at the date of this Declaration, and each Successor
Property Trustee represents and warrants to the Trust and the Sponsor at the
time of the Successor Property Trustee's acceptance of its appointment as
Property Trustee that:
(a) the Property Trustee is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, with trust power and authority to execute and
deliver, and to carry out and perform its obligations under the terms of, this
Declaration;
(b) the Property Trustee satisfies the requirements set forth in
Section 6.03(a));
(c) the execution, delivery and performance by the Property Trustee of
this Declaration has been duly authorized by all necessary corporate action on
the part of the Property Trustee. This Declaration has been duly executed and
delivered by the Property Trustee, and it constitutes a legal valid and binding
obligation of the Property Trustee, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency and other similar laws affecting creditors' rights generally and to
general principles of equity and the discretion of the court (regardless of
whether the enforcement of such remedies is considered in a proceeding in equity
or at law);
(d) the execution, delivery and performance of this Declaration by the
Property Trustee does not conflict with or constitute a breach of the articles
of association or incorporation, as the case may be, or the by-laws (or other
similar organizational documents) of the Property Trustee; and
(e) no consent, approval or authorization of, or registration with or
notice to, any Delaware or federal banking authority is required for the
execution, delivery or performance by the Property Trustee of this Declaration.
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<PAGE> 86
SECTION 12.02. REPRESENTATIONS AND WARRANTIES OF THE DELAWARE TRUSTEE.
The Trustee that acts as initial Delaware Trustee represents and warrants to the
Trust and to the Sponsor at the date of this Declaration, and each Successor
Delaware Trustee represents and warrants to the Trust and the Sponsor at the
time of the Successor Delaware Trustee's acceptance of its appointment as
Delaware Trustee that:
(a) the Delaware Trustee satisfies the requirements set forth in
Section 6.02 and has the power and authority to execute and deliver, and to
carry out and perform its obligations under the terms of this Declaration and,
if it is not a natural person, is duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization;
(b) the Delaware Trustee has been authorized to perform its
obligations under the Certificate of Trust and this Declaration. This
Declaration under Delaware law constitutes a legal, valid and binding obligation
of the Delaware Trustee, enforceable against it in accordance with its terms,
subject to applicable bankruptcy, reorganization, moratorium, insolvency and
other similar laws affecting creditors' rights generally and to general
principles of equity and the discretion of the court (regardless of whether the
enforcement of such remedies is considered in a proceeding in equity or at law);
and
(c) no consent, approval or authorization of, or registration with or
notice to, any Delaware or federal banking authority is required for the
execution, delivery or performance by the Delaware Trustee of this Declaration.
ARTICLE 13
MISCELLANEOUS
SECTION 13.01. NOTICES. All notices provided for in this Declaration
shall be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by registered or certified mail, as follows:
(a) if given to the Trust, in care of the Regular Trustees at the
Trust's mailing address set forth below (or such other address as the Trust may
give notice of to the Property Trustee, the Delaware Trustee and the Holders of
the Securities):
Servico, Inc.
1601 Belvedere Road
West Palm Beach, Florida 33406
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Attention: Chief Executive Officer
Telecopy No: 561-689-8946
(b) if given to the Delaware Trustee, at the mailing address set forth
below (or such other address as the Delaware Trustee may give notice of to the
Regular Trustees, the Property Trustee and the Holders of the Securities):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
Telecopy No: 302-651-8882
(c) if given to the Property Trustee, at its Corporate Trust Office (or
such other address as the Property Trustee may give notice of to the Regular
Trustees, the Delaware Trustee and the Holders of the Securities);
(d) if given to the Sponsor, the Holder of the Common Securities, or
Lodgian at the mailing address set forth below (or such other address as the
Holder of the Common Securities may give notice of to the Property Trustee, the
Delaware Trustee and the Trust):
Servico, Inc.
1601 Belvedere Road
West Palm Beach, Florida 33406
Attention: Chief Executive Officer
Telecopy No: 561-689-8946
(e) if given to any other Holder, at the address set forth on the
register of the Trust.
All such notices shall be deemed to have been given when received in person,
telecopied with receipt confirmed or mailed by first class mail, postage prepaid
except that if a notice or other document is refused delivery or cannot be
delivered because of a changed address of which no notice was given, such notice
or other document shall be deemed to have been delivered on the date of such
refusal or inability to deliver.
SECTION 13.02. GOVERNING LAW. This Declaration and the rights of the
parties hereunder shall be governed by and interpreted in accordance with the
laws of the State of Delaware.
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SECTION 13.03. INTENTION OF THE PARTIES. It is the intention of the
parties hereto that the Trust be classified for United States federal income tax
purposes as a grantor trust. The provisions of this Declaration shall be
interpreted in a manner consistent with such classification.
SECTION 13.04. HEADINGS. Headings contained in this Declaration are
inserted for convenience of reference only and do not affect the interpretation
of this Declaration or any provision hereof.
SECTION 13.05. SUCCESSORS AND ASSIGNS. Whenever in this Declaration any
of the parties hereto is named or referred to, the successors and assigns of
such party shall be deemed to be included, and all covenants and agreements in
this Declaration by the Sponsor and the Trustees shall bind and inure to the
benefit of their respective successors and assigns, whether so expressed.
SECTION 13.06. PARTIAL ENFORCEABILITY. If any provision of this
Declaration, or the application of such provision to any Person or circumstance,
shall be held invalid, the remainder of this Declaration, or the application of
such provision to persons or circumstances other than those to which it is held
invalid, shall not be affected thereby.
SECTION 13.07. COUNTERPARTS. This Declaration may contain more than one
counterpart of the signature page and this Declaration may be executed by the
affixing of the signature of each of the Trustees to one of such counterpart
signature pages. All of such counterpart signature pages shall be read as though
one, and they shall have the same force and effect as though all of the signers
had signed a single signature page.
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<PAGE> 89
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.
SERVICO, INC.,
as Sponsor and as Common Securities Holder
BY: /s/ Charles M. Diaz
---------------------------------------
Name: Charles M. Diaz
Title: Vice President and Secretary
WILMINGTON TRUST COMPANY,
as Property Trustee and as Delaware Trustee
BY: /s/ W. Christopher Sponenberg
---------------------------------------
Name: W. Christopher Sponenberg
Title: Senior Financial Services Officer
David Buddemeyer,
as Regular Trustee
/s/ David Buddemeyer
---------------------------------------
Phillip R. Hale,
as Regular Trustee
/s/ Phillip R. Hale
---------------------------------------
Charles M. Diaz,
as Regular Trustee
/s/ Charles M. Diaz
---------------------------------------
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LODGIAN, INC.
BY: /s/ Charles M. Diaz
---------------------------------------
Name: Charles M. Diaz
Title: Vice President and Secretary
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<PAGE> 91
EXHIBIT A
[FORM OF CRESTS CERTIFICATE]
This CRESTS is a Global Security within the meaning of the Declaration
hereinafter referred to and is registered in the name of The Depository Trust
Company, a New York corporation (the "DEPOSITARY"), or a nominee of the
Depositary. This CRESTS is exchangeable for CRESTS registered in the name of a
person other than the Depositary or its nominee only in the limited
circumstances described in the Declaration and no transfer of this CRESTS (other
than a transfer of this CRESTS as a whole by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary) may be registered except in limited circumstances.
Unless this CRESTS Certificate is presented by an authorized
representative of the Depositary to the issuer or its agent for registration of
transfer, exchange or payment, and any CRESTS Certificate issued is registered
in the name of Cede & Co. or such other name as requested by an authorized
representative of the Depositary (and any payment hereon is made to Cede & Co.
or to such other entity as is requested by an authorized representative of the
Depositary), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has
an interest herein.
THIS SECURITY, COMMON STOCK ISSUABLE UPON CONVERSION THEREOF, THE
GUARANTEE AND THE CONVERTIBLE DEBENTURES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAW. NEITHER THESE SECURITIES NOR ANY INTEREST OR
PARTICIPATION IN THESE SECURITIES MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM,
OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THESE SECURITIES BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITIES, PRIOR TO THE DATE
(THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH
THE COMPANY OR ANY "AFFILIATE" OF THE COMPANY WAS THE OWNER OF SUCH
A-1
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SECURITIES (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE
COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT,
(C) FOR SO LONG AS SUCH SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT
THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF
RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING SUCH SECURITIES FOR
ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED
INVESTOR, OR AS FIDUCIARY FOR THE ACCOUNT OF ONE OR MORE TRUSTS, EACH
OF WHICH IS AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH
(a) (7) OF RULE 501 UNDER THE SECURITIES ACT, FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (E) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT UPON THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO THE COMPANY,
SUBJECT IN EACH OF THE FOREGOING CASES, TO A CERTIFICATE OF TRANSFER IN
THE FORM APPEARING ON THE OTHER SIDE OF THESE SECURITIES BEING
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY. EACH
PURCHASER OR HOLDER OF THE SECURITY EVIDENCED HEREBY SHALL BE DEEMED TO
HAVE REPRESENTED EITHER THAT (A) IT IS NOT AN EMPLOYEE BENEFIT PLAN
SUBJECT TO PART 4 OF SUBTITLE B OF TITLE 1 OF ERISA OR A PLAN DESCRIBED
IN SECTION 4975 OF THE CODE OR AN ENTITY WHOSE UNDERLYING ASSETS
INCLUDE THE ASSETS OF ANY SUCH ERISA PLAN OR OTHER PLAN OR (B) BY
REASON OF THE APPLICATION OF ONE OR MORE STATUTORY OR ADMINISTRATIVE
EXEMPTIONS FROM THE PROHIBITED TRANSACTION RULES OF SECTION 406 OF
ERISA AND SECTION 4975 OF THE CODE, ITS PURCHASE AND HOLDING OF CRESTS
SHALL NOT CONSTITUTE, CAUSE OR RESULT IN THE
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OCCURRENCE OF A NON-EXEMPT PROHIBITED TRANSACTION WITHIN THE MEANING OF
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE. THIS LEGEND SHALL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
THE HOLDER OF THESE SECURITIES BY ITS ACCEPTANCE HEREOF AGREES TO BE
BOUND BY THE PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT RELATING
TO THE SECURITIES.
Certificate No. Number of CRESTS: 3,500,000
CUSIP No. 540217106
Certificate Evidencing 7% Convertible Redeemable Equity
Structured Trust Securities ("CRESTS")
of
Lodgian Capital Trust I
7% Convertible Redeemable Equity Structured Trust
Securities (liquidation amount $50 per CRESTS)
Lodgian Capital Trust I, a statutory business trust formed under the
laws of the State of Delaware (the "TRUST"), hereby certifies that Cede & Co.
(the "HOLDER") is the registered owner of 3,500,000 CRESTS of the Trust
representing undivided beneficial ownership interests in the assets of the Trust
designated the 7% Convertible Redeemable Equity Structured Trust Securities
("CRESTS") (liquidation amount $50 per CRESTS). The CRESTS are transferable on
the register of the Trust, in person or by a duly authorized attorney, upon
surrender of this certificate duly endorsed and in proper form for transfer as
provided in the Declaration (as defined below). The designation, rights,
privileges, restrictions, preferences and other terms and provisions of the
CRESTS are set forth in, and the CRESTS represented hereby are issued and shall
in all respects be subject to the provisions of the Amended and Restated
Declaration of Trust of the Trust, dated as of June 17, 1998 (as the same may be
amended from time to time (the "DECLARATION")), among Servico, Inc., as Sponsor,
David Buddemeyer, Phillip R. Hale and Charles M. Diaz, as Regular Trustees,
Wilmington Trust Company, as Property Trustee, Wilmington Trust Company, as
Delaware Trustee and Lodgian, Inc. Capitalized terms used herein but not defined
shall have the meaning given them in the Declaration. The Holder is entitled to
the benefits of the Guarantee to the extent described therein. The Sponsor shall
provide a copy of the Declaration, the Guarantee and the Indenture to a Holder
without charge upon written request to the Sponsor at its principal place of
business.
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Upon repayment of the Debentures, in whole, or in part, whether at
maturity or upon redemption, the proceeds from such repayment or payment shall
be substantially simultaneously applied to redeem the CRESTS as provided in the
Declaration.
The CRESTS shall be exchangeable at the option of the Debenture Issuer
upon certain events as set forth in the Declaration and in the Supplemental
Indenture.
The CRESTS shall be exchangeable for Debentures for conversion into
shares of Common Stock or other shares of common stock of the Debenture Issuer
at the holder's direction to the Conversion Agent as set forth in the
Declaration.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States federal
income tax purposes, the Debentures as indebtedness and the CRESTS as evidence
of undivided indirect beneficial ownership interests in the Debentures.
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IN WITNESS WHEREOF, the Trust has executed this certificate this
____________ day of _______, 1998.
LODGIAN CAPITAL TRUST I
By:
----------------------------------------
Name:
Title: Regular Trustee
This is one of the Securities referred to in the within-mentioned
Declaration.
WILMINGTON TRUST COMPANY,
as Property Trustee
BY:
----------------------------------------
Name:
Title:
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<PAGE> 96
ASSIGNMENT FORM
To assign this CRESTS, fill in the form below:
I or we assign and transfer this CRESTS to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this CRESTS on the
books of the Sponsor. The agent may substitute another to act for
him.
- -------------------------------------------------------------------------------
Date: Your Signature:
------------------------ ----------------------------
Signature Guarantee:
--------------------------------------------
(Signature must be guaranteed)*
- -------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this CRESTS.
In connection with any transfer or exchange of any of the CRESTS evidenced by
this certificate occurring prior to the date that is two years after the later
of the date of original issuance of such CRESTS and the last date, if any, on
which such Securities were owned by the Sponsor or any Affiliate of the Sponsor,
the undersigned confirms that such CRESTS are being:
[Check One]
(1) _____ to the Sponsor or a subsidiary thereof; or
(2) _____ pursuant to a registration statement which has been declared
effective under the Securities Act of 1933, as amended (the
"SECURITIES ACT");
(3) _____ for so long as the CRESTS are eligible for resale pursuant to
Rule 144A under the Securities Act, to a person the
undersigned reasonably believes is a "qualified institutional
buyer" as defined in
- --------
* The signature(s) should be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and credit
unions with membership in an approved signature guarantee medallion program),
pursuant to SEC Rule 17Ad-15.
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<PAGE> 97
Rule 144A that purchases for its own account or for the
account of a qualified institutional buyer to whom notice is
give that the transfer is being made in reliance on Rule 144A;
or
(4) _____ to an institutional "accredited investor" within the meaning
of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the
Securities Act, that is acquiring such securities for its own
account, or for the account of such an institutional
Accredited Investor, or as fiduciary for the account of one or
more trusts, each of which is an "accredited investor" within
the meaning of subparagraph (a)(7) of Rule 501 under the
Securities Act, for investment purposes and not with a view
to, or for offer or sale in connection with, any distribution
in violation of the Securities Act; or
(5) _____ pursuant to another available exemption from the registration
requirements of the Securities Act.
Unless one of the boxes is checked, the Trustees shall refuse to register any of
the CRESTS evidenced by this certificate in the name of any person other than
the registered Holder thereof; PROVIDED, however, that if box (5) is checked,
the Sponsor or the Trustees may require, prior to registering any such transfer
of the CRESTS, in its sole discretion, such written legal opinions,
certifications and other information satisfactory to the Sponsor.
Dated: Signed:
-------------------------- ------------------------------------
(Sign exactly as name appears on the
other side of this Security)
Signature Guarantee:
-----------------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
CRESTS for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "QUALIFIED
INSTITUTIONAL BUYER" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Sponsor as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
A-7
<PAGE> 98
Dated:
-------------------------------- -------------------------------------
NOTICE: To be executed by an executive
officer
A-8
<PAGE> 99
CONVERSION REQUEST
To: Wilmington Trust Company as Conversion Agent of Lodgian Capital Trust I
The undersigned Holder of these Convertible Redeemable Equity
Structured Trust Securities ("CRESTS") hereby irrevocably exercises the option
to convert these CRESTS, or the portion below designated, into Common Stock of
[Servico, Inc.] [Lodgian, Inc.] (the "COMPANY") (the "COMMON STOCK"), or any
other class of common stock of the Company as permitted by the Articles of
Incorporation of the Company, in accordance with the terms of the Amended and
Restated Declaration of Trust of Lodgian Capital Trust I, dated as of June 17,
1998 (as amended from time to time, the "DECLARATION"). Pursuant to the
aforementioned exercise of the option to convert these CRESTS, the undersigned
hereby directs the Conversion Agent (as that term is defined in the Declaration)
on behalf of the undersigned to (i) exchange such CRESTS for a portion of the
Debentures (as that term is defined in the Declaration) held by the Trust (at
the rate of exchange specified in the terms of the CRESTS set forth in the
Declaration) and (ii) immediately convert such Debentures, into Common Stock or
any such other class of common stock pursuant to the terms of the Indenture (as
defined in the Declaration).
However, CRESTS surrendered for conversion during the period between
the close of business on any distribution record date and the opening of
business on the corresponding distribution payment date (except CRESTS called
for redemption on a redemption date during such period) must be accompanied by
payment of an amount equal to the Distribution payable on such shares on such
distribution payment date.
The undersigned does also hereby direct the Conversion Agent that the
shares of Common Stock, or other class of common stock of the Company, issuable
and deliverable upon conversion, together with any check in payment for
fractional shares, be issued in the name of and delivered to the undersigned,
unless a different name has been indicated in the assignment below. If shares
are to be issued in the name of a person other than the undersigned, the
undersigned shall pay all transfer taxes payable with respect thereto.
Date: Number of CRESTS to be converted:
in whole: /__/ in part /___/
If a name or names other than the undersigned, please indicate in the spaces
below the name or names in which the shares of Common Stock, or other class of
common stock of the Company, are to be issued, along with the address or
addresses of such person or persons
Signature (for conversion only)
A-9
<PAGE> 100
Please Print or Typewrite Name and Address, Including Zip Code, and Social
Security or Other Identifying Number
Signature Guarantee:*
- --------
* The signature(s) should be guaranteed by an eligible institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guaranteed medallion program), pursuant to
SEC Rule 17Ad-15.
A-10
<PAGE> 101
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this CRESTS
Certificate to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee and irrevocably appoints agent to
transfer this CRESTS Certificate on the books of the Trust. The agent may
substitute another to act for him or her.
Date:
Signature:
(Sign exactly as your name appears on the other side of this CRESTS Certificate)
Signature Guarantee*
- --------
* The signature(s) should be guaranteed by an eligible institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guaranteed medallion program), pursuant to
SEC Rule 17Ad-15.
A-11
<PAGE> 102
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this CRESTS purchased by the Debenture Issuer
pursuant to Section 7.15 of the Declaration, check the Box: |_|
If you wish to have a portion of this CRESTS purchased by the Debenture
Issuer pursuant to Section 7.15 of the Declaration, state the amount:
maturity: $______________.
Date: ________________
Your Signature: ____________________________________________
(Sign exactly as your name appears on
the other side of this CRESTS)
Signature Guarantee:*__________________________
- --------
* The signature(s) should be guaranteed by an eligible institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guaranteed medallion program), pursuant to
SEC Rule 17Ad-15.
A-12
<PAGE> 103
SCHEDULE I
CHANGES TO NUMBER OF CRESTS
IN GLOBAL SECURITY
<TABLE>
<CAPTION>
NUMBER OF CRESTS
BY WHICH THIS GLOBAL
SECURITY IS TO BE
REDUCED OR INCREASED, REMAINING CRESTS
AND REASON FOR REPRESENTED BY THIS NOTATION
DATE REDUCTION OR INCREASE GLOBAL SECURITY MADE BY
- -------- ---------------------- ------------------- --------
<S> <C> <C> <C>
- -------- ---------------------- ------------------- --------
- -------- ---------------------- ------------------- --------
- -------- ---------------------- ------------------- --------
- -------- ---------------------- ------------------- --------
- -------- ---------------------- ------------------- --------
- -------- ---------------------- ------------------- --------
- -------- ---------------------- ------------------- --------
- -------- ---------------------- ------------------- --------
</TABLE>
A-13
<PAGE> 104
EXHIBIT B
[FORM OF COMMON SECURITY CERTIFICATE]
THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT IN
COMPLIANCE WITH APPLICABLE LAW AND THE PROVISIONS
OF THE DECLARATION.
Certificate No. Number of Common Securities: 108,248
Certificate Evidencing 7% Common Securities
of
Lodgian Capital Trust I
7% Common Securities
(liquidation amount $50 per Common Security)
Lodgian Capital Trust I, a statutory business trust formed under the
laws of the State of Delaware (the "TRUST"), hereby certifies that SERVICO,
INC., (the "HOLDER") is the Registered owner of 108,248 common securities of the
Trust representing an undivided beneficial ownership interest in the assets of
the Trust designated the 7% Common Securities (liquidation amount $50 per Common
Security) (the "COMMON SECURITIES"). The Common Securities are not transferable
except in compliance with the provisions of the Declaration and any attempted
transfer thereof shall be void. The designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Common
Securities are set forth in, and the Common Securities represented hereby are
issued and shall in all respects be subject to, the provisions of the Amended
and Restated Declaration of Trust of the Trust, dated as of June 17, 1998 (as
the same may be amended from time to time, the "DECLARATION"), among Servico,
Inc. as Sponsor, David Buddemeyer, Phillip R. Hale and Charles M. Diaz as
Regular Trustees, Wilmington Trust Company as Property Trustee and as Delaware
Trustee and Lodgian, Inc. The Holder is entitled to the benefits of the
Guarantee to the extent described therein. Capitalized terms used herein but not
defined shall have the meaning given them in the Declaration. The Sponsor shall
provide a copy of the Declaration, the Guarantee and the Indenture to the Holder
without charge upon written request to the Sponsor at its principal place of
business.
Upon repayment of the Debentures, in whole or in part, whether at
maturity or upon redemption, the proceeds from such repayment or payment shall
be substantially simultaneously applied to redeem the Common Securities as
provided in the Declaration.
B-1
<PAGE> 105
The Common Securities shall be exchangeable at the option of the
Debenture Issuer upon certain events as set forth in the Declaration and in the
Supplemental Indenture.
The Common Securities shall be exchangeable for Debentures for
conversion into shares of Common Stock at the Holder's direction to the
Conversion Agent as set forth in the Declaration.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
B-2
<PAGE> 106
By acceptance, the Holder agrees to treat, for United States federal
income tax purposes, the Debentures as indebtedness and the Common Securities as
evidence of an undivided indirect beneficial ownership interest in the
Debentures.
IN WITNESS WHEREOF, the Trust has executed this certificate this _____
day of _____ 1998.
LODGIAN CAPITAL TRUST I
By:
---------------------------------------
Name:
Title: Regular Trustee
B-3
<PAGE> 107
CONVERSION REQUEST
To: Wilmington Trust Company, as Conversion Agent of Lodgian Capital Trust I
The undersigned Holder of these Common Securities hereby irrevocably
exercises the option to convert these Common Securities, or the portion below
designated, into Common Stock of Servico, Inc. (the "COMMON STOCK"), or any
other class of common stock of Servico, Inc. as permitted by the Articles of
Incorporation of Servico, Inc., in accordance with the terms of the Amended and
Declaration of Trust of Lodgian Capital Trust I, dated as of June 17, 1998 (as
amended from time to time, the "DECLARATION"). Pursuant to the aforementioned
exercise of the option to convert these Common Securities, the undersigned
hereby directs the Conversion Agent (as that term is defined in the Declaration)
on behalf of the undersigned to (i) exchange such Common Securities for a
portion of the Debentures (as that term is defined in the Declaration) held by
the Trust (at the rate of exchange specified in the terms of the Common
Securities set forth as Annex I to the Declaration) and (ii) immediately convert
such Debentures into Common Stock pursuant to the terms of the Indenture (as
defined in the Declaration).
However, Common Securities surrendered for conversion during the period
between the close of business on any distribution record date and the opening of
business on the corresponding distribution payment date (except Common
Securities called for redemption on a redemption date during such period) must
be accompanied by payment of an amount equal to the Distribution payable on such
shares on such distribution payment date.
The undersigned does also hereby direct the Conversion Agent that the
shares of Common Stock issuable and deliverable upon conversion, together with
any check in payment for fractional shares, be issued in the name of and
delivered to the undersigned, unless a different name has been indicated in the
assignment below. If shares are to be issued in the name of a person other than
the undersigned, the undersigned shall pay all transfer taxes payable with
respect thereto.
Date: ___________, in whole /__/ in part /__/
Number of Common Securities to be converted:
If a name or names other than the undersigned, please indicate in the
spaces below the name or names in which the shares of ____________ Stock are to
be issued, along with the address or addresses of such person or persons
Signature (for conversion only)
B-4
<PAGE> 108
Please Print or Typewrite Name and Address, Including Zip Code, and
Social Security or Other Identifying Number
Signature Guarantee *:
- --------
* The signature(s) should be guaranteed by an eligible institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guaranteed medallion program), pursuant to
SEC Rule 17Ad-15.
B-5
<PAGE> 109
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common
Security Certificate to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee) and irrevocably appoints
_______ agent to transfer this Common Security Certificate on the books of the
Trust.
The agent may substitute another to act for him or her.
Date:
Signature:
(Sign exactly as your name appears on the other side of this Common
Security Certificate)
Signature Guarantee*:
- --------
* The signature(s) should be guaranteed by an eligible institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guaranteed medallion program), pursuant to
SEC Rule 17Ad-15.
B-6
<PAGE> 1
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
Employment Agreement dated as of ____________, 1998 between DAVID A.
BUDDEMEYER (the "Executive") and LODGIAN, INC., a Delaware corporation (the
"Company").
RECITALS
The Company desires to employ the Executive as Chief Executive Officer,
and the Executive desires to accept such employment, for the term and upon the
other conditions hereinafter set forth.
As a condition of entering into this Agreement, the Executive agrees to
waive the Executive's rights, if any, against the Company and any predecessor
company under (i) any employment agreement and (ii) any other plan, arrangement
or agreement of any kind that provides any form of severance payments.
The parties desire to enter into this Agreement setting forth the terms
and conditions of the employment relationship of the Executive with the Company.
STATEMENT OF AGREEMENT
1. Employment The Company hereby employs the Executive, and the
Executive hereby accepts employment with the Company, upon the terms and subject
to the conditions set forth herein.
2. Term. The Executive shall be considered an at-will employee and his
employment may be terminated by either party subject to the obligations of the
parties upon such termination as may be set forth hereinafter.
3. Position and Duties
(a) Position. The Executive will be employed as the Chief Executive
Officer of the Company or in such other executive and managerial
capacities as determined by the Board of Directors of the Company (the
"Board").
(b) Business Time. During the term of this Agreement, the Executive
agrees to devote his full business time during normal business hours to
the business and affairs of the Company and to use his best efforts to
perform faithfully and efficiently the responsibilities assigned to him
hereunder, to the extent necessary to discharge such responsibilities,
except for:
<PAGE> 2
(i) time spent managing his personal, financial and legal
affairs and serving on corporate, civic or charitable boards or
committees, in each case only if and to the extent not substantially
interfering with the performance of such responsibilities, and
(ii) periods of vacation to which he is entitled.
(c) Duties. During the term of this Agreement, the Executive shall
perform the duties normally associated with his position as Chief Executive
Officer and consistent with the Company's Bylaws and such other duties as may be
requested by the Board from time to time.
(d) Co-Chairman. As long as the Executive is employed the Company
and serves on the Company's Board of Directors, he shall have the position as
Co-Chairman. In the event he is no longer employed by the Company hereunder, he
shall resign as a member of the Board and as Co-Chairman.
4. Place of Performance. The Executive shall perform his duties and
conduct his business at the principal executive offices of the Company, except
for required travel on the Company's business.
5. Salary and Annual Bonus.
(a) Base Salary. The Executive shall receive a base salary (the
"Base Salary") payable in equal bi-weekly installments at an annual
rate of $405,000. The Company will review the Base Salary periodically
and in light of such review may increase (but not decrease) the Base
Salary taking into account any change in the Executive's
responsibilities, increases in compensation of other executives with
comparable responsibilities, performance of the Executive and other
pertinent factors, and such adjusted Base Salary shall then constitute
the "Base Salary" for purposes of this Agreement. Neither the Base
Salary nor any increase in the Base Salary after the date hereof shall
serve to limit or reduce any other obligation of the Company hereunder.
(b) Annual Bonus. The Company shall provide the Executive with an
annual bonus plan providing the Executive with an opportunity to earn
an annual bonus equal to one hundred percent (100%) (the "Bonus") of
his Base Salary if the Company achieves for the relevant year certain
financial targets established pursuant to such plan.
6. Vacation, Holidays and Sick Leave. During the term of this
Agreement, the Executive shall be entitled to paid vacation, paid holidays and
sick leave in accordance with the Company's standard policies for its similarly
situated executives.
7. Business Expenses. The Executive shall be reimbursed for all
ordinary and necessary business expenses incurred by him in connection with his
employment upon timely submission by the Executive of receipts and other
documentation as required by the Internal Revenue Code and in conformance with
the Company's normal procedures.
-2-
<PAGE> 3
8. Pension and Welfare Benefits. During the term of this Agreement,
the Executive shall be eligible to participate fully in all health benefits,
insurance programs, pension and retirement plans and other employee benefit and
compensation arrangements available to similarly situated executives of the
Company generally.
9. Stock Options. The Company, pursuant to the terms of its stock
option plan, may grant to the Executive, nonqualified stock options, incentive
stock options or a combination thereof to purchase a number of shares of common
stock.
10. Termination of Employment.
(a) Death or Disability.
(i) The Executive's employment hereunder shall automatically
terminate upon the death of the Executive.
(ii) The Company may terminate the Executive's employment upon
the Executive's Disability by giving to the Executive written
notice of its intention to terminate his employment, and his
employment with the Company shall terminate effective on the
ninetieth (90th) day after receipt of such notice if the Executive
shall fail to return to full-time performance of his duties within
ninety (90) days after such receipt.
For the purposes of this Agreement, "Disability" means:
(1) the inability of the Executive to perform his duties
under this Agreement for a period of ninety (90) consecutive
days due to accident, illness or any other physical or mental
incapacity, or
(2) a disability of the Executive within the meaning of
Section 72(m)(7) of the Internal Revenue Code, that is, the
Executive is unable to engage in any substantial gainful
activity with the Company or any other employer, by reason of
any medically determinable physical or mental impairment which
can be expected to result in death or to be of long, continued
and indefinite duration, or
(3) the Executive becomes entitled to:
(A) disability retirement benefits under the Federal
Social Security Act, or
(B) receive benefits under any long-term disability
plan or policy maintained by the Company.
-3-
<PAGE> 4
(c) Termination by the Company. The Company may terminate the
Executive's employment hereunder at any time, whether or not for Cause.
For purposes of this Agreement, "Cause" means:
(i) the failure or refusal by the Executive to perform his
duties hereunder (other than any such failure resulting from the
Executive's incapacity due to physical or mental illness), which
has not ceased within ten (10) days after a written demand for
substantial performance is delivered to the Executive by the
Company, which demand identifies the manner in which the Company
believes that the Executive has not performed such duties,
(ii) the engaging by the Executive in willful misconduct or an
act of moral turpitude which is materially injurious to the
Company, monetarily or otherwise (including, but not limited to,
conduct which violates Section 13 hereof) or
(iii) the conviction of the Executive of, or the entering of a
plea of nolo contendere by, the Executive with respect to, a
felony.
(d) Termination by the Executive. The Executive shall be entitled
to terminate his employment hereunder:
(i) for Good Reason,
(ii) if his health should become impaired to an extent that
makes his continued performance of his duties hereunder hazardous
to his physical or mental health, provided that the Executive shall
have furnished the Company with a written statement from a
qualified doctor to such effect and provided, further, that, at the
Company's request, the Executive shall submit to an examination by
a doctor selected by the Company and such doctor shall have
concurred in the conclusion of the Executive's doctor or
(iii) without the Executive's express written consent, any
failure by the Company to comply with any material provision of
this Agreement, which failure has not been cured within ten (10)
days after written notice of such noncompliance has been given by
the Executive to the Company.
For purposes of this Agreement, "Good Reason" shall mean the
occurrence, during the term of this Agreement, of any one of the
following acts by the Company, or failures by the Company to act,
unless, in the case of any act or failure to act described below,
such act or failure to act is corrected prior to the Date of
Termination specified in the Notice of Termination given in respect
thereof:
-4-
<PAGE> 5
(A) any material diminution in the Executive's
authorities or responsibilities (including reporting
responsibilities) or from his status, title, position or
responsibilities (including reporting responsibilities); the
assignment to him of any duties or work responsibilities which
are inconsistent with such status, title, position or work
responsibilities; or any removal of the Executive from, or
failure to reappoint or reelect him to any of such positions,
except if any such changes are because of Disability,
retirement, death or Cause;
(B) a reduction by the Company in the Executive's Base
Salary or Bonus as in effect on the date hereof or as the same
may be increased from time to time except for across-the-board
salary reductions similarly affecting all senior executives of
the Company and all senior executives of any Person (as defined
Section 10(h) below) in control of the Company;
(C) the relocation of the Executive's place of employment
to a location more than fifty (50) miles from its present
location, except for required travel on the Company's business;
(D) the failure by the Company, without the Executive's
consent, to pay to the Executive any portion of the Executive's
current compensation;
(E) the failure by the Company to provide the Executive
with benefits substantially similar to benefits provided to
other senior executives of the Company under any of the
Company's pension, life insurance, medical, health and
accident, or disability plans;
(F) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 10(f) below;
for purposes of this Agreement, no such purported termination
shall be effective.
The Executive's continued employment for sixty (60) days
following any act or failure to act constituting Good Reason
hereunder without the delivery of a Notice of Termination shall
constitute consent to, and a waiver of rights with respect to,
such act or failure to act.
(e) Voluntary Resignation. Should the Executive wish to resign from
his position with the Company or terminate his employment for other
than Good Reason during the term of this Agreement, the Executive shall
give sixty (60) days written notice to the Company ("Notice Period"),
setting forth the reasons and specifying the date as of which his
resignation is to become effective. During the Notice Period, the
Executive shall cooperate fully with the Company in achieving a smooth
transition of the Executive's duties and responsibilities to such
person(s) as may be designated by the Company. The Company reserves the
right to accelerate the Date of Termination by giving the Executive
notice and payment of amounts due to the Executive under Section
-5-
<PAGE> 6
5(a) and, to the extent applicable, Section 5(b) for the balance of the
Notice Period. The Company's obligation to continue to employ the
Executive or to continue payment of the amounts described in the
preceding sentence shall cease immediately if: (1) the Executive has
not satisfied his obligations to cooperate fully with a smooth
transition or (2) the Company has grounds to terminate the Executive's
employment immediately for Cause.
(f) Notice of Termination. Any purported termination of the
Executive's employment by the Company or by the Executive shall be
communicated by written Notice of Termination to the other party hereto
in accordance with Section 17. "Notice of Termination" shall mean a
notice that shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated.
(g) Date of Termination. "Date of Termination" shall mean (i) if
the Executive's employment is terminated because of death, the date of
the Executive's death, (ii) if the Executive's employment is terminated
for Disability, the date Notice of Termination is given, (iii) if the
Executive's employment is terminated pursuant to Subsection (c), (d) or
(e) hereof or for any other reason (other than death or Disability),
the date specified in the Notice of Termination which shall not be less
than sixty (60) days from the date such Notice of Termination is given.
(h) Change in Control. For purposes of this Agreement, a Change in
Control of the Company shall have occurred if
(i) any person (as defined in Section 3(a)(9) of the Exchange
Act and as used in Sections 13(d) and 14(d) thereof), excluding the
Company, any Subsidiary and any employee benefit plan sponsored or
maintained by the Company or any Subsidiary (including any trustee
of such plan acting as trustee) (the Company, all Subsidiaries, and
such employee benefit plans and trustees acting as trustees being
hereafter referred to as the "Company Group"), but including a
'group' as defined in Section 13(d)(3) of the Exchange Act (a
"Person"), becomes the beneficial owner of shares of the Company
having at least forty percent (40%) of the total number of votes
that may be cast for the election of directors of the Company (the
"Voting Shares"); provided that no Change of Control will occur as
a result of an acquisition of stock by the Company Group which
increases, proportionately, the stock representing the voting power
of the Company beneficially owned by such Person above forty
percent (40%) of the voting power of the Company, and provided
further that if such Person acquires beneficial ownership of stock
representing more than forty percent (40%) of the voting power of
the Company by reason of share purchases by the Company Group, and
after such share purchases by the Company Group acquires any
additional shares representing voting power of the Company, then a
Change of Control shall occur;
-6-
<PAGE> 7
(ii) the shareholders of the Company shall approve any merger
or other business combination of the Company, sale of the Company's
assets or combination of the foregoing transactions (a
"Transaction") other than a Transaction involving only the Company
and one or more of its Subsidiaries, or a Transaction immediately
following which the shareholders of the Company immediately prior
to the Transaction continue to have a majority of the voting power
in the resulting entity; or
(iii) within any 24-month period, the persons who were
directors of the Company immediately before the beginning of such
period (the "Incumbent Directors") shall cease (for any reason
other than death) to constitute at least a majority of the Board or
the board of directors of any successor to the Company, provided
that any director who was not a director as of the effective date
of this Plan shall be deemed to be an Incumbent Director if such
director was elected to the Board by, or on the recommendation of
or with the approval of, at least two-thirds of the directors who
then qualified as Incumbent Directors either actually or by prior
operation of this clause (iii); and provided that any director
elected to the Board to avoid or settle a threatened or actual
proxy context shall in no event be deemed to be an Incumbent
Director.
(i) Return of Property. When the Executive ceases to be employed by
the Company, the Executive will promptly surrender to the Company all
Company property, including without limitation, all records and other
documents obtained by him or entrusted to him during the course of his
employment with the Company provided, however, that the Executive may
retain copies of such documents as necessary for the Executive's
personal records for federal income tax purposes.
11. Compensation During Disability; Death or Upon Termination.
(a) During any period that the Executive fails to perform his
duties hereunder as a result of incapacity due to physical or mental
illness ("Disability Period"), the Executive shall continue to receive
his Base Salary at the rate then in effect for such period until his
employment is terminated pursuant to Section 10(a)(ii) hereof, provided
that payments so made to the Executive during the Disability Period
shall be reduced by the sum of the amounts, if any, payable to the
Executive with respect to such period under disability benefit plans of
the Company or under the Social Security disability insurance program,
and which amounts were not previously applied to reduce any such
payment.
(b) If the Executive's employment is terminated by his death or
Disability, the Company shall pay (i) any Base Salary due to the
Executive under Section 5(a) through the date of such termination and
(ii) if the Executive's Date of Termination is after June 30 of the
fiscal year in which the Date of Termination occurs, an amount equal to
the Bonus he would have received for the fiscal year that ends on or
immediately after the Date of Termination, assuming the Company
achieved the lowest target level for which a bonus is paid under the
plan described in Section 5(b), prorated for the period beginning
-7-
<PAGE> 8
on the first day of the fiscal year in which occurs the Date of
Termination through the Date of Termination.
(c) If the Executive's employment is terminated by the Company for
Cause or by the Executive for other than Good Reason, the Company shall
pay the Executive his Base Salary through the Date of Termination at
the rate in effect at the time Notice of Termination is given, and the
Company shall have no further obligations to the Executive under this
Agreement.
(d) If following a Change in Control (A) the Company terminates the
Executive's employment without Cause, or (B) the Executive terminates
his employment for Good Reason or under clause (iii) of Section 10(d)
hereof, then
(i) the Company shall pay the Executive his Base Salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given and all other unpaid amounts, if
any, to which the Executive is entitled as of the Date of
Termination under any compensation plan or program of the Company,
at the time such payments are due;
(ii) the Company shall pay the Executive, in a lump sum, two
and one-half times his Base Salary at the rate in effect of the
Date of Termination;
(iii) the Company shall pay the Executive, in a lump sum, an
amount equal to the greater of: (I) the Executive's Bonus that
would have been paid for the period beginning on the last day of
the fiscal year in which the Date of Termination occurs or (II) the
average of the Executive's Bonus payable for the three fiscal years
immediately preceding the fiscal year in which occurs the Date of
Termination;
(iv) provided that there are no adverse tax consequences, the
Company shall continue coverage for the Executive, on the same
terms and conditions as would be applicable if the Executive were
an active Employee, under the Company's life insurance, medical,
health and similar welfare benefit plans (other then group
disability benefits) for a period of twelve (12) months. Benefits
otherwise receivable by the Executive pursuant to this Section
11(d)(iv) shall be reduced to the extent comparable benefits are
actually received by the Executive from a subsequent employer
during the period during which the Company is required to provide
such benefits, and the Executive shall report any such benefits
actually received by him to the Company. In lieu of continued
participation in life insurance, medical, health and similar
welfare benefit plans, the Executive may elect by written notice
delivered to the Company prior to the Date of Termination, to
receive an amount equal to the annual cost to the Company (based on
premium rates) of providing such coverage. In the event that
adverse tax consequences would result from the continuation of
benefits under this Section 11(d)(iv), the Company may pay to the
Executive an amount equal to the annual cost to the Company (based
on premium rates) of providing such coverage;
-8-
<PAGE> 9
(v) the payments provided for in this Section 11(d) (other
than Section 11(d)(iv)) shall be made not later than the thirtieth
(30th) day following the Date of Termination. At the time that
payments are made under this Section 11(d), the Company shall
provide the Executive with a written statement setting forth the
manner in which such payments were calculated and the basis for
such calculations including, without limitation, any opinions or
other advice the Company has received from outside counsel,
auditors or consultants (and any such opinions or advice which are
in writing shall be attached to the statement); and
(vi) any unvested, outstanding stock options or other
equity-based incentive shall fully vest as of the Date of
Termination.
(e) If, prior to any Change of Control, the Executive terminates
his employment under clause (iii) of Section 10(d) hereof or the
Company terminates the Executive's employment without Cause, then
(i) the Company shall pay the Executive his Base Salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given and all other unpaid amounts, if
any, to which the Executive is entitled as of the Date of
Termination under any compensation plan or program of the Company,
at the time such payments are due;
(ii) the Company shall pay the Executive two and one-half
times his Base Salary at the rate in effect at termination; such
amount to be paid in substantially equal monthly installments
during the period commencing with the month immediately following
the month in which the Date of Termination occurs or in a lump sum
payment, as decided by the Company;
(iii) if the Executive's Date of Termination is after June 30
of the fiscal year in which occurs the Date of Termination, the
Company shall pay the Executive his Bonus prorated for the period
beginning on the first day of the fiscal year in which occurs the
Date of Termination through the Date of Termination;
(iv) provided that there are no adverse tax consequences, the
Company shall continue coverage for the Executive, on the same
terms and conditions as would be applicable if the Executive were
an active Employee, under the Company's life insurance, medical,
health and similar welfare benefit plans (other then group
disability benefits) for a period of twelve (12) months. Benefits
otherwise receivable by the Executive pursuant to this Section
11(d)(iv) shall be reduced to the extent comparable benefits are
actually received by the Executive from a subsequent employer
during the period during which the Company is required to provide
such benefits, and the Executive shall report any such benefits
actually received by him to the Company. In lieu of continued
participation in life insurance, medical, health and similar
welfare benefit plans, the Executive may elect by written notice
delivered to the Company prior to the Date of Termination,
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to receive an amount equal the annual cost to the Company (based on
premium rates) of providing such coverage. In the event that
adverse tax consequences would result from the continuation of
benefits under this Section 11(d)(iv), the Company may pay to the
Executive an amount equal to the annual cost to the Company (based
on premium rates) of providing such coverage;
(v) benefits otherwise receivable by the Executive pursuant
to clause (iv) of this Section 11(e) shall be reduced to the extent
comparable benefits are actually received by the Executive from a
subsequent employer during the period which the Company is required
to provide such benefits, and the Executive shall report any such
benefits actually received by him to the Company;
(vi) the payments made to the Executive under Section 11(e)
hereof may not be reduced by the amount of payments provided for by
any subsequent employer of the executive for a position obtained
after the Date of Termination; and
(vii) any unvested, outstanding stock options and other equity
based incentive shall fully vest as of the Date of Termination.
(f) If the Executive experiences a termination under Section 11(d)
or 11(e) hereof, until the Executive finds another full-time position
or for 6 months, whichever is earlier, the Company shall provide the
Executive with professional outplacement services of the Executive's
choosing and shall reimburse the Executive documented incidental
outplacement expenses directly related to the Executive's job search
such as resume mailing, interview trips, and clerical support, subject
to a maximum cost of $10,000 for such outplacement services and
incidental expenses. The Executive's choice of professional
outplacement services is subject to the Company's reasonable prior
approval. If the Company has not approved or disapproved of the
Executive's choice within ten (10) business days of receiving notice of
such choice, the Company will be deemed to have given its approval. Any
disapproval by the Company will be in writing and will state the basis
for such disapproval. The Executive will not be entitled to receive
cash in lieu of the professional outplacement services provided
pursuant to this Section.
(g) If the Executive shall terminate his employment under clause
(ii) of Section 10(d) hereof, the Company shall pay the Executive his
Base Salary through the Date of Termination at the rate in effect at
the time Notice of Termination is given, and the Company shall have no
further obligations to the Executive under this Agreement.
12. Successors: Binding Agreement.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
expressly assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it
if no such succession had taken place.
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(b) This Agreement is a personal contract and the rights and
interests of the Executive hereunder may not be sold, transferred,
assigned, pledged, encumbered, or hypothecated by him, except as
otherwise expressly permitted by the provisions of this Agreement. This
Agreement shall inure to the benefit of and be enforceable by the
Executive and his personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
If the Executive should die while any amount would still be payable to
him hereunder had the Executive continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to his devisee, legatee or other designee or,
if there is no such designee, to his estate.
13. Confidentiality and Non-Solicitation Covenants.
(a) All Confidential Information and Trade Secrets and all physical
embodiments thereof received or developed by the Executive while
employed by the Company are confidential to and are and will remain the
sole and exclusive property of the Company. Except to the extent
necessary to perform the duties assigned to him by the Company, the
Executive will hold such Confidential Information and Trade Secrets in
trust and strictest confidence, and will not use, reproduce,
distribute, disclose or otherwise disseminate the Confidential
Information and Trade Secrets or any physical embodiments thereof and
may in no event take any action causing or fail to take the action
necessary in order to prevent, any Confidential Information and Trade
Secrets disclosed to or developed by the Executive to lose its
character or cease to qualify as Confidential Information or Trade
Secrets. As used herein, "Confidential Information" means data and
information relating to the business of the Company (which does not
rise to the status of a Trade Secret) which is or has been disclosed to
the Executive or of which the Executive became aware as a consequence
of or through its relationship to the Company and which has value to
the Company and is not generally known to its competitors. Confidential
Information shall not include any data or information that has been
voluntarily disclosed to the public by the Company (except where public
disclosure) has been made by the Executive without authorization) or
that has been independently developed and disclosed by others, or that
otherwise enters the public domain through lawful means. The provisions
in the Agreement restricting the use of Confidential Information shall
survive for a period of one (1) year following termination of this
Agreement. As used herein, "Trade Secrets" means information including,
but not limited to, technical or nontechnical data, formulas, patterns,
compilations, programs, devices, methods, techniques, drawings,
processes, financial data, financial plans, product plans or lists of
actual or potential customers or suppliers which (i) derives economic
value, actual or potential, from not being generally known to, and not
being readily ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use, and (ii) is the
subject of efforts that are reasonable under the circumstances to
maintain its secrecy. The provisions of this Agreement restricting the
use of Trade Secrets shall survive termination of this Agreement for so
long as is permitted by the Georgia Trade Secrets Act of 1990, O.C.G.A.
ss.ss. 10-1-760-10-1-767.
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<PAGE> 12
(b) Upon request by the Company, and in any event upon termination
of the employment of the Executive with the Company for any reason, as
a prior condition to receiving any final compensation hereunder, the
Executive will promptly deliver to the Company all property belonging
to the Company, including, without limitation, all Confidential
Information and Trade Secrets (and all embodiments thereof) then in the
Executive's custody, control or possession.
(c) The Executive agrees that during the period he is employed
hereunder and for a period of one (1) year after termination of this
Agreement, he will not, either directly or indirectly, on the
Executive's own behalf or in the service of or on behalf of others,
solicit or divert, or attempt to solicit or divert, to a Competing
Business, any individual or entity which was an actual or actively
sought prospective client or customer of the Company and with whom the
Executive had material contact during the Executive's last year of
employment with the Company. The Executive agrees that during the
period he is employed hereunder and for a period of one (1) year after
termination of this Agreement, he will not, either directly or
indirectly, on the Executive's own behalf or in the service of or on
behalf of others, solicit or divert, or attempt to solicit or divert,
to any Competing Business any person employed by the Company or an
affiliate, whether or not such employee is a full-time employee or a
temporary employee of the Company or an affiliate and whether or not
such employment is pursuant to written agreement and whether or not
such employment is for a determined period or is at will. As used
herein, "Competing Business" means any person, firm, corporation, joint
venture or other business entity which is engaged in a business that
competes directly or indirectly with the Company.
(d) Without limiting the right of the Company to pursue all other
legal and equitable remedies available for violation by the Executive
of the covenants contained in this Section 13, it is expressly agreed
by the Executive and the Company that such other remedies cannot fully
compensate the Company for any such violation and that the Company
shall be entitled to injunctive relief, without the necessity of
proving actual monetary loss, to prevent any such violation or any
continuing violation thereof. Each party intends and agrees that if in
any action before any court or agency legally empowered to enforce the
covenants contained in this Section 13, any term, restriction, covenant
or promise contained herein is found to be unreasonable and accordingly
unenforceable, then such term, restriction, covenant or promise shall
be deemed modified to the extent necessary to make it enforceable by
such court or agency. The covenants contained in Section 13 shall
survive the conclusion of the Executive's employment by the Company.
14. Certain Further Payments by the Company.
(a) Tax Reimbursement Payment. In the event that any amount or
benefit paid or distributed to the Executive by the Company or any
affiliated company, whether pursuant to this Agreement or otherwise
(collectively, the "Covered Payments"), is or becomes subject to the
tax (the "Excise Tax") imposed under Section 4999 of the Code or any
similar tax that may hereafter be imposed, the Company shall pay to the
Executive, at
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the time specified in Section 14(e) below, the Tax Reimbursement
Payment (as defined below). The Tax Reimbursement is defined as an
amount, which when added to the Covered Payments and reduced by any
Excise Tax on the Covered Payments and any federal, state and local
income tax and Excise Tax on the Tax Reimbursement Payment provided for
by this Agreement (but without reduction for any federal, state or
local income or employment tax on such Covered Payments), shall be
equal to the sum of (i) the amount of the Covered Payments, and (ii) an
amount equal to the product of any deductions disallowed for federal,
state or local income tax purposes because of the inclusion of the Tax
Reimbursement Payment in the Executive's adjusted gross income and the
highest applicable marginal rate of federal, state or local income
taxation, respectively, for the calendar year in which the Tax
Reimbursement Payment is to be made.
(b) Determining Excise Tax. For purposes of determining whether any
of the Covered Payments will be subject to the Excise Tax and the
amount of such Excise Tax,
(i) such Covered Payments will be treated as "parachute
payments" within the meaning of Section 280G of the Code, and all
"parachute payments" in excess of the "base amount" (as defined
under Section 280G(b)(3) of the Code) shall be treated as subject
to the Excise Tax, unless, and except to the extent that, in the
opinion of the Company's independent certified public accountants,
which, in the case of Covered Payments made after the Change of
Control, shall be the Company's independent certified public
accounts appointed prior to the Change of Control, or tax counsel
selected by such accountants (the "Accountants"), such Covered
Payments (in whole or in part) either do not constitute "parachute
payments" or represent reasonable compensation for services
actually rendered (within the meaning of Section 280G(b)(4) of the
Code) in excess of the "base amount," or such "parachute payments"
are otherwise not subject to such Excise Tax,
(ii) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Accountants in
accordance with the principles of Section 280G of the Code, and
(iii) if the Covered Payments exceed the amount allowed under
Code Section 280G(d)(2), the Executive may elect one of the
following:
(A) the Company will adjust the Covered Payments by the
amount of excise tax due as a result of excess payment amount
under Code Section 280G; or
(B) the Covered Payments may be reduced by the amount
which exceeds the limit on Code Section 280G.
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(c) Applicable Tax Rates and Deductions. For purposes of
determining the amount of the Tax Reimbursement Payment, the Executive
shall be deemed:
(i) to pay federal income taxes at the highest applicable
marginal rate of federal income taxes for the calendar year in
which the Tax Reimbursement Payment is to be made,
(ii) to pay any applicable state and local income taxes at the
highest applicable marginal rate of taxation for the calendar year
in which the Tax Reimbursement Payment is to be made, net of the
maximum reduction in federal income taxes which could be obtained
from the deduction of such state or local taxes if paid in such
year (determined without regard to limitations on deductions based
upon the amount of the Executive's adjusted gross income), and
(iii) to have otherwise allowable deductions for federal, state
and local income tax purposes at least equal to those disallowed
because of the inclusion of the Tax Reimbursement Payment in the
Executive's adjusted gross income.
(d) Subsequent Events. In the event that the Excise Tax is
subsequently determined by the Accountants to be less than the amount
taken into account hereunder in calculating the Tax Reimbursement
Payment made, the Executive shall repay to the Company, at the time
that the amount of such reduction in the Excise Tax is finally
determined, the portion of such prior Tax Reimbursement Payment that
has been paid to the Executive or to federal, state or local tax
authorities on the Executive's behalf and that would not have been paid
if such Excise Tax had been applied in initially calculating such Tax
Reimbursement Payment, plus interest on the amount of such repayment at
the rate provided in Section 1274(b)(2)(B) of the Code. Notwithstanding
the foregoing, in the event any portion of the Tax Reimbursement
Payment to be refunded to the Company has been paid to any federal,
state or local tax authority, repayment thereof shall not be required
until actual refund or credit of such portion has been made to the
Executive, and interest payable to the Company shall not exceed
interest received or credited to the interest received or credited to
the Executive by such tax authority for the period it held such
portion. The Executive and the Company shall mutually agree upon the
course of action to be pursued (and the method of allocating the
expenses thereof) if the Executive's good faith claim for refund or
credit is denied.
In the event that the Excise Tax is later determined by the
Accountants to exceed the amount taken into account hereunder at the
time the Tax Reimbursement Payment is made (including, but not limited
to, by reason of any payment the existence or amount of which cannot be
determined at the time of the Tax Reimbursement Payment), the Company
shall make an additional Tax Reimbursement Payment in respect of such
excess which Tax Reimbursement Payment shall include any interest or
penalty payable with respect to such excess) at the time that the
amount of such excess is finally determined.
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(e) Date of Payment. The portion of the Tax Reimbursement Payment
attributable to a Covered Payment shall be paid to the Executive or to
a "rabbi" trust established by the Company prior to the Change of
Control Date within ten (10) business days following the payment of the
Covered Payment. If the amount of such Tax Reimbursement Payment (or
portion thereof) cannot be finally determined on or before the date on
which payment is due, the Company shall pay to the Executive an amount
estimated in good faith by the Accountants to be the minimum amount of
such Tax Reimbursement Payment and shall pay the remainder of such Tax
Reimbursement Payment (which Tax Reimbursement Payment shall include
interest at the rate provided in Section 1274(b)(2)(B) of the Code) as
soon as the amount thereof can be determined, but in no event later
than forty-five (45) calendar days after payment of the related Covered
Payment. In the event that the amount of the estimated Tax
Reimbursement Payment exceeds the amount subsequently determined to
have been due, such excess shall be repaid or refunded pursuant to the
provisions of Section 16(d) above.
15. Entire Agreement. This Agreement contains all the understandings
between the parties hereto pertaining to the matters referred to herein, and on
the Effective Date shall supersede all undertakings and agreements, whether oral
or in writing, previously entered into by them with respect thereto. The
Executive represents that, in executing this Agreement, he does not rely and has
not relied upon any representation or statement not set forth herein made by the
Company with regard to the subject matter, bases or effect of this Agreement or
otherwise.
16. Amendment or Modification. Waiver. No provision of this Agreement
may be amended or waived unless such amendment or waiver is agreed to in
writing, signed by the Executive and by a duly authorized officer of the
Company. No waiver by any party hereto of any breach by another party hereto of
any condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same time, any prior time or any subsequent time.
17. Notices. Any notice to be given hereunder shall be in writing and
shall be deemed given when delivered personally, sent by courier or telecopy or
registered or certified mail, postage prepaid, return receipt requested,
addressed to the party concerned at the address indicated below or to such other
address as such party may subsequently give notice of hereunder in writing:
To Executive at: [FILL IN ADDRESS]
To the Company at: [FILL IN ADDRESS]
Any notice delivered personally or by courier under this Section 17
shall be deemed given on the date delivered and any notice sent by telecopy or
registered or certified mail, postage prepaid, return receipt requested, shall
be deemed given on the date telecopied or mailed.
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<PAGE> 16
18. Severability. If any provision of this Agreement or the application
of any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to any extent,
the remainder of this Agreement or the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid and unenforceable, shall not be affected thereby, and each provision
hereof shall be validated and shall be enforced to the fullest extent permitted
by law.
19. Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
20. Governing Law: Attorney's Fees.
(a) This Agreement will be governed by and construed in accordance
with the laws of the State of Georgia, without regard to its conflicts
of laws principles.
(b) If Executive commences a cause of action to enforce any
provision or resolve any dispute arising under this Agreement, the
Company shall reimburse Executive for all reasonable costs incurred
(including reasonable attorneys' fees) by the Executive to the extent,
but only to the extent, Executive prevails in any such action.
21. Dispute Resolution.
(a) (i) In the event of disputes between the parties with
respect to the terms and conditions of this Agreement, such
disputes shall be resolved by and through an arbitration proceeding
to be conducted under the auspices of the American Arbitration
Association (or any like organization successor thereto) in
Atlanta, Georgia. Such arbitration proceeding shall be conducted
pursuant to the commercial arbitration rules (formal or informal)
of the American Arbitration Association in as expedited a manner as
is then permitted by such rules (the "Arbitration"). Both the
foregoing agreement of the parties to arbitrate any and all such
claims, and the results, determination, finding, judgment and/or
award rendered through such Arbitration, shall be final and binding
on the parties hereto and may be specifically enforced by legal
proceedings.
(ii) Such Arbitration may be initiated by written notice
from either party to the other which shall be a compulsory and
binding proceeding on each party. The Arbitration shall be
conducted by an arbitrator selected in accordance with the
procedures of the American Arbitration Association. Time is of the
essence of this arbitration procedure, and the arbitrator shall be
instructed and required to render his or her decision within thirty
(30) days following completion of the Arbitration.
(iii) Any action to compel arbitration hereunder shall be
brought in the State Court of Georgia.
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22. Headings. All descriptive headings of sections and paragraphs in
this Agreement are intended solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading of any section or
paragraph.
23. No Set-off. The existence of any claim, demand, action or cause of
action by the Executive against the Company, whether predicated upon this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company of any of its rights hereunder.
24. Withholdings. All payments to the Executive under this Agreement
shall be reduced by all applicable withholding required by federal, state or
local tax laws.
25. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
26. Release of Prior Employment Agreement. The Executive hereby
releases the Company and any predecessor from all obligations under any
predecessor employment agreement entered into by the Executive and a predecessor
company, including any obligation to pay severance or other post-termination
benefits, which shall be upon the execution hereof terminated and of no further
force and effect; provided, however, that in no event shall this release affect
the Executive's right under any grant or award under any stock option or stock
award plans of the Company and any predecessor company.
27. Indemnification. The indemnification of the Executive set forth in
the Amended and Restated Agreement and Plan of Merger, dated July ___, 1998, by
and between the Company, Servico, Inc., Impac Hotel Group, L.L.C. and others
will not be terminated, rescinded or other adversely affected.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
----------------------------------------
BY:
-------------------------------------
NAME:
-----------------------------------
TITLE:
----------------------------------
EXECUTIVE:
----------------------------------------
DAVID A. BUDDEMEYER
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EXHIBIT 10.10
EMPLOYMENT AGREEMENT
Employment Agreement dated as of ____________, 1998 between ROBERT COLE
(the "Executive") and LODGIAN, INC., a Delaware corporation (the "Company").
RECITALS
The Company desires to employ the Executive as President, and the
Executive desires to accept such employment, for the term and upon the other
conditions hereinafter set forth.
As a condition of entering into this Agreement, the Executive agrees to
waive the Executive's rights, if any, against the Company and any predecessor
company under (i) any employment agreement and (ii) any other plan, arrangement
or agreement of any kind that provides any form of severance payments.
The parties desire to enter into this Agreement setting forth the terms
and conditions of the employment relationship of the Executive with the Company.
STATEMENT OF AGREEMENT
1. Employment The Company hereby employs the Executive, and the
Executive hereby accepts employment with the Company, upon the terms and subject
to the conditions set forth herein.
2. Term. The Executive shall be considered an at-will employee and his
employment may be terminated by either party subject to the obligations of the
parties upon such termination as may be set forth hereinafter.
3. Position and Duties
(a) Position. The Executive will be employed as the President of
the Company or in such other executive and managerial capacities as
determined by the Board of Directors of the Company (the "Board").
(b) Business Time. During the term of this Agreement, the Executive
agrees to devote his full business time during normal business hours to
the business and affairs of the Company and to use his best efforts to
perform faithfully and efficiently the responsibilities assigned to him
hereunder, to the extent necessary to discharge such responsibilities,
except for:
(i) time spent managing his personal, financial and legal
affairs and serving on corporate, civic or charitable
boards or committees, in each case only if and to the
extent not substantially interfering with the performance
of such responsibilities, and
(ii) periods of vacation to which he is entitled.
<PAGE> 2
(c) Duties. During the term of this Agreement, in addition to the
duties normally associated with the Executive's position with the
Company, the Executive shall, in addition to such other duties as may
be requested by the Board from time to time (i) have primary
responsibility for acquisition, development, renovation and
construction projects and (ii) together with the CEO assist in capital
raising activities, the development of strategic alternatives and
long-term strategies, and the appointment of senior level Company
managers and officers, subject to the approval of the Board.
(d) Co-Chairman. As long as the Executive is employed by the Company
and serves on the Company's Board of Directors, he shall have the
position as Co-Chairman. In the event he is no longer employed by the
Company hereunder he shall resign as a member of the Board and as
Co-Chairman.
4. Place of Performance. The Executive shall perform his duties and
conduct his business at the principal executive offices of the Company, except
for required travel on the Company's business.
5. Salary and Annual Bonus.
(a) Base Salary. The Executive shall receive a base salary (the
"Base Salary") payable in equal bi-weekly installments at an annual rate of
$300,000. The Company will review the Base Salary periodically and in light of
such review may increase (but not decrease) the Base Salary taking into account
any change in the Executive's responsibilities, increases in compensation of
other executives with comparable responsibilities, performance of the Executive
and other pertinent factors, and such adjusted Base Salary shall then constitute
the "Base Salary" for purposes of this Agreement. Neither the Base Salary nor
any increase in the Base Salary after the date hereof shall serve to limit or
reduce any other obligation of the Company hereunder.
(b) Annual Bonus. The Company shall provide the Executive with an
annual bonus plan providing the Executive with an opportunity to earn
an annual bonus equal to one hundred percent (100%) (the "Bonus") of
his Base Salary if the Company achieves for the relevant year certain
financial targets established pursuant to such plan.
6. Vacation, Holidays and Sick Leave. During the term of this
Agreement, the Executive shall be entitled to paid vacation, paid holidays and
sick leave in accordance with the Company's standard policies for its similarly
situated executives.
7. Business Expenses. The Executive shall be reimbursed for all
ordinary and necessary business expenses incurred by him in connection with his
employment upon timely submission by the Executive of receipts and other
documentation as required by the Internal Revenue Code and in conformance with
the Company's normal procedures.
8. Pension and Welfare Benefits. During the term of this Agreement, the
Executive shall be eligible to participate fully in all health benefits,
insurance programs, pension and
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retirement plans and other employee benefit and compensation arrangements
available to similarly situated executives of the Company generally.
9. Stock Options. The Company, pursuant to the terms of its stock
option plan, may grant to the Executive, nonqualified stock options, incentive
stock options or a combination thereof to purchase a number of shares of common
stock.
10. Termination of Employment.
(a) Death or Disability.
(i) The Executive's employment hereunder shall automatically
terminate upon the death of the Executive.
(ii) The Company may terminate the Executive's employment upon
the Executive's Disability by giving to the Executive written
notice of its intention to terminate his employment, and his
employment with the Company shall terminate effective on the
ninetieth (90th) day after receipt of such notice if the Executive
shall fail to return to full-time performance of his duties within
ninety (90) days after such receipt.
For the purposes of this Agreement, "Disability" means:
(1) the inability of the Executive to perform his duties
under this Agreement for a period of ninety (90) consecutive
days due to accident, illness or any other physical or mental
incapacity, or
(2) a disability of the Executive within the meaning of
Section 72(m)(7) of the Internal Revenue Code, that is, the
Executive is unable to engage in any substantial gainful
activity with the Company or any other employer, by reason of
any medically determinable physical or mental impairment which
can be expected to result in death or to be of long, continued
and indefinite duration, or
(3) the Executive becomes entitled to:
(A) disability retirement benefits under the Federal
Social Security Act, or
(B) receive benefits under any long-term disability
plan or policy maintained by the Company.
(b) Termination by the Company. The Company may terminate the
Executive's employment hereunder at any time, whether or not for Cause.
For purposes of this Agreement, "Cause" means:
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<PAGE> 4
(i) the failure or refusal by the Executive to perform his
duties hereunder (other than any such failure resulting from the
Executive's incapacity due to physical or mental illness), which
has not ceased within ten (10) days after a written demand for
substantial performance is delivered to the Executive by the
Company, which demand identifies the manner in which the Company
believes that the Executive has not performed such duties,
(ii) the engaging by the Executive in willful misconduct or an
act of moral turpitude which is materially injurious to the
Company, monetarily or otherwise (including, but not limited to,
conduct which violates Section 13 hereof) or
(iii) the conviction of the Executive of, or the entering of a
plea of nolo contendere by, the Executive with respect to, a
felony.
(c) Termination by the Executive. The Executive shall be entitled
to terminate his employment hereunder:
(i) for Good Reason,
(ii) if his health should become impaired to an extent that
makes his continued performance of his duties hereunder hazardous
to his physical or mental health, provided that the Executive shall
have furnished the Company with a written statement from a
qualified doctor to such effect and provided, further, that, at the
Company's request, the Executive shall submit to an examination by
a doctor selected by the Company and such doctor shall have
concurred in the conclusion of the Executive's doctor or
(iii) without the Executive's express written consent, any
failure by the Company to comply with any material provision of
this Agreement, which failure has not been cured within ten (10)
days after written notice of such noncompliance has been given by
the Executive to the Company.
For purposes of this Agreement, "Good Reason" shall mean the
occurrence, during the term of this Agreement, of any one of the
following acts by the Company, or failures by the Company to act,
unless, in the case of any act or failure to act described below,
such act or failure to act is corrected prior to the Date of
Termination specified in the Notice of Termination given in respect
thereof:
(A) any material diminution in the Executive's
authorities or responsibilities (including reporting
responsibilities) or from his status, title, position or
responsibilities (including reporting responsibilities); the
assignment to him of any duties or work responsibilities which
are inconsistent with such status, title, position or work
responsibilities; or any removal of the Executive from, or
failure to reappoint or reelect him to any
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of such positions, except if any such changes are because of
Disability, retirement, death or Cause;
(B) a reduction by the Company in the Executive's Base
Salary or Bonus as in effect on the date hereof or as the same
may be increased from time to time except for across-the-board
salary reductions similarly affecting all senior executives of
the Company and all senior executives of any Person (as defined
Section 10(h) below) in control of the Company;
(C) the relocation of the Executive's place of employment
to a location more than fifty (50) miles from its present
location, except for required travel on the Company's business;
(D) the failure by the Company, without the Executive's
consent, to pay to the Executive any portion of the Executive's
current compensation;
(E) the failure by the Company to provide the Executive
with benefits substantially similar to benefits provided to
other senior executives of the Company under any of the
Company's pension, life insurance, medical, health and
accident, or disability plans;
(F) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 10(f) below;
for purposes of this Agreement, no such purported termination
shall be effective.
The Executive's continued employment for sixty (60) months
following any act or failure to act constituting Good Reason
hereunder without the delivery of a Notice of Termination shall
constitute consent to, and a waiver of rights with respect to, such
act or failure to act.
(d) Voluntary Resignation. Should the Executive wish to resign from
his position with the Company or terminate his employment for other
than Good Reason during the term of this Agreement, the Executive shall
give sixty (60) days written notice to the Company ("Notice Period"),
setting forth the reasons and specifying the date as of which his
resignation is to become effective. During the Notice Period, the
Executive shall cooperate fully with the Company in achieving a smooth
transition of the Executive's duties and responsibilities to such
person(s) as may be designated by the Company. The Company reserves the
right to accelerate the Date of Termination by giving the Executive
notice and payment of amounts due to the Executive under Section 5(a)
and, to the extent applicable, Section 5(b) for the balance of the
Notice Period. The Company's obligation to continue to employ the
Executive or to continue payment of the amounts described in the
preceding sentence shall cease immediately if: (1) the Executive has
not satisfied his obligations to cooperate fully with a smooth
transition or (2) the Company has grounds to terminate the Executive's
employment immediately for Cause.
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(e) Notice of Termination. Any purported termination of the
Executive's employment by the Company or by the Executive shall be
communicated by written Notice of Termination to the other party hereto
in accordance with Section 17. "Notice of Termination" shall mean a
notice that shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated.
(f) Date of Termination. "Date of Termination" shall mean (i) if
the Executive's employment is terminated because of death, the date of
the Executive's death, (ii) if the Executive's employment is terminated
for Disability, the date Notice of Termination is given, (iii) if the
Executive's employment is terminated pursuant to Subsection (c), (d) or
(e) hereof or for any other reason (other than death or Disability),
the date specified in the Notice of Termination which shall not be less
than sixty (60) days from the date such Notice of Termination is given.
(g) Change in Control. For purposes of this Agreement, a Change in
Control of the Company shall have occurred if
(i) any person (as defined in Section 3(a)(9) of the Exchange
Act and as used in Sections 13(d) and 14(d) thereof), excluding the
Company, any Subsidiary and any employee benefit plan sponsored or
maintained by the Company or any Subsidiary (including any trustee
of such plan acting as trustee) (the Company, all Subsidiaries, and
such employee benefit plans and trustees acting as trustees being
hereafter referred to as the "Company Group"), but including a
'group' as defined in Section 13(d)(3) of the Exchange Act (a
"Person"), becomes the beneficial owner of shares of the Company
having at least forty percent (40%) of the total number of votes
that may be cast for the election of directors of the Company (the
"Voting Shares"); provided that no Change of Control will occur as
a result of an acquisition of stock by the Company Group which
increases, proportionately, the stock representing the voting power
of the Company beneficially owned by such Person above forty
percent (40%) of the voting power of the Company, and provided
further that if such Person acquires beneficial ownership of stock
representing more than forty percent (40%) of the voting power of
the Company by reason of share purchases by the Company Group, and
after such share purchases by the Company Group acquires any
additional shares representing voting power of the Company, then a
Change of Control shall occur;
(ii) the shareholders of the Company shall approve any merger
or other business combination of the Company, sale of the Company's
assets or combination of the foregoing transactions (a
"Transaction") other than a Transaction involving only the Company
and one or more of its Subsidiaries, or a Transaction immediately
following which the shareholders of the Company
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immediately prior to the Transaction continue to have a majority of
the voting power in the resulting entity; or
(iii) within any 24-month period, the persons who were
directors of the Company immediately before the beginning of such
period (the "Incumbent Directors") shall cease (for any reason
other than death) to constitute at least a majority of the Board or
the board of directors of any successor to the Company, provided
that any director who was not a director as of the effective date
of this Plan shall be deemed to be an Incumbent Director if such
director was elected to the Board by, or on the recommendation of
or with the approval of, at least two-thirds of the directors who
then qualified as Incumbent Directors either actually or by prior
operation of this clause (iii); and provided that any director
elected to the Board to avoid or settle a threatened or actual
proxy context shall in no event be deemed to be an Incumbent
Director.
(h) Return of Property. When the Executive ceases to be employed by
the Company, the Executive will promptly surrender to the Company all
Company property, including without limitation, all records and other
documents obtained by him or entrusted to him during the course of his
employment with the Company provided, however, that the Executive may
retain copies of such documents as necessary for the Executive's
personal records for federal income tax purposes.
11. Compensation During Disability; Death or Upon Termination.
(a) During any period that the Executive fails to perform his
duties hereunder as a result of incapacity due to physical or mental
illness ("Disability Period"), the Executive shall continue to receive
his Base Salary at the rate then in effect for such period until his
employment is terminated pursuant to Section 10(a)(ii) hereof, provided
that payments so made to the Executive during the Disability Period
shall be reduced by the sum of the amounts, if any, payable to the
Executive with respect to such period under disability benefit plans of
the Company or under the Social Security disability insurance program,
and which amounts were not previously applied to reduce any such
payment.
(b) If the Executive's employment is terminated by his death or
Disability, the Company shall pay (i) any Base Salary due to the
Executive under Section 5(a) through the date of such termination and
(ii) if the Executive's Date of Termination is after June 30 of the
fiscal year in which the Date of Termination occurs, an amount equal to
the Bonus he would have received for the fiscal year that ends on or
immediately after the Date of Termination, assuming the Company
achieved the lowest target level for which a bonus is paid under the
plan described in Section 5(b), prorated for the period beginning on
the first day of the fiscal year in which occurs the Date of
Termination through the Date of Termination.
(c) If the Executive's employment is terminated by the Company for
Cause or by the Executive for other than Good Reason, the Company shall
pay the Executive his Base Salary through the Date of Termination at
the rate in effect at the time Notice of
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<PAGE> 8
Termination is given, and the Company shall have no further obligations
to the Executive under this Agreement.
(d) If following a Change in Control (A) the Company terminates the
Executive's employment without Cause, or (B) the Executive terminates
his employment for Good Reason or under clause (iii) of Section 10(d)
hereof, then
(i) the Company shall pay the Executive his Base Salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given and all other unpaid amounts, if
any, to which the Executive is entitled as of the Date of
Termination under any compensation plan or program of the Company,
at the time such payments are due;
(ii) the Company shall pay the Executive, in a lump sum, two
and one-half times his Base Salary at the rate in effect of the
Date of Termination;
(iii) the Company shall pay the Executive, in a lump sum, an
amount equal to the greater of: (I) the Executive's Bonus that
would have been paid for the period beginning on the last day of
the fiscal year in which the Date of Termination occurs or (II) the
average of the Executive's Bonus payable for the three fiscal years
immediately preceding the fiscal year in which occurs the Date of
Termination;
(iv) provided that there are no adverse tax consequences, the
Company shall continue coverage for the Executive, on the same
terms and conditions as would be applicable if the Executive were
an active Employee, under the Company's life insurance, medical,
health and similar welfare benefit plans (other then group
disability benefits) for a period of twelve (12) months. Benefits
otherwise receivable by the Executive pursuant to this Section
11(d)(iv) shall be reduced to the extent comparable benefits are
actually received by the Executive from a subsequent employer
during the period during which the Company is required to provide
such benefits, and the Executive shall report any such benefits
actually received by him to the Company. In lieu of continued
participation in life insurance, medical, health and similar
welfare benefit plans, the Executive may elect by written notice
delivered to the Company prior to the Date of Termination, to
receive an amount equal to the annual cost to the Company (based on
premium rates) of providing such coverage. In the event that
adverse tax consequences would result from the continuation of
benefits under this Section 11(d)(iv), the Company may pay to the
Executive an amount equal to the annual cost to the Company (based
on premium rates) of providing such coverage;
(v) the payments provided for in this Section 11(d) (other
than Section 11(d)(iv)) shall be made not later than the thirtieth
(30th) day following the Date of Termination. At the time that
payments are made under this Section 11(d), the Company shall
provide the Executive with a written statement setting forth the
manner in which such payments were calculated and the basis for
such
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<PAGE> 9
calculations including, without limitation, any opinions or other
advice the Company has received from outside counsel, auditors or
consultants (and any such opinions or advice which are in writing
shall be attached to the statement); and
(vi) any unvested, outstanding stock options or other
equity-based incentive shall fully vest as of the Date of
Termination.
(e) If, prior to any Change of Control, the Executive terminates
his employment under clause (iii) of Section 10(d) hereof or the
Company terminates the Executive's employment without Cause, then
(i) the Company shall pay the Executive his Base Salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given and all other unpaid amounts, if
any, to which the Executive is entitled as of the Date of
Termination under any compensation plan or program of the Company,
at the time such payments are due;
(ii) the Company shall pay the Executive two and one-half
times his Base Salary at the rate in effect at termination; such
amount to be paid in substantially equal monthly installments
during the period commencing with the month immediately following
the month in which the Date of Termination occurs or in a lump sum
payment, as decided by the Company;
(iii) if the Executive's Date of Termination is after June 30
of the fiscal year in which occurs the Date of Termination, the
Company shall pay the Executive his Bonus prorated for the period
beginning on the first day of the fiscal year in which occurs the
Date of Termination through the Date of Termination;
(iv) provided that there are no adverse tax consequences, the
Company shall continue coverage for the Executive, on the same
terms and conditions as would be applicable if the Executive were
an active Employee, under the Company's life insurance, medical,
health and similar welfare benefit plans (other then group
disability benefits) for a period of twelve (12) months. Benefits
otherwise receivable by the Executive pursuant to this Section
11(d)(iv) shall be reduced to the extent comparable benefits are
actually received by the Executive from a subsequent employer
during the period during which the Company is required to provide
such benefits, and the Executive shall report any such benefits
actually received by him to the Company. In lieu of continued
participation in life insurance, medical, health and similar
welfare benefit plans, the Executive may elect by written notice
delivered to the Company prior to the Date of Termination, to
receive an amount equal to the annual cost to the Company (based on
premium rates) of providing such coverage. In the event that
adverse tax consequences would result from the continuation of
benefits under this Section 11(d)(iv), the Company may pay to the
Executive an amount equal to the annual cost to the Company (based
on premium rates) of providing such coverage;
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<PAGE> 10
(v) benefits otherwise receivable by the Executive pursuant
to clause (iv) of this Section 11(e) shall be reduced to the extent
comparable benefits are actually received by the Executive from a
subsequent employer during the period which the Company is required
to provide such benefits, and the Executive shall report any such
benefits actually received by him to the Company;
(vi) the payments made to the Executive under Section 11(e)
hereof may not be reduced by the amount of payments provided for by
any subsequent employer of the executive for a position obtained
after the Date of Termination; and
(vii) any unvested, outstanding stock options and other equity
based incentive shall fully vest as of the Date of Termination.
(f) If the Executive experiences a termination under Section 11(d)
or 11(e) hereof, until the Executive finds another full-time position
or for 6 months, whichever is earlier, the Company shall provide the
Executive with professional outplacement services of the Executive's
choosing and shall reimburse the Executive documented incidental
outplacement expenses directly related to the Executive's job search
such as resume mailing, interview trips, and clerical support, subject
to a maximum cost of $10,000 for such outplacement services and
incidental expenses. The Executive's choice of professional
outplacement services is subject to the Company's reasonable prior
approval. If the Company has not approved or disapproved of the
Executive's choice within ten (10) business days of receiving notice of
such choice, the Company will be deemed to have given its approval. Any
disapproval by the Company will be in writing and will state the basis
for such disapproval. The Executive will not be entitled to receive
cash in lieu of the professional outplacement services provided
pursuant to this Section.
(g) If the Executive shall terminate his employment under clause
(ii) of Section 10(d) hereof, the Company shall pay the Executive his
Base Salary through the Date of Termination at the rate in effect at
the time Notice of Termination is given, and the Company shall have no
further obligations to the Executive under this Agreement.
(h) If the Executive is terminated by the Company without Cause at
any time, the Company will enter into a Registration Rights Agreement
in customary form with respect to the registration of the shares of the
Company's Common Stock owned by Executive if necessary so as to permit
the Executive to sell such shares
12. Successors: Binding Agreement.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
expressly assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it
if no such succession had taken place.
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(b) This Agreement is a personal contract and the rights and
interests of the Executive hereunder may not be sold, transferred,
assigned, pledged, encumbered, or hypothecated by him, except as
otherwise expressly permitted by the provisions of this Agreement. This
Agreement shall inure to the benefit of and be enforceable by the
Executive and his personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
If the Executive should die while any amount would still be payable to
him hereunder had the Executive continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to his devisee, legatee or other designee or,
if there is no such designee, to his estate.
13. Confidentiality and Non-Solicitation Covenants.
(a) All Confidential Information and Trade Secrets and all physical
embodiments thereof received or developed by the Executive while
employed by the Company are confidential to and are and will remain the
sole and exclusive property of the Company. Except to the extent
necessary to perform the duties assigned to him by the Company, the
Executive will hold such Confidential Information and Trade Secrets in
trust and strictest confidence, and will not use, reproduce,
distribute, disclose or otherwise disseminate the Confidential
Information and Trade Secrets or any physical embodiments thereof and
may in no event take any action causing or fail to take the action
necessary in order to prevent, any Confidential Information and Trade
Secrets disclosed to or developed by the Executive to lose its
character or cease to qualify as Confidential Information or Trade
Secrets. As used herein, "Confidential Information" means data and
information relating to the business of the Company (which does not
rise to the status of a Trade Secret) which is or has been disclosed to
the Executive or of which the Executive became aware as a consequence
of or through its relationship to the Company and which has value to
the Company and is not generally known to its competitors. Confidential
Information shall not include any data or information that has been
voluntarily disclosed to the public by the Company (except where public
disclosure) has been made by the Executive without authorization) or
that has been independently developed and disclosed by others, or that
otherwise enters the public domain through lawful means. The provisions
in the Agreement restricting the use of Confidential Information shall
survive for a period of one (1) year following termination of this
Agreement. As used herein, "Trade Secrets" means information including,
but not limited to, technical or nontechnical data, formulas, patterns,
compilations, programs, devices, methods, techniques, drawings,
processes, financial data, financial plans, product plans or lists of
actual or potential customers or suppliers which (i) derives economic
value, actual or potential, from not being generally known to, and not
being readily ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use, and (ii) is the
subject of efforts that are reasonable under the circumstances to
maintain its secrecy. The provisions of this Agreement restricting the
use of Trade Secrets shall survive termination of this Agreement for so
long as is permitted by the Georgia Trade Secrets Act of 1990, O.C.G.A.
ss.ss. 10-1-760-10-1-767.
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<PAGE> 12
(b) Upon request by the Company, and in any event upon termination
of the employment of the Executive with the Company for any reason, as
a prior condition to receiving any final compensation hereunder, the
Executive will promptly deliver to the Company all property belonging
to the Company, including, without limitation, all Confidential
Information and Trade Secrets (and all embodiments thereof) then in the
Executive's custody, control or possession.
(c) The Executive agrees that during the period he is employed
hereunder and for a period of one (1) year after termination of this
Agreement, he will not, either directly or indirectly, on the
Executive's own behalf or in the service of or on behalf of others,
solicit or divert, or attempt to solicit or divert, to a Competing
Business, any individual or entity which was an actual or actively
sought prospective client or customer of the Company and with whom the
Executive had material contact during the Executive's last year of
employment with the Company. The Executive agrees that during the
period he is employed hereunder and for a period of one (1) year after
termination of this Agreement, he will not, either directly or
indirectly, on the Executive's own behalf or in the service of or on
behalf of others, solicit or divert or attempt to solicit or divert to
any Competing Business any person employed by the Company or an
affiliate, whether or not such employee is a full-time employee or a
temporary employee of the Company or an affiliate and whether or not
such employment is pursuant to written agreement and whether or not
such employment is for a determined period or is at will. As used
herein, "Competing Business" means any person, firm, corporation, joint
venture or other business entity which is engaged in a business that
competes directly or indirectly with the Company.
(d) Without limiting the right of the Company to pursue all other
legal and equitable remedies available for violation by the Executive
of the covenants contained in this Section 13, it is expressly agreed
by the Executive and the Company that such other remedies cannot fully
compensate the Company for any such violation and that the Company
shall be entitled to injunctive relief, without the necessity of
proving actual monetary loss, to prevent any such violation or any
continuing violation thereof. Each party intends and agrees that if in
any action before any court or agency legally empowered to enforce the
covenants contained in this Section 13, any term, restriction, covenant
or promise contained herein is found to be unreasonable and accordingly
unenforceable, then such term, restriction, covenant or promise shall
be deemed modified to the extent necessary to make it enforceable by
such court or agency. The covenants contained in Section 13 shall
survive the conclusion of the Executive's employment by the Company.
14. Certain Further Payments by the Company.
(a) Tax Reimbursement Payment. In the event that any amount or
benefit paid or distributed to the Executive by the Company or any
affiliated company, whether pursuant to this Agreement or otherwise
(collectively, the "Covered Payments"), is or becomes subject to the
tax (the "Excise Tax") imposed under Section 4999 of the Code or any
similar tax that may hereafter be imposed, the Company shall pay to the
Executive, at the time specified in Section 14(e) below, the Tax
Reimbursement Payment (as defined
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below). The Tax Reimbursement is defined as an amount, which when added
to the Covered Payments and reduced by any Excise Tax on the Covered
Payments and any federal, state and local income tax and Excise Tax on
the Tax Reimbursement Payment provided for by this Agreement (but
without reduction for any federal, state or local income or employment
tax on such Covered Payments), shall be equal to the sum of (i) the
amount of the Covered Payments, and (ii) an amount equal to the product
of any deductions disallowed for federal, state or local income tax
purposes because of the inclusion of the Tax Reimbursement Payment in
the Executive's adjusted gross income and the highest applicable
marginal rate of federal, state or local income taxation, respectively,
for the calendar year in which the Tax Reimbursement Payment is to be
made.
(b) Determining Excise Tax. For purposes of determining whether any
of the Covered Payments will be subject to the Excise Tax and the
amount of such Excise Tax,
(i) such Covered Payments will be treated as "parachute
payments" within the meaning of Section 280G of the Code, and all
"parachute payments" in excess of the "base amount" (as defined
under Section 280G(b)(3) of the Code) shall be treated as subject
to the Excise Tax, unless, and except to the extent that, in the
opinion of the Company's independent certified public accountants,
which, in the case of Covered Payments made after the Change of
Control, shall be the Company's independent certified public
accounts appointed prior to the Change of Control, or tax counsel
selected by such accountants (the "Accountants"), such Covered
Payments (in whole or in part) either do not constitute "parachute
payments" or represent reasonable compensation for services
actually rendered (within the meaning of Section 280G(b)(4) of the
Code) in excess of the "base amount," or such "parachute payments"
are otherwise not subject to such Excise Tax,
(ii) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Accountants in
accordance with the principles of Section 280G of the Code, and
(iii) if the Covered Payments exceed the amount allowed under
Code Section 280G(d)(2), the Executive may elect one of the
following:
(A) the Company will adjust the Covered Payments by the
amount of excise tax due as a result of excess payment amount
under Code Section 280G; or
(B) the Covered Payments may be reduced by the amount
which exceeds the limit on Code Section 280G.
(c) Applicable Tax Rates and Deductions. For purposes of
determining the amount of the Tax Reimbursement Payment, the Executive
shall be deemed:
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(i) to pay federal income taxes at the highest applicable
marginal rate of federal income taxes for the calendar year in
which the Tax Reimbursement Payment is to be made,
(ii) to pay any applicable state and local income taxes at the
highest applicable marginal rate of taxation for the calendar year
in which the Tax Reimbursement Payment is to be made, net of the
maximum reduction in federal income taxes which could be obtained
from the deduction of such state or local taxes if paid in such
year (determined without regard to limitations on deductions based
upon the amount of the Executive's adjusted gross income), and
(iii) to have otherwise allowable deductions for federal, state
and local income tax purposes at least equal to those disallowed
because of the inclusion of the Tax Reimbursement Payment in the
Executive's adjusted gross income.
(d) Subsequent Events. In the event that the Excise Tax is
subsequently determined by the Accountants to be less than the amount
taken into account hereunder in calculating the Tax Reimbursement
Payment made, the Executive shall repay to the Company, at the time
that the amount of such reduction in the Excise Tax is finally
determined, the portion of such prior Tax Reimbursement Payment that
has been paid to the Executive or to federal, state or local tax
authorities on the Executive's behalf and that would not have been paid
if such Excise Tax had been applied in initially calculating such Tax
Reimbursement Payment, plus interest on the amount of such repayment at
the rate provided in Section 1274(b)(2)(B) of the Code. Notwithstanding
the foregoing, in the event any portion of the Tax Reimbursement
Payment to be refunded to the Company has been paid to any federal,
state or local tax authority, repayment thereof shall not be required
until actual refund or credit of such portion has been made to the
Executive, and interest payable to the Company shall not exceed
interest received or credited to the interest received or credited to
the Executive by such tax authority for the period it held such
portion. The Executive and the Company shall mutually agree upon the
course of action to be pursued (and the method of allocating the
expenses thereof) if the Executive's good faith claim for refund or
credit is denied.
In the event that the Excise Tax is later determined by the
Accountants to exceed the amount taken into account hereunder at the
time the Tax Reimbursement Payment is made (including, but not limited
to, by reason of any payment the existence or amount of which cannot be
determined at the time of the Tax Reimbursement Payment), the Company
shall make an additional Tax Reimbursement Payment in respect of such
excess which Tax Reimbursement Payment shall include any interest or
penalty payable with respect to such excess) at the time that the
amount of such excess is finally determined.
(e) Date of Payment. The portion of the Tax Reimbursement Payment
attributable to a Covered Payment shall be paid to the Executive or to
a "rabbi" trust established by the Company prior to the Change of
Control Date within ten (10) business days following the payment of the
Covered Payment. If the amount of such Tax Reimbursement Payment (or
portion thereof) cannot be finally determined on or before
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the date on which payment is due, the Company shall pay to the
Executive an amount estimated in good faith by the Accountants to be
the minimum amount of such Tax Reimbursement Payment and shall pay the
remainder of such Tax Reimbursement Payment (which Tax Reimbursement
Payment shall include interest at the rate provided in Section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined, but in no event later than forty-five (45) calendar days
after payment of the related Covered Payment. In the event that the
amount of the estimated Tax Reimbursement Payment exceeds the amount
subsequently determined to have been due, such excess shall be repaid
or refunded pursuant to the provisions of Section 16(d) above.
15. Entire Agreement. This Agreement contains all the understandings
between the parties hereto pertaining to the matters referred to herein, and on
the Effective Date shall supersede all undertakings and agreements, whether oral
or in writing, previously entered into by them with respect thereto. The
Executive represents that, in executing this Agreement, he does not rely and has
not relied upon any representation or statement not set forth herein made by the
Company with regard to the subject matter, bases or effect of this Agreement or
otherwise.
16. Amendment or Modification. Waiver. No provision of this Agreement
may be amended or waived unless such amendment or waiver is agreed to in
writing, signed by the Executive and by a duly authorized officer of the
Company. No waiver by any party hereto of any breach by another party hereto of
any condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same time, any prior time or any subsequent time.
17. Notices. Any notice to be given hereunder shall be in writing and
shall be deemed given when delivered personally, sent by courier or telecopy or
registered or certified mail, postage prepaid, return receipt requested,
addressed to the party concerned at the address indicated below or to such other
address as such party may subsequently give notice of hereunder in writing:
To Executive at: [FILL IN ADDRESS]
To the Company at: [FILL IN ADDRESS]
Any notice delivered personally or by courier under this Section 17
shall be deemed given on the date delivered and any notice sent by telecopy or
registered or certified mail, postage prepaid, return receipt requested, shall
be deemed given on the date telecopied or mailed.
18. Severability. If any provision of this Agreement or the application
of any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to any extent,
the remainder of this Agreement or the
-15-
<PAGE> 16
application of such provision to such person or circumstances other than those
to which it is so determined to be invalid and unenforceable, shall not be
affected thereby, and each provision hereof shall be validated and shall be
enforced to the fullest extent permitted by law.
19. Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
20. Governing Law; Attorney's Fees.
(a) This Agreement will be governed by and construed in accordance
with the laws of the State of Georgia, without regard to its conflicts
of laws principles.
(b) If Executive commences a cause of action to enforce any
provision or resolve any dispute arising under this Agreement, the
Company shall reimburse Executive for all reasonable costs incurred
(including reasonable attorneys' fees) by the Executive to the extent,
but only to the extent, Executive prevails in any such action.
21. Dispute Resolution.
(a) (i) In the event of disputes between the parties with respect
to the terms and conditions of this Agreement, such disputes shall be
resolved by and through an arbitration proceeding to be conducted under
the auspices of the American Arbitration Association (or any like
organization successor thereto) in Atlanta, Georgia. Such arbitration
proceeding shall be conducted pursuant to the commercial arbitration
rules (formal or informal) of the American Arbitration Association in
as expedited a manner as is then permitted by such rules (the
"Arbitration"). Both the foregoing agreement of the parties to
arbitrate any and all such claims, and the results, determination,
finding, judgment and/or award rendered through such Arbitration, shall
be final and binding on the parties hereto and may be specifically
enforced by legal proceedings.
(ii) Such Arbitration may be initiated by written notice from
either party to the other which shall be a compulsory and binding
proceeding on each party. The Arbitration shall be conducted by an
arbitrator selected in accordance with the procedures of the
American Arbitration Association. Time is of the essence of this
arbitration procedure, and the arbitrator shall be instructed and
required to render his or her decision within thirty (30) days
following completion of the Arbitration.
(iii) Any action to compel arbitration hereunder shall be
brought in the State Court of Georgia.
22. Headings. All descriptive headings of sections and paragraphs in
this Agreement are intended solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading of any section or
paragraph.
-16-
<PAGE> 17
23. No Set-off. The existence of any claim, demand, action or cause of
action by the Executive against the Company, whether predicated upon this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company of any of its rights hereunder.
24. Withholdings. All payments to the Executive under this Agreement
shall be reduced by all applicable withholding required by federal, state or
local tax laws.
25. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
26. Indemnification. The indemnification of the Executive set forth in
the Amended and Restated Agreement and Plan of Merger dated July ___, 1998 by
and among the Company, Servico, Inc., Impac Hotel Group, L.L.C. and others will
not be terminated, rescinded or other adversely affected.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
----------------------------------------
BY:
-------------------------------------
NAME:
-----------------------------------
TITLE:
----------------------------------
EXECUTIVE:
----------------------------------------
ROBERT COLE
-17-
<PAGE> 1
EXHIBIT 10.11
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of the ___ day of ________, 1998 by and among LODGIAN, INC., a
Delaware corporation (the "Company"), and the individuals and entities listed on
the signature pages hereto (individually referred to as, a "Stockholder" and
collectively referred to as, the "Stockholders").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Amended and Restated Agreement and
Plan of Merger, dated March 20, 1998 (the "Acquisition Agreement"), among
Servico, Inc., a Florida corporation ("Servico"), the Company, Impac Hotel
Group, L.L.C., a Georgia limited liability company, SHG-S Sub, Inc., a Florida
corporation and wholly-owned subsidiary of the Company, SHG-I Sub, L.L.C., a
Georgia limited liability company and wholly-owned subsidiary of the Company,
P-Burg Lodging Associates, Inc., a Kentucky corporation ("P-Burg"), Hazard
Lodging Associates, Inc. a Kentucky corporation ("Hazard"), Memphis Lodging
Associates, Inc., a Florida corporation ("Memphis"), Delk Lodging Associates,
Inc., a Delaware corporation ("Delk"), Impac Hotel Development, Inc., a Delaware
corporation ("IHD"), Impac Design and Construction, Inc., a Delaware corporation
("IDC"), Impac Hotel Group, Inc., a Florida corporation, ("IHG") (P-Burg,
Hazard, Memphis, Delk, IHD, IDC and IHG being referred to collectively as the
"Impac Affiliated Companies"), and certain acquisition subsidiaries, Impac and
each of the Impac Affiliated Companies became wholly-owned subsidiaries of the
Company and the members of Impac and the stockholders of the Impac Affiliated
Companies became stockholders of the Company (such transaction being hereinafter
referred to as the "Merger");
WHEREAS, pursuant to the Merger, the Stockholders received shares of
Common Stock, par value $.01 per share, of the Company ("Common Stock"), in
exchange for their membership interests in Impac; and
WHEREAS, pursuant to the Acquisition Agreement, the Company has agreed
to grant to the Stockholders certain registration rights with respect to such
shares of Common Stock.
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter set forth, the Company and the Stockholders agree as follows:
1. Registration Rights.
(a) Subject to the limitations set forth in this Agreement, if at
any time prior to the date which is two years from the date hereof the Company
proposes to register any of its Common Stock for its own account under the
Securities Act of 1933, as amended (the "Act"), in connection with an
underwritten public offering, the Company shall give written notice to the
Stockholders as promptly as practicable of its intention to effect such a
registration. Upon written
<PAGE> 2
request of any Stockholder, given within 10 days after receipt from the Company
of such notice, the Company shall, subject to the limitations set forth in this
Agreement, use its best efforts to cause the number of the Stockholder's
Registerable Securities (as hereinafter defined) referred to in such request
(which may not exceed 40% of the number of Registerable Securities then held by
such Stockholder) to be included in such registration statement.
(b) Requirements of Request. Each request delivered pursuant to
Section 1(a) shall: (i) specify the amount of Registerable Securities intended
to be offered and sold by such Stockholder; and (ii) contain the undertaking of
the Stockholder to provide all such information and materials and take all such
action as may be required in order to permit the Company to comply with all
applicable requirements of the Securities and Exchange Commission (the "SEC")
and state securities and "blue sky" laws with respect to registration of such
Stockholder's Registerable Securities and to obtain acceleration of the
effective date of the registration statement.
(c) Limitations on Incidental Registrations. The obligations of the
Company to cause any Stockholder's Registerable Securities to be registered
pursuant to this Section 1 are subject to each of the following limitations,
conditions and qualifications:
(i) In no event shall the Company be required to register
Registerable Securities pursuant to this Agreement in an amount in excess of 10%
of the aggregate number of shares of Common Stock being offered in the
registration.
(ii) If the Company is advised in writing by the managing
underwriter that the inclusion of the Registerable Securities requested to be
included in such registration pursuant to Section 1(a) and pursuant to any other
rights granted by the Company to holders of its securities to request inclusion
of any such securities in such registration exceeds the number of securities
which can be sold in the offering without, in the opinion of such underwriter,
interfering with the orderly sale and distribution of the Common Stock proposed
to be offered by the Company or adversely affecting the price at which such
Common Stock may be sold, the Company may first include in such registration all
Common Stock the Company proposes to sell, and the Stockholders shall accept a
reduction (including a total elimination) in the number of shares to be included
in such registration in accordance with Section 5 below.
(iii) Any Stockholder wishing to participate in the offering
must (together with the Company and other holders distributing their securities
through such offering) enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such offering by the Company.
(iv) The Company may, in its sole discretion and without the
consent of the Stockholders, withdraw any registration statement it has filed,
before or after effectiveness, and abandon the proposed offering in which the
Stockholders had requested to participate at any time.
-2-
<PAGE> 3
2. Indemnification. In the event that the Company shall register under
the Act any Stockholder's Registerable Securities (such selling Stockholder
being hereafter referred to as a "Seller"):
(a) Company's Indemnification. The Company will indemnify and hold
harmless the Seller and each person who controls the Seller within the meaning
of the Act and the Securities Exchange Act of 1934, as amended (the "Exchange
Act") against any losses, claims, expenses, damages or liabilities (including
reasonable attorneys' fees), joint or several, to which the Seller or
controlling person become subject under the Act, insofar as such losses, claims,
expenses, damages or liabilities (or actions in respect thereof) arise 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 Registerable
Securities were registered under the Act pursuant to Section 1 hereof, any
preliminary prospectus (if used prior to the effective date of the registration
statement) or final prospectus contained therein, or any amendment or supplement
thereof, or arise out or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the Seller and each
such controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
expense, damage, liability or action; provided, however, that the Company will
not be liable in any such case if and to the extent that any such loss, claim,
expense, damage or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished to the Company by the Seller or such
controlling person.
(b) Seller's Indemnification. The Seller will indemnify and hold
harmless the Company and each underwriter of the Company's securities under
Section 1 and each person who controls the Company or underwriter within the
meaning of the Act and the Exchange Act, each officer of the Company who signs
the registration statement and each director of the Company, against all losses,
claims, expenses, damages or liabilities (including reasonable attorneys' fees),
joint or several, to which the Company, underwriter or such officer or director
or controlling person become subject under the Act, insofar as such losses,
claims, expenses, damages or liabilities (or actions in respect thereof) arise
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
Registerable Securities were registered under the Act pursuant to Section 1
hereof, any preliminary prospectus (if used prior to the effective date of the
registration statement) or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company, each such underwriter and each such officer, director and controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, expense, damage, liability
or action; provided, however, that the Seller will be liable hereunder in any
such case if and only to the extent that any such loss, claim, expense, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in conformity with
information furnished to the Company by the Seller or any controlling person of
the Seller.
-3-
<PAGE> 4
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof; provided, however, that any
failure to give such notice will not waive any rights of the indemnified party
except to the extent the rights of the indemnified party are materially
prejudiced. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof 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 and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 2 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected; provided,
however, that (i) if the indemnifying party has failed to assume the defense and
employ counsel or (ii) if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to it
that are different from or additional to those available to the indemnifying
party or if the interests of the indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying party, then the indemnified
party shall have the right to select a separate counsel and to assume such legal
defense and otherwise to participate in the defense of such action, with the
expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the indemnifying party as incurred. In no
event shall the indemnifying party be liable for fees and expenses of more than
one counsel separate from its own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions
arising out of the same general allegations or circumstances.
(d) If the indemnification provided for in this Section 2 is
unavailable or insufficient to hold harmless an indemnified party in respect of
any losses, claims, expenses, damages or liabilities or actions in respect
thereof, then each indemnifying party shall in lieu of indemnifying such
indemnified party contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, expenses, damages, liabilities or
actions in such proportion as is appropriate to reflect the relative fault of
the Company, on the one hand, and the Seller, on the other, in connection with
the statements or omissions which resulted in such losses, claims, expenses,
damages, liabilities or actions as well as any other relevant equitable
considerations, including the failure to give any required notice. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company, on the one hand, or the Seller, on the other, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The Company and the Stockholders agree that
it would not be just and equitable if contribution pursuant to this Section 2(d)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 2(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, expenses, damages, liabilities or actions in
respect thereof referred to above in this Section 2(d) shall be deemed to
-4-
<PAGE> 5
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
3. Expenses. The Company shall pay the costs and expenses incurred in
connection with the preparation and filing of any registration statement
covering Registerable Securities pursuant to this Agreement, including, but not
limited to, the fees and expenses of counsel, accountants and other experts for
the Company, printing costs, registration and filing fees and blue sky fees and
expenses, commissions of underwriters (other than commissions of underwriters
attributable to Registerable Securities, which shall be paid by the respective
Sellers) and all other direct and indirect costs and expenses in connection with
the registration and public offering of Registerable Securities. Notwithstanding
anything contained herein to the contrary, the Company shall not be required to
pay the fees and expenses of counsel for any of the Stockholders.
4. Registerable Securities. For purposes of this Agreement, the term
"Registerable Securities" shall mean (i) any and all shares of Common Stock
owned by the Stockholders and issued in connection with the Mergers contemplated
by the Acquisition Agreement and (ii) any shares of Common Stock issued or
issuable with respect to the shares of Common Stock described in (i) above, by
way of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganizations.
5. Allocation of Registration Opportunities. In any circumstance in
which all of the Registerable Securities and other shares of Common Stock of the
Company (including shares of Common Stock issuable upon conversion or exchange
of other securities or obligations of the Company) with registration rights
("Other Shares") requested to be included in a registration on behalf of the
Stockholders or other selling stockholders of the Company cannot be so included
as a result of limitations of the aggregate number of shares of Registerable
Securities and Other Shares that may be so included, the number of shares of
Registerable Securities and Other Shares that may be so included shall be
allocated among the Stockholders and other selling stockholders requesting
inclusion of shares pro rata on the basis of the number of shares of
Registerable Securities and Other Shares that are requested to be registered by
such Stockholders and other stockholders, including shares of Common Stock which
would be held by such other stockholders assuming conversion or exchange of any
other securities or obligations of the Company held by such Stockholders.
6. Restriction on Sale. Except for the Registerable Securities proposed
to be offered pursuant to Section 1(a) of this Agreement, each Stockholder
agrees not to effect any sale, transfer, distribution or disposition (other than
to donees who agree to be similarly bound) of Common Stock, including sales
pursuant to Rule 144 of the SEC promulgated under the Securities Act, during the
fourteen days prior to, and during the 90-day period beginning on, the effective
date of any registration statement filed in connection with a registration under
this Agreement (or such longer periods as may be requested by the underwriter or
underwriters of such offering).
-5-
<PAGE> 6
7. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of Delaware,
without regard to the conflict of law principles thereof.
8. Binding Effect. The obligations of this Agreement shall be binding
upon the parties, their heirs, successors and legal representatives.
9. Assignment. This Agreement may not be assigned.
10. Amendment. Amendments to this Agreement may only be made in writing
signed by each of the parties.
11. Entire Agreement. This Agreement contains the entire understanding
of the parties and there are no other agreements, written or oral, regarding the
subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
LODGIAN, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
STOCKHOLDERS:
---------------------------------------------
[ ]
---------------------------------------------
[ ]
---------------------------------------------
[ ]
---------------------------------------------
[ ]
-6-
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
SHG-S Sub, Inc.
SHG-I Sub, L.L.C.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF LEHMAN BROTHERS
We hereby consent to the use of our opinion letter dated March 12,
1998, to the Board of Directors of Servico, Inc. (the "Company") attached as
Appendix B to the Company's Joint Proxy Statement/Prospectus on Form S-4 (the
"Prospectus") and to the references to our firm in the Prospectus under the
heading Opinion of Lehman Brothers therein. In giving such consent, we do not
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder, and we do not
thereby admit that we are experts with respect to any part of the Registration
Statement under the meaning of the term "expert" as used in the Securities Act.
LEHMAN BROTHERS INC.
By: /s/ Ali Elam
-----------------------------
New York, New York
July 8, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF COUNSEL
We hereby consent to the use of our opinions included herein and to all
references to this firm under the heading "Legal Matters" in the
Prospectus/Proxy Statement/Solicitation of Written Consents constituting a part
of this Registration Statement on Form S-4 of Lodgian, Inc.
STEARNS WEAVER MILLER WEISSLER
ALHADEFF & SITTERSON, P.A.
Miami, Florida
July 17, 1998
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and
to the incorporation by reference of our report dated February 16, 1998, except
for paragraph one of Note 11, as to which the date is March 5, 1998 and
paragraph two of Note 11, as to which the date is March 20, 1998, with respect
to the consolidated financial statements of Servico, Inc. and to the inclusion
of our report dated April 20, 1998 with respect to the balance sheet of Lodgian,
Inc., in the Joint Proxy Statement/Prospectus of Servico, Inc. that is made a
part of the Registration Statement (Form S-4) and Prospectus of Lodgian, Inc.
that is made a part of the Registration Statement for the registration of
29,951,695 shares of Lodgian, Inc.'s common stock.
ERNST & YOUNG L.L.P.
West Palm Beach, Florida
July 17, 1998
<PAGE> 1
Exhibit 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-4
(File No. _______) of our report dated April 10, 1998 except for note 9 as to
which the date is July 7, 1998 on our audits on the consolidated and combined
financial statements of Impac Hotel Group, L.L.C. and Predecessors and Impac
Hotel Development, Inc. We also consent to the references to our firm under the
caption "Experts."
PricewaterhouseCoopers LLP
Atlanta, Georgia
July 16, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED PRO FORMA BALANCE SHEET AT MARCH 31, 1998 AND UNAUDITED PRO
FORMA COMBINING STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
CONTAINED IN SERVICO'S PROXY STATEMENT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 16,739
<SECURITIES> 0
<RECEIVABLES> 26,111
<ALLOWANCES> 0
<INVENTORY> 7,498
<CURRENT-ASSETS> 71,003
<PP&E> 1,108,807
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,253,225
<CURRENT-LIABILITIES> 72,956
<BONDS> 585,745
175,000
0
<COMMON> 270
<OTHER-SE> 349,022
<TOTAL-LIABILITY-AND-EQUITY> 1,253,225
<SALES> 0
<TOTAL-REVENUES> 117,452
<CGS> 0
<TOTAL-COSTS> 104,023
<OTHER-EXPENSES> (455)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,178
<INCOME-PRETAX> (294)
<INCOME-TAX> (116)
<INCOME-CONTINUING> (178)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (178)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
<PAGE> 1
Exhibit 99.1
PROXY
SERVICO, INC.
ANNUAL MEETING OF SHAREHOLDERS - ___________ 1998
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Servico, Inc. ("Servico") hereby
appoints David Buddemeyer and Warren M. Knight, and each of them, the
undersigned's proxies, with full power of substitution, to vote all shares of
Common Stock of Servico which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Shareholders to be held on
___________, 1998 at 10:00 A.M. local time, at the Omni Hotel, 1601 Belvedere
Road, West Palm Beach, Florida 33406 and at any adjournments or postponements
thereof, to the same extent and with the same power as if the undersigned was
personally present at said meeting or such adjournments or postponements thereof
and, without limiting the generality of the power hereby conferred, the proxy
nominees named above and each of them are specifically directed to vote as
indicated below.
WHERE A CHOICE IS INDICATED, THE SHARES REPRESENTED BY THIS PROXY WILL
BE VOTED AS SPECIFIED. IF NO CHOICE IS INDICATED, THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED FOR THE MERGER, FOR EACH OF THE LODGIAN PLANS, FOR THE
ELECTION OF THE NOMINEE LISTED IN ITEM NO. 5 AND FOR THE ADOPTION OF THE
PROPOSAL TO AMEND SERVICO'S STOCK OPTION PLAN AS SET FORTH IN ITEM NO. 6.
If there are amendments or variations to the matters proposed at the
meeting or at any adjournments or postponements thereof, or if any other
business properly comes before the meeting, this proxy confers discretionary
authority on the proxy nominees named herein and each of them to vote on such
amendments, variations or other business.
(Continued, and to be signed and dated on the other side.)
<TABLE>
<S> <C>
1. Approval of the Amended and Restated Agreement 6. Proposal to Amend Servico's Stock
and Plan of Merger pursuant to which Option Plan to increase the number
Servico, Inc. and Impac Hotel Group, L.L.C. of shares issuable pursuant to
will become wholly owned subsidiaries the Plan
of Lodgian, Inc.
FOR AGAINST ABSTAIN
FOR AGAINST ABSTAIN [ ] [ ] [ ]
[ ] [ ] [ ]
2. Approval of the Lodgian 1998 Short-Term The undersigned acknowledges receipt of the
Incentive Compensation Plan accompanying Notice of Annual Meeting of
Shareholders and the Proxy Statement for the
FOR AGAINST ABSTAIN ___________, 1998 meeting.
[ ] [ ] [ ]
Dated: _________________________, 1998
3. Approval of the Lodgian 1998 Stock
Incentive Plan
FOR AGAINST ABSTAIN -----------------------------------------------------
[ ] [ ] [ ] Signature of Stockholder(s)
4. Approval of the Lodgian Non-Employee
Directors' Stock Plan
-----------------------------------------------------
FOR AGAINST ABSTAIN Print Name(s) Here
[ ] [ ] [ ]
(Please sign exactly as name or names appear hereon.
Full title of one signing in representative capacity
5. Election of Michael Leven as a Class I should be clearly designated after signature. Names
Director of all joint holders should be written even if signed
by only one.)
FOR the nominee WITHHOLD AUTHORITY
listed to vote for the PLEASE COMPLETE, DATE, SIGN AND MAIL
nominee listed THIS PROXY IN THE ENVELOPE PROVIDED
[ ] [ ]
</TABLE>
<PAGE> 1
Exhibit 99.2
IMPAC HOTEL GROUP, L.L.C.
MEMBER CONSENT FORM
The undersigned member of Impac Hotel Group, L.L.C. ("Impac" or the
"Company") hereby acknowledges receipt of the Joint Statement/Prospectus of
Servico, Inc. ("Servico") and Impac Hotel Group, L.L.C. ("Impac") dated
________, 1998 and consents to and approves the terms of the Amended and
Restated Agreement and Plan of Merger, dated as of July __, 1998 among Lodgian,
Inc., Servico, Impac, SHG-S Sub, Inc., SHG-I Sub, L.L.C., certain corporate
unitholders of Impac and certain acquisition subsidiaries, and all transactions
contemplated thereby.
-------------------------------------------
Authorized Signature
-------------------------------------------
Printed Name of Member
(Name in which Impac Units are Held)
-----------------------------------------
Social Security/Tax Identification Number
-----------------------------------------
Date
<PAGE> 1
EXHIBIT 99.3
CONSENT OF A PERSON NAMED AS ABOUT TO BECOME A DIRECTOR
I hereby consent to my being named in the Registration Statement on
Form S-4 of Lodgian, Inc. (the "Company") as a person who will become a director
of the Company upon consummation of the transactions described therein.
/s/ Peter R. Tyson
----------------------------------------
Peter R. Tyson
<PAGE> 1
EXHIBIT 99.4
CONSENT OF A PERSON NAMED AS ABOUT TO BECOME A DIRECTOR
I hereby consent to my being named in the Registration Statement on
Form S-4 of Lodgian, Inc. (the "Company") as a person who will become a director
of the Company upon consummation of the transactions described therein.
/s/ Joseph C. Calabro
----------------------------------------
Joseph C. Calabro
<PAGE> 1
EXHIBIT 99.5
CONSENT OF A PERSON NAMED AS ABOUT TO BECOME A DIRECTOR
I hereby consent to my being named in the Registration Statement on
Form S-4 of Lodgian, Inc. (the "Company") as a person who will become a director
of the Company upon consummation of the transactions described therein.
/s/ Michael Leven
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Michael Leven
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EXHIBIT 99.6
CONSENT OF A PERSON NAMED AS ABOUT TO BECOME A DIRECTOR
I hereby consent to my being named in the Registration Statement on
Form S-4 of Lodgian, Inc. (the "Company") as a person who will become a director
of the Company upon consummation of the transactions described therein.
/s/ John Lang
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John Lang
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EXHIBIT 99.7
CONSENT OF A PERSON NAMED AS ABOUT TO BECOME A DIRECTOR
I hereby consent to my being named in the Registration Statement on
Form S-4 of Lodgian, Inc. (the "Company") as a person who will become a director
of the Company upon consummation of the transactions described therein.
/s/ Richard H. Weiner
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Richard H. Weiner
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EXHIBIT 99.8
CONSENT OF A PERSON NAMED AS ABOUT TO BECOME A DIRECTOR
I hereby consent to my being named in the Registration Statement on
Form S-4 of Lodgian, Inc. (the "Company") as a person who will become a director
of the Company upon consummation of the transactions described therein.
/s/ Robert S. Cole
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Robert S. Cole
